<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
----------------
American Residential Services, Inc.
(Name of Subject Company)
SVM-M9 Acquisition Corporation
The ServiceMaster Company
(Bidders)
Common Stock, Par Value $0.001 Per Share
(Title of Class of Securities)
028911105
(CUSIP Number of Class of Securities)
----------------
Vernon T. Squires
Senior Vice President and General Counsel
The ServiceMaster Company
One ServiceMaster Way
Downers Grove, IL 60515
Telephone: (630) 271-5870
Facsimile: (630) 271-5870
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
Copy To:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Robert H. Kinderman
312-861-2096
312-861-2200
----------------
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Transaction Valuation* Amount of Filing Fee
- ------------------------------------------------------------------------------
$64,361,158 $12,872.23
- ------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
* Estimated for purposes of calculating the amount of the filing fee only.
This amount assumes the purchase of 21,525,471 shares of common stock, par
value $0.001 par value per share (the "Shares"), of American Residential
Services, Inc. at a price of $5.75 per Share in cash, without interest
thereon. Such number of Shares represents the 15,887,704 Shares outstanding
as of March 22, 1999 and assumes the issuance prior to the consummation of
the Offer of 5,637,687 Shares upon the exercise or conversion of all
outstanding stock options, warrants and convertible notes. The amount of
the filing fee calculated in accordance with Regulation 240.0-11 of the
Securities Exchange Act of 1934, as amended, equals 1/50th of one percent
of the value of the transaction.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CUSIP NO. 028911105 Page 1 of 2 Pages
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
SVM M9 ACQUISITION CORPORATION
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)[_]
(b) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC, BK
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEM 2(e) OR 2(f):
[_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION:
DELAWARE
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
NONE
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
N/A
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
2
<PAGE>
SCHEDULE 14D-1
CUSIP NO.
- --------------------------------------------------------------------------------
1 NAMES OF REPORTING PERSONS:
I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
THE SERVICEMASTER COMPANY; I.R.S. IDENTIFICATION NO. 36-3858106
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a)[_]
(b) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC, BK
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEM 2(e) OR 2(f)
[_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
NONE
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
N/A
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
3
<PAGE>
TENDER OFFER
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by SVM M9 Acquisition Corporation, a Delaware corporation
("Purchaser") and a wholly-owned subsidiary of The ServiceMaster Company, a
Delaware corporation (the "Parent"), to purchase all of the outstanding shares
(the "Shares") of common stock, par value $0.001 per share (the "Common
Stock"), including the associated preferred stock purchase rights (the
"Shares"), of American Residential Services, Inc., a Delaware corporation (the
"Company"), at $5.75 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated March 29, 1999 (the "Offer to Purchase"), a copy of which is
attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal, a
copy of which is attached hereto as Exhibit(a)(2) (which together constitute
the "Offer").
Item 1: Security and Subject Company.
(a) The name of the subject company is American Residential Services, Inc.,
a Delaware corporation, and the address of its principal executive office is
Post Oak Tower, Suite 725, 5051 Westheimer Road, Houston, Texas 77056.
(b) The information set forth in the "INTRODUCTION" of the Offer to
Purchase is incorporated herein by reference.
(c) The information set forth in "Section 6--Price Range of the Shares;
Dividends" of the Offer to Purchase is incorporated herein by reference.
Item 2. Identity and Background.
(a)-(d),(g) This Statement is being filed by Parent and Purchaser. The
information set forth in the "INTRODUCTION" and "Section 9--Certain
Information Concerning Parent and Purchaser" of the Offer to Purchase is
incorporated herein by reference. The name, business address, present
principal occupation or employment, the material occupations, positions,
offices or employments for the past five years and citizenship of each
director and executive officer of Parent and Purchaser and the name, principal
business and address of any corporation or other organization in which such
occupations, positions, offices and employments are or were carried on are set
forth in Schedule I of the Offer to Purchase and incorporated herein by
reference.
(e)-(f) During the last five years neither Parent, Purchaser nor, to the
best knowledge of Parent and Purchaser, any of the persons listed in Schedule
I of the Offer to Purchase have been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors or was a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction as a result of which any such person was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation of such laws.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
(a)(1) Other than the transactions described in Item 3(b) below, neither
Parent, Purchaser nor, to the best knowledge of Parent and Purchaser, any of
the persons listed in Schedule I of the Offer to Purchase have entered into
any transaction with the Company, or any of the Company's affiliates which are
corporations, since the commencement of the Company's third full fiscal year
preceding the date of this Statement, the aggregate amount of which was equal
to or greater than one percent of the consolidated revenues of the Company for
(i) the fiscal year in which such transaction occurred or (ii) the portion of
the current fiscal year which has occurred if the transaction occurred in such
year.
4
<PAGE>
(a)(2) Other than the transactions described in Item 3(b) below, neither
Parent, Purchaser nor, to the best knowledge of Parent and Purchaser, any of
the persons listed in Schedule I of the Offer to Purchase have entered into
any transaction since the Company's third full fiscal year preceding the date
of this Statement with the executive officers, directors or affiliates of the
Company which are not corporations, in which the aggregate amount involved in
such transaction or in a series of similar transactions, including all
periodic installments in the case of any lease or other agreement providing
for periodic payments or installments, exceeded $40,000.
(b) The information set forth in the "INTRODUCTION," "Section 9--Certain
Information Concerning Parent and Purchaser," "Section 11--Background of the
Offer; Purpose of the Offer and the Merger; the Merger Agreement and Certain
Other Agreements" and "Section 12--Plans for the Company; Other Matters" of
the Offer to Purchase is incorporated herein by reference.
Item 4. Source and Amount of Funds or Other Consideration.
(a)-(b) The information set forth in "Section 10--Sources and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
Item 5. Purpose of the Tender Offer and Plans or Proposals of the Bidders.
(a)-(e) The information set forth in the "INTRODUCTION" and "Section 11--
Background of the Offer; Purpose of the Offer and the Merger; the Merger
Agreement and Certain Other Agreements" and "Section 12--Plans for the
Company; Other Matters" of the Offer to Purchase is incorporated herein by
reference.
(f)-(g) The information set forth in the "INTRODUCTION," "Section 7--Effect
of the Offer on the Market for the Shares; Stock Listing; Exchange Act
Registration; Margin Regulations" of the Offer to Purchase is incorporated
herein by reference.
Item 6: Interest in Securities of the Subject Company.
(a)-(b) The information set forth in the "INTRODUCTION," "Section 9--
Certain Information Concerning Parent and Purchaser" and "Section 11--
Background of the Offer; Purpose of the Offer and the Merger; the Merger
Agreement and Certain Other Agreements" of the Offer to Purchase is
incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relations with Respect to
the Subject Company's Securities.
The information set forth in the "INTRODUCTION," "Section 10--Sources and
Amount of Funds," "Section 11--Background of the Offer; Purpose of the Offer
and the Merger; the Merger Agreement and Certain Other Agreements," "Section
12--Plans for the Company; Other Matters" and "Section 16--Fees and Expenses"
of the Offer to Purchase is incorporated herein by reference.
Item 8. Persons Retained, Employed or to be Compensated.
The information set forth in "Section 16--Fees and Expenses" of the Offer
to Purchase is incorporated herein by reference.
Item 9. Financial Statements of Certain Bidders.
The information set forth in "Section 9--Certain Information Concerning
Parent and Purchaser" of the Offer to Purchase is incorporated herein by
reference.
5
<PAGE>
Item 10. Additional Information.
(a) Except as disclosed in Items 3 and 7 of this Statement, there are no
present or proposed material contracts, arrangements, understandings or
relationships between Parent or Purchaser, or to the best knowledge of Parent
and Purchaser, any of the persons listed in Schedule I of the Offer to
Purchase, and the Company or any of its executive officers, directors,
controlling persons or subsidiaries.
(b)-(c) The information set forth in the "INTRODUCTION," "Section 14--
Conditions of the Offer" and "Section 15--Certain Legal Matters" of the Offer
to Purchase is incorporated herein by reference.
(d) The information set forth in "Section 7--Effect of the Offer on the
Market for Shares; Stock Listing; Exchange Act Registration; Margin
Regulations" of the Offer to Purchase is incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase and the related
Letter of Transmittal, to the extent not otherwise incorporated herein by
reference, is incorporated herein by reference.
