AMERICAN RESIDENTIAL SERVICES INC, SC 14D9, 1999-03-29

AMERICAN RESIDENTIAL SERVICES INC
SC 14D9, 1999-03-29
CONSTRUCTION - SPECIAL TRADE CONTRACTORS

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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SCHEDULE 14D-9

SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934

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AMERICAN RESIDENTIAL SERVICES, INC.
(Name of Subject Company)

AMERICAN RESIDENTIAL SERVICES, INC.
(Name of Person(s) Filing Statement)

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COMMON STOCK, PAR VALUE $.001 PER SHARE
and Associated Rights to Purchase Series A Junior Participating Preferred Stock
(Title of Class of Securities)

028911105
(CUSIP Number of Class of Securities)

John D. Held, Esq.
Senior Vice President, General Counsel and Secretary
American Residential Services, Inc.
Post Oak Tower
5051 Westheimer, Suite 725
Houston, Texas 77056-5604
(713) 599-0100
(Name, address and telephone number of person authorized to
receive notice and communications on behalf of person filing statement)

WITH COPY TO:

Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, Texas 77010
(713) 651-5151
Attention: Charles L. Strauss

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ITEM 1. SECURITY AND SUBJECT COMPANY

The name of the subject company is American Residential Services, Inc., a
Delaware corporation (the "Company" or "ARS"), and the address of the
principal executive offices of the Company is Post Oak Tower, 5051 Westheimer,
Suite 725, Houston, Texas 77056-5604. The title and the class of equity
securities to which this statement relates is the Company's common stock, par
value $.001 per share (the "Common Stock") (and the associated rights to
purchase Series A Junior Participating Preferred Stock pursuant to the Rights
Agreement, as defined below (the "Rights" and, together with the Common Stock,
the "Shares")).

ITEM 2. TENDER OFFER OF THE BIDDER

This statement relates to the cash tender offer (the "Offer") by SVM M9
Acquisition Corporation (the "Purchaser"), a Delaware corporation and a
wholly-owned subsidiary of The ServiceMaster Company ("Parent" or
"ServiceMaster"), disclosed in a Schedule 14D-1, dated March 29, 1999 (the
"Schedule 14D-1"), filed with the Securities and Exchange Commission (the
"SEC") by ServiceMaster and Purchaser to purchase all outstanding Shares at a
price of $5.75 per Share, net to the seller in cash, without interest thereon,
upon the terms and subject to the conditions set forth in Purchaser's Offer to
Purchase and the related Letter of Transmittal (which together, as they may be
amended and supplemented from time to time, constitute the "Offer"). The
Schedule 14D-1 states that the principal executive offices of each of
ServiceMaster and Purchaser are located at One ServiceMaster Way, Downers
Grove, Illinois 60515.

The Offer is being made pursuant to an Agreement and Plan of Merger dated as
of March 22, 1999 (the "Merger Agreement") among the Company, ServiceMaster
and Purchaser. A copy of the Merger Agreement is filed as Exhibit 3.1 to this
Schedule 14D-9 and is hereby incorporated herein by reference. The Merger
Agreement provides, among other things, that as soon as practicable after the
consummation of the Offer, and the satisfaction of the other conditions set
forth in the Merger Agreement and in accordance with the relevant provisions
of the General Corporation Law of the State of Delaware ("Delaware Law" or the
"DGCL"), Purchaser will be merged into the Company (the "Merger"). Following
consummation of the Merger, the Company will be a wholly-owned subsidiary of
ServiceMaster. At the effective time of the Merger (the "Effective Time"),
each Share then issued and outstanding immediately prior to the Effective Time
(other than Shares held by ARS or by any subsidiary of ARS, or owned by
ServiceMaster, Purchaser or any other subsidiary of ServiceMaster, or Shares
held by stockholders who shall have demanded and perfected appraisal rights in
accordance with the requirements of Delaware Law) will be canceled and
converted into the right to receive the price per Share paid pursuant to the
Offer in cash, without interest (the "Merger Consideration"). The Merger
Agreement is summarized in Item 3 of this Schedule 14D-9.

ITEM 3. IDENTITY AND BACKGROUND

(a) The name and business address of the Company, which is the entity filing
this statement, are set forth in Item 1 above. Certain information contained
in this Schedule 14D-9 or incorporated herein by reference concerning
ServiceMaster, Purchaser or their affiliates, or actions or events with
respect to any of them, was provided by ServiceMaster, and the Company takes
no responsibility for such information.

(b) Except as described herein, or in the Information Statement of the
Company attached to this Schedule 14D-9 as Annex B (which is hereby
incorporated by reference), to the knowledge of the Company, as of the date
hereof, there is no material contract, agreement, arrangement or
understanding, or any actual or potential conflict of interest, between the
Company or its affiliates and (i) the Company's executive officers, directors
or affiliates or (ii) ServiceMaster, Purchaser or their respective executive
officers, directors or affiliates.

In considering the recommendation of the Company Board set forth in Item 4
below, the Company's stockholders should be aware that certain members of the
Company's management and certain members of the Company's Board have interests
in the Offer and the Merger, which are described herein and in Annex B hereto
and which may present them with certain conflicts of interest. The Board of
Directors was aware of these potential conflicts and considered them along
with the other factors described in Item 4 below.

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THE MERGER AGREEMENT

Information with respect to the terms of the Merger Agreement and certain
related matters, including the Merger (as defined therein), is set forth under
the headings "Introduction", "Terms of the Offer", "Background of the Offer;
Purpose of the Offer and the Merger; The Merger Agreement and Certain Other
Agreements", "Conditions to the Offer" and "Certain Legal Matters" in the
Offer to Purchase, a copy of which is filed as Exhibit 3.3 hereto and is
hereby incorporated herein by reference.

INDEMNITY AND LIMITATION OF LIABILITY

The Company has entered into indemnification agreements with each of its
directors and executive officers by which the Company provides such persons
with the maximum indemnification allowed under applicable law, with regard to
all judgments, penalties, fines, amounts paid in settlement and expenses
(including attorneys' fees) whatsoever arising out of any event or occurrence
related to the fact that such person is or was a director or officer of the
Company, with certain limitations and exceptions. A copy of the form of such
indemnification agreement is filed as Exhibit 3.6 to this statement and is
hereby incorporated herein by reference. To the extent that the Company
maintains an insurance policy or policies providing liability insurance for
directors, officers, employees or agents of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise that such person serves at the request of the Company, the
indemnified person shall be covered by such policy or policies in accordance
with its or their terms to the maximum extent of the coverage available for
any such director, officer, employee or agent under such policy or policies.
The agreements are binding upon any successor to the Company. The agreements
continue in effect regardless of whether the indemnified person continues to
serve as a director or officer of the Company.

Subject to certain limitations, Article IV of the Amended and Restated
Bylaws of the Company also provides for indemnification of officers and
directors of the Company. A copy of the Amended and Restated Bylaws is filed
as Exhibit 3.5 to this statement and is hereby incorporated herein by
reference.

Delaware Law obligates the Company, as the Surviving Company in the Merger,
to fulfill and honor after the consummation of the Offer its current
obligations under the indemnification agreements and the bylaws.

In accordance with Delaware Law, Article Seventh of the Restated Certificate
of Incorporation of the Company eliminates the personal liability of a
director to the Company and its stockholders for monetary damages for breaches
of fiduciary duty as a director. Delaware Law prescribes certain limitations
on such exculpatory provisions. A copy of the Restated Certificate of
Incorporation is filed as Exhibit 3.4 to this statement and is hereby
incorporated herein by reference.

The Merger Agreement obligates ARS, as the surviving company, and
ServiceMaster to indemnify the present and former directors and officers of
ARS in respect of certain actions taken prior to the effective time of the
Merger for a period of not less than six years from such effective time.

LIABILITY INSURANCE

Each of the Company's directors and executive officers is insured against
liabilities incurred by them in connection with their service in such
capacities. The insurance policy provides aggregate coverage of $20,000,000
for claims made during the effective period of the policy.

The Merger Agreement obligates ServiceMaster (or ARS, as the surviving
corporation) to maintain in effect directors' and officers' liability
insurance with respect to actions that shall have been taken prior to the
effective time of the Merger on terms and conditions no less favorable to such
persons than those in effect under ARS's directors' and officers' liability
insurance as was in effect on March 22, 1999.

OTHER MATTERS

Certain other contracts and arrangements between the Company and certain of
its directors and executive officers are discussed in the Information
Statement attached as Annex B to this Schedule 14 D-9.

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OTHER MATERIAL 1998 TRANSACTIONS WITH ARS DIRECTORS AND EXECUTIVE OFFICERS

The standard compensation and stock option grant policies for ARS Board
members, and the 1998 compensation and option grants to certain executive
officers, are described in the Information Statement attached as Annex B to
this Schedule 14D-9.

ITEM 4. THE SOLICITATION OR RECOMMENDATION

(a) RECOMMENDATION OF THE BOARD OF DIRECTORS

THE ARS BOARD HAS UNANIMOUSLY APPROVED AND DECLARED ADVISABLE THE OFFER, THE
MERGER AND THE MERGER AGREEMENT AND DETERMINED THAT THE TERMS OF THE OFFER AND
THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY AND UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS OF THE COMPANY ACCEPT THE
OFFER AND TENDER THEIR SHARES.

A letter to stockholders communicating the Board's recommendations is filed
as Exhibit 1.1 hereto and is hereby incorporated herein in its entirety by
reference.

(b) BACKGROUND OF THE OFFER; REASONS FOR THE RECOMMENDATION

BACKGROUND OF THE OFFER

Pursuant to a request from Phillip B. Rooney, Vice Chairman of
ServiceMaster, to Howard Hoover, Chairman of ARS, Messrs. Rooney and Kenneth
N. Hooten, a ServiceMaster Vice President, met with Messrs. Hoover and Thomas
N. Amonett, President of ARS, in Houston, Texas on March 10 and March 11,
1998. In this introductory meeting, Mr. Rooney noted ServiceMaster's recent
acquisition of Rescue Rooter and told Messrs. Hoover and Amonett that
ServiceMaster was interested in expanding its plumbing operations to encompass
heating, ventilation and air conditioning installation and repair. The parties
also discussed a possible strategic alliance involving ServiceMaster's
American Home Shield operations and ARS's operations. The parties agreed that
an exchange of ideas would be beneficial.

On March 18, 1998, ServiceMaster and ARS executed a confidentiality
agreement in connection with the consideration of a possible alliance or other
transaction between ServiceMaster and ARS.

On May 11, 1998, Messrs. Hoover and Amonett met with Messrs. Rooney and
Hooten at ServiceMaster's offices in Downers Grove, Illinois to discuss in
general terms a possible combination of ServiceMaster's Rescue Rooter
operations and ARS's operations or a possible strategic alliance involving
ServiceMaster's American Home Shield operations and ARS's operations. On June
29, 1998, Messrs. Amonett and Elliot Sokolow, Senior Vice President, Director
of Residential Operations of ARS, met with Messrs. Hooten, Ernest J. Mrozek,
Group President of ServiceMaster Consumer Services, Paul A. Bert, Executive
Vice President, Marketing, of ServiceMaster Consumer Services, Scott J.
Cromie, President and Chief Operating Officer of American Home Shield, William
E. LeBaron, President of Rescue Rooter, Thomas Scherer, Executive Vice
President and Chief Financial Officer of ServiceMaster Consumer Services, and
Robert Zipperer, Associate of ServiceMaster Ventures, in Memphis, Tennessee,
regarding such possible combination or strategic alliance.

During a telephone conversation in September or October 1998, Mr. Rooney
suggested to Mr. Hoover that, subject to receipt and review of more detailed
financial information, ServiceMaster and ARS consider a possible business
combination at a potential price ranging from $6.00 to $8.00 per share of ARS
common stock. Mr. Hoover agreed to continue discussions of such a possible
business combination, but indicated that ARS sought a higher price.

ARS engaged Jefferies & Company, Inc. ("Jefferies") in November 1998 to act
as financial advisor to ARS in connection with the evaluation of potential
options, including but not limited to a recapitalization, the repurchase of
ARS's convertible subordinated notes or other financial alternatives. The
engagement letter provided that ARS and Jefferies would enter into a separate
engagement letter if ARS undertook a private offering, a public offering, a
business combination or a similar transaction.

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Messrs. Rooney, Hooten, Mrozek, LeBaron and Stanley J. Zalik, Vice President
of Finance of Rescue Rooter, met with Messrs. Hoover, Amonett and Nolan
Lehmann, a director of ARS, in Houston on November 10 and 11, 1998 to discuss
ARS's business and a possible acquisition of ARS by ServiceMaster. No specific
conclusions or recommendations were reached as ServiceMaster desired to first
receive and review ARS third quarter 1998 results and revised projections for
fiscal year 1998 and 1999.

At a special meeting of the ARS Board of Directors held on December 1, 1998,
Mr. Amonett updated the Board on the status of discussions with ServiceMaster.

A dinner meeting was held in Houston on December 14, 1998 among Messrs.
Hoover, Amonett, Rooney, Mrozek, LeBaron, Zalik and David E. K. Frischkorn of
Jefferies. ARS provided an operational update, as well as some financial
information for the third quarter and October 1998. Expectations for the
fourth quarter 1998 and for 1999 were also discussed, although these
discussions were preliminary in nature and ARS was in the process of
developing the financial detail by location.

At a special meeting of the ARS Board of Directors held on December 17,
1998, Messrs. Hoover and Amonett updated the Board on the status of
discussions with ServiceMaster.

On January 14 and January 15, 1999, further discussion and negotiations
occurred in Houston. Messrs. Rooney, Mrozek, LeBaron, Zalik and Lawrence A.
Mariano, Vice President, Secretary and Controller of ServiceMaster Consumer
Services, met with Messrs. Hoover and Amonett and, from time to time, with
Messrs. Sokolow, Frank N. Menditch, Senior Vice President, Regional Vice
President--Northern Region of ARS, Harry O. Nicodemus, IV, Senior Vice
President, Treasurer, Chief Financial Officer and Chief Accounting Officer of
ARS, Ed Dunn, Senior Vice President, Director of Commercial Operations of ARS,
and Mr. Frischkorn. The ARS representatives shared updated financial estimates
for the fiscal year 1998, which were less favorable than had previously been
anticipated, as well as preliminary budget expectations for 1999. The ARS
representatives reviewed the historical and estimated results and other key
operating matters with the ServiceMaster representatives on a location by
location basis.

On January 22, 1999, ARS publicly announced that it would post a larger loss
in the quarter ended December 31, 1998 than analysts had expected and that ARS
expected the fourth quarter loss to result in a loss for the 1998 fiscal year.

Based on the results of these meetings and several follow-up telephone
conversations between the parties, on January 27, 1999, ServiceMaster
delivered to ARS a proposed letter of intent pursuant to which ServiceMaster
would pay $5.00 per share of ARS common stock in an all cash transaction. On
February 2, 1999, ServiceMaster delivered to ARS a revised proposed letter of
intent pursuant to which ServiceMaster would pay $5.00 per share of ARS common
stock in cash, ServiceMaster common stock or a combination of cash and stock.
Neither letter of intent was executed.

During February and March 1999, numerous meetings and telephone
conversations took place between representatives of ServiceMaster and
ServiceMaster's legal advisors, on the one hand, and representatives of ARS,
representatives of Jefferies and ARS's legal advisors, on the other hand, to
conduct due diligence and to negotiate the terms of a merger agreement
pursuant to which ARS shareholders would receive cash, ServiceMaster common
stock or a combination of cash and stock. During such time period,
representatives of ServiceMaster and representatives of ARS discussed prices
ranging from $5.00 to $7.50 per share of ARS common stock. In addition,
extensive negotiations of termination events, termination fees and financial
covenants occurred in this time period.

At a special meeting of the ARS Board of Directors held on February 3, 1999,
Messrs. Amonett and Hoover updated the Board on the status of discussions with
ServiceMaster. Messrs. Frischkorn and Robert M. Werle presented Jefferies'
financial review of ARS and an overview of Jefferies' valuation methodologies
and analysis

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for ARS. Charles L. Strauss of Fulbright & Jaworski L.L.P., outside legal
counsel to ARS, discussed legal duties of the Board in connection with the
discussions with ServiceMaster.

On February 11, 1999, counsel for ServiceMaster delivered the initial draft
of a proposed merger agreement to ARS and its counsel. Subsequent drafts of a
proposed merger agreement were delivered to ARS and its counsel during
February and March that reflected business and legal negotiations.

On February 12, 1999, ServiceMaster increased its offer to $5.50 per share
of ARS common stock payable in cash, ServiceMaster common stock or a
combination of cash and stock.

At a special meeting of the ARS Board of Directors held on February 15,
1999, Messrs. Amonett, Frischkorn and Werle updated the Board on the status of
discussions with ServiceMaster and summarized for the Board certain of the
issues associated with the negotiations with ServiceMaster.

At a special meeting of the ARS Board of Directors held on February 18,
1999, Messrs. Amonett and Hoover updated the Board on the status of
discussions with ServiceMaster. Mr. Werle reviewed Jefferies' analysis and
methodology for a valuation of ARS.

At a special meeting of the ARS Board of Directors held on February 19,
1999, the Board reviewed and discussed the status of the ServiceMaster
negotiations.

On February 20, 1999, Messrs. Hoover and Rooney tentatively agreed to
recommend to their respective boards of directors to continue negotiations of
the terms of a merger agreement pursuant to which ARS stockholders would
received cash, ServiceMaster common stock or a combination of cash and stock,
based upon a price of between $5.75 and $6.00 per share of ARS common stock
(depending upon the average price of ServiceMaster shares determined over a
20-day pricing period). A collar proposal previously suggested by Mr. Rooney
to Mr. Hoover that would protect ServiceMaster at a ServiceMaster common stock
per share price below $16.50, but could cause the price to be paid per share
of ARS common stock to be less than $5.75, was rejected by ARS.

At a special meeting of the ARS Board of Directors held on February 22,
1999, the Board reviewed and discussed the status of the ServiceMaster
negotiations. John D. Held, Senior Vice President and General Counsel of ARS,
and Mr. Strauss reviewed certain specific provisions set forth in the draft
merger agreement and discussed the legal duties of the Board in connection
therewith.

Between February 23 and February 26, 1999, business, financial and legal
representatives of the two parties convened in Houston to conduct further due
diligence and to negotiate a definitive merger agreement.

At a special meeting of the ARS Board of Directors held on March 2, 1999,
Mr. Amonett updated the Board on the status of discussions with ServiceMaster
and summarized for the Board certain of the issues associated with the
negotiations with ServiceMaster.

ServiceMaster representatives returned to Houston for the period March 5
through March 8, 1999 to conduct additional due diligence investigation with
particular focus on the financial data for 1998 and the first month of 1999.

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shares of ARS common stock. The parties also discussed specific due diligence
procedures and related termination rights. Counsel for ServiceMaster and ARS
were instructed to immediately revise the merger agreement to reflect the new
arrangements. Concurrently with this meeting, Messrs. Zalik, Mariano, Brian
Stevenson, an analyst for ServiceMaster, and John Deegan, Director, Financial
Planning of ServiceMaster, continued with due diligence inquiries, with
particular focus on the financial results of ARS for 1998 and January 1999.

On March 19, 1999, the ServiceMaster Board of Directors approved the merger
agreement.

At a special meeting of the ARS Board of Directors held on March 20, 1999,
Mr. Hoover updated the Board on the status of discussions with ServiceMaster.
Mr. Strauss summarized the terms of the proposed merger agreement. Messrs.
Werle, Frischkorn and Claman reviewed Jefferies' analysis and methodology for
a valuation of ARS. The Board and Messrs. Held and Strauss discussed various
factors to be considered in analyzing a business combination with
ServiceMaster and the legal issues surrounding the approval thereof. Jefferies
presented its oral opinion, subsequently confirmed in writing, that the
consideration to be received by the holders of ARS common stock pursuant to
the Offer and the Merger is fair, from a financial point of view, to such
holders. The Board approved the Offer, the Merger and the Merger Agreement and
the transactions contemplated thereby and recommended acceptance of the tender
offer by ARS's stockholders. The Board also approved the engagement letter
between ARS and Jefferies related to the potential sale of ARS or any of its
material assets.

The merger agreement was executed during the evening of March 22, 1999.
ServiceMaster and ARS publicly announced the agreement on March 23, 1999.

REASONS FOR THE RECOMMENDATION

In reaching its determination described in Item 4(a) above, the Board took
into consideration a number of factors including (among others) the following:

(i) information concerning ARS's business and operations, future prospects,
past, current and anticipated future financial performance, financial
condition and competitive position;

(ii) potential financial operating results and challenges in 1999 and
beyond, and the assumptions, variables and risks affecting such potential
financial results and challenges;

(iii) current and anticipated developments in the industry in which the
Company operates;

(iv) the historical trading prices for the Common Stock;

(v) the extensive activities conducted by management and Jefferies
soliciting proposals from numerous other companies concerning a merger or
other strategic transactions and the results of those activities;

(vi) the extensive negotiations between the Company and ServiceMaster and
their respective financial advisors, leading to the Board's belief that $5.75
per Share represented the highest price per Share that could be negotiated
with ServiceMaster;

(vii) the fact that the Merger Agreement provides for a prompt cash tender
offer for all Shares, to be followed by a merger for the same consideration,
thereby enabling all of the Company's stockholders to obtain the benefits of
the transaction at the earliest possible time;

(viii) the terms of the Merger Agreement, including termination rights,
termination fees, operating, financial and other covenants, representations
made and to be made by ARS, the fact that the Offer and the Merger are

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not conditioned on financing, the provisions permitting the Company to
consider other takeover proposals and to terminate the Merger Agreement after
notice of a superior proposal (and payment of a termination fee), and the
views of ARS's legal and financial advisors regarding certain of such terms;

(ix) alternatives to the Offer and the Merger, including remaining
independent, strategic alliances and a sale to or merger with a company other
than ServiceMaster, including the advantages and disadvantages of each and the
likelihood of achieving transactions with other companies in a timely manner
and at consideration in excess of that offered by ServiceMaster;

(x) the information presented to the Board by the Company's financial
advisor, Jefferies, which involved discussions of various valuation analyses,
the terms of the Offer and the Merger and other alternatives;

(xi) the oral opinion of Jefferies delivered to the Board at its special
meeting held on March 20, 1999 that the consideration to be received by the
holders of Common Stock pursuant to the Offer and the Merger is fair, from a
financial point of view, to such holders. Jefferies' advice to the Board was
confirmed in an opinion letter dated March 22, 1999, a copy of which is
attached as Annex A and is hereby incorporated herein in its entirety by
reference. Such opinion sets forth the scope of the investigation made, the
procedures followed and assumptions made by Jefferies in rendering its
opinion. Stockholders are urged to carefully read such opinion in its
entirety;

(xii) the effects of the announcement of the Offer and the Merger on ARS
employees, dealers and customers, and the potential resulting effects on
stockholder value;

(xiii) the likelihood of the successful completion of the Offer and the
Merger and the risks of non-completion;

(xiv) current market conditions and the relationship between the
consideration to be received by ARS stockholders in connection with the Offer
and the Merger and the historical and recent market prices of the Shares, and
the fact that the $5.75 per Share Offer price represents an approximately 31%
premium over the closing price of $4.375 per Share on the New York Stock
Exchange on March 22, 1999, the last trading day before the public
announcement of the Merger Agreement;

(xv) (a) the right of the Company under the Merger Agreement, prior to the
consummation of the Offer, to provide non-public information to, and seek to
negotiate a business combination transaction or sale of all or a material
portion of the Company's assets or capital stock (an "Acquisition
Transaction") with, a person other than ServiceMaster or any of its
subsidiaries, provided that such third party makes a bona fide unsolicited
written proposal to make an Acquisition Transaction for all the capital stock
or assets on terms more favorable than the offer price to the ARS stockholders
(as determined in good faith by the ARS Board) and (b) the right of the ARS
Board to withdraw or modify its recommendation that the ARS stockholders
accept the Offer and tender their shares of Common Stock if, after having
consulted with outside counsel, the ARS Board determines that the refusal to
do so would constitute a breach by the ARS Board of its fiduciary duties under
applicable laws; and

(xvi) the availability of appraisal rights under Delaware law.

The ARS Board did not attach specific weight to any of the foregoing factors
in reaching its conclusion that the terms of the Offer and the Merger are fair
to, and in the best interests of, the stockholders of the Company.

ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED

Pursuant to a letter agreement dated November 25, 1998, the Company retained
Jefferies to act as financial advisor to ARS in connection with the evaluation
of potential options, including but not limited to a recapitalization, the
repurchase of ARS' convertible subordinated notes or other financial
alternatives. Pursuant

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to such letter agreement, the Company paid Jefferies $100,000 and agreed to
reimburse Jefferies for its out-of-pocket expenses, including the reasonable
fees and expenses of its legal counsel. Such letter agreement provided that
ARS and Jefferies would enter into a separate engagement letter if ARS
undertook a private offering, a public offering, a business combination or a
similar transaction.

Pursuant to a letter agreement dated March 20, 1999, the Company retained
Jefferies to provide financial advisory services in connection with a possible
sale of the Company or any of its material assets. Pursuant to such letter
agreement, the Company, as compensation for such services, agreed to pay
Jefferies $300,000 upon delivery of its fairness opinion to the ARS Board and
a transaction fee payable upon the consummation of the Offer equal to 0.75% of
the transaction value (equity plus debt assumed), net of fees previously paid
to Jefferies by ARS pursuant to the November 25, 1998 and March 20, 1999
letter agreements. The Company also has agreed to reimburse Jefferies for its
out-of-pocket expenses, including the reasonable fees and expenses of its
legal counsel. The Company also has agreed to indemnify Jefferies and its
directors, officers, agents, employees and controlling persons for certain
costs, expenses and liabilities, including certain liabilities under the
federal securities laws.

Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any person to
make solicitations or recommendations to the stockholders of the Company on
its behalf with respect to the Offer, except that such solicitations or
recommendations may be made by directors, officers or employees of the
Company, for which services no additional compensation will be paid.

ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES

(a) Based upon the Company's records and upon information provided to the
Company by its directors, executive officers and affiliates, neither the
Company nor any of its affiliates nor, to the best of the Company's knowledge,
any of the directors or executive officers of the Company or any of its
subsidiaries has effected any transactions in the Shares during the 60 days
prior to the date hereof.

(b) To the Company's knowledge based upon information provided to the
Company by its directors and executive officers, all of the Company's
executive officers and directors who own Shares currently intend to tender all
of their Shares.

ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY

(a) Except as set forth herein, no negotiation is being undertaken or is
underway by the Company in response to the Offer that relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization
involving the Company or any subsidiary thereof; (ii) a purchase, sale of
transfer of a material amount of assets by the Company or any subsidiary
thereof, (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.

(b) Except as set forth herein, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that
relates to or would result in one or more of the events referred to in Item
7(a) above.

ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED

The Information Statement attached as Annex B hereto is being furnished in
connection with the intended designation by ServiceMaster, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board of Directors
of the Company following the consummation of the Offer other than at a meeting
of the Company's stockholders.

Antitrust. Under the HSR Act, and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares pursuant to the Offer is subject to
such requirements.

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Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares under the Offer may be consummated following the expiration of a 15
calendar day waiting period following the filing by ARS of a Pre-Merger
Notification and Report Form with respect to the Offer, unless ARS receives a
request for additional information or documentary material, or the Antitrust
Division and the FTC terminate the waiting period prior thereto. ARS has filed
a Pre-Merger Notification and Report Form with respect to the Offer. If,
within the initial 15 day period, either the Antitrust Division of the FTC
requests additional information or material from ARS concerning the Offer, the
waiting period will be extended and would expire at 11:59 p.m., New York City
time, on the tenth calendar day after the date of substantial compliance by
ARS with such request. Only one extension of the waiting period pursuant to a
request for additional information is authorized by the HSR Act. Thereafter,
such waiting period may be extended only by court order or with the consent of
ARS. In practice, complying with a request for additional information or
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties may engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and
may agree to delay consummation of the transaction while such negotiations
continue. Expiration or termination of applicable waiting periods under the
HSR Act is a condition to Purchaser's obligation to accept for payment and pay
for Shares tendered pursuant to the Offer.

The FTC and the Antitrust Divisions frequently scrutinize the legality under
the antitrust laws of transactions such as Purchaser's proposed acquisition of
Shares pursuant to the Offer and shares of Common Stock pursuant to the
Merger. At any time before or after Purchaser's acquisition of Shares, the
Antitrust Division or the FTC could take such action under the antitrust laws
as it deems necessary or desirable in the public interest, including seeking
to enjoin the acquisition of Shares pursuant to the Offer or the consummation
of the Merger or seeking divestiture of Shares acquired by Purchaser or
divestiture of substantial assets of ARS or its subsidiaries or the Company or
its subsidiaries. Private parties and state attorneys general may also bring
action under the antitrust laws under certain circumstances. There can be no
assurance that a challenge to the Offer or the Merger on antitrust grounds
will not be made or, if such a challenge is made, of the result thereof.

State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware. Section 203 of the DGCL limits the ability of a Delaware
corporation to engage in business combinations with "interested stockholders"
(generally defined as any beneficial owner of 15% or more of the outstanding
voting stock of the corporation) unless, among other things, the corporation's
board of directors has given its prior approval to either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder. As indicated in Item 4, the Company, pursuant to a
resolution of the Board of Directors approving the Offer and the Merger, has
rendered Section 203 of the DGCL inapplicable to the Offer and the Merger. A
number of other states throughout the United States have enacted takeover
statutes that purport, in varying degrees, to be applicable to attempts to
acquire securities of corporations that are incorporated or have assets,
stockholders, executive offices or places of business in such states. In Edgar
v. MITE Corp., the Supreme Court of the United States held that the Illinois
Business Takeover Act, which involved state securities laws that made the
takeover of certain corporations more difficult, imposed a substantial burden
on interstate commerce and therefore was unconstitutional. In CTS Corp. v.
Dynamics Corp. of America, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining stockholders, provided that such laws were
applicable only under certain conditions.

The Company and certain of its subsidiaries conduct business in a number of
other states throughout the United States, some of which have enacted takeover
laws and regulations. Neither Purchaser, ServiceMaster nor ARS knows whether
any or all of these takeover laws and regulations will by their terms apply to
the Offer, and, except with respect to the DGCL, neither Purchaser,
ServiceMaster nor ARS has currently complied with any other state takeover
statute or regulation. Purchaser has reserved the right to challenge the
applicability or validity of any state law purportedly applicable to the
Offer. If it is asserted that any state takeover statute is applicable to the
Offer and an appropriate court does not determine that it is inapplicable or
invalid as applied to the Offer, Purchaser might be required to file certain
information with, or to receive approvals from, the relevant state

10
<PAGE>

authorities, and purchaser might be unable to accept for payment or pay for
Shares tendered pursuant to the Offer, or may be delayed in consummating the
Offer. In such case, Purchaser may not be obligated to accept for payment or
pay for any Shares tendered pursuant to the Offer.

ITEM 9. MATERIAL TO BE FILED AS EXHIBITS

<TABLE>
<C> <S>
1.1 Letter to Stockholders dated March 29, 1999 from Thomas N. Amonett,
President and Chief Executive Officer of the Company.*
1.2(A) Opinion of Jefferies & Company, Inc. dated March 22, 1999.*
3.1(B) Agreement and Plan of Merger, dated as of March 22, 1999, by and among
ARS, ServiceMaster and Purchaser.
3.2(C) The Company's Information Statement pursuant to Section 14(f) of the
Exchange Act and Rule 14f-1 thereunder.*
3.3 Offer to Purchase dated March 29, 1999.
3.4(D) Restated Certificate of Incorporation of the Company.
3.5(E) Amended and Restated Bylaws of the Company.
3.6(D) Form of Indemnification Agreement.
3.7(F) Rights Agreement, dated as of August 1, 1996, between the Company and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent.
3.8(B) Amendment No. 1 dated March 22, 1999, to Rights Agreement, dated as of
August 1, 1996, between the Company and ChaseMellon Shareholder
Services, L.L.C., as Rights Agent.
3.9(B) Press release of the Company dated March 23, 1999.
</TABLE>
- --------
* Included in copies mailed to stockholders of the Company.

(A) Attached hereto as Annex A.

(B) Incorporated by reference to the Company's Current Report on Form 8-K
dated March 24, 1999, Exhibits 2.1, 4.1 and 99.1.

(D) Incorporated by reference to exhibits the Company's Registration
Statement on Form S-1, Reg. No. 333-06195, Exhibits 3.1 and 10.17).

(E) Incorporated by reference to the Company's Current Report on Form 8-K/A
dated February 8, 1999, Exhibit 3.1.

(F) Incorporated by reference to the Company's Registration Statement on
Form S-8, Reg. No. 333-13299, Exhibit 4.4.

11
<PAGE>

SIGNATURE

After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.

Dated: March 29, 1999 AMERICAN RESIDENTIAL SERVICES, INC.

By: /s/ THOMAS N. AMONETT
__________________________________
Thomas N. Amonett
PRESIDENT AND CHIEF EXECUTIVE
OFFICER

12
<PAGE>

ANNEX A

March 22, 1999

The Board of Directors
AMERICAN RESIDENTIAL SERVICES, INC.
5051 Westheimer, Suite 725
Houston, TX 77056-5604

To the Members of the Board of Directors:

We understand that American Residential Services, Inc. a Delaware
corporation ("ARS"), The ServiceMaster Company, a Delaware corporation
("SVM"), and SVM-M9 Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of SVM ("Purchaser"), propose to enter into an
Agreement and Plan of Merger dated as of March 22, 1999 (the "Merger
Agreement"). The Merger Agreement provides, among other things, for (i) the
commencement by Purchaser of a tender offer for all of the outstanding shares
of ARS common stock, par value $0.001 per share ("ARS Common Stock"), for
$5.75 per share net to the seller in cash, and (ii) the subsequent merger of
Purchaser with and into ARS (the "Merger") pursuant to which each share of ARS
Common Stock outstanding immediately prior to the effective time of the Merger
will be converted into the right to receive $5.75 in cash (the consideration
to be received in the tender offer and the Merger are collectively referred to
as the "Acquisition Consideration" and the tender offer and the Merger are
collectively referred to as the "Transaction"). You have requested Jefferies &
Company's ("Jefferies") opinion as investment bankers as to whether the
Acquisition Consideration is fair, from a financial point of view, to the
holders of ARS Common Stock.

In our review and analysis and in rendering this opinion, we have with your
permission assumed and relied upon the accuracy and completeness of all
information provided to us by ARS's management, as well as publicly available
information, and have not verified such information. We have not conducted a
physical inspection of any of the properties or facilities of ARS or SVM, nor
have we made, been provided with or considered any independent evaluation or
appraisals of any of such properties or facilities. The Acquisition
Consideration was based on negotiations between ARS and SVM during which
Jefferies provided investment banking services to the Board of Directors of
ARS.

In conducting our analysis and rendering our opinion as expressed herein, we
have reviewed and considered such financial and other factors as we have
deemed appropriate under the circumstances including, among others, the
following (i) the Merger Agreement; (ii) the historical financial condition
and results of operations of ARS, including (a) the Annual Reports on Form 10-
K of ARS for the years ended December 31, 1996 and 1997, and recent drafts of
the Annual Report on Form 10-K for the year ended December 31, 1998, and (b)
the Quarterly Report on Form 10-Q of ARS for the quarter ended September 30,
1998; (iii) certain internal financial and non-financial information prepared
by the management of ARS, which data was made available to us in our role as
financial advisor to ARS; (iv) published information regarding the financial
performance and operating characteristics of a selected group of companies
which we deemed comparable; (v) business prospects of ARS as projected by the
management of ARS; (vi) the historical and current market prices for ARS
Common Stock and for the equity securities of certain other companies with
businesses that we consider relevant to our inquiry; (vii) publicly available
information, including research reports on companies we considered relevant to
our inquiry; and (viii) the nature and terms of other recent acquisition
transactions in the facilities services industry. We have met with certain
officers and employees of ARS and SVM to discuss the foregoing as well as
other matters we believed relevant to our opinion. We have also taken into
account general economic, monetary, political, market and other conditions as
well as our experience in connection with similar transactions and securities
valuation generally. Our opinion is based upon all of such conditions as they
exist currently and can be evaluated on the date hereof. Existing conditions
are subject to rapid and unpredictable changes and such changes could impact
our opinion. Our opinion does not constitute a recommendation of the
Transaction over

A-1
<PAGE>

any alternative transactions which may be available to ARS and does not
address ARS's underlying business decision to effect the Transaction.

For purposes of rendering this opinion and based on your direction and with
your consent, Jefferies has assumed that, in all respects material to its
analysis, the representations and warranties of ARS and SVM contained in the
Merger Agreement are true and correct, ARS and SVM will each perform all of
the covenants and agreements to be performed by it under the Merger Agreement,
and all conditions to the obligations of each of ARS and SVM to consummate the
Transaction will be satisfied without any waiver thereof. In addition, we have
also been advised by the management of ARS that the financial statements to be
included in the Annual Report on Form 10-K for the year ended December 31,
1998 will not vary materially from the recent drafts of the Annual Report on
Form 10-K for the year ended December 31, 1998 that we reviewed in connection
with this opinion.

Jefferies is a registered broker-dealer. Jefferies has acted as financial
advisor to the Board of Directors of ARS in connection with the Transaction
and will receive (i) a cash fee upon rendering of the opinion and (ii) a cash
fee at the closing of the Transaction. Jefferies maintains a market in ARS
Common Stock and regularly publishes research reports regarding the property
services industry and the businesses and securities of ARS and other publicly
owned companies in such industry. In the ordinary course of business,
Jefferies and its affiliates may actively trade or hold the securities of both
ARS and SVM for their own account and the accounts of customers and,
accordingly, may at any time hold a long or short position in securities of
ARS and SVM.

Based upon and subject to the foregoing, we are of the opinion as investment
bankers that the Acquisition Consideration to be received by the holders of
ARS Common Stock pursuant to the Transaction is fair, from a financial point
of view, to such holders.

It is understood and agreed that this opinion is provided for the use and
benefit of the Board of Directors of ARS as one element in the Board's
consideration of the Transaction. Without limiting the foregoing, this opinion
does not constitute a recommendation to any shareholder of ARS as to whether
to tender such holder's ARS Common Stock or as to how such person should vote
with respect to the proposed Merger.

Sincerely,

/s/ Jefferies & Company, Inc.

Jefferies & Company, Inc.

A-2
<PAGE>

ANNEX B

AMERICAN RESIDENTIAL SERVICES, INC.
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND RULE 14F-1 THEREUNDER

This Information Statement is being mailed on or about March 29, 1999 as a
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of American Residential Services, Inc. (the "Company" or
"ARS") to the holders of record of shares of Common Stock, par value $.001 per
share, of the Company (the "Shares"). You are receiving this Information
Statement in connection with the possible appointment of persons designated by
the Purchaser (as defined below) to all of the seats on the Board of Directors
of the Company.

On March 22, 1999 the Company, The ServiceMaster Corporation, a Delaware
corporation ("ServiceMaster"), and SVM M9 Acquisition Corporation, a Delaware
corporation and wholly-owned subsidiary of ServiceMaster (the "Purchaser"),
entered into an Agreement and Plan of Merger (the "Merger Agreement") in
accordance with the terms and subject to the conditions of which (i)
ServiceMaster will cause the Purchaser to commence a tender offer (the
"Offer") for all outstanding Shares at a price of $5.75 per Share, and (ii)
the Purchaser will be merged into the Company (the "Merger"). As a result of
the Offer and the Merger, the Company will become a wholly-owned subsidiary of
ServiceMaster. The Merger Agreement requires the Company to cause the
directors designated by ServiceMaster to be elected to the Board of Directors
under the circumstances described therein.

Certain information contained in this Information Statement concerning
ServiceMaster, Purchaser or their affiliates, or actions or events with
respect to any of them, was furnished to the Company by ServiceMaster and
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.

This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
thereunder. You are urged to read this Information Statement carefully. You
are not, however, required to take any action at this time. Capitalized terms
used herein and not otherwise defined herein shall have the meaning set forth
in the Schedule 14D-9.

GENERAL

The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of March 22, 1999, there were
15,887,704 Shares outstanding. The Company's Board of Directors currently
consists of nine directors. The Company's Board of Directors is divided into
three classes. The term of one of the three classes expires each year. The
term of the Class I Directors expires in 2000 and each third year thereafter,
the term of the Class II Directors expires in 2001 and each third year
thereafter, and the term of the Class III Directors expires in 1999 and each
third year thereafter.

The Merger Agreement provides that, upon the acceptance for payment of, and
payment for, Shares by Purchaser pursuant to the Offer, ARS shall cause the
directors of ARS and its Subsidiaries as ServiceMaster may request to resign
their positions as such upon consummation of the Offer and/or shall arrange
for the election or appointment as directors of ARS upon consummation of the
Offer of the persons designated by ServiceMaster. Subject to applicable law,
ARS shall take all action requested by Purchaser necessary to effect any such
requested election, including mailing to its stockholders the Information
Statement containing the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder, and ARS makes such mailing with the
mailing of the Schedule 14D-9.

Purchaser has informed the Company that it designates Phillip B. Rooney,
Ernest J. Mrozek and Vernon T. Squires (subject to certain exceptions) to be
elected as directors of ARS. Purchaser has informed the Company that each has
consented to act as a director. Biographical information concerning each is
presented below. Such biographical information has been furnished by
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.

B-1
<PAGE>

Phillip B. Rooney, age 54, Vice Chairman of the Board of Directors of The
ServiceMaster Company. From June 5, 1996 to February 17, 1997, he was
President and Chief Executive Officer of WMX Technologies, Inc., Oak Brook,
Illinois ("WMX") and from November 1984 to May 1996 he was President and Chief
Operating Officer of WMX. Mr. Rooney is a director of Van Kampen American
Capital, Oak Brook, Illinois, an investment management company; Illinois Tool
Works, Inc., Glenview, Illinois a diversified manufacturing company; and Urban
Shopping Centers, Inc., Chicago, Illinois, a retail real estate management
company.

Ernest J. Mrozek, age 45, Group President, ServiceMaster Consumer Services.
He served as President and Chief Operating Officer, ServiceMaster Consumer
Services from January 1, 1997 to October 2, 1998; Senior Vice President and
Chief Financial Officer of The ServiceMaster Company from January 1, 1995 to
December 31, 1996; Vice President and Chief Financial Officer of The
ServiceMaster Company from May 1994 to December 1994; and as Vice President,
Treasurer and Chief Financial Officer of The ServiceMaster Company from
November 1, 1992 to April 30, 1994.

Vernon T. Squires, age 64, Senior Vice President and General Counsel of The
ServiceMaster Company since January 1, 1988. He has served as Secretary since
December 7, 1998.

Messrs. Rooney, Mrozek, and Squires are citizens of the United States. None
(i) is currently a director of, or holds any position with, the Company, (ii)
has a familial relationship with any of the directors or executive officers of
the Company or (iii) to Purchaser's knowledge, beneficially owns any
securities (or rights to acquire any securities) of the Company. The Company
has been advised by Purchaser that, to Purchaser's knowledge, none has been
involved in any transaction with the Company or any of its directors,
executive officers or affiliates which is required to be disclosed pursuant to
the rules and regulations of the Commission, except transactions between
ServiceMaster and/or Purchaser and the Company disclosed in the Schedule 14D-
9.

CURRENT DIRECTORS AND EXECUTIVE OFFICERS

Directors

Class I--Terms Expiring at the 2000 Annual Meeting

Elliot Sokolow, age 56, has been a Senior Vice President of the Company and
Director of Operations of the Company's residential operations since January
1998 and a director of the Company since September 1996. Mr. Sokolow served as
Assistant to the Chairman of the Company from June 1997 to January 1998 and as
Director of the Company's southeast operations from November 1996 to June
1997. He was a founder of Florida Heating & Air Conditioning, Inc., a
subsidiary of the Company, in 1970 and served as its President from 1977 until
June 1997. Mr. Sokolow served as national president of ACCA in 1992 and 1993.

Thomas N. Amonett, age 55, has been President and Chief Executive Officer of
the Company since October 1997 and a director of the Company since September
1996. Mr. Amonett served as President and Chief Executive Officer of
Weatherford Enterra, Inc., a diversified international energy service and
manufacturing company, from July 1996 until May 1997. From 1992 to 1996, he
served as Chairman of the Board and President of Reunion Industries, Inc., a
company engaged in plastics manufacturing and other activities. Prior thereto,
he was Of Counsel with the law firm of Fulbright & Jaworski LLP from 1986 to
1992. He was President and a director of Houston Oil Fields Company from 1982
to 1986. Mr. Amonett also currently serves as a director of ITEQ, Inc.,
HomeUSA, Inc., PetroCorp Incorporated, Reunion Industries, Inc., and Pool
Energy Services, Inc.

Class II--Terms Expiring at the 2001 Annual Meeting

Howard S. Hoover, Jr., age 60, has been Chairman of the Board since November
1995. From 1970 until 1991, Mr. Hoover was employed by Browning-Ferris
Industries, Inc. ("BFI"), a waste services company, and served during his
tenure as a director and in various management capacities as a member of the
Senior Management Committee, Senior Vice President, General Counsel and
Secretary. From 1992 until 1995, Mr. Hoover was engaged in various business
development and consulting activities.

B-2
<PAGE>

Frank N. Menditch, age 47, has been a Senior Vice President of the Company
since September 1997, and Regional Vice President--Northern Region since
September 1998. In addition, Mr. Menditch was Director of Operations of the
Company's commercial operations from January 1998 through September 1998. He
has also served as a director of the Company since September 1996. Mr.
Menditch served as Regional Vice President--Northeast of the Company from June
1997 to January 1998 and Director of the Company's northeast operations from
November 1996 to June 1997. He was President of General Heating & Air
Conditioning Company, Inc., a subsidiary of the Company, from 1983 to 1997.
Mr. Menditch is a past president of the National Capitol Chapter of the Air
Conditioning Contractors of America ("ACCA") and of the Metro Washington Heat
Pump Association. Mr. Menditch is the brother of Howard C. Menditch.

Robert J. Cruikshank, age 68, has been a director of the Company since
September 1996. He is primarily engaged in managing his personal investments
in Houston. Prior to his retirement in 1993, he was a Senior Partner in the
accounting firm of Deloitte & Touche LLP. Mr. Cruikshank currently serves as a
director of Reliant Energy, formerly known as Houston Industries Incorporated
("Reliant"), MAXXAM Inc., Kaisier Aluminum Corporation, Compass Bank-Houston,
Texas Biotechnology Corporation and Weingarten Realty Investors.

Randall B. Hale, age 36, has been a director of the Company since September
1996. He has been a Vice President of Equus Capital Management Corporation
("ECMC") and Equus II since 1992 and a director of ECMC since February 1996.
ECMC is the investment advisor for Equus II, a closed-end investment fund. See
"Security Ownership of Certain Beneficial Owners and Management." Mr. Hale
currently serves as an officer or director of several private businesses and
is a director and Chairman of the Board of Brazos Sportswear, Inc. From 1985
to 1992, he was employed by the accounting firm of Arthur Andersen LLP. Mr.
Hale is a Certified Public Accountant.

Class III--Terms Expiring at the 1999 Annual Meeting

Nolan Lehmann, age 54, has been a director of the Company since September
1996. He has been the President and a director of ECMC since its formation in
1983 and of Equus II since its formation in 1991 (see "Security Ownership of
Certain Beneficial Owners and Management"). Prior thereto, Mr. Lehmann was
employed by Service Corporation International, where he held various
positions, including Vice President--Regional Manager and Vice President--
Corporate Development. Mr. Lehmann currently serves as a director of a number
of public and private companies, including Allied Waste Industries, Inc.,
Brazos Sportswear, Inc., Drypers Corporation and Paracesus Healthcare Corp.

Don Jordan, age 66, has been a director of the Company since September,
1998. Mr. Jordan has been a director of Reliant, since 1977 and of its
subsidiary, Houston Lighting & Power ("HL&P") since 1974. Mr. Jordan is
Chairman and Chief Executive Officer of Reliant and Chairman and Chief
Executive Officer of HL&P. Mr. Jordan also serves as an advisory director of
Texas Commerce Bank National Association and a director of BJ Services
Company, Inc.

Bobby Shackouls, age 48, has been a director of the Company since June,
1998. Mr. Shackouls has been the President and Chief Executive Officer of
Burlington Resources Inc. ("BRI") from December 1995 through July 1997. Since
October 1994, Mr. Shackouls has been President and Chief Executive Officer of
Burlington Resources Oil & Gas Company (formerly known as Meridian Oil Inc.),
a wholly owned subsidiary of BRI. From June 1993 to October 1994, Mr.
Shackouls was Executive Vice President and Chief Operating Officer of Meridian
Oil Inc. From July 1991 to May 1993, Mr. Shackouls was President and Chief
Operating Officer of Torch Energy Advisors, Inc. Mr. Shackouls has been a
director of BRI since 1995.