Item 11. Materials to be Filed as Exhibits.
(a)(1) Offer to Purchase, dated March 29, 1999.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release, dated March 23, 1999 of Parent.
(a)(8) Press Release, dated March 23, 1999, of the Company, is incorporated
by reference to Exhibit 99.1 to the Form 8-K of the Company filed on March 24,
1999.
(a)(9) Summary Advertisement, dated March 29, 1999.
(a)(10) Letter from the CEO of the Company to the stockholders of the
Company in connection with the Offer.
(b) $750,000,000 Five-Year Credit Agreement dated as of April 1, 1997 by
and among Parent, Bank One and Morgan Guaranty Trust Company, is incorporated
by reference to Exhibit 10.2 to the Annual Report on Form 10-K of the Company
for the fiscal year ended December 31, 1997.
(c)(1) Agreement and Plan of Merger, dated as of March 22, 1999, by and
among Parent, Purchaser and the Company.
(d) None
(e) None
(f) None
6
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Tender Offer
Statement is true, complete and correct.
Date: March 29, 1999 SVM M9 Acquisition Corporation
/s/ Vernon T. Squires
By: _________________________________
Name: Vernon T. Squires
Title:Secretary and Treasurer
7
<PAGE>
SIGNATURE
After due inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this Tender Offer
Statement is true, complete and correct.
Date: March 29, 1999 The ServiceMaster Company
/s/ Phillip B. Rooney
By: _________________________________
Name: Phillip B. Rooney
Title:Vice Chairman
8
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(Including the Associated Preferred Stock Purchase Rights)
OF
American Residential Services, Inc.
AT
$5.75 Net Per Share in Cash
BY
SVM M9 Acquisition Corporation,
A Wholly-Owned Subsidiary
OF
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.
14
<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.
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 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.
16
<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."
22
<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.
23
<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);
25
<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.
27
<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
* * * *
28
<PAGE>
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
<PAGE>
LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
American Residential Services, Inc.
Pursuant to the Offer to Purchase Dated March 29, 1999
by
SVM M9 Acquisition Corporation,
A Wholly-Owned Subsidiary
of
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.
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
Delivery of this Letter of Transmittal to an address other than as set
forth above, or transmission of instructions via facsimile to a number other
than as set forth above, will not constitute a valid delivery to the
Depositary.
The instructions contained within this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed.
This Letter of Transmittal is to be used by stockholders of American
Residential Services, Inc. (i) if certificates for Shares (as such term is
defined below) are to be forwarded herewith or, unless an Agent Message (as
defined in Instruction 2 below) is utilized, (ii) if delivery of Shares is to
be made by book-entry transfer to an account maintained by the Depositary (as
defined in the "INTRODUCTION" of the Offer to Purchase at the Book-Entry
Transfer Facility (as defined in, and pursuant to the procedures set forth in,
Section 3 of the Offer to Purchase). Stockholders who deliver Shares by book-
entry transfer are referred to herein as "Book-Entry Stockholders" and other
stockholders who deliver shares are referred to herein as "Certificate
Stockholders."
Stockholders who wish to tender their Shares but whose certificates for
Shares are not immediately available or who cannot deliver either the
certificates for their Shares, or a Book-Entry Confirmation (as defined in
Section 3 of the Offer to Purchase) with respect to their Shares, and all
other documents required hereby to the Depositary on or prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase) must tender
such Shares pursuant to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase. See Instruction 2. Delivery of documents
to the Book-Entry Transfer Facility will not constitute delivery to the
Depositary.
<PAGE>
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING (ONLY PARTICIPANTS IN THE BOOK-ENTRY TRANSFER FACILITY MAY
DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution: _____________________________________________
Account Number: _________________ Transaction Code Number: _________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s): ____________________________________________
Window Ticket Number (if any): _____________________________________________
Date of Execution of Notice of Guaranteed Delivery: ________________________
Name of Institution that Guaranteed Delivery: ______________________________
If delivered by Book-Entry Transfer, check box: [_]
Account Number: ________________ Transaction Code Number: _________________
DESCRIPTION OF SHARES TENDERED
- -------------------------------------------------------------------------------
Name(s) and Address(es) of
Registered Holder(s) (Please Fill Shares Tendered
in, if Blank, Exactly as Name(s) (Attach Additional Schedule List
Appear(s) on Share Certificate(s)) if Necessary)
- -------------------------------------------------------------------------------
Certificate
Number(s)
(1)
Total Number
Number of of Shares
Shares Tendered
Represented (2)
by
Certificate(s)
(1)
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Total
Shares:
- -------------------------------------------------------------------------------
(1) Need not be completed by Book-Entry Stockholders.
(2) Unless otherwise indicated, it will be assumed that all Shares
represented by certificates delivered to the Depositary are being
tendered hereby. See Instruction 4.
[_]Check here if any of the Certificates representing Shares that you own have
been lost, destroyed or stolen and see Instruction 11.
Number of Shares represented by lost, destroyed or stolen certificates:
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE INSTRUCTIONS SET
FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SVM M9 Acquisition Corporation, a
Delaware corporation ("Purchaser") and a wholly-owned subsidiary of The
ServiceMaster Company, a Delaware corporation ("Parent"), the above-described
shares of common stock, par value $0.001 per share (the "Common Stock"),
including the associated preferred stock purchase rights (the "Rights" and,
together with the Common Stock, the "Shares"), of American Residential
Services, Inc., a Delaware corporation (the "Company"), pursuant to the offer
to purchase all of the outstanding Shares at a price of $5.75 per Share of
Purchaser, net to the seller in cash, without interest thereon (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer
to Purchase dated March 29, 1999, and in this Letter of Transmittal (which,
together with any amendments or supplements thereto or hereto, collectively
constitute the "Offer"). The undersigned understands that Purchaser reserves
the right to transfer or assign, in whole at any time, or in part from time to
time, to one or more of its affiliates, the right to purchase all or any
portion of the 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. Receipt of the Offer is hereby acknowledged.
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 Parent, Purchaser
and the Company.
Upon the terms and subject to the conditions of the Offer (and if the Offer
is extended or amended, the terms of any such extension or amendment), subject
to, and effective upon, acceptance for payment of, and payment for, the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby (and any and all non-cash dividends, distributions, rights, other
Shares or other securities issued or issuable in respect thereof on or after
March 22, 1999 (collectively, "Distributions")) and irrevocably constitutes
and appoints the Depositary the true and lawful Agent and attorney-in-fact of
the undersigned with respect to such Shares (and any and all Distributions),
with full power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest), to (i) deliver certificates for
such Shares (and any and all Distributions), or transfer ownership of such
Shares (and any and all Distributions) on the account books maintained by the
Book-Entry Transfer Facility, together, in any such case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares (and any and all Distributions) for
transfer on the books of the Company, and (iii) receive all benefits and
otherwise exercise all rights of beneficial ownership of such Shares (and any
and all Distributions), all in accordance with the terms of the Offer.
By executing this Letter of Transmittal (including delivery through an
Agent Message), the undersigned hereby irrevocably appoints Phillip B. Rooney,
Ernest J. Mrozek and Vernon T. Squires in their respective capacities as
officers of Purchaser, and any individual who shall thereafter succeed to any
such office of Purchaser, and each of them, the attorneys-in-fact and proxies
of the undersigned, each with full power of substitution, to vote at any
annual or special meeting of the stockholders of the Company or any
adjournment or postponement thereof or otherwise in such manner as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, execute any written consent concerning any matter as
each such attorney-in-fact and proxy or his substitute shall in his sole
discretion deem proper with respect to, and otherwise act as each such
attorney-in-fact and proxy or his substitute shall in his sole discretion deem
proper with respect to, all of the Shares (and any and all Distributions)
tendered hereby and accepted for payment by Purchaser. 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 pursuant to the Offer. 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 named above 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
<PAGE>
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 the stockholders of the
Company.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
(including any and all Distributions) tendered hereby, that the undersigned
owns the Shares tendered hereby within the meaning of Rule 14e-4 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that the tender of the tendered Shares complies with Rule 14e-4 under the
Exchange Act, and that when such Shares are accepted for payment by Purchaser,
Purchaser will acquire good, marketable and unencumbered title to such Shares
and to any and all Distributions, free and clear of all liens, restrictions,
charges and encumbrances and such Shares and Distributions will not be subject
to any adverse claims. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Depositary or Purchaser to be necessary
or desirable to complete the sale, assignment and transfer of the Shares
tendered hereby and any and all Distributions. In addition, the undersigned
shall remit and transfer promptly to the Depositary for the account of
Purchaser any and all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer, and, pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of each such Distributions and
may withhold the entire purchase price of the Shares tendered hereby or deduct
from such purchase price, the amount or value of such Distributions as
determined by Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and any obligation of the undersigned
hereunder shall be binding upon the heirs, executors, administrators, personal
representatives, trustees in bankruptcy, successors and assigns of the
undersigned. Except as stated in the Offer, this tender is irrevocable.
The undersigned understands that the valid tender of Shares pursuant to any
one of the procedures described in Section 3 of the Offer to Purchase and in
the instructions hereto will constitute a binding agreement between the
undersigned and Purchaser upon the terms and subject to the conditions of the
Offer (and if the Offer is extended or amended, the terms or conditions of any
such extension or amendment). Without limiting the foregoing, if the price to
be paid in the Offer is amended in accordance with the Merger Agreement, the
price to be paid to the undersigned will be the amended price notwithstanding
the fact that a different price is stated in this Letter of Transmittal. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, Purchaser may not be required to accept for payment and pay for
any of the Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions," please
issue the check for the purchase price of all Shares purchased and/or return
any certificates for Shares not tendered or accepted for payment in the
name(s) of the registered holder(s) appearing above under "Description of
Shares Tendered." Similarly, unless otherwise indicated under "Special
Delivery Instructions," please mail the check for the purchase price of all
Shares purchased and/or return any certificates for Shares not tendered or not
accepted for payment (and any accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing above under "Description of
Shares Tendered." In the event that the boxes entitled "Special Payment
Instructions" and "Special Delivery Instructions" are both completed, please
issue the check for the purchase price of all Shares purchased and/or return
any certificates evidencing Shares not tendered or not accepted for payment
(and any accompanying documents, as appropriate) in the name(s) of, and
deliver such check and/or return any such certificates (and any accompanying
documents, as appropriate) to, the person(s) so indicated. Unless otherwise
indicated in the box entitled "Special Payment Instructions," please credit
any Shares tendered herewith by book-entry transfer that are not accepted for
payment by crediting the account at the Book-Entry Transfer Facility
designated above. The undersigned recognizes that Purchaser has no obligation,
pursuant to the "Special Payment Instructions," to transfer any Shares from
the name of the registered holder(s) thereof if Purchaser does not accept for
payment any of the Shares so tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5, 6 and 7) (See Instructions 1 and 7)
To be completed ONLY if the To be completed ONLY if
check for the purchase price of certificates for Shares not
Shares accepted for payment is to tendered or not accepted for
be issued in name of someone other payment and/or the check for the
than the undersigned, if purchase price of Shares accepted
certificates for Shares not for payment is to be sent to
tendered or not accepted for someone other than the undersigned
payment are to be issued in the or to the undersigned at an address
name of someone other than the other than that shown under
undersigned or if Shares tendered "Description of Shares Tendered."
hereby and delivered by book-entry
transfer that are not accepted for
payment are to be returned by
credit to an account maintained at
the Book-Entry Transfer Facility
other than the account indicated
above.
Mail check and/or Share
certificates to:
Name: ______________________________
(Please Print)
Address: ___________________________
Issue check and/or Share ------------------------------------
certificate(s) to: ------------------------------------
(Include Zip Code)
Name: ______________________________
(Please Print) ------------------------------------
(Taxpayer Identification or Social
Address: ___________________________ Security Number)
------------------------------------ (See Substitute Form W-9)
------------------------------------
(Include Zip Code)
------------------------------------
(Taxpayer Identification or Social
Security Number)
(See Substitute Form W-9)
Credit Shares delivered by book-
entry transfer and not purchased to
the Book-Entry Transfer Facility
account.
------------------------------------
(Account Number)
<PAGE>
SIGN HERE
(Also Complete Substitute Form W-9 Below)
------------------------------------------------------------------------------
------------------------------------------------------------------------------
(Signature(s) of Stockholder(s))
Dated: , 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on the
Share certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting
in a fiduciary or representative capacity, please provide the following
information and see Instruction 5.)
Name(s): _____________________________________________________________________
(Please Print)
Name of Firm: ________________________________________________________________
Capacity (full title): _______________________________________________________
(See Instruction 5)
Address: _____________________________________________________________________
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(Include Zip Code)
Area Code and Telephone Number: ______________________________________________
Tax Identification or Social Security Number: ________________________________
(Complete Substitute Form W-9)
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5)
For Use By Financial Institutions
Authorized Signature: ________________________________________________________
Name(s): _____________________________________________________________________
(Please Print)
Title: _______________________________________________________________________
Name of Firm: ________________________________________________________________
Address: _____________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number: ______________________________________________
<PAGE>
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares (which term, for purposes hereof, 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 herewith,
unless such registered holder(s) has completed either the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the Letter of Transmittal or (b) 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 member in good
standing of 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"). In all other cases, all signatures
on this Letter of Transmittal must be guaranteed by an Eligible Institution.
See Instruction 5.
2. Delivery of Letter of Transmittal and Shares; Guaranteed Delivery
Procedures. This Letter of Transmittal is to be completed by stockholders of
the Company either if Share certificates are to be forwarded herewith or,
unless an Agent Message is utilized, if delivery of Shares is to be made by
book-entry transfer pursuant to the procedures set forth herein and in Section
3 of the Offer to Purchase. For a stockholder validly to tender Shares
pursuant to the Offer, either (a) a properly completed and duly executed
Letter of Transmittal (or facsimile hereof), together with any required
signature guarantees, or an Agent Message (in connection with book-entry
transfer), and any other required documents, must be received by the
Depositary at one of its addresses set forth herein on or prior to the
Expiration Date and either (i) certificates for tendered Shares must be
received by the Depositary at one of such addresses on or prior to the
Expiration Date or (ii) Shares must be delivered pursuant to the procedures
for book-entry transfer set forth herein and in Section 3 of the Offer to
Purchase and a Book-Entry Confirmation must be received by the Depositary on
or prior to the Expiration Date or (b) the tendering stockholder must comply
with the guaranteed delivery procedures set forth herein and in Section 3 of
the Offer to Purchase.
Stockholders whose certificates for Shares are not immediately available or
who cannot deliver their certificates and all other required documents to the
Depositary on or prior to the Expiration Date or who cannot comply with the
book-entry transfer procedures on a timely basis may tender their Shares by
properly completing and duly executing the Notice of Guaranteed Delivery
pursuant to the guaranteed delivery procedure set forth herein and in Section
3 of the Offer to Purchase.
Pursuant to such guaranteed delivery procedures, (i) such tender must be
made by or through an Eligible Institution, (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
Purchaser, must be received by the Depositary on or prior to the Expiration
Date and (iii) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation with respect to all tendered Shares),
together with a properly completed and duly executed Letter of Transmittal (or
facsimile hereof), 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 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, Inc. is open for business.
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 the participant.
The signatures on this Letter of Transmittal cover the Shares tendered
hereby.
<PAGE>
The method of delivery of the shares, this 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. The 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, properly insured registered mail with return receipt
requested is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by executing
this Letter of Transmittal (or facsimile hereof), waive any right to receive
any notice of acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the number of Shares tendered and the Share
certificate numbers with respect to such Shares should be listed on a separate
signed schedule attached hereto.
4. Partial Tenders. (Not applicable to stockholders who tender by book-
entry transfer.) If fewer than all the Shares evidenced by any Share
certificate delivered to the Depositary herewith are to be tendered hereby,
fill in the number of Shares that are to be tendered in the box entitled
"Number of Shares Tendered." In any such case, new certificate(s) for the
remainder of the Shares that were evidenced by the old certificate(s) will be
sent to the registered holder, unless otherwise provided in the appropriate
box on this Letter of Transmittal, as soon as practicable after the Expiration
Date or the termination of the Offer, whichever occurs earlier. All Shares
represented by certificates delivered to the Depositary will be deemed to have
been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written
on the face of the certificate(s) without alteration, enlargement or any
change whatsoever.