Board Organization and Meetings

During 1998, the Board of Directors held eight meetings and acted one time
by unanimous written consent. Each member of the Board of Directors attended
at least 75% of all meetings of the Board of Directors and its committees of
which he was a member.

B-3
<PAGE>

The Board of Directors has five standing committees:

Audit Committee. The Audit Committee recommends the independent public
accountants to be selected by the Board of Directors for stockholder
approval each year and acts on behalf of the Board of Directors in
reviewing with the independent public accountants, the chief financial and
chief accounting officer and other corporate officers various matters
relating to the adequacy of the Company's accounting policies and
procedures and financial controls and the scope of the annual audits by the
independent public accountants. The Audit Committee consists of Mr.
Cruikshank, who serves as Chairman, and Mr. Hale. During 1998, the Audit
Committee held four meetings.

Compensation Committee. The Compensation Committee is authorized to
establish the general compensation policy for the officers and directors of
the Company and annually reviews and establishes officers' salaries and
participation in benefit plans, prepares reports required by the Securities
and Exchange Commission (the "SEC") and approves the directors'
compensation. The Compensation Committee consists of Mr. Lehmann, who
serves as Chairman, and Mr. Shackouls. During 1998, the Compensation
Committee held five meetings and acted two times by unanimous written
consent.

Executive Committee. The Executive Committee may exercise all powers of
the Board of Directors and exists primarily to deal with issues and
transactions that require approval between regular meetings of the entire
Board. The Executive Committee consists of Mr. Amonett, who serves as
Chairman, and Messrs. Hoover and Lehmann. During 1998, the Executive
Committee held two meetings and acted two times by unanimous written
consent.

Nominating Committee. The Nominating Committee reviews the size and
composition of the Board of Directors, designates new directors by classes
and makes recommendations with respect to nominations for the election of
directors. The Nominating Committee consists of Mr. Amonett, who serves as
Chairman and Messrs. Hoover and Cruikshank. The Nominating Committee did
not meet in 1998, but acted once by unanimous written consent. The
Nominating Committee will consider nominees proposed by stockholders, if
such proposals are submitted in writing in accordance with the Bylaws of
the Company to the Corporate Secretary at the address of the Company's
corporate address.

Industry Relations Committee. The Industry Relations Committee acts on
behalf of the Company in developing and overseeing the Company's role in
industry affairs and consists of Mr. Sokolow, who serves as Chairman, and
Messrs. Hoover and Menditch. During 1998, the Industry Relations Committee
held one meeting.

Directors' Remuneration

The Company currently pays each director who is not a Company employee (a
"Nonemployee Director") a fee of $1,500 for each Board meeting attended and
$1,000 for each Board committee meeting attended (except for committee
meetings held on the same day as Board meetings). It does not pay any
additional compensation to its employees for serving as directors, but will
reimburse all directors for out-of-pocket expenses they incur in connection
with attending meetings of the Board or Board committees or otherwise in their
capacity as directors.

Each Nonemployee Director is also automatically granted options to purchase
up to 5,000 shares of Common Stock pursuant to the Company's 1996 Incentive
Plan (the "1996 Incentive Plan") on the first business day of the month
following the date of which each annual meeting of the Company's stockholders
is held (the "Annual Grant"). The 1996 Plan also provides that, if a
Nonemployee Director is elected after such date otherwise than by election at
an annual meeting of stockholders, such Nonemployee Director shall
automatically be granted on the date of his election to the Board, options to
purchase shares of Common Stock equal to the product of (i) 10,000 and (ii) a
fraction, the numerator of which is the number of days between the date of
election of such Nonemployee Director and the next scheduled award date for an
Annual Grant, and the denominator of which is 365 (the "Pro Rata Grant"). All
options in the Annual Grant and the Pro Rate Grant (i) have a ten-year term,
(ii) have an exercise price per share equal to the fair market value of a
share of Common Stock on the date of grant and (iii) become exercisable in 33
1/3% annual increments beginning on the first anniversary of the date of
grant.

B-4
<PAGE>

In connection with such grants to Nonemployee Directors, on July 1, 1998,
each Nonemployee Director, other than Mr. Jordan who joined the Board after
the 1998 annual grant date, was granted options to purchase 5,000 shares of
Common Stock with an exercise price of $10.81 per share. In 1998, two new
directors joined the Board and accordingly received option grants for their
respective portions of the Pro Rata Grant. Mr. Shackouls was granted options
to acquire 795 shares of Common Stock on June 2, 1998, the date of his
election to the Board, with an exercise price of $11.25 and Mr. Jordan was
granted options to acquire 7,124 shares of Common Stock on September 15, 1998,
the date of his election to the Board, with an exercise price of $5.44 per
share.

Executive Officers

The following table sets forth certain information as of March 29, 1999
concerning each of the executive officers and other officers of ARS:

<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
Thomas N. Amonett................... 55 President and Chief Executive
Officer*
Harry O. Nicodemus, IV.............. 51 Senior Vice President, Treasurer,
Chief Financial Officer and Chief
Accounting Officer
John D. Held........................ 36 Senior Vice President, General
Counsel and Secretary
Frank N. Menditch................... 47 Senior Vice President, Regional
Vice President--Northern Region*
Elliot Sokolow...................... 56 Senior Vice President, Director of
Operations--Residential Services*
Ed Dunn............................. 39 Senior Vice President, Director of
Operations--Commercial Maintenance
Services
Elliott Ettlinger................... 48 Vice President--Plumbing Operations
Terri L. Hardt...................... 38 Vice President--Retail Sales and
Service
Howard C. Menditch.................. 46 Vice President--National Accounts
Jennifer L. Tweeton................. 37 Vice President--Investor Relations
</TABLE>
- --------
* Also serves as a director of the Company. See information set forth under
"Directors" above.

Harry O. Nicodemus, IV has served as Senior Vice President, Chief Financial
Officer and Chief Accounting Officer since September 1997 and as Treasurer
since December 1998. Prior thereto, he served as Vice President, Chief
Financial Officer and Chief Accounting Officer of the Company since January
1997. From December 1995 through December 1996, Mr. Nicodemus was Controller
of Drilex International, Inc., an oilfield services company. He was Vice
President, Controller and Chief Accounting Officer for American Ecology
Corporation ("American Ecology"), a waste services company, from February 1993
to December 1995 and a divisional vice president and an assistant controller
at Browning-Ferris, Industries, a waste services company, from January 1991 to
January 1993. Mr. Nicodemus is a Certified Public Accountant.

John D. Held has been Senior Vice President, General Counsel and Secretary
since March 1996. From October 1995 to March 1996, he was an associate at the
law firm of Liddell, Sapp, Zivley, Hill and LaBoon, L.L.P. Mr. Held was
Associate General Counsel of American Ecology from 1994 to 1995 and an
associate at the law firm of Baker & Botts, L.L.P., prior thereto.

Ed Dunn has been a Senior Vice President since December 1998 and Director of
Operations of the Company's commercial maintenance operations since September
1998. Prior thereto, he was a Regional Vice President-Eastern Region of the
Company's Commercial maintenance operations since January 1998. Prior thereto,
he was President of EMD Mechanical Specialists, one of the businesses acquired
by ARS.

Elliott Ettlinger has been Vice President--Plumbing Operations since March
1998 and has served as the President of Larry Teague & Sons Plumbing, Inc.,
one of the businesses acquired by ARS, since its formation in

B-5
<PAGE>

December 1993. Prior thereto, Mr. Ettlinger was Vice President of Indoor
Quality Technologies, a company providing HVAC, electrical and plumbing
services, from December 1992 to November 1993 and Vice President of The
Vitalizers, a residential real estate service company from March 1992 to
December 1992. From July 1986 to December 1991, he was a Regional Vice
President of Roto-Rooter Services Co. Inc. ("Roto-Rooter"), a national
plumbing company. Mr. Ettlinger also served on the board of directors of Roto-
Rooter in 1990.

Terri L. Hardt has been Vice President--Retail Sales and Service since June
1997. From May 1997 to June 1997, she was Director of Retail Services of the
Company. From May 1996 to May 1997, Ms. Hardt was a Division Manager C Heating
and Cooling Division with Warm Thoughts Communications, Inc., an advertising
and marketing firm for the home services industry. From August 1995 to May
1996, she served as a Small Business Consultant with Allison & Associates, a
communications consulting firm. From May 1994 to May 1996, Ms. Hardt served as
an independent consultant with Business Ventures Corporation, Inc., a
management facilitation and consulting firm specializing in HVAC businesses.
Prior thereto, she served in various management positions, including
President, with Automatic Controls Service, one of the businesses acquired by
ARS.

Howard C. Menditch has been Vice President--National Accounts since March
1998. From September 1997 to March 1998, Mr. Menditch was also responsible for
the Company's operations in the Washington, D.C. area and Virginia, Maryland
and Pennsylvania. He has also served as Executive Vice President of General
Heating since September 1996 and, prior thereto, as Senior Vice President of
General Heating from 1974 to September 1996. Mr. Menditch is the brother of
Frank N. Menditch.

Jennifer L. Tweeton has been Vice President--Investor Relations since June
1997. From July 1996 to June 1997, she was Director of Investor Relations for
the Company. Prior thereto, she was Vice President of Special Projects for
Infrastructure Services, Inc., an industrial contractor for highway
maintenance and repair, from March 1996 to July 1996 and Financial Planning
Manager for U.S. Delivery from 1994 to March 1996. From 1990 to 1994, Ms.
Tweeton was employed as Financial Planning Manager by Team, Inc., a service
provider to the petrochemical industry.

B-6
<PAGE>

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of March 29, 1999, the "beneficial
ownership" (as defined by the SEC) of the Common Stock of (i) each person
known to the Company to beneficially own more than 5% of its outstanding
shares of Common Stock, (ii) each of the Company's directors, (iii) the
executive officers of the Company named in the Summary Compensation Table, and
(iv) all executive officers and directors of the Company as a group.

<TABLE>
<CAPTION>
Shares Beneficially
Owned(1)
------------------------
Name Name Percent
---- ------------ -----------
<S> <C> <C>
Consolidation Experts, LP
Consolidation Experts, LLC
C. Clifford Wright, Jr.
William P. McCaughey
Ronald R. McCann
Wes Lewis
A. Jefferson Walker
Rosario P. Schembari
c/ Consolidated Experts, LP(2)
5051 Westheimer Road, Suite 1890
Houston, Texas 77056-5604............................. 1,450,797 8.8%
Equus II Incorporated(3)
2929 Allen Parkway, 25th Floor
Houston, Texas 77019.................................. 1,225,000 7.7%
Howard S. Hoover, Jr................................... 313,751 2.0%
Frank N. Menditch...................................... 259,860 1.6%
Elliot Sokolow......................................... 302,761 1.9%
Thomas N. Amonett...................................... 91,185 *
John D. Held........................................... 85,218 *
Harry O. Nicodemus, IV................................. 24,082 *
Nolan Lehmann.......................................... 12,334 *
Robert J. Cruikshank................................... 10,334 *
Randall B. Hale........................................ 9,334 *
Bobby Shackouls........................................ 0 *
Don Jordan............................................. 0 *
All executive officers and directors as a group (12
persons)(1)........................................... 1,576,347 9.7%
</TABLE>
- --------
* Less than 1%

(1) The shares beneficially owned include shares issuable upon exercise of
outstanding options that are exercisable within 60 days of April 1, 1999
as follows: Mr. Hoover--156,280 shares; Mr. Menditch--35,300; Mr.
Sokolow--33,740 shares; Mr. Held--79,560 shares; Mr. Amonett--89,009
shares; Mr. Nicodemus--22,800 shares; Mr. Lehmann--8,344 shares; Mr.
Cruikshank--8,344 shares; Mr. Hale--8,344 shares; Mr. Shackouls--0 shares;
Mr. Jordan--0 shares and all current executive officers and directors as a
group--442,891 shares. Shares held by executive officers through the
Company's 401(k) plan are reflected as of December 31, 1998, and
additional shares may have accumulated since that date.
(2) Based on a Schedule 13D dated January 14, 1999. The Schedule 13D indicates
that the reporting persons have, in the aggregate, sole voting power and
sole dispositive power as to 929,676 shares.
(3) Based on a Schedule 13D dated March 9, 1998. That Schedule 13D indicates
that the 1,225,000 shares reported as beneficially owned include 100,000
shares obtainable on exercise of a warrant exercisable at $15.00 per
share. The Schedule 13D indicates that the reporting person has sole
voting and sole dispositive power with respect to all 1,225,000 shares.
Nolan Lehmann, a director of the Company, is the President and a director
of Equus II and Randall B. Hale, a director of the Company, is a Vice
President of Equus II, and thus each may be deemed to be the beneficial
owner of the shares held by Equus II. Mr. Lehmann and Mr. Hale each
disclaim beneficial ownership of all of those shares.

Except as otherwise indicated, the address of each person listed in the
above table is c/o American Residential Services, Inc., Post Oak Tower, Suite
725, 5051 Westheimer Road, Houston, Texas 77056-5604. All persons listed have
sole voting and investment power with respect to their shares unless otherwise
indicated.

B-7
<PAGE>

EXECUTIVE COMPENSATION AND OTHER INFORMATION

Executive Compensation

The following table sets forth information regarding aggregate cash
compensation, restricted stock and stock option awards and other compensation
earned by the Company's Chief Executive Officer, and its five other most
highly compensated executive officers for services rendered to the Company
during 1996, 1997 and 1998:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Long-Term
Compensation Awards
---------------------
Annual
Compensation Restricted Shares
Name and Principal -------------------- Stock Underlying All Other
Position Year Salary Bonus(1) Awards Options Compensation(2)
------------------ ---- -------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Thomas N. Amonett(3).... 1998 $148,833 $ 0 -- 0 $ 1,053
President and Chief 1997 $ -- $ -- ---- 280,675 $ --
Executive Officer 1996 $ -- $ -- -- 0 $ --
Howard S. Hoover,
Jr.(4)................. 1998 $178,200 $ 0 -- 0 $ 806
Chairman of the Board 1997 $175,000 $ 78,904 -- 31,400 $ 1,116
1996 $160,000 $ 26,970 -- 150,000 $ 498
Frank N. Menditch....... 1998 $173,100 $ 0 -- 0 $ 1,558
Senior Vice President,
Regional 1997 $165,000 $ 0 -- 26,500 $ 2,273
Vice President-Northern
Region 1996 $ 39,425(5) $ 0 -- 50,000 $ 375
Elliot Sokolow.......... 1998 $173,100 $ 0 -- 0 $ 1,731
Senior Vice President,
Director of 1997 $156,522 $ 0 -- 18,700 $ 2,200
Residential Operations 1996 $ 24,518(6) $ 0 -- 50,000 $ 0
John D. Held............ 1998 $170,000 $ 0 -- 7,500 $ 1,673
Senior Vice President, 1997 $150,000 $ 58,679 -- 27,800 $ 1,661
General Counsel and
Secretary 1996 $ 99,230(7) $100,220 -- 75,000 $ 685
Harry O. Nicodemus, IV.. 1998 $170,000 $ 0 7,500 $ 1,677
Senior Vice President,
Treasurer, 1997 $ 12,981(9) $ 0 -- 71,500 $ 529
Chief Financial
Officer, and 1996 $ 0 $ 0 -- 0 $ 0
Chief Accounting
Officer
</TABLE>
- --------

(1) Except as stated in Note (8) below, represents aggregate cash bonus awards
relating to Company performance in 1996, which were paid in one quarterly
installment in 1996 and three quarterly installments in 1997. The Company
did not pay any bonuses to executive officers in 1997 or 1998 relating to
individual or Company performance for 1997 or 1998.
(2) Represents: (i) matching contributions by the Company under the Company's
401(k) plan during 1998 for the executive officers named in the above
table in the amounts of $673 for Mr. Amonett; $806 for Mr. Hoover; $1,558
for Mr. Menditch; $1,734 for Mr. Sokolow; $1,673 for Mr. Held; and $1,677
for Mr. Nicodemus, and (ii) $308 of premium cost for life insurance
coverage under an executive life insurance program provided to Mr.
Amonett. This executive life insurance program was terminated in 1998.
(3) On October 31, 1997, the Board of Directors appointed Mr. Amonett as
President and Chief Executive Officer. Mr. Amonett received options to
purchase up to 250,000 shares of Common Stock at an exercise price of
$14.75 per share, which become exercisable in annual increments of 20%
beginning one year from the grant date and expire on October 31, 2007. In
lieu of receipt of his base salary through May 31, 1998, Mr. Amonett
received additional options to purchase up to 30,675 shares of Common
Stock at an exercise price of $14.75 per share, which became exercisable
in full on June 1, 1998 and expire on October 31, 2002. The information
reflected in the table above does not include director's fees paid to Mr.
Amonett in 1996 and 1997, options to purchase up to 10,000 shares of
Common Stock granted on September 27, 1996, or

B-8
<PAGE>

options to purchase 5,000 shares of Common Stock, granted on July 1, 1997,
in each case while Mr. Amonett was a Nonemployee Director of the Company.
See "Directors Remuneration."
(4) Effective as of January 1, 1999, Mr. Hoover became a part-time non-officer
employee of the Company and serves as non-executive Chairman of the Board
of Directors of the Company. See "Employment Agreements."
(5) Salary earned in 1996 from the date of commencement of Mr. Menditch's
employment with the Company in September 1996.
(6) Salary earned in 1996 from date of commencement of Mr. Sokolow's
employment with the Company in September 1996.
(7) Salary earned in 1996 from the date of commencement of Mr. Held's
employment with the Company in March 1996.
(8) Of this amount, $80,000 represents 5,333 shares of Common Stock awarded to
Mr. Held under an incentive plan when the IPO closed, valued at the
initial IPO price to the public of $15 per share.
(9) Salary earned in 1997 from date of commencement of Mr. Nicodemus'
employment with the Company in January 1997.

Option Grants

The following table sets forth information regarding the options granted
during 1998 to the executive officers named in the Summary Compensation Table.
All of the options listed below were granted July 20, 1998, become exercisable
in annual increments of 20% of the total number of shares subject thereto
beginning July 20, 1999 and become fully exercisable on July 20, 2003.

<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------------------
Potential
Realizable Value
Percent at Assumed Annual
of Total Rate of Stock
Number of Options Price
Shares Granted Appreciation for
Underlying to Option Term(1)
Options Employees Exercise Expiration -----------------
Name Granted in 1998 Price Price 5% 10%
---- ---------- --------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Thomas Amonett.......... 0 N/A N/A N/A N/A N/A
Howard S. Hoover, Jr.... 0 N/A N/A N/A N/A N/A
Frank Menditch.......... 0 N/A N/A N/A N/A N/A
Elliot Sokolow.......... 0 N/A N/A N/A N/A N/A
John D. Held............ 7,500 .86% $9.59 07/20/08 $117,158 $186,555
Hank Nicodemus.......... 7,500 .86% $9.59 07/20/08 $117,158 $186,555
</TABLE>
- --------
(1) Calculated on the basis of the indicated rate of appreciation in the value
of the Common Stock, compounded annually from the fair market value on the
grant date, from the grant date to the end of the option term.

B-9
<PAGE>

Aggregate Option Exercises and Holdings and Year-End Values

The following table presents information regarding options exercised during
1998 and options outstanding at December 31, 1998 for each of the executive
officers named in the Summary Compensation Table:

<TABLE>
<CAPTION>
Number of Shares
Underlying Unexercised Value of Unexercised
Options at Fiscal Year- In-the-Money Options Held
Shares End at Fiscal Year-End(2)
Acquired Value ------------------------- -------------------------
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas N. Amonett....... -- -- 89,009 206,666 $0 $0
Howard S. Hoover, Jr.... -- -- 156,280 25,120 $0 $0
Frank N. Menditch....... -- -- 35,300 41,200 $0 $0
Elliot Sokolow.......... -- -- 33,740 34,960 $0 $0
John D. Held............ -- -- 79,560 28,240 $0 $0
Hank Nicodemus.......... -- -- 15,800 63,200 $0 $0
</TABLE>
- --------
(1) Value is calculated on the basis of the market value of the Company's
Common Stock at the time of exercise, less the exercise price, multiplied
by the number of shares underlying the options exercised.

(2) The closing price for the Common Stock as listed on the New York Stock
Exchange on December 31, 1998 was $3.25. All of options outstanding held
by individuals in the above table had exercise prices greater than $3.25.

Employment Agreements

The Company has employment agreements with Messrs. Amonett, Sokolow,
Menditch, Held and Nicodemus. Each of these agreements (i) provides for an
annual minimum base salary, (ii) entitles the employee to participate in all
the Company's compensation plans (as defined) in which executive officers of
the Company participate and (iii) has a continuous three-year term subject to
the right of either party to terminate the employee's employment at any time.
If the employee's employment is terminated by the Company without cause (as
defined) or by the employee with good reason (as defined), the employee will
be entitled, during each of the years in the three-year period beginning on
the termination date, to (i) periodic payments equal to his average annual
cash compensation (as defined) from the Company, including bonuses, if any,
during the two years (or such shorter period of employment) preceding the
termination date and (ii) continued participation in all the Company's
compensation plans (other than the granting of new awards under the incentive
plan or any other performance-based plan). Except in the case of a termination
for cause, any stock options previously granted to the employee under the
incentive plan that have not been exercised and are outstanding as of the time
immediately prior to the date of his termination will remain outstanding (and
continue to become exercisable pursuant to their respective terms) until
exercised or the expiration of their term, whichever is earlier. If a change
of control (as defined) of the Company occurs, the employee may terminate his
employment at any time during the 365-day period following that event and
receive a lump sum payment equal to three times his highest annual base salary
under the agreement (plus such amounts as may be necessary to hold the
employee harmless from the consequences of any resulting excise or other
similar purpose tax relating to "parachute payments" under the Internal
Revenue Code of 1986, as amended). Each employment agreement contains a
covenant limiting competition with the Company for a period of one year
following termination of employment.

The Company also had an employment agreement with terms substantially the
same as those described above with Mr. Hoover through December 31, 1998. In
settlement of the Company's obligations to Mr. Hoover under that agreement,
effective as of January 1, 1999 Mr. Hoover became a part-time non-officer
employee of the Company and the Company will pay Mr. Hoover $180,000 per annum
until December 31, 2001. In addition, the Company will provide Mr. Hoover an
office, certain administrative services and other items to which he would
otherwise be entitled under his employment agreement until December 31, 2001.

The Company also has employment agreements with other executive officers of
the Company.

B-10
<PAGE>

PERFORMANCE GRAPH

The following graph compares the percentage change in the market value of
the Company's Common Stock to the cumulative total stockholder return (change
in stock price plus reinvested dividends) of the Standard & Poor's 500 Stock
Index ("S&P 500 Index"), the Company's Current MG Industry Group 059--
Plumbing, Heating and Air Conditioning index published by Medial General
Financial Services, Inc. (the "Current Industry Index") and the Company's
previous MG Industry Group 636--General Contractors index published by Medial
General Financial Services, Inc. (together with the Current Industry Index,
the "Industry Indexes") for the period from September 25, 1996, the date
immediately following the date of the IPO to December 31, 1998, assuming the
investment of $100 on September 25, 1996 and the reinvestment of all dividends
since that date to December 31, 1998.

[PERFORMANCE CHART APPEARS HERE]
<TABLE>
<CAPTION>
9/25/96 12/31/96 12/1/97 12/31/98
<S> <C> <C> <C> <C>
ARS 100 100 100 100
MG Group 059 150.69 115.14 107.39 108.34
MG Group 636 86.86 131.50 86.67 144.48
S&P Composite 18.86 147.76 60.87 185.77

</TABLE>

Source: Media General Financial Services, Inc.

The performance of the Company's Common Stock reflected above is not
necessarily indicative of future performance of the Common Stock. The total
return on investment for the period shown for the Company, the S&P 500 Index,
and the Industry Indexes is based on the stock price or composite index at
September 25, 1996.

The performance graph appearing above shall not be deemed incorporated by
reference by any general statement incorporating this Proxy Statement by
reference into any filing under the Securities Act of 1933, as amended (the
"Securities Act"), or under the Security Exchange Act of 1934, as amended (the
"Exchange Act"), and shall not be deemed filed under either of such Acts
except to the extent that the Company specifically incorporates this
information by reference.

B-11
<PAGE>

REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION

Overview

The Compensation Committee of the Board of Directors of ARS is responsible
for establishing a general compensation policy for officers and employees of
the Company, preparing any reports that may be required relating to officer
compensation and approving any increases in director's fees.

The Company's executive compensation program has been designed to assist the
Company in attracting, motivating and retaining the executive talent necessary
for the Company to maximize its return to stockholders. To this end, this
program provides competitive compensation levels and incentive pay levels that
vary based on corporate, business unit (for business unit positions) and
individual performance.

The Company's compensation program for executives consists of three key
elements:

a base salary,
a performance-based annual bonus, and
periodic grants of stock options.

The Compensation Committee believes that this three-part approach best
serves the interests of the Company and its stockholders. It enables the
Company to meet the requirements of the highly competitive environment in
which the Company operates while ensuring that executive officers are
compensated in a way that advances both the short-term and long-term interests
of stockholders. Under this approach, compensation for these officers involves
a high proportion of pay that is "at risk" through the annual bonus and stock
options.

Base Salary

Base salaries for the Company's executive officers, as well as changes in
such salaries, are based upon recommendations by the Company's Chief Executive
Officer, taking into account such factors as competitive industry salaries, a
subjective assessment of the nature of the position, and the contribution and
experience of the officer. Performance for base salary purposes is assessed on
a qualitative, rather than a quantitative, basis. No specific performance
formula or weighting of factors is used in determining base salary levels.

Annual Bonus

1998 Award Program. For the year ended December 31, 1998, the Compensation
Committee approved an award program under the 1996 Incentive Plan for certain
executive officers whose target awards were based on the Company's 1998
earnings per share. In 1998, the Company did not meet its 1998 earnings per
share target. As a result, no awards were paid under the 1998 award program.

1999 Award Program. As of the date of this report, the Compensation
Committee has not approved an award program for the year ending December 31,
1999.

Stock Options

In 1997, the Company adopted an incentive plan for employees other than
executive officers and directors (collectively with the 1996 Incentive Plan,
the "Incentive Plans"). The objectives of the Incentive Plans are to (i)
attract and retain the services of key employees, qualified independent
directors and qualified consultants and other independent contractors and (ii)
encourage the sense of proprietorship in and stimulate the active interest of
those persons in the development and financial success of the Company by
making awards designed to provide participants in the Incentive Plans with a
proprietary interest in the growth and performance of the Company.

Stock options align the interests of employees and stockholders by providing
value to the option holder through stock price appreciation only. In 1998, the
Company granted a total of 873,971 options under the

B-12
<PAGE>

Incentive Plans to officers and other employees of the Company. In all cases,
the exercise price of the options was equivalent to or greater than the fair
market value of the Common Stock at the time of those grants.

The Compensation Committee expects that it will make future stock option
awards periodically at its discretion based on recommendations of the Chief
Executive Officer. Stock option grant sizes, in general, will be evaluated by
regularly assessing competitive market practices and the overall performance
of the Company. This posture with regard to stock options is intended to focus
management's efforts on maximizing stockholder returns. However, the number of
options granted to a particular participant is also based on the Company's
historical financial success, its future business plans and the individual's
position and level of responsibility within the Company. These factors are
assessed subjectively and are not weighted.

1998 Chief Executive Officer Pay

As described above, the Compensation Committee considers several factors in
developing an executive compensation package. For the Chief Executive Officer,
these factors include competitive market pay practices, performance level,
experience, contributions toward achievement of strategic goals and the
overall financial and operations success of the Company. Specific actions
taken by the Compensation Committee regarding the Chief Executive Officer's
compensation in 1998 are summarized below.

Base Salary

Thomas Amonett was appointed by the Board of Directors as Chief Executive
Officer of the Company on October 31, 1997. Mr. Amonett's annual base salary
rate for 1997 was $250,000, the same annual base salary rate of the Company's
former Chief Executive Officer. For 1998 and for 1999, Mr. Amonett's base
salary remained unchanged. Pursuant to his employment agreement, Mr. Amonett
was entitled to an inflation-based cost of living increase to base salary on
November 1, 1998 but he voluntarily waived this increase.

Stock Options

Mr. Amonett was not awarded any Company stock options in 1998.

This report shall not be deemed incorporated by reference by any general
statement incorporating this Proxy Statement by reference into any filing
under the Securities Act or the Exchange Act and shall not be deemed filed
under either of such statutes except to the extent that the Company
specifically incorporates this information by reference.

This report is furnished by the Compensation Committee of the Board of
Directors.

Nolan Lehmann (Chairman)
Bobby Shackouls

Dated: March 25, 1999

B-13
<PAGE>

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In 1998, American Residential Services of South Carolina, Inc. ("ARS of
South Carolina"), a subsidiary of the Company, leased certain office and
warehouse space under three leases from a partnership in which Gorden H.
Timmons, a former officer and director of the Company during a portion of
1998, owns a 90% equity interest. The expiration dates of the three leases
range from month-to-month to 2006. Aggregate annual 1998 rentals under the
three leases totaled $254,200.

In March 1998, the Company sold an office and warehouse property owned by
ARS of South Carolina in Charleston, South Carolina to a company in which Mr.
Timmons owns a 50% equity interest. The sales price was $1,755,000, which was
paid in full at the closing. Immediately after the sale, ARS of South Carolina
leased the property from Mr. Timmons' company under a triple-net seven-year
lease, effective April 1, 1998. The aggregate annual rent to be paid by ARS of
South Carolina under that lease is $155,625 and is not subject to increase
during the seven-year term of the lease. The sale of the property and the
terms of the lease were reviewed and approved by the Company's Board of
Directors in March 1998 (with Mr. Timmons abstaining from voting). In making
its determination to approve the sale and lease transactions, the Board of
Directors reviewed the reports of an independent real estate appraisal firm
which showed that the sales price was slightly higher than the appraised fair
market value of the property, net of commissions, and the annual lease rental
amount was slightly lower than the fair market value of the property.

American Residential Services of Virginia, Inc., a subsidiary of the
Company, leases office and warehouse space under four leases from a limited
partnership owned by Frank N. Menditch, his brothers and trusts for the
benefit of their children. Aggregate annual 1998 rentals under the leases,
which expire in 2005, totaled $531,500 and will increase a minimum of 4% each
year during the terms of the leases.

American Residential Services of Florida, Inc. ("ARS of Florida"), a
subsidiary of the Company, leases its principal office and warehouse space
under two triple-net leases, one of which was entered into in 1998 from a
limited partnership in which Elliot Sokolow owns an 80% interest. The
aggregate annual rent paid by ARS of Florida in 1998 under the previously
existing lease was $271,400, which will increase 5% per year during the term
of the lease. In December 1998, ARS of Florida leased additional property
contiguous to its existing facility from Mr. Sokolow's partnership under a
second lease. Both leases will expire in May 2005. The annual rent to be paid
by ARS of Florida under the second lease is $124,900 and is subject to
increase 3% per year during the term of the lease. The terms of the new lease
were reviewed and approved by the Company's Board of Directors in December
1998 (with Mr. Sokolow abstaining from voting). In making its determination to
approve the lease transaction, the Board of Directors reviewed the report of
an independent real estate appraisal firm, which showed that the annual lease
rental amount was equal to the fair rental value of the property. The
aggregate annual 1998 rentals under both leases was $281,800.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and persons holding more than 10% of a registered class of
the Company's equity securities to file with the SEC and the New York Stock
Exchange initial reports of ownership, reports of changes in ownership and
annual reports of ownership of Common Stock and other equity securities of the
Company. Such directors, officers and stockholders are also required to
furnish the Company with copies of all such filed reports.

Based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required during
1998, the Company believes that all Section 16(a) reporting requirements
related to the Company's directors and executive officers were timely
fulfilled during 1998.

INTERESTS OF CERTAIN PERSONS IN THE OFFER AND MERGER

In considering the recommendation of the Board, stockholders of the Company
should be aware that certain officers and directors of the Company have
certain interests in the Offer and the Merger that present actual or potential
conflicts of interest in connection with the Offer and the Merger. The Board
was aware of these potential or actual conflicts of interest and considered
them along with other matters described under Item 4 of the Schedule 14D-9 to
which this Information Statement is attached.

B-14

<PAGE>

March 29, 1999

Dear Fellow Stockholders:

On March 22, 1999, American Residential Services, Inc. ("ARS") entered into
an Agreement and Plan of Merger (the "Agreement") with The ServiceMaster
Company ("ServiceMaster") and a wholly-owned subsidiary of ServiceMaster that
provides for the acquisition of ARS for a price of $5.75 per share in cash.
Under the terms of the proposed transaction, ServiceMaster's subsidiary has
commenced a cash tender offer (the "Tender Offer") for all outstanding shares
of ARS Common Stock, par value $.001 per share, including the associated
Preferred Stock Purchase Rights (the "Rights") (collectively, the "ARS
Shares"). The Tender Offer is currently scheduled to expire at 11:59 p.m., New
York City time, on April 26, 1999.

Completion of the Tender Offer is conditioned, among other things, upon the
tender of at least 52 percent of the outstanding ARS Shares on the date Shares
are accepted for payment. Following successful completion of the Tender Offer,
all ARS Shares not tendered and purchased in the Tender Offer will be
converted into the right to receive the price per share paid pursuant to the
Tender Offer in cash pursuant to a merger of ARS with ServiceMaster's
subsidiary as contemplated by the Agreement (the "Merger").

YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED AND DECLARED ADVISABLE THE
TENDER OFFER, THE MERGER AND THE AGREEMENT AND HAS DETERMINED THAT THE TERMS
OF THE TENDER OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF,
THE STOCKHOLDERS OF ARS. ACCORDINGLY, THE BOARD OF DIRECTORS RECOMMENDS THAT
THE STOCKHOLDERS ACCEPT THE TENDER OFFER AND TENDER THEIR SHARES.

The recommendation of the Board of Directors is described in the Schedule
14D-9 filed by ARS with the Securities and Exchange Commission and enclosed
with this letter. In arriving at its recommendation, the Board of Directors
gave careful consideration to a number of factors, including the opinion of
Jefferies & Company, Inc., financial advisors to ARS, that the consideration
to be received by the ARS stockholders pursuant to the Tender Offer and Merger
is fair, from a financial point of view, to such holders (a copy of which
opinion is attached as Annex A to the Schedule 14D-9). We urge you to read
carefully the Schedule 14D-9 in its entirety so that you will be more informed
as to the Board's recommendation.

Also accompanying this letter is a copy of the Offer to Purchase and related
materials, including a Letter of Transmittal used for tendering your shares.
These documents set forth the terms and conditions of the Tender Offer and
provide instructions as to how to tender your shares. We urge you to read each
of the enclosed materials carefully.

ServiceMaster has retained D.F. King & Co., Inc. to act as Information Agent
for this offer. If you have any questions about what steps you need to take to
tender your shares or have other questions about the offer, please call D.F.
King as follows: banks and brokers call collect (212) 269-5550 and all others
call (800) 431-9646.

On behalf of the Board of Directors,
Thomas N. Amonett
President and Chief Executive Officer

<PAGE>

OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(Including the Associated Preferred Stock Purchase Rights)

American Residential Services, Inc.

$5.75 Net Per Share in Cash

SVM M9 Acquisition Corporation,
A Wholly-Owned Subsidiary

The ServiceMaster Company

THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M. NEW YORK CITY
TIME ON MONDAY, APRIL 26, 1999, UNLESS THE OFFER IS EXTENDED.

<PAGE>

The offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 22, 1999 (the "Merger Agreement"), by and among the ServiceMaster
Company ("Parent"), SVM M9 Acquisition Corporation ("Purchaser") and American
Residential Services, Inc. (the "Company"). The Board of Directors of the
Company has unanimously approved the Offer, the contemplated merger (the
"Merger") and the Merger Agreement, and determined that the Offer and the
Merger are fair to, and in the best interests of, the stockholders of the
company and unanimously recommends that the stockholders of the Company accept
the offer and tender their shares.

The offer is conditioned upon, among other things, there being validly
tendered and not withdrawn on or prior to the expiration date (as defined
herein) such number of shares that would constitute at least 52 percent of the
outstanding shares on the date shares are accepted for payment. The offer is
also subject to certain other conditions set forth in this Offer to Purchase.
See Section 14.

----------------

IMPORTANT

Any stockholder desiring to tender all or any portion of its Shares (as
defined herein) should either (i) complete and sign the enclosed Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal, have the signature of such stockholder thereon
guaranteed (if required by Instruction 1 to the Letter of Transmittal), mail
or deliver the Letter of Transmittal (or a facsimile thereof) and any other
required documents to the Depositary (as defined herein) and either deliver
the certificates for such Shares to the Depositary or tender such Shares
pursuant to the procedure for book-entry transfer set forth in Section 3 of
this Offer to Purchase or (ii) request the broker, dealer, commercial bank,
trust company or other nominee of such stockholder to effect the transaction
for such stockholder, in each case on or prior to the Expiration Date. Any
stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee to tender such Shares.

Any stockholder who desires to tender Shares and whose certificates
evidencing such Shares are not immediately available, who cannot comply with
the procedures for book-entry transfer on a timely basis, or who cannot
deliver all required documents to the Depositary prior to the expiration of
the Offer, may tender such Shares by following the procedures for guaranteed
delivery set forth in Section 3 of this Offer to Purchase.

Questions and requests for assistance may be directed to the Information
Agent (as defined herein) at its address and telephone numbers set forth
immediately below and on the back cover of this Offer to Purchase. Requests
for additional copies of this Offer to Purchase, the related Letter of
Transmittal, the Notice of Guaranteed Delivery and the other tender offer
documents may be directed to the Information Agent or brokers, dealers,
commercial banks or trust companies.

----------------

The Information Agent for the Offer is:

D.F. KING & CO., INC.
77 Water Street, 20th Floor
New York, New York 10005
Banks and Brokers call collect: (212) 269-5550
All others call: (800) 431-9646

ii
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
INTRODUCTION............................................................... 1

THE OFFER.................................................................. 3

1.Terms of the Offer...................................................... 3

2.Acceptance for Payment.................................................. 4

3.Procedures for Tendering Shares......................................... 5

4.Withdrawal Rights....................................................... 8

5.Certain U.S. Federal Income Tax Consequences............................ 8

6.Price Range of the Shares; Dividends.................................... 9

7. Effect of the Offer on the Market for the Shares; Stock Listing;
Exchange Act Registration;
Margin Regulations..................................................... 10

8.Certain Information Concerning the Company.............................. 11

9.Certain Information Concerning Parent and Purchaser..................... 12

10.Sources and Amount of Funds............................................. 14

11. Background of the Offer; Purpose of the Offer and the Merger; the
Merger Agreement and
Certain Other Agreements............................................... 14

12.Plans for the Company; Other Matters.................................... 24

13.Dividends and Distributions............................................. 25

14.Conditions to the Offer................................................. 25

15.Certain Legal Matters................................................... 26

16.Fees and Expenses....................................................... 28

17.Miscellaneous........................................................... 28
</TABLE>

iii
<PAGE>

To the Holders of Common Stock of
American Residential Services, Inc.:

INTRODUCTION

SVM M9 Acquisition Corporation, a Delaware corporation ("Purchaser") and a
wholly-owned subsidiary of The ServiceMaster Company, a Delaware corporation
("Parent"), hereby offers to purchase all outstanding shares of common stock,
par value $0.001 per share (the "Common Stock"), including the associated
preferred stock purchase rights issued pursuant to the Rights Agreement (as
defined below) of the Company (the "Rights" and, together with the Common
Stock, the "Shares") of American Residential Services, Inc., a Delaware
corporation (the "Company"), at a price of $5.75 per Share, net to the seller
in cash, without interest thereon (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as amended or supplemented from time to
time, collectively constitute the "Offer"). The Offer is being made pursuant
to the Merger Agreement.

Tendering stockholders of record who tender Shares directly will not be
obligated to pay brokerage fees or commissions or, except as set forth in
Instruction 6 of the Letter of Transmittal, stock transfer taxes on the
purchase of Shares by Purchaser pursuant to the Offer. Stockholders who hold
their Shares through a bank or broker should check with such institution as to
whether they charge any service fees. The Purchaser will pay all fees and
expenses of D.F. King & Co., Inc., which is acting as Information Agent (in
such capacity, the "Information Agent"), incurred in connection with the
Offer. The Purchaser will also pay all fees and expenses of Harris Trust
Company of New York, which is acting as the Depositary (in such capacity, the
"Depositary"), incurred in connection with the Offer. See Section 16.

The Board of Directors of the Company (the "Company Board") has unanimously
approved the Offer, the Merger and the Merger Agreement and determined that
the Offer and the Merger are fair to, and in the best interests of, the
stockholders of the Company and unanimously recommends that the stockholders
of the Company accept the offer and tender their shares.

Jefferies & Company, Inc. is the financial advisor to the Company and has
delivered to the Company Board its opinion, dated March 22, 1999 (the
"Financial Advisor Opinion"), to the effect that, as of such date and based
upon and subject to certain assumptions and matters stated therein, the
consideration to be received by the public shareholders of the Company in the
Offer and the Merger is fair, from a financial point of view, to such holders.
A copy of the Financial Advisor Opinion is attached as an exhibit to the
Information Statement on Schedule 14D-9 of the Company (the "Schedule 14D-9"),
which has been filed by the Company with the Securities and Exchange
Commission (the "Commission") in connection with the Offer and which is being
mailed to holders of Shares herewith. Holders of Shares are urged to, and
should, read the Schedule 14D-9 in its entirety.

The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn on or prior to the expiration date such number of
shares that would constitute at least 52 percent of the outstanding shares on
the date shares are accepted for payment (the "Minimum Condition"). The offer
is also subject to certain other conditions set forth in this Offer to
Purchase. See Section 14. Purchaser believes that, as of March 22, 1999 there
were 15,887,784 Shares issued and outstanding, 2,780,491 Shares issuable
pursuant to the exercise of outstanding stock options ("Options") and
2,857,196 Shares issuable pursuant to the exercise of outstanding warrants and
convertible notes ("Warrants and Convertible Notes"). The Merger Agreement
provides, among other things, that the Company will not, without the prior
written consent of Parent, issue any additional Shares (except upon the
exercise of outstanding Options and Warrants and Convertible Notes) or other
securities convertible into, or exercisable or exchangeable for, Shares. See
Section 11. Based on the foregoing, Purchaser believes that the Minimum
Condition will be satisfied if 11,193,245 Shares are validly tendered and not
withdrawn prior to the Expiration Date (assuming the exercise of Options,
Warrants and Convertible Notes between now and then).

1
<PAGE>

Pursuant to the Merger Agreement and the General Corporation Law of the
State of Delaware, as amended (the "DGCL"), as soon as practicable after the
completion of the Offer and satisfaction or waiver, if permissible, of all
conditions, including the purchase of Shares pursuant to the Offer (sometimes
referred to herein as the "consummation" of the Offer) and the approval and
adoption of the Merger Agreement by the stockholders of the Company (if
required by applicable law), Purchaser shall be merged with and into the
Company (the "Merger") and the Company will be the surviving corporation in the
Merger (the "Surviving Corporation"). At the effective time of the Merger (the
"Effective Time"), each Share then outstanding, other than Shares held by (i)
the Company or any of its subsidiaries, (ii) Parent or any of its subsidiaries,
including Purchaser, and (iii) stockholders who properly perfect their
appraisal rights under the DGCL, will be converted into the right to receive
from the surviving corporation the consideration per Share paid in the Offer
(the "Merger Consideration"), without interest. The Merger Agreement is more
fully described in Section 11.

The Merger Agreement provides that upon the acceptance for payment of, and
payment for, Shares by Purchaser pursuant to the Offer, the Company (i) shall
cause the directors of the Company and its subsidiaries to resign their
positions as such upon such consummation of the Offer and (ii) shall arrange
for the appointment of certain individuals designated by Parent as the
directors of the Company.

Consummation of the Merger is conditioned upon, among other things, the
adoption by the requisite vote of stockholders of the Company of the Merger
Agreement, if required by applicable law. See Section 11. In the Merger
Agreement, the Company has represented to the Purchaser and Parent that the
affirmative vote of the holders of a majority of the outstanding Shares is the
only vote of any class or series of the capital stock of the Company necessary
to approve the Merger Agreement at a meeting of the stockholders of the
Company. If the Purchaser purchases at least 90 percent of the outstanding
Shares in the Offer, Purchaser will be able to effect the Merger without the
affirmative vote of any other stockholder of the Company. Pursuant to the
Merger Agreement, Parent has agreed to vote and to cause any subsidiary of
Parent to vote the Shares acquired by them pursuant to the Offer in favor of
the Merger. See Section 12.

Under Section 253 of the DGCL, if a corporation owns at least 90 percent of
the outstanding shares of each class of a subsidiary corporation, the
corporation holding such stock may merge such subsidiary into itself, or itself
into such subsidiary, without any action or vote on the part of the board of
directors or the stockholders of such other corporation (a "short-form
merger"). In the event that Purchaser acquires in the aggregate at least 90
percent of the outstanding Shares pursuant to the Offer or otherwise, then, at
the election of Parent, a short-form merger could be effected without any
further approval of the Company Board or the stockholders of the Company. In
the Merger Agreement, Parent, Purchaser and the Company have agreed that,
notwithstanding that all conditions to the Offer are satisfied or waived as of
the scheduled Expiration Date, Purchaser may extend the Offer for a period not
to exceed five business days, subject to certain conditions, if the Shares
tendered pursuant to the Offer constitute less than 90 percent of the
outstanding Shares. Even if Purchaser does not own 90 percent of the
outstanding Shares following consummation of the Offer, Parent or Purchaser
could seek to purchase additional shares in the open market or otherwise in
order to reach the 90 percent threshold and employ a short-form merger. The per
share consideration paid for any Shares so acquired in open market purchases
may be greater or less than the Offer Price. Parent presently intends to effect
a short-form merger, if permitted to do so under the DGCL, pursuant to which
Purchaser will be merged with and into the Company. See Section 12.

The Company has declared a dividend of one Right for each outstanding Share
pursuant to the Rights Agreement, dated as of August 1, 1996, by and between
the Company and ChaseMellon Shareholder Services, L.L.C., as Rights Agent (the
"Rights Agreement"). The Purchaser understands that pursuant to the Merger
Agreement the Rights Agreement has been amended (i) to render the Rights
Agreement inapplicable to the Offer, the Merger, the Merger Agreement, the
acquisition of Shares by Purchaser pursuant to the Offer and any purchase of
Shares by Parent or Purchaser subsequent to the consummation of the Offer, (ii)
to ensure that (y) none of Parent, Purchaser or any of their respective
affiliates shall constitute an Acquiring Person (as defined in the Rights
Agreement) pursuant to the Rights Agreement by virtue of the execution of the
Merger Agreement, commencement and consummation of the Offer, the acquisition
of Shares by Purchaser pursuant to the Offer,

2
<PAGE>

the consummation of the Merger and any purchase of Shares by Parent or
Purchaser subsequent to the consummation of the Offer and (z) a Distribution
Date, a Stock Acquisition Date or a Triggering Event (as such terms are
defined in the Rights Agreement) does not occur by reason of the Offer, the
Merger, the execution of the Merger Agreement, the acquisition of the Shares
by Purchaser pursuant to the Offer, the consummation of the Merger or any
purchase of Shares by Parent or Purchaser subsequent to the consummation of
the Offer and (iii) to provide that the expiration date shall occur
immediately prior to the Effective Time.

This Offer to Purchase and the related Letter of Transmittal contain
important information and should be read carefully before any decision is made
with respect to the Offer.

THE OFFER

1. Terms of the Offer.

Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of such extension
or amendment), Purchaser will accept for payment and pay for all Shares
validly tendered on or prior to the Expiration Date, and not withdrawn in
accordance with Section 4. The term "Expiration Date" shall mean April 26,
1999 at 11:59 p.m. New York City time, unless and until Purchaser, in
accordance with the terms of the Merger Agreement, shall have extended the
period of time during which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date at which the Offer, as
so extended by Purchaser pursuant to the terms of the Merger Agreement, shall
expire. In the Merger Agreement, subject to certain limitations, Parent and
Purchaser have agreed that if all conditions to the obligation of Purchaser to
accept for payment and pay for Shares pursuant to the Offer are not satisfied
or waived on the scheduled Expiration Date, Purchaser may extend the Offer for
additional periods. See Section 14.

The Offer is conditioned upon the satisfaction of the Minimum Condition,
the expiration or termination of all waiting periods imposed by the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
and the other conditions set forth in Section 14. If such conditions are not
satisfied prior to the Expiration Date, Purchaser reserves the right, subject
to the terms of the Merger Agreement and subject to the applicable rules and
regulations of the Commission, to (i) decline to purchase any Shares tendered
in the Offer and terminate the Offer and return all tendered Shares to the
tendering stockholders, (ii) waive any or all conditions to the Offer (except
the Minimum Condition) and, to the extent permitted by applicable law,
purchase all Shares validly tendered and not withdrawn, (iii) extend the Offer
and, subject to the right of stockholders to withdraw Shares until the
Expiration Date, retain all Shares which have been validly tendered and not
withdrawn during the period or periods for which the Offer is extended or (iv)
subject to the following sentence, modify the terms of the Offer. The Merger
Agreement provides that Purchaser will not, without the consent of the
Company, reduce the number of Shares subject to the Offer, reduce the Offer
Price, add to the Offer conditions, extend the Offer (except as contemplated
by the Merger Agreement), change the form of consideration to be paid in the
Offer or amend any other condition to the Offer in any manner adverse to the
holders of the Shares.