If any of the Shares tendered hereby are held of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal or any Share certificate or stock power is
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to Purchaser of the authority of such person so
to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of Share certificates or
separate stock powers are required unless payment or certificates for Shares
not tendered or not accepted for payment are to be issued in the name of a
person other than the registered holder(s). Signatures on any such Share
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares evidenced by certificates listed and
transmitted hereby, the Share certificates must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on the Share certificates. Signature(s) on any
such Share certificates or stock powers must be guaranteed by an Eligible
Institution.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the transfer
and sale of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or if
certificates for Shares not tendered or not accepted for payment are to be
registered in the name of, any person other than the registered holder(s), or
if tendered certificates are registered in the name of any person other than
the person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes
<PAGE>
(whether imposed on the registered holder(s) or such other person(s)) payable
on account of the transfer to such other person will be deducted from the
purchase price of such Shares purchased unless evidence satisfactory to
Purchaser of the payment of such taxes or exemption therefrom is submitted.
Except as otherwise provided in this Instruction 6, it will not be
necessary for transfer tax stamps to be affixed to the Share certificates
evidencing the Shares tendered hereby.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares accepted for payment is to be issued in the name of,
and/or Share certificates for Shares not accepted for payment or not tendered
are to be issued in the name of and/or returned to, a person other than the
signer(s) of this Letter of Transmittal or to an address other than that
designated above, the appropriate boxes on this Letter of Transmittal should
be completed. Any stockholder(s) delivering Shares by book-entry transfer may
request that Shares not purchased be credited to an account maintained at the
Book-Entry Transfer Facility as such stockholder(s) may designate in the box
entitled "Special Payment Instructions." If no such instructions are given,
any such Shares not purchased will be returned by crediting the account at the
Book-Entry Transfer Facility designated above as the account from which such
Shares were delivered.
8. Requests for Assistance or Additional Copies. Questions and requests for
assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal and the Notice of Guaranteed Delivery may be directed to the
Information Agent at its address and telephone number set forth below, or from
brokers, dealers, commercial banks or trust companies.
9. Waiver of Conditions. Subject to the terms of the Merger Agreement,
Parent and Purchaser reserve the absolute right in their sole discretion to
waive, at any time or from time to time, any of the specified conditions of
the Offer (except the Minimum Condition, as such term is defined in the Merger
Agreement), in whole or in part, in the case of any Shares tendered.
10. Backup Withholding. In order to avoid "backup withholding" of federal
income tax on payments of cash pursuant to the Offer, a stockholder
surrendering Shares in the Offer must, unless an exemption applies, provide
the Depositary with such stockholder's correct taxpayer identification number
("TIN") on Substitute Form W-9 in this Letter of Transmittal and certify,
under penalties of perjury, that such TIN is correct and that such stockholder
is not subject to backup withholding.
Backup withholding is not an additional income tax. Rather, the amount of
the backup withholding can be credited against the federal income tax
liability of the person subject to the backup withholding, provided that the
required information is given to the Internal Revenue Service (the "IRS"). If
backup withholding results in an overpayment of tax, a refund can be obtained
by the stockholder upon filing an income tax return.
The stockholder is required to give the Depositary the TIN (that is, social
security number or employer identification number) of the record owner of the
Shares. If the Shares are held in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the stockholder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding. Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Depositary will withhold 31 percent on all payments made prior to the time a
properly certified TIN is provided to the Depositary. However, such amounts
will be refunded to such stockholder if a TIN is provided to the Depositary
within 60 days.
Certain stockholders (including, among others, all corporations and certain
foreign individuals and entities) are not subject to backup withholding.
Noncorporate foreign stockholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup
<PAGE>
withholding. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for more instructions.
11. Lost, Destroyed or Stolen Share Certificates. If any Certificate(s)
representing Shares has been lost, destroyed or stolen, you should promptly
notify the Company transfer agent, ChaseMellon Shareholders Services, at (800)
635-9270. You will be instructed by such transfer agent as to the steps that
must be taken in order to replace the Share certificate(s). This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Share certificates have been followed and
such Share certificate(s) have been in fact replaced and submitted to the
Depository pursuant to Letter of Transmittal.
Important: this Letter of Transmittal (or facsimile hereof) 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 on or prior to the Expiration Date and either certificates for
tendered shares must be received by the Depositary or shares must be delivered
pursuant to the procedures for Book-Entry Transfer, in each case on or prior
to the Expiration Date, or the tendering stockholder must comply with the
procedures for Guaranteed Delivery.
Important Tax Information
Under Federal income tax law, a stockholder whose tendered Shares are
accepted for payment is required to provide the Depositary (as payor) with
such stockholder's correct taxpayer identification number on Substitute Form
W-9 below. If such stockholder is an individual, the TIN is such shareholder's
social security number. If a tendering stockholder is subject to backup
withholding, such stockholder must cross out Part 2 of the Substitute Form W-
9. If the Depositary is not provided with the correct taxpayer identification
number, the stockholder may be subject to a $50 penalty imposed by the IRS. In
addition, payments that are made to such stockholder with respect to Shares
purchased pursuant to the Offer may be subject to backup withholding of 31
percent.
Certain stockholders (including, among others, all corporations, and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such stockholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Forms of
such statements can be obtained from the Depositary. Exempt stockholders,
other than foreign individuals, should furnish their TIN, write "Exempt" on
the face of the Substitute Form W-9 below, and sign, date and return the
Substitute Form W-9 to the Depositary. See the enclosed Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 for
additional instructions.
If backup withholding applies, the Depositary is required to withhold 31
percent of any payments made to the stockholder. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the IRS.
Purpose of Substitute Form W-9
To prevent backup withholding on payments that are made to a stockholder
with respect to Shares purchased pursuant to the Offer, the stockholder is
required to notify the Depositary of such stockholder's correct TIN by
completing the form contained herein certifying that the taxpayer
identification number provided on Substitute Form W-9 is correct (or that such
stockholder is awaiting a taxpayer identification number).
What Number to Give the Depositary
The stockholder is required to give the Depositary the social security
number or employer identification number of the record owner of the Shares. If
the Shares are in more than one name or are not in the name of the actual
owner, consult the
<PAGE>
enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional guidance on which number to report. If the
tendering stockholder has not been issued a TIN and has applied for a number
or intends to apply for a number in the near future, such stockholder should
write "Applied For" in the space provided for in the TIN in Part 1, and sign
and date the Substitute Form W-9. If "Applied For" is written in Part 1 and
the Depositary is not provided with a TIN within 60 days, the Depositary will
withhold 31 percent on all payments of the purchase price until a TIN is
provided to the Depositary.
<PAGE>
PAYOR'S NAME: Harris Trust Company of New York
- -------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR Social Security Number or
SUBSTITUTE TIN IN THE BOX AT RIGHT AND Employer Identification
Form W-9 CERTIFY BY SIGNING AND Number
Department of DATING BELOW: //
the Treasury ----------------------------
Internal
Revenue Service
(If awaiting TIN write
"Applied For")
-------------------------------------------------------------
Part 2--Certificate--Under penalties of perjury, I certify
that:
(a) The number shown on this form is my correct Taxpayer
Identification Number ("TIN") (or I am waiting for a
TIN to be issued to me), and
(b) I am not subject to backup withholding either because:
(1) I am exempt from backup withholding, (2) I have
not been notified by the IRS that I am subject to
backup withholding as a result of a failure to report
Payor's Request all interest and dividends, or (3) the IRS has
for notified me that I am no longer subject to backup
Taxpayer withholding.
Identification
CERTIFICATION INSTRUCTIONS--You must cross out Part 2
above if you have been notified by the IRS that you are
currently subject to backup withholding because of under-
reporting interest or dividends on your tax returns.
However, if after being notified by the IRS that you are
subject to backup withholding, you receive another
notification from the IRS that you are no longer subject
to backup withholding, do not cross out such Part 2. (Also
see instructions in the enclosed Guidelines).
-------------------------------------------------------------
SIGNATURE: _______________________________________________
DATE: _____________________________________________________
------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31 PERCENT OF ANY CASH PAYMENTS MADE TO YOU PURSUANT TO
THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE
BOX IN PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a Taxpayer Identification
Number has not been issued to me, and either (1) I have mailed or delivered
an application to receive a Taxpayer Identification Number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (2) I intend to mail or deliver an application in
the near future. I understand that if I do not provide a Taxpayer
Identification Number to the Depositary within 60 days, 31 percent of all
reportable payments made to me thereafter will be withheld, but that such
amounts will be refunded to me if I provide a certified Taxpayer
Identification Number to the Depositary within 60 days.
Signature:
Date:
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and the other tender offer documents may
be directed to the Information Agent at its address and telephone numbers set
forth below:
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 Toll Free: (800) 431-9646
<PAGE>
NOTICE OF GUARANTEED DELIVERY
(Not to be used for Signature Guarantees)
for
TENDER OF SHARES OF COMMON STOCK
(Including the Associated Preferred Stock Purchase Rights)
of
American Residential Services, Inc.
Pursuant to the Offer to Purchase Dated March 29, 1999
by
SVM M9 Acquisition Corporation,
A Wholly-Owned Subsidiary
of
The Servicemaster Company
----------------
This Notice of Guaranteed Delivery, or a form substantially equivalent
hereto, must be used to accept the Offer (as defined below) (i) if
certificates representing shares of Common Stock, par value $0.001 per share
(the "Common Stock"), including the associated preferred stock purchase rights
(the "Rights" and, together with the Common Stock, the "Shares"), of American
Residential Services, Inc., a Delaware corporation (the "Company"), are not
immediately available, (ii) if the procedure for book-entry transfer cannot be
completed on or prior to the Expiration Date (as defined in Section 1 of the
Offer to Purchase), or (iii) if time will not permit all required documents to
reach the Depositary on or prior to the Expiration Date. This form may be
delivered by hand to the Depositary or transmitted by facsimile transmission,
telegram or mail to the Depositary. See Section 3 of the Offer to Purchase.
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
----------------
Delivery of this Notice of Guaranteed Delivery to an address other than as
set forth above or transmission of instructions via facsimile number other
than as set forth above will not constitute a valid delivery.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an "Eligible
Institution" under the instructions thereto, such signature guarantee must
appear in the applicable space provided in the signature box on the Letter of
Transmittal.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to SVM M9 Acquisition Corporation, a
Delaware corporation ("Purchaser") and a wholly-owned subsidiary of The
ServiceMaster Company, a Delaware corporation ("Parent"), upon the terms and
subject to the conditions set forth in the Offer to Purchase of Purchaser and
Parent, dated March 29, 1999, and the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute
the "Offer"), receipt of which is hereby acknowledged, the number of Shares
set forth below of common stock, par value $0.001 per share (the "Common
Stock"), including the associated preferred stock purchase rights (the
"Rights" and, together with the Common Stock, the "Shares"), of American
Residential Services, Inc., a Delaware corporation, pursuant to the guaranteed
delivery procedures set forth in Section 3 of the Offer to Purchase.
Number of Shares: _____________________________________________________________
Certificate Nos. (if available): ______________________________________________
- -------------------------------------------------------------------------------
Check box if Shares will be tendered by book-entry transfer: [_]
Name of Tendering Institution: ________________________________________________
Account Number: _______________________________________________________________
Date: , 1999
Names(s) of Record Holder(s): _________________________________________________
- -------------------------------------------------------------------------------
(Please Print)
Address(es): __________________________________________________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Zip Code)
Area Code and Telephone Number(s): ____________________________________________
- -------------------------------------------------------------------------------
Signature(s): _________________________________________________________________
- -------------------------------------------------------------------------------
<PAGE>
GUARANTEE
(Not to be Used for Signature Guarantees)
The undersigned, a member in good standing of the Security Transfer Agents
Medallion Program, the New York Stock Exchange Medallion Signature Guarantee
Program or the Stock Exchange Medallion Program, guarantees to deliver to the
Depositary either certificates representing the Shares tendered hereby, in
proper form for transfer, or confirmation of book-entry transfer of such
Shares into the account of the Depositary at The Depository Trust Company, in
each case with delivery of a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or
an Agent Message (as defined in the Offer to Purchase), and any other
documents required by the Letter of Transmittal, within three trading days (as
defined in the Offer to Purchase) after the date hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible
Institution.
Name of Firm: _________________________________________________________________
- -------------------------------------------------------------------------------
(Authorized Signature)
- -------------------------------------------------------------------------------
(Title)
Address: ______________________________________________________________________
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Please Print) (Zip Code)
Area Code and Telephone Number(s): ____________________________________________
Date: , 1999
Note: Do not send certificates for Shares with this notice. Certificates
should be sent only with your Letter of Transmittal.
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
OF
American Residential Services, Inc.
AT
$5.75 Net Per Share in Cash
BY
SVM M9 Acquisition Corporation
a Wholly-Owned Subsidiary
OF
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.
March 29, 1999
To Brokers, Dealers, Commercial Banks,
Trust Companies And Other Nominees:
We have been appointed by SVM M9 Acquisition Corporation, a Delaware
corporation ("Purchaser") and a wholly-owned subsidiary of The ServiceMaster
Company, a Delaware corporation ("Parent"), to act as Information Agent in
connection with an offer by Purchaser to purchase all outstanding shares of
common stock, par value $0.001 per share (the "Common Stock"), including the
associated preferred stock purchase rights (the "Rights" and, together with
the Common Stock, the "Shares"), of American Residential Services, Inc., a
Delaware corporation (the "Company"), at $5.75 per Share, net to the seller in
cash, without interest thereon, upon the terms and subject to the conditions
set forth in the Offer to Purchase, dated March 29, 1999 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer")
enclosed herewith. The Offer is being made in connection with the Agreement
and Plan of Merger, dated as of March 22, 1999 (the "Merger Agreement"), by
and among Parent, Purchaser and the Company. All capitalized terms used and
not otherwise defined herein shall have the meanings ascribed to them in the
Offer to Purchase. Please furnish copies of the enclosed materials to those of
your clients for whose accounts you hold Shares registered in your name or in
the name of your nominee.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn on or prior to the Expiration Date (as defined in
the Offer to Purchase) 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 the Offer
to Purchase. See Section 14 of the Offer to Purchase.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
shares in their own names, we are enclosing the following documents:
1. Offer to Purchase, dated March 29, 1999;
2. Letter of Transmittal for your use in accepting the Offer and
tendering Shares and for the information of your clients;
3. Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares and all other required documents cannot be
delivered to the Depositary (as defined in the Offer to Purchase), or if
the procedures for book-entry transfer cannot be completed, on or prior to
the Expiration Date (as defined in the Offer to Purchase);
4. A letter which may be sent to your clients for whose accounts you
hold Shares registered in your name or in the name of your nominees, with
space provided for obtaining the instructions of such clients with regard
to the Offer;
<PAGE>
5. A Solicitation/Recommendation Statement on Schedule 14D-9, dated
March 29, 1999, which has been filed by the Company with the Securities and
Exchange Commission;
6. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
7. A return envelope addressed to Harris Trust Company of New York, as
Depositary.
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 pay for Shares
which are validly tendered and not withdrawn on or prior to the Expiration
Date when, as and if Purchaser gives oral or written notice to the Depositary
of the acceptance by Purchaser of such Shares for payment pursuant to the
Offer. Payment for Shares purchased pursuant to the Offer will in all cases be
made only after timely receipt by the Depositary of (i) certificates for such
Shares, or timely confirmation of a book-entry transfer of such Shares into
the account of the Depositary at The Depository Trust Company, pursuant to the
procedures described in Section 3 of the Offer to Purchase, (ii) a properly
completed and duly executed Letter of Transmittal (or a properly completed and
manually signed facsimile thereof) or an Agent Message (as defined in the
Offer to Purchase) in connection with a book-entry transfer and (iii) all
other documents required by the Letter of Transmittal.
Neither Purchaser nor ServiceMaster will pay any fees or commissions to any
broker or dealer or other person (other than the Depositary and the
Information Agent as described in the Offer to Purchase) for soliciting
tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks
and trust companies will be reimbursed for customary mailing and handling
expenses incurred by them in forwarding the enclosed materials to their
customers.
Purchaser will pay or cause to be paid all stock transfer taxes applicable
to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of
the Letter of Transmittal.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE
THAT 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.