The Merger Agreement requires Purchaser to accept for payment and pay for
all Shares validly tendered and not withdrawn pursuant to the Offer if all
conditions to the Offer are satisfied or waived on the Expiration Date.
Purchaser may, without the consent of the Company, (i) extend the Offer, if at
the initial scheduled or extended expiration date of the Offer any of the
conditions with respect to the Offer set forth in the Merger Agreement are not
satisfied or waived, until such time as such conditions are satisfied or
waived, (ii) extend the Offer for any period required by any rule, regulation,
interpretation or position of the Commission or the staff thereof applicable
to the Offer and (iii) extend the Offer on one or more occasions for an
aggregate period of not more than 5 business days beyond the latest expiration
date that would otherwise be permitted under clauses (i) or (ii) of this
sentence, if on such expiration date there shall not have been tendered at
least 90 percent of the outstanding ARS Shares. As used in this Offer to
Purchase, "business day" has the meaning set forth in Rule 14d-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act").

3
<PAGE>

Any extension, amendment or termination of the Offer will be followed as
promptly as practicable by public announcement thereof, the announcement in
the case of an extension to be issued no later than 9:00 a.m. New York City
time, on the next business day after the previously scheduled Expiration Date
in accordance with Rules 14d-4(c), 14d-6(d) and 14e-1(d) under the Exchange
Act. Without limiting the obligation of Purchaser under such Rules or the
manner in which Purchaser may choose to make any public announcement,
Purchaser currently intends to make announcements by issuing a press release
to the Dow Jones News Service.

If Purchaser extends the Offer, or if Purchaser (whether before or after
its acceptance for payment of Shares) is lawfully delayed in its purchase of,
or payment for, Shares, the Depositary may retain tendered Shares on behalf of
Purchaser, and such Shares may not be withdrawn except to the extent tendering
stockholders are entitled to withdrawal rights as described in Section 4.
However, the ability of Purchaser to delay the payment for Shares which
Purchaser has accepted for payment is limited by Rule 14e-1(c) under the
Exchange Act, which requires that a bidder pay the consideration offered or
return the securities deposited by, or on behalf of, holders of securities
promptly after the termination or withdrawal of the Offer.

If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Exchange Act. The minimum period during which the Offer must remain open
following material changes in the terms of the Offer or information concerning
the Offer, other than a change in price or a change in percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. In a
public release, the Commission has stated its view that an offer must remain
open for a minimum period of time following a material change in the terms of
the Offer and that waiver of a material condition, such as the Minimum
Condition or the Offer Price, is a material change in the terms of the Offer.
The release states that an offer should remain open for a minimum of five
business days from the date a material change is first published, or sent or
given to security holders and that, if material changes are made with respect
to information not materially less significant than the offer price and the
number of shares being sought, a minimum of ten business days may be required
to allow adequate dissemination and investor response. The requirement to
extend the Offer will not apply to the extent that the number of business days
remaining between the occurrence of the change and the then-scheduled
Expiration Date equals or exceeds the minimum extension period that would be
required because of such amendment. If, prior to the Expiration Date,
Purchaser increases the consideration offered to holders of Shares pursuant to
the Offer, such increased consideration will be paid to all holders whose
Shares are purchased in the Offer whether or not such Shares were tendered
prior to such increase.

The Company has provided Purchaser with the stockholder lists and security
position listings of the Company for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished
to brokers, dealers, banks and similar persons whose names, or the names of
whose nominees, appear on the stockholder lists or, if applicable, who are
listed as participants in a clearing agency security position listing, for
subsequent transmittal to beneficial owners of Shares.

2. Acceptance for Payment.

Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any such
extension or amendment), Purchaser will accept for payment and will pay for,
as soon as practicable after the Expiration Date, all Shares validly tendered
prior to the Expiration Date and not withdrawn in accordance with Section 4.

For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares properly tendered to Purchaser and not
withdrawn, if, as and when Purchaser gives oral or written notice to the
Depositary of the acceptance by Purchaser for payment of such Shares. Payment
for Shares accepted for payment pursuant to the Offer will be made by deposit
in cash of the purchase price therefor with the Depositary,

4
<PAGE>

which will act as agent for tendering stockholders for the purpose of receiving
payment from Purchaser and transmitting payment to tendering stockholders. In
all cases, payment for Shares accepted for payment pursuant to the Offer will
be made only after timely receipt by the Depositary of (i) certificates for
such Shares or a timely Book-Entry Confirmation (as defined below) with respect
thereto, (ii) a Letter of Transmittal or facsimile thereof, properly completed
and duly executed, with any required signature guarantees or, in the case of a
book-entry transfer, an Agent Message (as defined below) and (iii) any other
documents required by the Letter of Transmittal. Accordingly, payment may be
made to tendering stockholders at different times if delivery of the Shares and
other required documents occur at different times. The per Share consideration
paid to any holder of Shares pursuant to the Offer will be the highest per
Share consideration paid to any other holder of such Shares pursuant to the
Offer.

Under no circumstances will interest be paid on the purchase price to be
paid by purchaser for the Shares, regardless of any extension of the Offer or
any delay in making such payment.

Purchaser expressly reserves the right, in its sole discretion, to delay
acceptance for payment of, or payment for, Shares in order to comply in whole
or in part with any applicable law. If Purchaser is delayed in its acceptance
for payment of, or payment for, Shares, then, without prejudice to the rights
of Purchaser under the Offer (including such rights as are set forth in
Sections 1 and 14) (but subject to compliance with Rule 14e-1(c) under the
Exchange Act), the Depositary may, nevertheless, on behalf of Purchaser, retain
tendered Shares, and such Shares may not be withdrawn except to the extent
tendering stockholders are entitled to exercise, and duly exercise, withdrawal
rights as described in Section 4.

If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted representing more Shares than are
being tendered by the holder thereof, certificates evidencing Shares not
tendered or not accepted for purchase will be returned to the tendering
stockholder, or such other person as the tendering stockholder shall specify in
the Letter of Transmittal (subject to the terms and conditions thereof), as
promptly as practicable following the expiration, termination or withdrawal of
the Offer. In the case of Shares delivered by book-entry transfer into the
account of the Depositary at the Book-Entry Transfer Facility (as defined in
Section 3) pursuant to the procedures set forth in Section 3, such Shares will
be credited to such account maintained at the Book-Entry Transfer Facility as
the tendering stockholder shall specify in the Letter of Transmittal (subject
to the terms and conditions thereof), as promptly as practicable following the
expiration, termination or withdrawal of the Offer. If no such instructions are
given with respect to Shares delivered by book-entry transfer, any such Shares
not tendered or not purchased will be returned by crediting the account at the
Book-Entry Transfer Facility designated in the Letter of Transmittal as the
account from which such Shares were delivered.

Purchaser reserves the right to transfer or assign, in whole or, from time
to time, in part, to one or more of its affiliates, the right to purchase
Shares tendered pursuant to the Offer, but any such transfer or assignment will
not relieve Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering stockholders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.

3. Procedures for Tendering Shares.

Valid Tender. For Shares to be validly tendered pursuant to the Offer,
either (i) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), together with any required signature guarantees, or in the
case of a book-entry transfer, an Agent Message, and any other required
documents, must be received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase on or prior to the Expiration Date
and either certificates evidencing tendered Shares must be received by the
Depositary at one of such addresses or such Shares must be delivered to the
Depositary pursuant to the procedures for book-entry transfer set forth below
and a Book-Entry Confirmation (as defined below) must be received by the
Depositary, in each case on or prior to the Expiration Date, or (ii) the
tendering stockholder must comply with the guaranteed delivery procedures
described below.

5
<PAGE>

Book-Entry Transfer. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "Book-Entry Transfer
Facility") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
Book-Entry Transfer Facility system may make book-entry delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
account of the Depositary in accordance with such Book-Entry Transfer Facility
procedures for such transfer. Even though delivery of Shares may be effected
through book-entry transfer into the account of the Depositary at the Book-
Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or
an Agent Message, and any other required documents must, in any case, be
transmitted to, and received by, the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase on or prior to the Expiration
Date, or the tendering stockholder must comply with the guaranteed delivery
procedures described below. The confirmation of a book-entry transfer of Shares
into the account of the Depositary at the Book-Entry Transfer Facility as
described above is referred to herein as a "Book-Entry Confirmation."

Delivery of the Letter of Transmittal and any other required documents to
the Book-Entry Transfer Facility will not constitute delivery to the
Depositary.

The term "Agent Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that Purchaser
may enforce such agreement against such participant.

The method of delivery of shares, the Letter of Transmittal and all other
required documents, including delivery through the Book-Entry Transfer
Facility, is at the election and risk of the tendering stockholder. Shares will
be deemed delivered only when actually received by the Depositary (including,
in the case of a Book-Entry Transfer, by Book-Entry confirmation). If delivery
is by mail, registered mail with return receipt requested, properly insured, is
recommended. In all cases, sufficient time should be allowed to ensure timely
delivery.

Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (i) if the Letter of Transmittal is signed by the registered
holder(s) of Shares (which term, for purposes of this Section, includes any
participant in the Book-Entry Transfer Facility system whose name appears on a
security position listing as the owner of the Shares) tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on
the Letter of Transmittal or (ii) if such Shares are tendered for the account
of a financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (each, an
"Eligible Institution" and, collectively, "Eligible Institutions"). In all
other cases, all signatures on Letters of Transmittal must be guaranteed by an
Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If
the certificates for Shares are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made, or
certificates for Shares not tendered or not accepted for payment are to be
returned, to a person other than the registered holder of the certificates
surrendered, then the tendered certificates for such Shares must be endorsed or
accompanied by appropriate stock powers, in either case, signed exactly as the
name or names of the registered holders or owners appear on the certificates,
with the signatures on the certificates or stock powers guaranteed as
aforesaid. See Instructions 1 and 5 to the Letter of Transmittal.

Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and the certificates of such stockholder for Shares are not
immediately available or the procedures for book-entry transfer cannot be
completed on a timely basis or time will not permit all of the required
documents to reach the Depositary prior to the Expiration Date, the tender of
such stockholder may be effected if all the following conditions are met:

(a) such tender is made by or through an Eligible Institution;

6
<PAGE>

(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by Purchaser, is received by
the Depositary, as provided below, prior to the Expiration Date; and

(c) the certificates for (or a Book-Entry Confirmation with respect to)
such Shares, together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees,
or, in the case of a book-entry transfer, an Agent Message, and any other
required documents, are received by the Depositary within three trading
days after the date of execution of such Notice of Guaranteed Delivery. A
"trading day" is any day on which the New York Stock Exchange is open for
business.

The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mailed to the Depositary
and must include a guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.

Upon the acceptance of Shares for payment pursuant to the Offer, the valid
tender of Shares pursuant to one of the procedures described above will
constitute a binding agreement between the tendering stockholder and Purchaser,
upon the terms and subject to the conditions of the Offer.

Appointment. By executing the Letter of Transmittal as set forth above
(including delivery through an Agent Message), the tendering stockholder will
irrevocably appoint the designees of Parent set forth in the Letter of
Transmittal as the attorneys-in-fact of such stockholder and proxies in the
manner set forth in the Letter of Transmittal, each with full power of
substitution, to the full extent of the rights of such stockholder with respect
to the Shares tendered by such stockholder and accepted for payment by
Purchaser and with respect to any and all non-cash dividends, distributions,
rights, other Shares or other securities issued or issuable in respect of such
Shares on or after March 23, 1999 (collectively, "Distributions"). All such
powers of attorney and proxies will be considered coupled with an interest in
the tendered Shares. Such appointment will be effective if, as and when, and
only to the extent that, Purchaser accepts for payment the Shares tendered by
such stockholder as provided herein. All such powers of attorney and proxies
will be irrevocable and will be deemed granted in consideration of the
acceptance for payment by Purchaser of Shares tendered in accordance with the
terms of the Offer. Upon such appointment, all prior powers of attorney,
proxies and consents given by such stockholder with respect to such Shares (and
any and all Distributions) will, without further action, be revoked and no
subsequent powers of attorney, proxies, consents or revocations may be given by
such stockholder (and, if given, will not be deemed effective). The designees
of Purchaser will thereby be empowered to exercise all voting and other rights
with respect to such Shares (and any and all Distributions), including, without
limitation, in respect of any annual or special meeting of the stockholders of
the Company (and any adjournment or postponement thereof), actions by written
consent in lieu of any such meeting or otherwise, as each such attorney-in-fact
and proxy or his substitute shall in his sole discretion deem proper. Purchaser
reserves the right to require that, in order for Shares to be deemed validly
tendered, immediately upon the acceptance by Purchaser for payment of such
Shares, Purchaser must be able to exercise full voting, consent and other
rights with respect to such Shares (and any and all Distributions), including
voting at any meeting of stockholders.

Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser, in its sole discretion, which
determination will be final and binding. Purchaser reserves the absolute right
to reject any or all tenders of any Shares determined by it not to be in proper
form or the acceptance for payment of which, or payment for which, may, in the
opinion of counsel for Purchaser, be unlawful. Purchaser also reserves the
absolute right, in its sole discretion, to waive any defect or irregularity in
any tender of Shares of any particular stockholder, whether or not similar
defects or irregularities are waived in the case of other stockholders. No
tender of Shares will be deemed to have been validly made until all defects or
irregularities relating thereto have been cured or waived. None of Purchaser,
Parent, the Depositary, the Information Agent or any other person will be under
any duty to give notification of any defects or irregularities in tenders or
incur any liability for failure to give any such notification. The
interpretation of Purchaser of the terms and conditions of the Offer in this
regard (including the Letter of Transmittal and the instructions thereto) will
be final and binding.

7
<PAGE>

Backup Withholding. Under the "backup withholding" provisions of federal
income tax law, unless a tendering registered holder, or its assignee (in
either case, the "Payee"), satisfies the conditions described in Instruction 10
of the Letter of Transmittal or is otherwise exempt, the cash payable as a
result of the Offer may be subject to backup withholding tax at a rate of 31
percent of the gross proceeds. To prevent backup withholding, each Payee should
complete and sign the Substitute Form W-9 provided in the Letter of
Transmittal. See Instruction 10 to the Letter of Transmittal.

4. Withdrawal Rights.

Except as otherwise provided in this Section 4 or as provided by applicable
law, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer
may be withdrawn pursuant to the procedures set forth below at any time on or
prior to the Expiration Date and, unless theretofore accepted for payment and
paid for by Purchaser pursuant to the Offer, may also be withdrawn at any time
after April 26, 1999.

To be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares to be withdrawn, if different from the name of the person
who tendered the Shares. If certificates evidencing Shares to be withdrawn have
been delivered or otherwise identified to the Depositary, then, prior to the
physical release of such certificates, the serial numbers shown on such
certificates must be submitted to the Depositary and, unless such Shares have
been tendered by an Eligible Institution, the signatures on the notice of
withdrawal must be guaranteed by an Eligible Institution. If Shares have been
delivered pursuant to the procedures for book-entry transfer as set forth in
Section 3, any notice of withdrawal must also specify the name and number of
the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility
procedures.

Withdrawals of tendered Shares may not be rescinded, and any Shares
withdrawn will thereafter be deemed not validly tendered for purposes of the
Offer. However, withdrawn Shares may be rendered by again following one of the
procedures described in Section 3 at any time on or prior to the Expiration
Date.

All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding. None of Purchaser, Parent, the
Depositary, the Information Agent or any other person will be under any duty to
give notification of any defects or irregularities in any notice of withdrawal
or incur any liability for failure to give any such notification.

5. Certain U.S. Federal Income Tax Consequences.

The following is a general summary of certain U.S. federal income tax
consequences of the Offer and the Merger relevant to a beneficial holder of
Shares whose Shares are tendered and accepted for payment pursuant to the Offer
or whose Shares are converted to cash in the Merger (a "Holder"). The
discussion is based on the Internal Revenue Code of 1986, as amended (the
"Code"), regulations issued thereunder, judicial decisions and administrative
rulings, all of which are subject to change, possibly with retroactive effect.
The following does not address the U.S. federal income tax consequences to all
categories of Holders that may be subject to special rules (that is, holders
who acquired their Shares pursuant to the exercise of employee stock options or
other compensation arrangements with the Company, holders who perfect their
appraisal rights under the DGCL, foreign holders, insurance companies, tax-
exempt organizations, dealers in securities and persons who have acquired the
Shares as part of a straddle, hedge, conversion transaction or other integrated
investment), nor does it address the federal income tax consequences to persons
who do not hold the Shares as "capital assets" within the meaning of Section
1221 of the Code (generally, property held for investment).

8
<PAGE>

The receipt of cash for Shares pursuant to the Offer or the Merger will be
a taxable transaction for U.S. federal income tax purposes and may also be a
taxable transaction under applicable state, local and foreign income and other
tax laws. In general, a Holder who sells Shares pursuant to the Offer or
receives cash in exchange for Shares pursuant to the Merger will recognize
gain or loss for federal income tax purposes equal to the difference, if any,
between the amount of cash received and the adjusted tax basis of such Holder
in the Shares sold pursuant to the Offer or surrendered for cash pursuant to
the Merger. Gain or loss will be determined separately for each block of
Shares (that is, Shares acquired at the same cost in a single transaction)
tendered pursuant to the Offer or surrendered for cash pursuant to the Merger.
Such gain or loss will be long-term capital gain or loss if the Holder has
held the Shares for more than one year at the time of the consummation of the
Offer or the Merger. Under recently adopted amendments to the Code, capital
gains recognized by an individual investor (or an estate or certain trusts)
upon a disposition of a Share that has been held for more than one year
generally will be subject to a maximum tax rate of 20 percent or, in the case
of a Share that has been held for one year or less, will be subject to tax at
ordinary income rates. Certain limitations apply to the use of capital losses.

Holders should consult their own tax advisors regarding the U.S. federal,
state, local and foreign income and other tax consequences of the Offer and
the Merger.

6. Price Range of the Shares; Dividends.

The Shares are traded through the over-the-counter market and are quoted on
the New York Stock Exchange, Inc. (the "NYSE") under the symbol "ARS." The
following table sets forth, for each of the fiscal quarters indicated, the
high and low reported sales price per Share on the NYSE, as set forth in the
Company 10-K (as hereafter defined) for 1996 and 1997 and as set forth in
published financial sources for 1998.

<TABLE>
<CAPTION>
COMMON STOCK
-------------
High Low
------ ------
<S> <C> <C>
Fiscal Year 1996:
Third Quarter (since September 25)............................. $19.62 $16.50
Fourth Quarter................................................. 18.81 12.00

Fiscal Year 1997:
First Quarter.................................................. 28.50 19.12
Second Quarter................................................. 24.50 17.50
Third Quarter.................................................. 25.37 15.37
Fourth Quarter................................................. 18.81 12.00

Fiscal Year 1998:
First Quarter.................................................. 16.06 8.25
Second Quarter................................................. 11.88 7.75
Third Quarter.................................................. 11.19 2.69
Fourth Quarter................................................. 4.63 2.56

Fiscal Year 1999:
First Quarter (through March 22, 1999)......................... 4.38 1.81
</TABLE>

On March 22, 1999, the last full trading day prior to the public
announcement of the execution of the Merger Agreement, the last reported sales
price of the Shares on the NYSE was $4.375 per Share. On March 26, 1999, the
last full trading day prior to the commencement of the Offer, the last
reported sales price of the Shares on the NYSE was $5.44 per Share.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.

The Company did not declare or pay any cash dividends during any of the
periods indicated in the above table. In addition, under the terms of the
Merger Agreement, the Company is not permitted to declare or pay dividends
with respect to the Shares without the prior written consent of Parent and
Parent does not intend to consent to any such declaration or payment.

9
<PAGE>

7. Effect of the Offer on the Market for the Shares; Stock Listing; Exchange
Act Registration; Margin Regulations.

The Offer will reduce the number of holders of Shares and the number of
Shares that might otherwise trade publicly and, depending upon the number of
Shares so purchased, could adversely affect the liquidity and market value of
the remaining Shares held by the public.

Stock Listing. The Shares are listed on the NYSE. Depending upon the
aggregate market value and the per share price of any Shares not purchased
pursuant to the Offer, the Shares may no longer meet the requirements for
continued listing on the NYSE. According to the published guidelines of the
NYSE, the NYSE would consider delisting the Shares if, among other things, the
number of record holders of at least 100 or more Shares should fall below
1,200, the number of publicly held Shares (exclusive of holdings of officers
and directors of the Company and their immediate families and other
concentrated holdings of 10 percent or more) should fall below 600,000 or the
aggregate market value of the publicly held Shares should fall below
$5,000,000. According to information supplied by the Company, there were
approximately 288 holders of record of Shares as of March 22, 1999. The Company
has represented that, as of March 22, 1999, 15,887,704 Shares were issued and
outstanding.

If the NYSE were to delist the Shares, the market therefor could be
adversely affected. It is possible that such Shares would continue to trade on
other securities exchanges or in the over-the-counter market, and that price
quotations would be reported by such exchanges or through the NASDAQ or other
sources. The extent of the public market for the Shares and the availability of
such quotations would, however, depend upon the number of stockholders and/or
the aggregate market value of such Shares remaining at such time, the interest
in maintaining a market in such Shares on the part of securities firms, the
possible termination of registration of such Shares under the Exchange Act and
other factors. Purchaser cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for, or marketability of, the Shares or whether it
would cause future market prices to be greater or less than the Offer Price.

Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Registration of the Shares under the Exchange Act may be
terminated upon application of the Company to the Commission if the Shares are
neither listed on a national securities exchange nor held by 300 or more
holders of record. Termination of registration of the Shares under the Exchange
Act would substantially reduce the information required to be furnished by the
Company to its stockholders and to the Commission and would make certain
provisions of the Exchange Act no longer applicable to the Company, such as the
short-swing profit recovery provisions of Section 16(b), the requirement of
furnishing a proxy statement pursuant to Section 14(a) in connection with
stockholder meetings and the related requirement of furnishing an annual report
to stockholders and the requirements of Rule 13e-3 under the Exchange Act with
respect to "going private" transactions. Furthermore, the ability of
"affiliates" of the Company and persons holding "restricted securities" of the
Company to dispose of such securities pursuant to Rule 144 or Rule 144A
promulgated under the Securities Act of 1933, as amended (the "Securities
Act"), may be impaired or eliminated.

Margin Regulations. The Shares are presently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which status has the effect, among other things, of
allowing brokers to extend credit on the collateral of the Shares. Depending
upon factors similar to those described above regarding listing and market
quotations, it is possible that, following the Offer, the Shares would no
longer constitute "margin securities" for the purposes of the margin
regulations of the Federal Reserve Board and therefore could no longer be used
as collateral for loans made by brokers. In addition, if registration of the
Shares under the Exchange Act were terminated, the Shares would no longer
constitute "margin securities."

Purchaser currently intends to seek delisting of the Shares from the NYSE
and the termination of the registration of the Shares under the Exchange Act as
soon after the completion of the Offer as the requirements

10
<PAGE>

for such delisting and termination are met. If the NYSE listing and the
Exchange Act registration of the Shares are not terminated prior to the Merger,
then the Shares will be delisted from the NYSE and the registration of the
Shares under the Exchange Act will be terminated following the consummation of
the Merger.

8. Certain Information Concerning the Company.

General. The information concerning the Company contained in this Offer to
Purchase, including that set forth below under the caption "Selected Financial
Information," has been furnished by the Company or has been taken from or based
upon publicly available documents and records on file with the Commission and
other public sources. None of Parent, Purchaser or the Information Agent
assumes responsibility for the accuracy or completeness of the information
concerning the Company contained in such documents and records or for any
failure by the Company to disclose events which may have occurred or may affect
the significance or accuracy of any such information but which are unknown to
Parent, Purchaser or the Information Agent.