In order to tender Shares pursuant to the Offer, a duly executed and
properly completed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, or an Agent Message in connection with a book-
entry transfer of Shares, and any other required documents, should be sent to
the Depositary, and certificates representing the tendered Shares should be
delivered or such Shares should be tendered by book-entry transfer, all in
accordance with the Instructions set forth in the Letter of Transmittal and in
the Offer to Purchase.
If holders of Shares wish to tender, but it is impracticable for them to
forward their certificates or other required documents or to complete the
procedures for delivery by book-entry transfer on or prior to the Expiration
Date, a tender may be effected by following the guaranteed delivery procedures
set forth in Section 3 of the Offer to Purchase.
Any inquiries you may have with respect to the Offer should be addressed
to, and additional copies of the enclosed documents may be obtained from the
Information Agent at its address and telephone numbers set forth on the back
cover of the Offer to Purchase.
Very truly yours,
D.F. King & Co., Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR
ANY OTHER PERSON THE AGENT OF PARENT, PURCHASER, THE COMPANY, THE
INFORMATION AGENT, THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING,
OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY
STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
Offer to Purchase for Cash
All Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
OF
American Residential Services, Inc.
AT
$5.75 Net Per Share in Cash
BY
SVM M9 Acquisition Corporation
a Wholly-Owned Subsidiary
OF
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.
March 29, 1999
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated March 29,
1999, and the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer") in
connection with the offer by SVM M9 Acquisition Corporation, a Delaware
corporation ("Purchaser") and a wholly-owned subsidiary of The ServiceMaster
Company, a Delaware corporation ("Parent"), to purchase for cash all
outstanding shares of common stock, par value $0.001 per share (the "Common
Stock"), including the associated preferred stock purchase rights (the
"Rights" and together with the Common Stock, the "Shares"), of American
Residential Services, Inc., a Delaware corporation (the "Company"). We are the
holder of record of Shares held for your account. A tender of such Shares can
be made only by us as the holder of record and pursuant to your instructions.
The enclosed Letter of Transmittal is furnished to you for your information
only and cannot be used by you to tender Shares held by us for your account.
If a stockholder desires to tender Shares pursuant to the Offer and such
Share certificates of such stockholder are not immediately available or time
will not permit all required documents to reach the Depositary prior to the
Expiration Date or the procedure for book-entry transfer cannot be completed
on a timely basis, such Shares may nevertheless be tendered according to the
guaranteed delivery procedures set forth in Section 3 of the Offer to
Purchase.
A tender of Shares can be made only by us as the holder of record of your
Shares and pursuant to your instructions. The Letter of Transmittal is
furnished to you for your information only and cannot be used by you to tender
Shares held by us for your account. Accordingly, we request instructions as to
whether you wish us to tender any or all of the Shares held by us for your
account, upon the terms and subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The offer price is $5.75 per Share, net to you in cash, without
interest thereon.
2. The Offer is being made for all outstanding Shares.
3. The Board of Directors of the Company has unanimously approved the
Merger Agreement and the transactions contemplated thereby (as defined in
the Offer to Purchase) 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.
4. The Offer and withdrawal rights expire at 11:59 p.m. New York City
time on Monday, April 26, 1999, unless the Offer is extended.
5. The Offer is conditioned upon, among other things, there being
validly tendered and not withdrawn on or prior to the Expiration Date (as
defined in the Offer to Purchase) 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 the Offer to Purchase. See Section 14 of the Offer
to Purchase.
6. Any stock transfer taxes applicable to the sale of Shares to
Purchaser pursuant to the Offer will be paid by Purchaser, except as
otherwise provided in Instruction 6 of the Letter of Transmittal.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give to the
Payor--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: that is, 00-0000000. The table below will help determine the
number to give the payer.
- --------------------------------------- ---------------------------------------
<TABLE>
<CAPTION>
Give the
For this Type of Account: Social
Security
Number of--
- ------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of
the account or,
if combined
funds, the first
individual on the
account (1)
3. Husband and Wife The actual owner
(joint account) of the account
or, if
joint funds,
either person (1)
4. Custodian account of a The minor (2)
minor (Uniform Gift to Minor
Act)
5. Adult and minor The adult, or, if
(joint account) the minor is the
only contributor,
the
minor (1)
6. Account in the name of The ward, minor,
guardian or committee for a or incompetent
designated ward, minor, or person (3)
incompetent person
7. a. The usual revocable The grantor-
savings trust account trustee (1)
(grantor is also trustee)
b. So-called trust account The actual owner
that is not a legal or (1)
valid
trust under State law
8. Sole proprietorship The owner (4)
account
</TABLE>
<TABLE>
<CAPTION>
Give the
For this Type of Account: EMPLOYER
IDENTIFICATION
Number of--
--------
<S> <C>
9. A valid trust, estate or The legal entity
pension trust (Do not furnish
the identifying
number
of the personal
representative or
trustee unless
the
legal entity
itself is
not designated in
the account
title.) (5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in
the name of the business
13. Association, club, or The organization
other
tax-exempt organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public entity
Department of Agriculture
in
the name of a public entity
(such as a State or local
government, school
district,
or prison) that receives
agricultural program
payments
</TABLE>
- ---------------------------------------
---------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's Social Security number or employer identification number.
(4) Show your individual name. You may also enter your business name. You may
use your Social Security number or employer identification number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
Obtaining a Number
If you do not have a Taxpayer Identification Number or you do not know your
number, obtain Form SS-5, Application for a Social Security Number Card (for
individuals), or Form SS-4, Application for Employer Identification Number
(for businesses and all other entities), at the local office of the Social
Security Administration or the Internal Revenue Service and apply for a
number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a) of the Internal Reve-
nue Code of 1986, as amended (the "Code"), or an individual retirement
plan.
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a) of the Code.
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
. A futures commission merchant registered with the Commodity Futures Trad-
ing Commission.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441
of the Code.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to an appropriate nominee.
. Section 404(k) payments made by an ESOP.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. NOTE: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not pro-
vided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
. Payments described in section 6049(b)(5) of the Code to nonresident al-
iens.
. Payments on tax-free covenant bonds under section 1451 of the Code.
. Payments made by certain foreign organizations.
. Payments of mortgage interest to you.
. Payments made to an appropriate nominee.
Exempt payees described above should file substitute Form W-9 to avoid
possible erroneous backup withholding. FILE THIS FORM WITH THE PAYOR. FURNISH
YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM,
AND RETURN IT TO THE PAYOR. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR
PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. IF YOU ARE A NONRESIDENT
ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYOR A
COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS).
Certain payments other than interest, dividends, and patronage dividends,
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice.--Section 6109 requires most recipients of dividend, inter-
est, or other payments to give correct Taxpayer Identification Numbers to
payor who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payor must be given the numbers whether or not recip-
ients are required to file a tax return. Payor must generally withhold 31 per-
cent of taxable interest, dividend, and certain other payments to a payee who
does not furnish a correct Taxpayer Identification Number to payor. Certain
penalties may also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you
fail to furnish your correct Taxpayer Identification Number to payor, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments.--If you fail to
include any portion of an includible payment for interest, dividends, or pat-
ronage dividends in gross income, such failure will be treated as being due to
negligence and will be subject to a penalty of 20 percent on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information with Respect to Withholding.--If you
make a false statement with no reasonable basis that results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information.--Willfully falsifying certi-
fications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
Exhibit (A)(7)
News Release
- --------------------------------------------------------------------------------
[Servicemaster logo] The ServiceMaster Company
One ServiceMaster Way
Downers Grove, IL 60515-1700
630/271-1300
For further information contact:
ServiceMaster
-------------
Claire Buchan, VP Comm, (630)271-2150
Bruce Duncan, VP IR, (630)271-2187
Steve Preston, CFO, (630)271-2637
ARS
---
Jennifer Tweeton, (713)599-9015
FOR IMMEDIATE RELEASE
March 23, 1999
SERVICEMASTER ANNOUNCES TENDER OFFER FOR
----------------------------------------
AMERICAN RESIDENTIAL SERVICES
-----------------------------
DOWNERS GROVE, Illinois--ServiceMaster (NYSE:SVM) and American Residential
Services (NYSE:ARS) today announced that their Boards of Directors have approved
a definitive agreement under which ServiceMaster will acquire ARS. Under the
terms of the agreement, ServiceMaster will initiate a cash tender offer for all
of the outstanding shares of ARS common stock at a price of $5.75 per share. The
total acquisition cost is approximately $92 million in cash and $180 million of
assumed indebtedness.