The Company is a leading national provider of (i) comprehensive maintenance,
repair and replacement services for heating, ventilating and air conditioning
("HVAC"), plumbing, electrical, indoor air quality and other systems and major
home appliances in homes and small commercial buildings (collectively,
"residential maintenance services") and (ii) new installations of those systems
in homes and small commercial facilities under construction. Through its
wholly-owned subsidiary, American Mechanical Services, the Company also
provides comprehensive maintenance, repair, replacement, reconfiguration and
monitoring services for HVAC, plumbing and electrical systems and controls in
existing large commercial, industrial and institutional facilities such as
office buildings, health care facilities, educational facilities and retail
centers (collectively, "commercial maintenance services"). The Company
currently has operations in Arizona, California, Colorado, Florida, Georgia,
Illinois, Indiana, Maryland, Michigan, Nebraska, Nevada, North Carolina,
Oklahoma, Pennsylvania, South Carolina, Texas, Virginia and the Washington,
D.C. metropolitan area. The principal executive offices of the Company are
located at Post Oak Tower, Suite 725, 5051 Westheimer Road, Houston, Texas
77056-5604, and its telephone number at that address is (713) 599-0100. The
Company is a Delaware corporation incorporated in 1995.

Selected Financial Information. Set forth below is certain consolidated
financial information with respect to the Company, excerpted or derived from
the Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1998 (the "Company 10-K"), as made available to Parent by the
Company.

More comprehensive financial information is included in such reports and in
other documents filed by the Company with the Commission. The following summary
is qualified in its entirety by reference to such reports and other documents
and all of the financial information (including any related notes) contained
therein. Such reports, documents and financial information may be inspected and
copies may be obtained from the Commission in the manner set forth below.

11
<PAGE>

AMERICAN RESIDENTIAL SERVICES, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
Fiscal Years Ended December 31,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
(In thousands, except per share data)
<S> <C> <C> <C>
Income Statement Data:
Net Sales.......................... $ 505,562 $ 381,645 $ 150,330
Operating Income................... 8,668 1,195 3,638
Loss Before Discontinued Operations
and Extraordinary Item............ (3,860) (5,211) (1,232)
Net Loss Before Discontinued
Operations and Extraordinary Item. (3,920) (4,382) (3,035)
Net Loss Before Extraordinary Item. (7,561) (4,701) (3,035)
Net Income (Loss).................. (7,861) (4,701) (3,035)
Basic and Diluted Net Loss per
Share............................. (0.50) (0.33) (0.48)

Balance Sheet Data:
Total Assets....................... 382,217 335,291 211,624
Total Liabilities.................. 250,245 200,728 95,373
Total Shareholders' Equity......... 131,972 134,563 116,251
</TABLE>

Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information
as of particular dates concerning the directors and officers of the Company,
their remuneration, options granted to them, the principal holders of the
Company securities and any material interests of such persons in transactions
with the Company is required to be disclosed in proxy statements distributed
to the Company stockholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable by mail, upon payment of the customary
charges of the Commission, by writing to the principal office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a website on the internet at http://www.sec.gov that contains
reports, proxy statements and other information relating to the Company which
have been filed via the EDGAR System.

9. Certain Information Concerning Parent and Purchaser.

Parent. Parent, with operating revenue of approximately $4.7 billion in
1998, is one of the largest providers of residential services to individual
customers and supportive management services to businesses and institutions in
the United States. In addition, Parent has operations in 41 countries around
the world.

The consumer services business of Parent provides services to over 10.5
million residential and commercial customers under eight market-leading brand
names:

TruGreen-ChemLawn for lawn, tree and shrub care and commercial landscape
and indoor plant maintenance;

Terminix for termite and pest control services;

American Home Shield and AmeriSpec for home system and appliance
warranty contracts and home inspection services;

Rescue Rooter for plumbing and drain cleaning services and heating and
air conditioning services;

ServiceMaster Residential/Commercial Services for heavy-duty residential
and commercial cleaning and disaster restoration services;

Merry Maids for residential maid services; and

Furniture Medic for on-site furniture repair and restoration services.

12
<PAGE>

The management services business of Parent provides facilities management
services to over 2,000 customers in the health care, education and business and
industrial markets. These services include plant operations and maintenance,
housekeeping, grounds and landscaping, clinical equipment management, food
service, laundry and linen services, total facilities management and other
services.

The employer services business of Parent provides a full range of support in
human resource services, including administrative processing of payroll,
worker's compensation insurance, health insurance, unemployment insurance and
other employee benefits, to approximately 950 customers with over 18,000 leased
employees.

These services of Parent comprise the "ServiceMaster Quality Service
Network" and may be accessed easily by calling a single toll-free telephone
number: 1-800-WE SERVE.

Purchaser. Purchaser is a newly incorporated Delaware corporation organized
in connection with the Offer and the Merger and has not carried on any
significant activities other than in connection with the Offer and the Merger.
All of the outstanding capital stock of Purchaser is owned directly by Parent.
Until immediately prior to the time Purchaser purchases Shares pursuant to the
Offer, it is not anticipated that Purchaser will have any significant assets or
liabilities or engage in any significant activities other than those incident
to its formation and capitalization and the transactions contemplated by the
Offer and the Merger.

The principal offices of Purchaser and Parent are located at One
ServiceMaster Way, Downers Grove, IL 60515. The telephone number of Parent and
Purchaser at such location is (630) 271-5870.

For certain information concerning the executive officers and directors of
Parent and Purchaser, see Schedule I to this Offer to Purchase.

Except as set forth in this Offer to Purchase, none of Purchaser, Parent
nor, to the best knowledge of Purchaser and Parent, any of the persons listed
on Schedule I, nor any associate or majority owned subsidiary of any of the
foregoing, beneficially owns or has a right to acquire any Shares, and none of
Purchaser or Parent nor, to the best of knowledge of Purchaser and Parent, any
of the persons or entities referred to above, nor any of the respective
executive officers, directors or subsidiaries of any of the foregoing, has
effected any transaction in the Shares during the past sixty days.

Except as set forth in this Offer to Purchase, none of Purchaser or Parent
has any contract, arrangement, understanding or relationship with any other
person with respect to any securities of the Company, including, but not
limited to, any contract, arrangement, understanding or relationship concerning
the transfer or the voting of any securities of the Company, joint ventures,
loan or option arrangements, puts or calls, guarantees of loans, guarantees
against loss or the giving or withholding of proxies.

Except as set forth in this Offer to Purchase, none of Purchaser, Parent,
any of their respective affiliates nor, to the best knowledge of Purchaser and
Parent, any of the persons listed on Schedule I, has had, since January 1,
1996, any business relationships or transactions with the Company or any of its
executive officers, directors or affiliates that would be required to be
reported under the rules of the Commission. Except as set forth in this Offer
to Purchase, since January 1, 1996 there have been no contacts, negotiations or
transactions between Purchaser, Parent, any of their respective affiliates or,
to the best knowledge of Purchaser and Parent, any of the persons listed on
Schedule I, and the Company or its affiliates concerning a merger,
consolidation or acquisition, tender offer or other acquisition of securities,
election of directors or a sale or other transfer of a material amount of
assets.

Available Information. Parent is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file reports, proxy statements and other information with the Commission
relating to its business, financial condition and other matters. Information as
of particular dates concerning the directors and officers of Parent, their
remuneration, options granted to them, the principal holders of securities of

13
<PAGE>

Parent and any material interests of such persons in transactions with Parent
is required to be disclosed in proxy statements distributed to the
stockholders of Parent and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located
at Seven World Trade Center, Suite 1300, New York, NY 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable by mail, upon payment of the customary
charges of the Commission, by writing to the principal office of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
also maintains a website at http://www.sec.gov that contains reports, proxy
statements and other information relating to Parent which have been filed via
the EDGAR System.

10. Sources and Amount of Funds.

Assuming all Shares are tendered pursuant to the Offer, the total amount of
funds required by Parent to acquire all of the Shares pursuant to the Offer
and the Merger and to pay the related fees and expenses of Parent and
Purchaser are estimated to be approximately $95 million. Parent has sufficient
financial resources (including available cash on hand and, if and to the
extent necessary, borrowing capacity available under its existing credit
facilities) to enable Parent to make all cash payments for the Shares in the
Offer and the Merger and to pay all related fees and expenses. Parent may make
any required borrowings under its $750,000,000 five-year unsecured revolving
credit facility, dated April 1, 1997, by and among Parent and a syndicate of
banks including Bank One and Morgan Guaranty Trust Company (the "Credit
Facility"). As of March 25, 1999, approximately $245,000,000 of borrowings
were outstanding under the Credit Facility. The Credit Facility provides for
floating rates of interest based on LIBOR and contains certain financial
covenants. Parent has no plans or arrangements to finance or refinance any
such borrowings, except for repayments of the Credit Facility that may be made
by Parent in the ordinary course of business.

11. Background of the Offer; Purpose of the Offer and the Merger; the Merger
Agreement and Certain Other Agreements.

Contacts with the Company; Background of the Offer.

Pursuant to a request from Phillip B. Rooney, Vice Chairman of Parent, to
Howard Hoover, Chairman of the Company, Messrs. Rooney and Kenneth N. Hooten,
a Vice President of Parent, met with Messrs. Hoover and Thomas N. Amonett,
President of the Company, in Houston, Texas on March 10 and March 11, 1998. In
this introductory meeting, Mr. Rooney noted Parent's recent acquisition of
Rescue Rooter and told Messrs. Hoover and Amonett that Parent was interested
in expanding its plumbing operations to encompass heating, ventilation and air
conditioning installation and repair. The parties also discussed a possible
strategic alliance involving Parent's American Home Shield operations and the
Company's operations. The parties agreed that an exchange of ideas would be
beneficial.

On March 18, 1998, Parent and the Company executed a confidentiality
agreement in connection with the consideration of a possible alliance or other
transaction between Parent and the Company.

On May 11, 1998, Messrs. Hoover and Amonett met with Messrs. Rooney and
Hooten at Parent's offices in Downers Grove, Illinois to discuss in general
terms a possible combination of Parent's Rescue Rooter operations and the
operations of the Company or a possible strategic alliance involving Parent's
American Home Shield operations and the operations of the Company. On June 29,
1998, Messrs. Amonett and Elliot Sokolow, Senior Vice President, Director of
Residential Operations of the Company, met with Messrs. Hooten, Ernest J.
Mrozek, Group President of ServiceMaster Consumer Services, Paul A. Bert,
Executive Vice President, Marketing, of ServiceMaster Consumer Services, Scott
J. Cromie, President and Chief Operating Officer of American Home Shield,
William E. LeBaron, President of Rescue Rooter, Thomas Scherer, Executive Vice
President and Chief Financial Officer of ServiceMaster Consumer Services, and
Robert Zipperer, Associate of ServiceMaster Ventures, in Memphis, Tennessee,
regarding such possible combination or strategic alliance.

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<PAGE>

During a telephone conversation in September or October 1998, Mr. Rooney
suggested to Mr. Hoover that, subject to receipt and review of more detailed
financial information, Parent and the Company considered a possible business
combination at a potential price ranging from $6.00 to $8.00 per Share. Mr.
Hoover agreed to continue discussions of such a possible business combination,
but indicated that the Company sought a higher price.

The Company engaged Jefferies & Company, Inc. ("Jefferies") in November
1998 to act as financial advisor to the Company in connection with the
evaluation of potential options, including but not limited to a
recapitalization, the repurchase of the convertible subordinated notes of the
Company or other financial alternatives. The engagement letter provided that
the Company and Jefferies would enter into a separate engagement letter if the
Company undertook a private offering, a public offering, a business
combination or a similar transaction.

Messrs. Rooney, Hooten, Mrozek, LeBaron and Stanley J. Zalik, Vice
President of Finance of Rescue Rooter, met with Messrs. Hoover, Amonett and
Nolan Lehmann, a director of the Company, in Houston on November 10 and 11,
1998 to discuss the business of the Company and a possible acquisition of the
Company by Parent. No specific conclusions or recommendations were reached as
Parent desired to first receive and review the third quarter 1998 results of
the Company and revised projections for fiscal year 1998 and 1999.

At a special meeting of the board of directors of the Company held on
December 1, 1998, Mr. Amonett updated the board on the status of discussions
with Parent.

A dinner meeting was held in Houston on December 14, 1998 among Messrs.
Hoover, Amonett, Rooney, Mrozek, LeBaron, Zalik and David E. K. Frischkorn of
Jefferies. The Company provided an operational update, as well as some
financial information for the third quarter and October 1998. Expectations for
the fourth quarter 1998 and for 1999 were also discussed, although these
discussions were preliminary in nature and the Company was in the process of
developing the financial detail by location.

At a special meeting of the board of directors of the Company held on
December 17, 1998, Messrs. Hoover and Amonett updated the board on the status
of discussions with Parent.

On January 14 and January 15, 1999, further discussion and negotiations
occurred in Houston. Messrs. Rooney, Mrozek, LeBaron, Zalik and Lawrence A.
Mariano, Vice President, Secretary and Controller of ServiceMaster Consumer
Services, met with Messrs. Hoover and Amonett and, from time to time, with
Messrs. Sokolow, Frank N. Menditch, Senior Vice President, Regional Vice
President--Northern Region of the Company, Harry O. Nicodemus, IV, Senior Vice
President, Treasurer, Chief Financial Officer and Chief Accounting Officer of
the Company, Ed Dunn, Senior Vice President, Director of Commercial Operations
of the Company, and Mr. Frischkorn. The Company representatives shared updated
financial estimates for the fiscal year 1998, which were less favorable than
had previously been anticipated, as well as preliminary budget expectations
for 1999. The representatives of the Company reviewed the historical and
estimated results and other key operating matters with the representatives of
Parent on a location by location basis.

On January 22, 1999, the Company publicly announced that it would post a
larger loss in the quarter ended December 31, 1998 than analysts had expected
and that the Company expected the fourth quarter loss to result in a loss for
the 1998 fiscal year.

Based on the results of these meetings and several follow-up telephone
conversations between the parties, on January 27, 1999, Parent delivered to
the Company a proposed letter of intent pursuant to which Parent would pay
$5.00 per Share in an all cash transaction. On February 2, 1999, Parent
delivered to the Company a revised proposed letter of intent pursuant to which
Parent would pay $5.00 per Share in cash, common stock of Parent or a
combination of cash and stock. Neither letter of intent was executed.

15
<PAGE>

During February and March 1999, numerous meetings and telephone
conversations took place between representatives of Parent and the legal
advisors of the Parent, on the one hand, and representatives of the Company,
representatives of Jefferies and the legal advisors of the Company, on the
other hand, to conduct due diligence and to negotiate the terms of a merger
agreement pursuant to which the shareholders of the Company would receive
cash, common stock of Parent or a combination of cash and stock. During such
time period, representatives of Parent and representatives of the Company
discussed prices ranging from $5.00 to $7.50 per Share. In addition, extensive
negotiations of termination events, termination fees and financial covenants
occurred in this time period.

At a special meeting of the board of directors of the Company held on
February 3, 1999, Messrs. Amonett and Hoover updated the board on the status
of discussions with Parent. Messrs. Frischkorn and Robert M. Werle presented
Jefferies' financial review of the Company and an overview of Jefferies'
valuation methodologies and analysis for the Company. Charles L. Strauss of
Fulbright & Jaworski L.L.P., outside legal counsel to the Company, discussed
legal duties of the board in connection with the discussions with Parent.

On February 11, 1999, counsel for Parent delivered the initial draft of a
proposed merger agreement to the Company and its counsel. Subsequent drafts of
a proposed merger agreement were delivered to the Company and its counsel
during February and March that reflected business and legal negotiations.

On February 12, 1999, Parent increased its offer to $5.50 per Share payable
in cash, common stock of Parent or a combination of cash and stock.

At a special meeting of the board of directors of the Company held on
February 15, 1999, Messrs. Amonett, Frischkorn and Werle updated the board on
the status of discussions with Parent and summarized for board certain of the
issues associated with the negotiations with Parent.

At a special meeting of the board of directors of the Company held on
February 18, 1999, Messrs. Amonett and Hoover updated the board on the status
of discussions with Parent. Mr. Werle reviewed Jefferies' analysis and
methodology for a valuation of the Company.

At a special meeting of the board of directors of the Company held on
February 19, 1999, the board reviewed and discussed the status of the
negotiations with Parent.

On February 20, 1999, Messrs. Hoover and Rooney tentatively agreed to
recommend to their respective boards of directors to continue negotiations of
the terms of a merger agreement pursuant to which the stockholders of the
Company would received cash, common stock of Parent or a combination of cash
and stock, based upon a price of between $5.75 and $6.00 per Share (depending
upon the average price of Parent common stock determined over a 20-day pricing
period). A collar proposal previously suggested by Mr. Rooney to Mr. Hoover
that would protect Parent at a Parent common stock per share price below
$16.50, but could cause the price to be paid per Share to be less than $5.75,
was rejected by the Company.

At a special meeting of the board of directors of the Company held on
February 22, 1999, the board reviewed and discussed the status of the
negotiations with Parent. John D. Held, Senior Vice President and General
Counsel of the Company, and Mr. Strauss reviewed certain specific provisions
set forth in the draft merger agreement and discussed the legal duties of the
board in connection therewith.

At a special meeting of the board of directors of the Company held on March
2, 1999, Mr. Amonett updated the board on the status of discussions with
Parent and summarized for the board certain of the issues associated with the
negotiations with Parent.

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<PAGE>

Representatives of Parent returned to Houston for the period March 5
through March 8, 1999 to conduct additional due diligence investigation with
particular focus on the financial data for 1998 and the first month of 1999.

On March 16, 1999, Messrs. Rooney and Mrozek met with Messrs. Hoover,
Amonett, Frischkorn, Werle and Douglas A. Claman of Jefferies to review the
price and structure for the acquisition. At this meeting, the representatives
of Parent and the representatives of the Company discussed the preliminary
financial figures of the Company for 1998 and the first two months of 1999 and
other financial matters. The representatives of Parent indicated that, based
on such figures, they believed that a lower purchase price would be
appropriate. The representatives of Parent proposed a flat cash price of $5.25
per Share, but the representatives of the Company stated that such price was
not acceptable. The representatives of Parent and the representatives of the
Company also discussed various other terms of the proposed transaction. At the
conclusion of this meeting, the representatives of the parties agreed to
recommend to their respective boards of directors to fix the price at $5.75
per Share and to restructure the acquisition as a cash tender offer by Parent
or an acquisition subsidiary of Parent for all outstanding Shares. The parties
also discussed specific due diligence procedures and related termination
rights. Counsels for Parent and the Company were instructed to immediately
revise the merger agreement to reflect the new arrangements. Concurrently with
this meeting, Messrs. Zalik, Mariano, Brian Stevenson, an analyst for Parent,
and John Deegan, Director, Financial Planning of Parent, continued with due
diligence inquiries, with particular focus on the financial results of the
Company for 1998 and January 1999.

On March 19, 1999, the board of directors of Parent approved the Merger
Agreement.

At a special meeting of the board of directors of the Company held on March
20, 1999, Mr. Hoover updated the board on the status of discussions with
Parent. Mr. Strauss summarized the terms of the proposed merger agreement.
Messrs. Werle, Frischkorn and Claman reviewed Jefferies' analysis and
methodology for a valuation of the Company. The board and Messrs. Held and
Strauss discussed various factors to be considered in analyzing a business
combination with Parent and the legal issues surrounding the approval thereof.
Jefferies presented its oral opinion, subsequently confirmed in writing, that
the consideration to be received by the holders of the common stock of the
Company pursuant to the Offer and the Merger is fair, from a financial point
of view, to such holders. The board approved the Offer, the Merger and the
Merger Agreement and the transactions contemplated thereby and recommended
acceptance of the tender offer by stockholders of the Company. The board also
approved the engagement letter between the Company and Jefferies related to
the potential sale of the Company or any of its material assets.

The Merger Agreement was executed during the evening of March 22, 1999.
Parent and the Company publicly announced the agreement on March 23, 1999.

Purpose of the Offer and the Merger. The purpose of the Offer and the
Merger is to enable Parent to acquire control of, and the entire equity
interest in, the Company. The Offer is being made pursuant to the Merger
Agreement and is intended to increase the likelihood that the Merger will be
effected. The purpose of the Merger is to acquire all of the outstanding
Shares not purchased pursuant to the Offer.

Stockholders of the Company who sell their Shares in the Offer will cease
to have any equity interest in the Company and any right to participate in its
earnings and future growth. If the Merger is consummated, non-tendering
stockholders will no longer have an equity interest in the Company and instead
will have only the right to receive cash consideration pursuant to the Merger
Agreement or to exercise statutory appraisal rights under Section 262 of the
DGCL. See Section 12. Similarly, after selling their Shares in the Offer or
the subsequent Merger, stockholders of the Company will not bear the risk of
any decrease in the value of the Company.

The primary benefits if the Offer (and the Merger) to the stockholders of
the Company are that such stockholders are being afforded an opportunity to
sell all of their Shares for cash at a price which represents a premium of
approximately 31.4 percent over the last reported sale price of the Shares on
the NYSE on March 22, 1999 (the last full trading day prior to the initial
public announcement of the Offer and the Merger) and a

17
<PAGE>

premium of approximately 86.7 percent over the average of the closing prices
of the Shares on the NYSE from January 1, 1999 through and including March 19,
1999. Stockholders of the Company are urged to obtain current quotations.

The Merger Agreement. The following is a summary of certain provisions of
the Merger Agreement. This summary is not a complete description of the terms
and conditions of the Merger Agreement and is qualified in its entirety by
reference to the full text of the Merger Agreement filed with the Commission
as an exhibit to the Schedule 14D-1 and is incorporated herein by reference.
Capitalized terms used but not otherwise defined herein shall have the
meanings set forth in the Merger Agreement. The Merger Agreement may be
examined, and copies obtained, as set forth in Section 9 of this Offer to
Purchase.

Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and Purchaser with
respect to, among other things, organization, corporate authority,
subsidiaries, capitalization, options or other rights to acquire Shares,
consents and approvals, no conflicts, financial statements, filings with the
Commission, information supplied, absence of certain changes, no undisclosed
liabilities, litigation, employee benefit plans, labor relations, ERISA
compliance, tax matters, compliance with applicable law, intellectual
property, contracts, transactions with affiliates, applicability of state
takeover statutes, receipt of the Financial Advisor Opinion, the Rights
Agreement of the Company and insurance matters.

In the Merger Agreement, each of Parent and Purchaser has made customary
representations and warranties to the Company with respect to, among other
things, organization, corporate authorization, consents and approvals, no
conflicts, capitalization, financial statements, filings with the Commission,
information supplied, absence of certain changes, no undisclosed liabilities,
litigation, compliance with applicable law, opinion of financial advisor and
ownership of Shares.

Conditions to the Merger. The obligations of Parent and Purchaser to
consummate the Merger are subject to the satisfaction of the following
conditions: (i) if required by applicable law, the Merger Agreement shall have
been adopted by the stockholders of the Company in accordance with the DGCL;
and (ii) Purchaser shall have previously accepted payment and paid for the
Shares pursuant to the Offer.

The Company Board. The Merger Agreement provides that prior to or
simultaneously with the acceptance for payment of, and payment for, Shares by
Purchaser pursuant to the Offer, the Company shall cause the directors of the
Company and its subsidiaries to resign their positions as such upon such
consummation of the Offer and shall arrange for the appointment of Phillip B.
Rooney, Ernest I. Mrozek and Vernon T. Squires (or such other persons
designated in writing by Parent) as directors of the Company effective upon
such consummation of the Offer.

Stockholder Meeting. If required by applicable law in order to consummate
the Merger, the Company, shall, in accordance with applicable law, its
certificate of incorporation and bylaws: (i) soon as practicable following the
expiration of the Offer, duly call, give notice of, convene and hold a special
meeting of its stockholders (the "Stockholders Meeting") for the purpose of
obtaining approval of the Merger by an affirmative vote of the holders of a
majority of the Shares ("Company Stockholder Approval"); and (ii) prepare and
file with the Commission a preliminary proxy statement relating to the Merger
and the Merger Agreement and obtain and furnish the information required to be
included in the Proxy Statement and respond to any comments made by the
Commission with respect to the preliminary proxy or information statement and
cause a definitive proxy statement, including any amendment or supplement
thereto (the "Proxy Statement"), to be mailed to its stockholders as promptly
as practicable after responding to all such comments to the satisfaction of
the staff. Parent has agreed to vote, or cause to be voted, all of the Shares
then owned by it, Purchaser or any of its other subsidiaries in favor of the
approval of the Merger and the adoption of the Merger Agreement.

Options and Warrants. The Merger Agreement provides that upon consummation
of the Merger, (i) every outstanding stock option granted by the Company (the
"Company Stock Options") under its 1996 Incentive Plan or under its 1997
Employee Incentive Plan (the "Company Option Plans") and (ii) the March 6,
1996 warrant of the Company held by Equus II Incorporated, if such warrant is
outstanding at the Effective Time (the "Company Warrant") shall automatically
convert so that: (i) common stock, par value $0.01 per share, of Parent (the
"Parent Common Stock") shall be substituted for Common Stock as the security
purchasable under the

18
<PAGE>

option or warrant; (ii) the number of shares of Parent Common Stock subject to
the option or warrant immediately after the Merger shall be equal to the
product derived by multiplying the number of shares of Common Stock that shall
have been subject to the option or warrant immediately prior to the Merger by
the Option Exchange Ratio (as hereinafter defined); and (iii) the exercise
price per share at which Parent Common Stock shall be purchasable immediately
after the Merger shall be equal to quotient derived by dividing the exercise
price per share at which Common Stock shall have been purchasable prior to the
Merger by the Option Exchange Ratio. "Option Exchange Ratio" means a fraction
equal to (i) the Offer Price divided by (ii) the average of the closing prices
of Parent Common Stock on the NYSE on the 20 consecutive trading days ending
on the trading day on which the Offer is consummated (or if such day is not a
trading day, the trading day first preceding such consummation day).

All Company Stock Options and the Company Warrant as modified pursuant to
the Merger Agreement shall remain in effect after the Effective Time and all
conditions and restrictions relating to all such options and warrant,
including limitations on exercisability, risks of forfeiture and conditions
and restrictions requiring continued performance of services with respect to
the exercisability or settlement of such Company Stock Options or Company
Warrant, shall remain in effect (except that for purposes of the Merger
Agreement, the Company Stock Options granted to non-employee directors of the
Company shall be treated as if the respective director had resigned with the
consent of the majority of the other directors).

Conduct of Business by the Company. The Company covenants in the Merger
Agreement that prior to the Effective Time or the date, if any, on which the
Merger Agreement is earlier terminated pursuant to its terms, unless the
Parent and Purchaser shall otherwise consent in writing or except as otherwise
contemplated by the Merger Agreement:

(a) the businesses of the Company and its subsidiaries will be conducted
only in the ordinary course; the Company will use its diligent efforts to
preserve intact its business organization and goodwill, keep available the
services of its officers and employees and maintain satisfactory
relationships with customers and others having business relationships with
it and its subsidiaries; and the Company will promptly notify Parent and
Purchaser of any event or occurrence or emergency not in the ordinary
course of the business of the Company or any of its subsidiaries that would
have a material adverse effect as such term is used in the Merger
Agreement;

(b) the Company will not (i) amend its certificate of incorporation or
bylaws or (ii) split, combine or reclassify the outstanding Shares or
declare, set aside or pay any dividend payable in cash, stock or property
with respect to the Shares, other than dividends paid by any of its
subsidiaries to the Company;

(c) neither the Company nor any of its subsidiaries will issue or agree
to issue any additional shares of, or rights of any kind to acquire shares
of, its capital stock of any class, other than (i) the issuance of shares
of capital stock of a subsidiary of the Company to the Company, (ii) with
respect to the Company, Shares issuable upon exercise of the Company Stock
Options and the Company Warrants outstanding on the date of the Merger
Agreement (together with the related Rights), (iii) any Shares issuable
upon conversion of any convertible note of the Company described on the
Company disclosure schedule (together with the related Rights), and (iv) in
accordance with the Rights Agreement;

(d) neither the Company nor any of its subsidiaries will enter into or
agree to enter into any new or amended contract or agreement with any labor
unions representing employees of the Company or any of its subsidiaries;

(e) except as permitted by the Merger Agreement, the Company will not
authorize, recommend, propose or announce an intention to authorize,
recommend or propose, or enter into an agreement in principle or an
agreement with respect to any merger, consolidation or business combination
(other than the Merger and the Offer) or any acquisition or disposition of
a material amount of assets or securities (including, without limitation,
the assets or securities of any of its subsidiaries);

(f) the Company will not authorize, recommend, propose or announce an
intention to authorize, recommend or propose, or enter into an agreement in
principle or an agreement with respect to any material

19
<PAGE>

change in its capitalization (it being acknowledged however by Parent that
the Company may incur indebtedness except as may be prohibited by paragraph
(j) below), or enter, other than in the ordinary course of business, into a
material contract;

(g) neither the Company nor any of its subsidiaries shall modify, amend
or terminate any of the material Company agreements or waive, release or
assign any material rights or claims, except in each case in the ordinary
course of business;

(h) except as contemplated by the Merger Agreement, neither the Company
nor any of its subsidiaries shall: (i) grant any increase in the
compensation payable or to become payable by the Company or any of its
subsidiaries to any officer or management employee other than scheduled
annual increases in the ordinary course of business; (ii) adopt any new, or
amend or otherwise increase, or accelerate the payment or vesting of the
amounts payable or to become payable under any existing, bonus, incentive
compensation, deferred compensation, severance, profit sharing, stock
option, stock purchase, insurance, pension, retirement or other employee
benefit plan agreement or arrangement; (iii) enter into any, or amend any
existing, employment, consulting or severance agreement with or, except in
accordance with the existing written policies of the Company, grant any
severance or termination pay to any officer, director or employee of the
Company or any of its subsidiaries; (iv) make any additional contributions
to any grantor trust created by the Company to provide funding for non-tax-
qualified employee benefits or compensation; or (v) provide any new
severance program or rights;

(i) to the extent within its control, neither the Company nor any of its
subsidiaries shall permit any material insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated, except in
the ordinary course of business;

(j) neither the Company nor any of its subsidiaries shall: (i) incur or
assume any debt except for borrowings under credit facilities of the
Company existing on the date hereof in the ordinary course of business and
other borrowings that can be repaid at any time without any prepayment
penalty or other similar fee; (ii) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person, except in the ordinary course of
business; (iii) make any loans, advances or capital contributions to, or
investments in, any other person (other than to wholly-owned subsidiaries
of the Company, customary loans or advances to employees in the ordinary
course of business and short-term investments pursuant to customary cash
management systems of the Company in the ordinary course of business); or
(iv) make or commit to make any material capital expenditure in an amount
or character that is not consistent with the Company's past practices;

(k) neither the Company nor any of its subsidiaries shall change any of
the accounting principles used by it unless required by generally accepted
accounting principles;

(l) the Company shall not make any material tax election; and

(m) neither the Company nor any subsidiary of the Company shall agree in
writing or otherwise to take (i) any action that it is prohibited from
taking by the above described provisions or (ii) any action that would
constitute or is likely to cause or result in a breach of any covenant,
agreement, representation or warranty set forth herein.

No Solicitation. Pursuant to the Merger Agreement, the Company agreed that
it will not, and will not authorize or permit any of its subsidiaries or any of
its or its subsidiaries' directors, officers, employees, agents or
representatives, directly or indirectly, to solicit, initiate or knowingly
encourage (including by way of furnishing or disclosing non-public information)
any inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination involving the Company or the
acquisition of all or any material portion of the assets or capital stock of
the Company (an "Acquisition Transaction") or negotiate, explore or otherwise
engage in substantive discussions with any person (other than Parent, Purchaser
or their respective directors, officers, employees, agents and
representatives), or enter into any agreement, with respect to any Acquisition
Transaction or enter into any agreement, arrangement or understanding requiring
it to

20
<PAGE>

abandon, terminate or fail to consummate the Merger or any other transactions
contemplated by the Merger Agreement, other than as expressly contemplated by
the Merger Agreement. The Merger Agreement provides that the board of directors
of the Company shall not withdraw or modify, or propose to withdraw or modify,
in a manner adverse to Parent or Purchaser, the approval or recommendation by
such board of directors of the Offer, subject to certain exceptions contained
in the Merger Agreement.

Notwithstanding the preceding paragraph, the Merger Agreement provides that
prior to the acceptance for payment of the Shares pursuant to the Offer, the
Company may provide non-public information to and seek to negotiate an
Acquisition Transaction with a person other than Parent or any of its
subsidiaries (the "Competitor") provided that the Competitor shall make a bona
fide unsolicited written proposal to make an Acquisition Transaction for all
the capital stock or assets of the Company on Superior Terms (as hereinafter
defined). Terms will be deemed to be "Superior Terms" only if the proposal of
such Competitor is more favorable than the Offer consideration to the
stockholders of the Company as determined in good faith by the board of
directors of the Company. A proposal to acquire the Company on Superior Terms
is called a "Qualified Competing Proposal." If prior to the termination of the
Merger Agreement in accordance with its terms, the Company receives an inquiry
or proposal relating to an Acquisition Transaction, it shall advise Parent in
writing of the receipt, directly or indirectly, of any such inquiry or proposal
(and any change or modification thereto) promptly upon such receipt and of its
intention to enter into any agreement relating to an Acquisition Transaction
which is a Qualified Competing Proposal, subject to the exercise of any rights
of Parent under the Merger Agreement. The Company is also required under the
Merger Agreement to promptly advise Parent in writing of any actions taken with
respect to a Qualified Competing Proposal and furnish to Parent either a copy
of such proposal or a detailed description of the terms and conditions of such
proposal or any subsequent change or modification thereto, and promptly supply
Parent with any other information which is either in the possession of the
Company or available to the Company relating in any way to any possible
Acquisition Transaction as Parent shall request. The Company shall prior to
entering into any Qualified Competing Proposal pay or cause to be paid to
Parent the termination fee specified in the Merger Agreement.

Termination. The Merger Agreement may be terminated prior to the purchase of
Shares pursuant to the Offer:

(a) by mutual written consent of Parent and the Company;

(b) by either Parent or the Company, in the event the Offer shall have
terminated or expired in accordance with its terms without Purchaser having
accepted for payment any Shares pursuant to the Offer or in the event
Purchaser shall not have accepted for payment any Shares pursuant to the
Offer prior to June 30, 1999 (except as otherwise indicated below, the
"Deadline") as a result of any of the closing conditions to the Offer not
being satisfied; provided, however, that (i) the right to terminate the
Merger Agreement pursuant to this paragraph shall not be available to any
party whose failure (including, in the case of Parent, a failure by
Purchaser) to perform any of its obligations under the Merger Agreement
shall have been the primary and but for reason for the failure of the
satisfaction of any such closing conditions or the termination of the Offer
without acceptance of any Shares; (ii) in the event that there has been any
public disclosure of a possible Acquisition Transaction other than the
Offer and in the reasonable judgment of Parent the pendency of such
alternative Acquisition Transaction shall have been a significant reason
for the failure to satisfy the Minimum Condition in response of the Offer,
the Company shall not have a right to terminate under this clause until and
unless Parent shall terminate the Offer; and (iii) if at the date which
could otherwise constitute the "Deadline" there shall be an injunction or
other governmental order prohibiting Parent from consummating the Offer,
then the Deadline shall be extended until 30 business days after such
prohibition shall cease be apply;

(c) by either the Company or Parent, if any judgment, injunction, order
or decree enjoining Parent, Purchaser or the Company from consummating the
transactions contemplated by the Merger Agreement (including the Merger,
the Offer and the acquisition of Shares by Purchaser pursuant to the Offer)
is entered and such judgment, injunction, order or decree shall have become
final and nonappealable;

21
<PAGE>

(d) by Parent if the board of directors of the Company shall (i)
withdraw, modify or change its recommendation or approval in respect of the
Offer in a manner not approved by Parent or (ii) have recommended any
proposal other than by Parent or Purchaser in respect of an Acquisition
Transaction;

(e) by Parent if a "Flip-In Event," a "Flip-Over Event," a "Distribution
Date" or a "Stock Acquisition Date" occurs under the Rights Agreement of
the Company;

(f) by Parent if the Company takes any action that would permit any
Person (other than Parent or Purchaser) to acquire in excess of 15 percent
of the outstanding shares of the Company Common Stock without causing a
"Flip-In Event," a "Flip-Over Event," a "Distribution Date" or a "Stock
Acquisition Date" to occur under the Rights Agreement of the Company;

(g) by Parent if the Company shall have breached in any material respect
any of its representations or warranties contained herein (which
representations and warranties for purposes of determining if Parent can
terminate the Merger Agreement pursuant to this clause shall be deemed to
be made as of the time of such termination except that any particular
representation or warranty that addresses matters only as of a particular
date shall be deemed for purposes of this clause to have been made as of
the particular date);

(h) by Parent if the Company shall have breached in any material respect
any of its covenants or agreements contained in Section 6.1(b), (c) or (e)
of the Merger Agreement (see "--Conduct of Business of the Company" above)
or its warranties in Section 4.24 of the Merger Agreement;

(i) by Parent if the Company shall have breached in any material respect
any of its covenants or agreements contained in the Merger Agreement other
than the covenants and agreements contained in Section 6.1(b), (c) or (e)
of the Merger Agreement;

(j) by the Company if a Qualified Competing Proposal is made to the
Company, subject to the restrictions set forth in the Merger Agreement (see
"--No solicitation" above); provided that the right to terminate described
in this subsection shall not be effective unless and until the Company
shall have paid to Parent the Termination Fee (as hereinafter defined);

(k) by the Company if Parent or Purchaser shall have breached in any
material respect any of its covenants or agreements contained in the Merger
Agreement or any of its representations or warranties contained in the
Merger Agreement (which representations and warranties for purposes of
determining if the Company can terminate the Merger Agreement pursuant to
this clause shall be deemed to be made as of the time of such termination
except that any particular representation or warranty that addresses
matters only as of a particular date shall be deemed for purposes of this
clause to have been made as of the particular date);

(l) by Parent if (i) in Parent's good faith judgment there shall be a
reasonable possibility that the Company will not generate EBITA for 1999 in
excess of $33.3 million or (ii) any other events, changes or effects
(including the incurrence of any liabilities of any nature, whether or not
accrued, contingent or otherwise) shall occur having, or which would be
reasonably likely to have in the aggregate, in the good faith judgment of
Parent, a material adverse effect on the Company and its subsidiaries taken
as a whole;

(m) by Parent if the directors of the Company do not resign and take all
other actions necessary to accomplish all of the results specified in
Section 6.7 of the Merger Agreement;

(n) by Parent if the "loss before income taxes, discontinued operations
and extraordinary items" of the Company as shown in the Company's
definitive audited financial statements for the fiscal year ended December
31, 1998 exceeds $3.9 million; provided that the Parent termination right
set forth in this paragraph shall terminate and be of no further force or
effect at 11:59 p.m. on the second business day after the actual receipt by
Parent of those definitive audited 1998 financial statements of the Company
together with a written notice from the Company that such delivery is
intended to begin the two business day time limit specified in this clause;
or

(o) by Parent if Parent or Purchaser is entitled to terminate the Offer
pursuant to the Merger Agreement. See "Section 14--Conditions to the
Offer."

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<PAGE>

Termination Fee and Expense Reimbursement. Pursuant to the Merger Agreement,
if the Merger Agreement is terminated pursuant to clause (d), (f), (h), (j) or
(m) as listed above, then the Company shall promptly, but in no event later
than two business days after the date of such termination, pay Parent a
termination fee equal to $3.25 million (the "Termination Fee") and (ii) Parent
shall be entitled to the Termination Fee regardless of whether any other ground
for termination shall exist under or by reason of the Merger Agreement. In no
event shall the Company be required to pay more than one termination fee and if
such fee shall be payable under this paragraph, then no additional amount shall
be separately payable under the provisions in the next paragraph.

Pursuant to the Merger Agreement, if the Merger Agreement is terminated
pursuant to clause (g) or (i) as listed above, then (except as otherwise
specified in the immediately preceeding paragraph) the Company shall pay Parent
an amount, not to exceed $1,000,000, equal to the reasonable and documented
actual out-of-pocket expenses incurred by Parent directly attributable to the
proposed acquisition of the Company, including negotiation and execution of the
Merger Agreement and the attempted completion of the Offer and the Merger. Each
such expense shall be paid within thirty days after Parent shall have submitted
the written request for payment of such expense except that in the event the
Company shall in good faith raise any question as to whether any particular
expense is payable by the Company as described in this paragraph, then the
Company shall be entitled to delay payment of such expense until Parent shall
supply documentation sufficient to establish that the particular expense is
payable under the standards specified above in this paragraph. In no event
shall any request for additional documentation to which the Company shall be
entitled as described above with respect to any particular expense item entitle
the Company to delay payment of any other expense owed by the Company as
described above.

If the Company shall for any reason fail to make the payment specified in
the prior two paragraphs at the required time, then the Company shall pay
Parent on demand interest at a per annum rate equal to 300 basis points in
excess of the prime rate (as reported in the Wall Street Journal) on the amount
remaining unpaid from that time until such payment shall be received by Parent
and shall also reimburse Parent for all attorney's fees and other expenses
which Parent shall reasonably incur to enforce its rights to such payment.

Indemnification. Pursuant to the Merger Agreement, from and after the
Effective Time, Parent and the surviving corporation jointly and severally have
agreed to indemnify, to the full extent permitted under the DGCL, the present
and former directors and officers of the Company and its subsidiaries (the
"Indemnified Parties") in respect of actions taken prior to and including the
Effective Time in connection with their duties as directors or officers of the
Company or its subsidiaries (including the transactions contemplated hereby)
for a period of not less than six years from the Effective Time; provided that,
in the event any claim or claims are asserted or made within such six-year
period, all rights to indemnification in respect of any such claim or claims
shall continue until final disposition of any and all such claims. Without
limitation of the foregoing, in the event any Indemnified Party becomes
involved in such capacity in any action, proceeding or investigation in
connection with any matter, including the transactions contemplated hereby,
occurring prior to and including the Effective Time, the Merger Agreement
provides that the Purchaser, to the extent permitted and on such conditions as
may be required by applicable law, will periodically advance expenses to such
Indemnified Party for his legal and other out-of-pocket expenses (including the
cost of any investigation and preparation) incurred in connection therewith.

Furthermore, for not less than six years after the Effective Time, the
Merger Agreement requires Parent or the surviving corporation to maintain in
effect directors' and officers' liability insurance covering the persons who
are currently covered by the existing directors' and officers' liability
insurance of the Company with respect to actions that shall have taken place
prior to the Effective Time, on terms and conditions no less favorable to such
persons than those in effect on the date of the Merger Agreement under the
existing directors' and officers' liability insurance of the Company; provided,
however, that in no event shall Parent or Purchaser required to pay in any year
an amount to maintain such insurance covering the Indemnified Parties in excess
of twice the amount paid by the Company as of the Effective Time for such
coverage; provided further that if the annual premiums of such insurance
coverage exceed such amount, Parent shall be obligated to obtain a policy with
a premium equal to such amount.

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<PAGE>

12. Plans for the Company; Other Matters.

Parent and Purchaser intend following completion of the Offer to conduct a
detailed review of the Company and its assets, corporate structure,
capitalization, business and operations, properties, policies, management and
personnel, including determining how to optimally realize any potential
synergies which may exist between the operations of the Company and those of
Parent and its affiliates, and to consider and determine what, if any, changes
would be desirable in light of the circumstances which then exist. Such review
is not expected to be completed until after the consummation of the Merger,
and, following such review, Parent will consider what, if any, changes would be
desirable in light of the circumstances then existing. Such changes could
include, among other things, changes in the business, corporate structure,
certificate of incorporation, bylaws, capitalization, management or dividend
policy of the Company.

Assuming the Minimum Condition is satisfied and Purchaser purchases Shares
pursuant to the Offer, Parent intends to promptly exercise its rights under the
Merger Agreement to obtain unanimous representation on the Company Board.
Parent intends to exercise such rights by causing the Company to elect to the
Company Board Phillip B. Rooney, Ernest J. Mrozek and Vernon T. Squires (or
such other persons designated in writing by Parent). Information with respect
to such directors is contained in Schedule I hereto and in the Schedule 14D-9.

Purchaser or an affiliate of Purchaser may, following the consummation or
termination of the Offer, seek to acquire additional Shares through open market
purchases, privately negotiated transactions, a tender offer or exchange offer
or otherwise, upon such terms and at such prices as it shall determine, which
may be more or less than the price to be paid pursuant to the Offer, subject to
the terms and conditions of the Merger Agreement. Purchaser and its affiliates
also reserve the right to dispose of any or all Shares acquired by them,
subject to the terms of the Merger Agreement.

Except as disclosed in this Offer to Purchase, neither Parent nor Purchaser
has any present plans or proposals that would result in an extraordinary
corporate transaction, such as a merger, reorganization, liquidation,
relocation of operations or sale or transfer of a material amount of assets,
involving the Company or any of its subsidiaries, or any material changes in
the capitalization, corporate structure, business or composition of the
management of the Company or the Company Board.

Stockholder Approval. Under the DGCL, the affirmative vote of the holders of
a majority of the outstanding Shares is required to adopt and approve the
Merger Agreement and transactions contemplated thereby unless the Merger is
consummated pursuant to the short-form merger provisions under the DGCL
described below (in which case no further corporate action by the stockholders
of the Company will be required to complete the Merger). The Merger Agreement
provides that Parent will vote, or cause to be voted, all of the Shares then
owned by Parent, Purchaser or any of other subsidiaries and affiliates of
Parent in favor of the adoption of the Merger Agreement. In the event that
Parent, Purchaser and other subsidiaries of the Company acquire in the
aggregate at least a majority of the Shares entitled to vote on the adoption of
the Merger Agreement, they would have the ability to effect the Merger without
the affirmative votes of any other stockholders.

Short-Form Merger. Section 253 of the DGCL provides that, if a corporation
owns at least 90 percent of the outstanding shares of each class of another
corporation, the corporation holding such stock may merge itself into such
corporation without any action or vote on the part of the board of directors or
the stockholders of such other corporation (a "short-form merger"). In the
event that Parent, Purchaser and any other subsidiaries of Parent acquire in
the aggregate at least 90 percent of the outstanding Shares, pursuant to the
Offer or otherwise, then, at the election of Parent, a short-form merger could
be effected without any approval of the Company Board or the stockholders of
the Company, subject to compliance with the provisions of Section 253 of the
DGCL. In the Merger Agreement, Parent, Purchaser and the Company have agreed
that, notwithstanding that all conditions to the Offer are satisfied or waived
as of the scheduled Expiration Date, Purchaser may extend the Offer on one or
more occasions for an aggregate period of not more than five business days
beyond the latest expiration date that would otherwise be permitted under the
Merger Agreement, if the Shares tendered pursuant to the Offer

24
<PAGE>

constitute less than 90 percent of the outstanding Shares. Even if Parent and
Purchaser do not own 90 percent of the outstanding Shares following
consummation of the Offer, Parent and Purchaser could seek to purchase
additional shares in the open market or otherwise in order to reach the 90
percent threshold and employ a short-form merger. The per share consideration
paid for any Shares so acquired may be greater or less than that paid in the
Offer. Parent presently intends to effect a short-form merger if permitted to
do so under the DGCL.

Appraisal Rights. Holders of the Shares do not have appraisal rights in
connection with the Offer. However, if the Merger is consummated, holders of
the Shares at the Effective Time will have certain rights pursuant to the
provisions of Section 262 of the DGCL including the right to demand appraisal
of, and to receive payment in cash of the fair value of, their Shares. Under
Section 262 of the DGCL, dissenting stockholders of the Company who comply with
the applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest thereon, if any. Any such judicial determination of the fair value of
the Shares could be based upon factors other than, or in addition to, the price
per Share to be paid in the Merger or the market value of the Shares. The value
so determined could be more or less than the price per Share to be paid in the
Merger.

The foregoing summary of the rights of dissenting stockholders under the
DGCL does not purport to be a complete statement of the procedures to be
followed by stockholders desiring to exercise any appraisal rights available
under the DGCL. The preservation and exercise of appraisal rights require
strict adherence to the applicable provisions of the DGCL.

Rule 13e-3. The Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger or another business
combination following the purchase of Shares pursuant to the Offer in which
Purchaser seeks to acquire the remaining Shares not held by it. Purchaser
believes, however, that Rule 13e-3 will not be applicable to the Merger because
it is anticipated that the Merger would be effected within one year following
consummation of the Offer and in the Merger stockholders would receive the same
price per Share as paid in the Offer. If Rule 13e-3 were applicable to the
Merger, it would require, among other things, that certain financial
information concerning the Company, and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such a transaction, be filed with the Commission and disclosed
to minority stockholders prior to consummation of the transaction.

13. Dividends and Distributions.

As described above, the Merger Agreement provides that from the date of the
Merger Agreement, without the prior written consent of Parent, neither the
Company nor any of its subsidiaries shall declare, set aside or pay any
dividends payable in, cash, stock or property in respect of Company Common
Stock (other than dividends and distributions by a direct or indirect wholly-
owned subsidiary of the Company to its parent) or split, combine or reclassify
any of its capital stock; issue or agree to issue any additional shares of, or
rights of any kind to acquire shares of, its capital stock of any class, other
than (i) the issuance of shares of capital stock of a subsidiary of the Company
to the Company, (ii) with respect to the Company, the Company shares issuable
upon exercise of the Company Stock Options and the Company Warrant, (iii) any
Shares issuable upon conversion of any convertible note of the Company
(together with the related preferred share purchase rights) and (iv) in
accordance with the Rights Agreement.