The acquisition of ARS will establish ServiceMaster as one of the country's
leading providers of heating, ventilation and air conditioning services, and
will complement the Company's Rescue Rooter plumbing business, which is already
among the nation's largest and fastest growing plumbing and drain cleaning
companies.
<PAGE>
- --------------------------------------------------------------------------------
[SERVICEMASTER LOGO]
Houston-based ARS provides comprehensive maintenance, repair and
replacement services for HVAC, plumbing, electrical and other systems and major
appliances in homes and commercial buildings. The company, which has 1998
annualized revenues of approximately $550 million, operates in 59 markets in 17
states and the District of Columbia. ARS also will support the HVAC services
offered to the residential market by ServiceMaster through its American Home
Shield warranty program and its maintenance management service of commercial
HVAC equipment in hospitals and schools.
"The acquisition of ARS continues our strategy of expanding our service
network by acquiring platform companies that are servicing both commercial and
residential customers and are operating in fragmented markets where there is an
opportunity to organize and provide an efficient service system. This strategy
was initiated by ServiceMaster in 1986 with the acquisition of Terminix, and
over the years we have established a proven track record of bringing added
benefits to our customers as we have applied our operating skills and systems to
improve productivity and service delivery. In the last 14 months, with the
acquisition of ARS, the 1998 acquisition of Rescue Rooter, and our entry into
the commercial landscape business with the acquisition of LandCare and other
regional landscape companies, we have added over $1 billion in revenue and
positioned ServiceMaster for an added dimension of growth in expanding new
markets," said ServiceMaster President and Chief Executive Officer
Carlos H. Cantu.
<PAGE>
- --------------------------------------------------------------------------------
[ServiceMaster logo]
Completion of the tender offer is subject to certain conditions, including
the tender of at least 52 percent of the outstanding ARS common shares and the
expiration of the applicable waiting period under the Hart-Scott-Rodino Act. The
offer and withdrawal rights are scheduled to expire on April 26, 1999, unless
the offer is extended.
"This acquisition significantly expands our service offerings on a
nationwide basis and provides added support for our rapidly growing American
Home Shield business," said ServiceMaster Consumer Services Group President
Ernie Mrozek.
"ServiceMaster has an outstanding reputation for people development, a
proven ability to operate service companies successfully, and a strong financial
track record," said ARS President and Chief Executive Officer Thomas Amonett.
"We believe this acquisition will provide opportunities for our people to grow
and develop, as well as the operational resources to grow the business."
ServiceMaster serves more than 10.5 million customers in the United States
and in 41 countries around the world, with annual customer level revenue of $6.4
billion. ServiceMaster is a network of quality service companies with two major
operating segments, ServiceMaster Consumer Services and ServiceMaster
Management Services.
ServiceMaster Consumer Services now includes eight market-leading
companies--TruGreen-ChemLawn, Terminix, American Home Shield, Rescue
<PAGE>
- --------------------------------------------------------------------------------
Servicemaster(R)
Rooter, ServiceMaster Residential and Commercial Services, Merry Maids,
AmeriSpec and Furniture Medic--which operate through the ServiceMaster Quality
Service Network of approximately 5,800 U.S. Company-owned locations and
franchised businesses.
ServiceMaster Management Services is the leading facilities management
company serving health care, education, and business and industrial facilities
with management of plant operations and maintenance, housekeeping, clinical
equipment maintenance, food service, laundry, grounds and energy.
In accordance with the Private Securities Litigation Reform Act of 1995,
the Company notes that statements that look forward in time, which include
everything other than historical information, involve risks and uncertainties
that may affect the Company's actual results of operations. Factors which could
cause actual results to differ materially include the following (among others):
weather conditions adverse to certain of the Company's Consumer Services
businesses, the entry of additional competitors in any of the markets served by
the Company, labor shortages, consolidation of hospitals in the healthcare
market, the condition of the U.S. economy, the inability of key suppliers to
achieve timely Y2K compliance in their delivery systems or the inability of the
Company to make its own systems Y2K compliant, and other factors listed from
time to time in the Company's filings with the Securities and Exchange
Commission.
<PAGE>
Exhibit (a)(9)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated
March 29, 1999 and the related Letter of Transmittal and any amendments or
supplements thereto, and is being made to all holders of Shares. The
Offer is not being made to (nor will tenders be accepted from or on behalf
of) holders of Shares in any jurisdiction in which the making of
the Offer or the acceptance thereof would not be in compliance
with the laws of such jurisdiction. In any jurisdiction where
the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealers the Offer shall be
deemed to be made on behalf of Purchaser by one or more
registered brokers or dealers licensed under the laws
of such jurisdiction.
Notice of Offer to Purchase for Cash
All of the Outstanding Shares of Common Stock
(Including the Associated Preferred Stock Purchase Rights)
of
American Residential Services, Inc.
(the "Company")
at
$5.75 Net Per Share
by
SVM M9 Acquisition Corporation
("Purchaser")
a Delaware Corporation and a Wholly-Owned Subsidiary of
The ServiceMaster Company
also a Delaware Corporation
("Parent")
Purchaser is offering to purchase all of the outstanding shares of common
stock, par value $0.001 per share (the "Common Stock"), including the associated
preferred stock purchase rights issued pursuant to a Rights Agreement (as
defined in the Offer to Purchase) (the "Rights" and, together with the Common
Stock, the "Shares") of the Company 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 the Offer to Purchase dated March 29, 1999 (the "Offer
to Purchase") and in the related Letter of Transmittal (which, together with any
amendments or supplements thereto, collectively constitute the "Offer"). The
primary benefits of 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 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 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.
- -------------------------------------------------------------------------------
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn on or prior to the Expiration Date (as defined in
Offer to Purchase) 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 the Offer to
Purchase. See Section 14 of the Offer to Purchase.
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 Parent, Purchaser and
the Company. 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 and the
adoption of the Merger Agreement by the stockholders of the Company (if required
by applicable law), Purchaser will be merged with and into the Company (the
"Merger") and the Company will be the surviving corporation in the Merger. 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 $5.75 in cash per Share paid in the
Offer, without interest.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND
THE MERGER 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.
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 (as defined in the Offer to Purchase) 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, 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 in the Offer to Purchase) 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 in the Offer to Purchase) and (iii) any other documents
required by the Letter of Transmittal.
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 pursuant to
the Offer. 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. Subject to the applicable rules and
regulations of the Securities and Exchange Commission and to applicable law,
Purchaser expressly reserves the right, in its sole discretion (subject to the
terms of the Merger Agreement), at any time and from time to time, to extend for
certain reasons, including the occurrence of any of the events specified in
Section 14 of the Offer to Purchase, the period of time during which the Offer
is open by giving oral or written notice of such extension to the Depositary.
Any such extension will be followed by a public announcement thereof by no later
than 9:00 a.m. New York City time on the next business day after the previously
scheduled Expiration Date. During any such extension, all Shares previously
tendered and not withdrawn will remain subject to the Offer, subject to the
right of a tendering stockholder to withdraw Shares. Without limiting the manner
in which Purchaser may choose to make any public announcement, Purchaser will
have no obligation to publish, advertise or otherwise communicate any such
announcement other than by issuing a press release to the Dow Jones News Service
or otherwise as may be required by applicable law.
Except as otherwise provided below 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 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 the Offer to Purchase. Any such notice
of withdrawal must specify the name of the person having 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 such 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 (as defined in the Offer to
Purchase), 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 set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must also specify the name and number of the account at the
Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be
credited with the withdrawn Shares and otherwise comply with the Book-Entry
Transfer Facility procedures. Withdrawals of tendered Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in Section 3 of
the Offer to Purchase at any time 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, whose determination
will be final and binding.
The Company has provided Purchaser with its stockholder lists and security
position listings for the purpose of disseminating the Offer to holders of
Shares. The Offer to Purchase, the related Letter of Transmittal and the other
tender offer documents will be mailed to record holders of Shares whose names
appear on the stockholder list, and will be furnished to brokers, dealers,
commercial banks, trust companies and similar persons whose names, or the names
of whose nominees, appear on the stockholder lists of the Company, or, if
applicable, who are listed as participants in a clearing agency security
position listing, for subsequent transmittal to beneficial owners of Shares.