14. Conditions to the Offer.

Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, to pay for, and may delay the
acceptance for payment of or the payment for any Shares tendered pursuant to
the Offer, and may terminate the Offer if:

(a) there shall not have been validly tendered and not withdrawn prior
to the expiration of the Offer such number of Shares that would constitute
at least 52 percent of the then outstanding Shares (that is, the Minimum
Condition);

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<PAGE>

(b) any waiting period under the HSR Act applicable to the purchase of
Shares pursuant to the Offer shall not have expired or been terminated;

(c) there shall have occurred any general suspension of, or limitation
on prices for, trading in securities on the NYSE or in the over-the-counter
market or the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States; or

(d) any state of facts shall exist that would entitle Parent to
terminate the Merger Agreement. See Termination above.

The foregoing conditions are for the sole benefit of Parent and Purchaser
and may, subject to the terms of the Merger Agreement, be waived by Parent and
Purchaser in whole or in part at any time and from time to time in their sole
discretion. The failure by Parent or Purchaser, at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any right and all such
rights may be asserted at any time or from time to time.

15. Certain Legal Matters.

General. Except as described in this Section 15, based on information
provided by the Company, none of the Company, Purchaser or Parent is aware of
(i) any license or regulatory permit that appears to be material to the
business of the Company and its subsidiaries, taken as a whole, that might be
adversely affected by the acquisition of Shares by Parent or Purchaser pursuant
to the Offer, the Merger or otherwise, or (ii) any approval or other action by
any governmental, administrative or regulatory agency or authority, domestic or
foreign, that would be required prior to the acquisition of Shares by Purchaser
pursuant to the Offer, the Merger or otherwise. Should any such approval or
other action be required, Purchaser and Parent presently contemplate that such
approval or other action will be sought, except as otherwise described below
under "State Antitakeover Statutes." While, except as otherwise described in
this Offer to Purchase, Purchaser does not presently intend to delay the
acceptance for payment of, or payment for, Shares tendered pursuant to the
Offer pending the outcome of any such matter, there can be no assurance that
any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
business of the Company or that certain parts of the business of the Company
might not have to be disposed of, or other substantial conditions complied
with, in the event that such approvals were not obtained or such other actions
were not taken or in order to obtain any such approval or other action. If
certain types of adverse action are taken with respect to the matters discussed
below, Purchaser could decline to accept for payment, or pay for, any Shares
tendered. See Section 14 for certain conditions to the Offer.

State Antitakeover Statutes. Section 203 of the DGCL, in general, prohibits
a Delaware corporation, such as the Company, from engaging in a "Business
Combination" (defined as a variety of transactions, including mergers) with an
"Interested Stockholder" (defined generally as a person that is the beneficial
owner of 15 percent or more of the outstanding voting stock of the subject
corporation) for a period of three years following the date that such person
became an Interested Stockholder unless, prior to the date such person became
an Interested Stockholder, the board of directors of the corporation approved
either the Business Combination or the transaction that resulted in the
stockholder becoming an Interested Stockholder. The provisions of Section 203
of the DGCL are not applicable to any of the transactions contemplated by the
Merger Agreement, since the Merger Agreement and the transactions contemplated
thereby were approved by the Company Board prior to the execution thereof.

A number of states have adopted laws and regulations that purport to apply
to attempts to acquire corporations that are incorporated in such states, or
whose business operations have substantial economic effects in such states, or
which have substantial assets, security holders, employees, principal executive
offices or principal places of business in such states. In Edgar v. MITE Corp.,
the Supreme Court of the United States (the "Supreme Court") invalidated on
constitutional grounds the Illinois Business Takeover statute, which, as a
matter of state securities law, made certain corporate acquisitions more
difficult. However, in 1987, in CTS Corp.

26
<PAGE>

v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana
may, as a matter of corporate law and, in particular, with respect to those
aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders. The state
law before the Supreme Court was by its terms applicable only to corporations
that had a substantial number of stockholders in the state and were
incorporated there.

The Company has represented to Parent and Purchaser that the Company
Stockholder Approval (as defined in the Merger Agreement) is the only vote of
the holders of any class or series of the capital stock of the Company which is
necessary to adopt the Merger Agreement.

Parent and Purchaser do not believe that the antitakeover laws and
regulations of any state other than the State of Delaware will by their terms
apply to the Offer and, except as set forth above with respect to Section 203
of the DGCL, neither Parent nor Purchaser has attempted to comply with any
state antitakeover statute or regulation. Purchaser reserves the right to
challenge the applicability or validity of any state law purportedly applicable
to the Offer and nothing in this Offer to Purchase or any action taken in
connection with the Offer is intended as a waiver of such right. If it is
asserted that any state antitakeover statute is applicable to the Offer and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer, Purchaser might be required to file certain information
with, or to receive approvals from, the relevant state authorities, and
Purchaser might be unable to accept for payment or pay for Shares tendered
pursuant to the Offer or may be delayed in consummating the Offer in order to
comply with applicable law. In such case, Purchaser may not be obligated to
accept for payment, or pay for, any Shares tendered pursuant to the Offer. See
Section 14.

Antitrust. The Offer and the Merger are subject to the HSR Act, which
provides that certain acquisition transactions may not be consummated unless
certain information has been furnished to the Antitrust Division of the
Department of Justice (the "DOJ") and the Federal Trade Commission (the "FTC")
and certain waiting period requirements have been satisfied.

Parent has filed its Notification and Report Form with respect to the Offer
under the HSR Act on March 29, 1999. The waiting period under the HSR Act with
respect to the Offer will expire at 11:59 p.m. New York City time on the
fifteenth day after the date of such filing unless early termination of the
waiting period is granted. However, the DOJ or the FTC may extend the waiting
period by requesting additional information or documentary material from Parent
and/or the Company. If such a request is made, such waiting period will expire
at 11:59 p.m. New York City time on the tenth day after substantial compliance
by Parent with such request. Only one extension of the waiting period pursuant
to a request for additional information is authorized by the HSR Act.
Thereafter, such waiting period may be extended only by court order or with the
consent of Parent. In practice, complying with a request for additional
information or material can take a significant amount of time. In addition, if
the DOJ or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and
may agree to delay consummation of the transaction while such negotiations
continue. The Purchaser will not accept for payment Shares tendered pursuant to
the Offer unless and until the waiting period requirements imposed by the HSR
Act with respect to the Offer have been satisfied. See Section 14.

The FTC and the DOJ frequently scrutinize the legality under the Antitrust
Laws (as defined below) of transactions such as the acquisition by the
Purchaser of Shares pursuant to the Offer and the Merger. At any time before or
after the acquisition by the Purchaser of Shares, the DOJ or the FTC could take
such action under the Antitrust Laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares pursuant
to the Offer or otherwise seeking divestiture of Shares acquired by Purchaser
or divestiture of substantial assets of Parent or its subsidiaries. Private
parties, as well as state governments, may also bring legal action under the
Antitrust Laws under certain circumstances. Based upon an examination of
information provided by the Company relating to the businesses in which Parent
and the Company are engaged, Parent and Purchaser believe that the acquisition
of Shares by Purchaser will not violate the Antitrust Laws. Nevertheless, there
can be no assurance that a challenge to the Offer or other acquisition of
Shares by Purchaser on antitrust grounds will not be made or, if such a
challenge is made, of the result. See Section 14 for certain conditions to the
Offer.

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<PAGE>

As used in this Offer to Purchase, "Antitrust Laws" shall mean and include
the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other Federal and state
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to prohibit, restrict
or regulate actions having the purpose or effect of monopolization or restraint
of trade.

Federal Reserve Board Regulations. Regulations U and X (the "Margin
Regulations") of the Federal Reserve Board restrict the extension or
maintenance of credit for the purpose of buying or carrying margin stock,
including the Shares, if the credit is secured directly or indirectly by margin
stock. Such secured credit may not be extended or maintained in an amount that
exceeds the maximum loan value of all the direct and indirect collateral
securing the credit, including margin stock and other collateral. The financing
of the Offer will be structured such that such financing will be in full
compliance with the Margin Regulations.

16. Fees and Expenses.

Purchaser and Parent have retained Harris Trust Company of New York to serve
as the Depositary in connection with the Offer. In addition, Purchaser and
Parent have retained D.F. King & Co., Inc. to serve as Information Agent in
connection with the Offer. The Information Agent may contact holders of Shares
by personal interview, mail, telephone, telex, telegraph and other methods of
electronic communication and may request brokers, dealers, commercial banks,
trust companies and other nominees to forward the Offer materials to beneficial
holders. The Information Agent and the Depositary will each receive reasonable
and customary compensation for their services, be reimbursed for certain
reasonable out-of-pocket expenses and be indemnified against certain
liabilities in connection with their services, including certain liabilities
and expenses under the federal securities laws.

Except as set forth above, neither Parent nor Purchaser will pay any fees or
commissions to any broker or dealer or other person or entity in connection
with the solicitation of tenders of Shares pursuant to the Offer. Brokers,
dealers, banks and trust companies will be reimbursed by Purchaser for
customary mailing and handling expenses incurred by them in forwarding the
Offer materials to their customers.

17. Miscellaneous.

Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to any valid state
statute. If Purchaser becomes aware of any valid state statute prohibiting the
making of the Offer or the acceptance of the Shares pursuant thereto, Purchaser
shall make a good faith effort to comply with such statute or seek to have such
statute declared inapplicable to the Offer. If, after such good faith effort,
Purchaser cannot comply with such state statute, the Offer will not be made to
(nor will tenders be accepted from or on behalf of) holders of Shares in such
state.

No person has been authorized to give any information or to make any
representation on behalf of Parent or Purchaser not contained herein or in the
Letter of Transmittal and, if given or made, such information or representation
must not be relied upon as having been authorized.

Purchaser and Parent have filed with the Commission the Schedule 14D-1
pursuant to Rule 14d-3 under the Exchange Act, together with exhibits,
furnishing certain additional information with respect to the Offer. In
addition, the Company has filed with the Commission the Schedule 14D-9 pursuant
to Rule 14d-9 under the Exchange Act, setting forth its recommendation with
respect to the Offer and the reasons for its recommendation and furnishing
certain additional related information. Such Schedules and any amendments
thereto, including exhibits, should be available for inspection and copies
should be obtainable in the same manner set forth in Section 9 of this Offer to
Purchase (except that such material will not be available at the regional
offices of the Commission).

SVM M9 ACQUISITION CORPORATION
THE SERVICEMASTER COMPANY

* * * *

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SCHEDULE I

INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS
OF PARENT AND PURCHASER

(a) Directors and Executive Officers of Parent. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Parent. Unless otherwise indicated, the
business address of such person is c/o The ServiceMaster Company, One
ServiceMaster Way, Downers Grove, IL 60515. Unless otherwise indicated, each
occupation set forth opposite an individual's name refers to employment with
Parent. Unless otherwise indicated each such person has held his or her present
occupation as set forth below, or has been an executive officer at Parent, or
the entity indicated, for the past five years.

Directors of Parent

The Board of Directors of Parent has nominated each member of the Class of
1999 for re-election to the Board of Directors as members of the Class of 2002
at the annual meeting of the stockholders of Parent to be held on April 30,
1999.

Class of 1999

Paul W. Berezny. President. Berezny Investments, Inc., a real estate and
development company. He is a member of the Audit Committee. Age 64. Director
since 1995.

Henry O. Boswell. Retired President of Amoco Production Company and Chairman
of the Board of Amoco Canada. Mr. Boswell is a director of Rowan Companies,
Inc., Houston, Texas, an offshore oil drilling company; and Cabot Oil & Gas
Corporation, Houston, Texas, an oil and gas production company. He is a member
of the Executive Committee, the Compensation Committee (of which he is the
chairman), the Nominating Committee, the Employee Benefit Plan Oversight
Committee, and the Finance Committee. Age 69. Director since 1985.

Carlos H. Cantu. President and Chief Executive Officer of the Company since
January 1, 1994. From May 1991 to December 31, 1993, Mr. Cantu was President
and Chief Executive Officer of ServiceMaster Consumer Services L.P. Mr. Cantu
is a director of First Tennessee National Corporation, Memphis, Tennessee, a
financial institution, and of Unicom Corporation, Chicago, Illinois, the parent
company of Commonwealth Edison, an electric utility company. He is a member of
the Executive Committee, the Nominating Committee, the Finance Committee, and
the Employee Benefit Plan Oversight Committee. Age 65. Director since 1988.

Vincent C. Nelson. Business investor. Mr. Nelson is a member of the
Executive Committee, the Nominating Committee (of which he is the chairman),
and the Audit Committee. Age 57. Director since 1978.

Steven S. Reinemund. Chairman and Chief Executive Officer of the Frito-Lay
Company, the packaged foods division of PepsiCo, Inc. From 1992 to March 1996,
he served as President and Chief Executive Officer of the North American
division of Frito-Lay. Mr. Reinemund is a director of PepsiCo, Inc., Purchase,
New York, a food and beverage conglomerate, and a director of Provident
Companies, Inc., Chattanooga, Tennessee, an insurance company. He is a member
of the Nominating Committee. Age 50. Director since January 1, 1998.

Charles W. Stair. Vice Chairman of the Board of Directors. He was President
and Chief Executive Officer of ServiceMaster Management Services L.P. from May
1991 to December 31, 1994. He is a member of the Nominating Committee. Age 58.
Director since 1986.

Class of 2000

Herbert P. Hess. Managing Director of Berents & Hess Capital Management,
Inc., Boston, Massachusetts, an investment management firm. He is a member of
the Executive Committee, the Finance Committee (of which he is the chairman),
the Employee Benefit Plan Oversight Committee, and the Compensation Committee.
Age 62. Director since 1981.

29
<PAGE>

Michele M. Hunt. Private business consultant. From 1980 to July 1993, she
was employed by Herman Miller, Inc., an office furniture manufacturer, and
during the period from July 1990 to July 1993 she served as the company's
Corporate Vice President for People and Quality. Ms. Hunt is a member of the
Nominating Committee. Age 49. Director since 1995.

Dallen W. Peterson. Retired Chairman, Merry Maids Limited Partnership. He is
a member of the Finance Committee and the Employee Benefit Plan Oversight
Committee. Age 62. Director since 1995.

Phillip B. Rooney. Vice Chairman of the Board of Directors. From June 5,
1996 to February 17, 1997, he was President and Chief Executive Officer of WMX
Technologies, Inc., Oak Brook, Illinois ("WMI"), and from November 1984 to May
1996, he was President and Chief Operating Officer of WMI. Mr. Rooney is a
director of Van Kampen American Capital, Oak Brook, Illinois, an investment
management company; Illinois Tool Works, Inc., Glenview, Illinois, a
diversified manufacturing company; and Urban Shopping Centers, Inc., Chicago,
Illinois, a retail real estate management company. Age 54. Director since 1994.

Burton E. Sorensen. Investor. From December 1984 to December 1995 he served
as Chairman, President and Chief Executive Officer of Lord Securities
Corporation. Mr. Sorensen is a director of Provident Companies, Inc.,
Chattanooga, Tennessee, an insurance company. He is a member of the Executive
Committee, the Finance Committee, the Employee Benefit Plan Oversight
Committee, and the Compensation Committee. Age 69. Director since 1984.

David K. Wessner. President, HealthSystem Minnesota. From August 1994 to
July 1998 he served as Executive Vice President of HealthSystem Minnesota. From
November 1992 to December 1993, he was Executive Vice President, Program and
Process Improvement, Geisinger Health System. He is a member of the Executive
Committee, the Nominating Committee, and the Compensation Committee. Age 47.
Director since 1987.

Class of 2001

Lord Brian Griffiths of Fforestfach. International adviser to Goldman, Sachs
& Co. concerned with strategic issues related to their United Kingdom and
European operations and business development activities worldwide. He was made
a life peer at the conclusion of his service to the British Prime Minister
during the period 1985 to 1990. Lord Griffiths is a director of Times Newspaper
Holding Ltd., London, England, a newspaper company; English, Welsh and Scottish
Railways, London, England, a rail freight company; Herman Miller, Inc.,
Zeeland, Michigan, an office furniture manufacturer; and Trillium Investments
GP Limited, London, England, a facilities management company. He is a member of
the Executive Committee and the Nominating Committee. Age 57. Director since
1992.

Sidney E. Harris. Dean, Robinson College of Business Administration, Georgia
State University. From July 1987 to July 1997, Dr. Harris was Professor of
Management at the Peter F. Drucker Graduate Management Center at the Claremont
Graduate School, Claremont, California. He was Dean of the Graduate Management
Center from September 1991 to July 1996. Dr. Harris is a director of
Transamerica Investors, Inc., Los Angeles, California, a mutual funds
investment company; and Amresco, Inc., Dallas, Texas, a financial services
company. He is a member of the Executive Committee. Age 49. Director since
1994.

Gunther H. Knoedler. Retired Executive Vice President and Director Emeritus
of Bell Federal Savings and Loan Association, Chicago, Illinois. He is a member
of the Executive Committee and the Audit Committee (of which he is the
chairman). Age 69. Director since 1979.

James D. McLennan. President of McLennan Company, a full-service real estate
company. Mr. McLennan is a director of The Loewen Group, Inc., Burnaby, B.C.,
Canada, a provider of funeral services; and Advocate Health Systems, Oak Brook,
Illinois, a health care provider. He is a member of the Audit Committee and the
Compensation Committee. Age 62. Director since 1986.

30
<PAGE>

C. William Pollard. Chairman of the Board of Directors. He served as Chief
Executive Officer of the Company from May 1983 to December 31, 1993. Mr.
Pollard is a director of Herman Miller, Inc., Zeeland, Michigan, an office
furniture manufacturer; and Provident Companies, Inc., Chattanooga, Tennessee,
an insurance company. He is a member of the Executive Committee (of which he is
the chairman), the Finance Committee, the Employee Benefit Plan Oversight
Committee, and the Nominating Committee. Age 60. Director since 1977.

Officers of Parent

<TABLE>
<CAPTION>
First
Became
An
Name Age Present Position Officer
- ---- --- ---------------- -------
<S> <C> <C> <C>
C. William
Pollard 60 Chairman and Director 1977
Carlos H. 65 President and Chief Executive Officer and Director 1986
Cantu
Phillip B. 54 Vice Chairman and Director 1997
Rooney
Charles W. 58 Vice Chairman and Director 1973
Stair
Donald K. 48 Group President, Consumer Services and a Senior 1992
Karnes Management Adviser
Ernest J. 45 Group President, Consumer Services, and a Senior 1987
Mrozek Management Adviser
Robert F. 42 President and Chief Operating Officer, Health Care 1986
Keith Management Services, and a Senior Management
Adviser
Robert D. 55 Executive Vice President and a Senior Management 1976
Erickson Adviser
Vernon T. 64 Senior Vice President and General Counsel 1987
Squires
Stephen E. 46 Senior Vice President and Chief Information Officer 1998
Reiter
Steven C. 38 Executive Vice President and Chief Financial Officer 1997
Preston
Eric R. 39 Vice President and Treasurer 1994
Zarnikow
Deborah A. 36 Vice President and Controller 1993
O'Connor
</TABLE>

Messrs. Pollard, Cantu, Stair and Rooney are also directors of the Parent.
See "Directors of Parent" above for biographical information with respect to
such persons.

Robert D. Erickson. Executive Vice President. Mr. Erickson was a director of
Parent from May 1987 to May 1993. He previously served as a director of Parent
from May 1981 to June 1984. He served as the President and Chief Operating
Officer of Parent's international business unit from October 1993 to December
1997.

Donald K. Karnes. Group President, ServiceMaster Consumer Services. He has
served as Group President of TruGreen-ChemLawn and Terminix since January 1996.
He served as President and Chief Operating Officer of TruGreen-ChemLawn from
January 1992 to December 1995.

Robert F. Keith. President, Healthcare Management Services. He served as
President and Chief Operating Officer, ServiceMaster Management Services, from
January 1, 1997 to October 2, 1998, as President and Chief Operating Officer,
ServiceMaster Consumer Services from July 1994 to December 31, 1996, and as
Group President, ServiceMaster Consumer Services, from November 1992 to July
1994.

31
<PAGE>

Ernest J. Mrozek. Group President, ServiceMaster Consumer Services. He
served as President and Chief Operating Officer, ServiceMaster Consumer
Services from January 1, 1997 to October 2, 1998, as Senior Vice President and
Chief Financial Officer of the Parent from January 1, 1995 to December 31,
1996, as Vice President and Chief Financial Officer of the Parent from May 1994
to December 1994, and as Vice President, Treasurer and Chief Financial Officer
from November 1, 1992 to April 30, 1994.

Deborah A. O'Connor. Vice President and Controller since January 1, 1993.

Steven C. Preston. Executive Vice President and Chief Financial Officer
since July 1, 1998. He served as Senior Vice President and Chief Financial
Officer from April 1, 1997 to June 30, 1998. From August 1993 to March 1997, he
was Senior Vice President and Corporate Treasurer for First Data Corporation,
Atlanta, Georgia.

Stephen E. Reiter. Senior Vice President and Chief Information Officer since
July 1, 1998. From May 8, 1996 to May 31, 1998, he was Vice President and
Partner for Computer Science Corporation, an outsourcing firm providing ITO
outsourcing and purchasing and materials management support to the chemical,
oil, gas and utilities industries. From June 1, 1994 to May 31, 1996 he was a
Principal/Practice Leader with A.T. Kearney, a management consulting firm
operating as a wholly-owned subsidiary of Electronic Data Systems (EDS). For
the preceding three-year period, he was a Vice President and Chief Information
Officer with Tenneco, Inc., a global industrial manufacturer in auto parts and
packaging.

Vernon T. Squires. Senior Vice President and General Counsel since January
1, 1998. He has served as Secretary since December 7, 1998.

Eric R. Zarnikow. Vice President and Treasurer since May 1, 1994. From
August 1991 to April 1994, he served as Vice President and Treasurer of Gaylord
Container Corporation.

(b) Directors and Executive Officers of Purchaser. The following table sets
forth the name and present principal occupation or employment, and material
occupations, positions, offices or employments for the past five years, of each
director and executive officer of Purchaser. The business address of each such
person is c/o The ServiceMaster Company, One ServiceMaster Way, Downers Grove,
IL 60515. Unless otherwise indicated, each occupation set forth opposite an
individual's name refers to employment with Purchaser. Each such person has
been an executive officer of Purchaser since March 22, 1999, the date on which
Purchaser was formed.

Directors of Purchaser

Phillip B. Rooney. See the information with respect to Mr. Rooney set forth
under "Directors of Parent" above.

Ernest J. Mrozek. See the information with respect to Mr. Mrozek set forth
under "Officers of Parent" above.

Vernon T Squires. See the information with respect to Mr. Squires set forth
under "Officers of Parent" above.

Officers of Purchaser

Ernest J. Mrozek, President.

Phillip B. Rooney, Vice President.

Vernon T. Squires, Secretary and Treasurer.

Messrs. Mrozek, Rooney and Squires are also directors or officers of Parent
and/or Purchaser. See "Directors of Purchaser" and "Officers of Purchaser"
above for information with respect to such persons.

32
<PAGE>

Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each
stockholder of the Company or his broker, dealer, commercial bank, trust
company or other nominee to the Depositary, at the applicable address set
forth below:

The Depositary for the Offer is:

HARRIS TRUST COMPANY OF NEW YORK

By Mail: By Hand and Overnight Courier:

Harris Trust Company of New York Harris Trust Company of New York
Wall Street Station 88 Pine Street
P.O. Box 1023 19th Floor
New York, New York 10268-1023 New York, New York 10005

By Facsimile Transmission: (212) 701-7636 or (212) 701-7637
(For Eligible Institutions Only)
Confirm Facsimile by Telephone: (212) 701-7624
For Information Call: (212) 701-7624

Any questions or requests for assistance or additional copies of this Offer
to Purchase, the related Letter of Transmittal, the Notice of Guaranteed
Delivery and the other tender offer documents may be directed to the
Information Agent at the address and telephone numbers set forth below.
Stockholders may also contact their broker, dealer, commercial bank, trust
company or other nominee for assistance concerning the Offer.

The Information Agent for the Offer is:

D.F. KING & CO., INC.
77 Water Street, 20th Floor
New York, New York 10005
Banks and Brokers call collect: (212) 269-5550
All others call: (800) 431-9646