THE 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.
Questions and requests for assistance or additional copies of the Offer to
Purchase, the related Letter of Transmittal and the other tender offer documents
may be directed to the Information Agent (as defined in the Offer to Purchase),
at its address and telephone number set forth below, and copies will be
furnished promptly at the expense of Purchaser. Neither Parent nor Purchaser
will pay any fees or commissions to any broker or dealer or other person other
than the Information Agent for soliciting tenders of Shares pursuant to the
Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 431-9646
March 29, 1999
<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>
AGREEMENT AND PLAN OF MERGER
dated as of
March 22, 1999
by and among
AMERICAN RESIDENTIAL SERVICES, INC.
THE SERVICEMASTER COMPANY
and
SVM M9 ACQUISITION CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 THE OFFER............................................................... 1
Section 1.1 The Offer................................................. 1
Section 1.2 ARS Actions............................................... 3
ARTICLE 2 THE MERGER...............................................................5
Section 2.1 The Merger................................................ 5
Section 2.2 Closing................................................... 5
Section 2.3 Effective Time............................................ 5
Section 2.4 Effects of the Merger..................................... 5
ARTICLE 3 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; PAYMENT OF MERGER CONSIDERATION; ARS STOCK OPTIONS........ 6
Section 3.1 Effect on Capital Stock................................... 6
Section 3.2 Payment of Merger Consideration........................... 7
Section 3.3 Stock Options............................................. 9
ARTICLE 4 ARS WARRANTIES..........................................................10
Section 4.1 Organization..............................................10
Section 4.2 Corporate Authorization; Validity of Agreement;
Board Action..............................................10
Section 4.3 Consents and Approvals; No Violations.....................11
Section 4.4 Capitalization............................................12
Section 4.5 Subsidiaries; Capitalization of Subsidiaries..............13
Section 4.6 SEC Reports and Financial Statements......................13
Section 4.7 Information Supplied......................................14
Section 4.8 Absence of Certain Changes................................14
Section 4.9 No Undisclosed Liabilities................................16
Section 4.10 Employee Benefit Plans....................................16
Section 4.11 Compliance with Law.......................................18
Section 4.12 Litigation................................................19
Section 4.13 No Default................................................19
Section 4.14 Taxes.....................................................19
Section 4.15 Contracts.................................................23
Section 4.16 Transactions with Affiliates..............................23
Section 4.17 Environmental Matters.....................................23
Section 4.18 Intellectual Property.....................................25
Section 4.19 Opinion of Financial Advisor..............................25
Section 4.20 Finders and Investment Bankers............................25
Section 4.21 Takeover Statutes.........................................25
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 4.22 Insurance.................................................26
Section 4.23 Board Action Regarding ARS Option Plans...................26
Section 4.24 Board Action Regarding Rights Agreement...................26
ARTICLE 5 WARRANTIES OF SERVICEMASTER AND ACQUISITION SUBSIDIARY..................26
Section 5.1 Organization..............................................27
Section 5.2 Corporate Authorization; Validity of Agreement;
Necessary Action.........................................27
Section 5.3 Consents and Approvals; No Violations.....................27
Section 5.4 Capitalization............................................28
Section 5.5 SEC Reports and Financial Statements......................29
Section 5.6 Absence of Certain Changes................................29
Section 5.7 No Undisclosed Liabilities................................29
Section 5.8 Litigation................................................30
Section 5.9 Compliance with Law.......................................30
Section 5.10 No Default................................................30
Section 5.11 Information Supplied......................................30
Section 5.12 Opinion of Financial Advisor..............................31
Section 5.13 Finders and Investment Bankers............................31
Section 5.14 Ownership of ARS Common Stock.............................31
ARTICLE 6 COVENANTS OF ARS........................................................31
Section 6.1 Conduct of Business by ARS Pending the Merger.............31
Section 6.2 ARS Stockholder Approval; Preparation of Proxy Statement..33
Section 6.3 Access to Information.....................................34
Section 6.4 No Solicitation...........................................34
Section 6.5 Corporate Organization....................................36
Section 6.6 Monthly Financial Statements..............................36
Section 6.7 Resignation of ARS Directors..............................36
ARTICLE 7 COVENANTS OF SERVICEMASTER..............................................37
Section 7.1 Obligations of Acquisition Subsidiary.....................37
Section 7.2 Indemnification...........................................37
ARTICLE 8 COVENANTS OF SERVICEMASTER AND ARS......................................38
Section 8.1 Diligent Efforts..........................................38
Section 8.2 Certain Filings...........................................38
Section 8.3 Public Announcements......................................38
Section 8.4 Further Assurances........................................38
Section 8.5 Notices of Certain Events.................................39
Section 8.6 Regulatory Matters and Approvals..........................39
Section 8.7 Representations...........................................39
Section 8.8 Material Consents.........................................39
</TABLE>
<PAGE>
<TABLE>
<S> <C>
ARTICLE 9 CONDITIONS........................................................40
Section 9.1 Conditions to the Offer...................................40
Section 9.2 Conditions to the Merger..................................40
ARTICLE 10 TERMINATION.......................................................41
Section 10.1 Termination...............................................41
Section 10.2 Waiver....................................................43
Section 10.3 Effect of Termination; Termination Fee....................44
ARTICLE 11 MISCELLANEOUS.....................................................45
Section 11.1 Notices...................................................45
Section 11.2 Survival of Representations and Warranties................46
Section 11.3 Amendments; No Waivers....................................46
Section 11.4 Expenses..................................................46
Section 11.5 Successors and Assigns....................................46
Section 11.6 Governing Law.............................................46
Section 11.7 Counterparts; Effectiveness...............................46
Section 11.8 Headings..................................................46
Section 11.9 No Third Party Beneficiaries..............................47
</TABLE>
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") has been made as of
March 22, 1999 (the "date hereof") by and among American Residential Services,
Inc., a Delaware corporation ("ARS"), The ServiceMaster Company, a Delaware
corporation ("ServiceMaster"), and SVM M9 ARS Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of ServiceMaster
("Acquisition Subsidiary").
WHEREAS, in furtherance of the acquisition of ARS by ServiceMaster on the
terms and subject to the conditions set forth in this Agreement, ServiceMaster
proposes to cause Acquisition Subsidiary to make a tender offer (as it may be
amended from time to time as permitted under this Agreement, the "Offer") to
purchase all the outstanding shares of Common Stock, par value $0.001 per share,
of ARS, together with the related preferred stock purchase rights (the "ARS
Common Stock" and the shares of ARS Common Stock being hereinafter collectively
referred to as the "ARS Shares"), at a purchase price of $5.75 per ARS Share, or
such higher price as ServiceMaster may decide to offer in its sole and absolute
discretion in the Offer (the "Offer Price"), net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in this
Agreement.
WHEREAS, the respective boards of directors of ServiceMaster, Acquisition
Subsidiary and ARS have declared advisable and approved the Offer and the merger
of Acquisition Subsidiary with and into ARS (the "Merger") upon the terms and
subject to the conditions set forth in this Agreement, whereby each issued and
outstanding ARS Share, other than ARS Shares owned directly or indirectly by
ServiceMaster or ARS and Dissenting Shares (as hereinafter defined), will be so
purchased in the Offer or converted in the Merger into the right to receive the
price per ARS Share paid in the Offer.
WHEREAS, ServiceMaster, Acquisition Subsidiary and ARS desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
The parties hereto agree as follows:
ARTICLE 1
THE OFFER
Section 1.1 The Offer.
(a) Subject to the provisions of this Agreement and the satisfaction
or waiver of the conditions set forth in this Agreement, as promptly as
practicable but in no event later than
<PAGE>
March 29, 1999, Acquisition Subsidiary shall, and ServiceMaster shall cause
Acquisition Subsidiary to, commence the Offer. ServiceMaster shall not be
obligated to commence the Offer if any state of facts or events shall exist
which would entitle ServiceMaster to not acquire the ARS Shares tendered in
response to the Offer under the conditions set forth in Section 9.1, other than
the Minimum Condition (as hereinafter defined). The initial scheduled expiration
date for the Offer shall be April 26, 1999. Acquisition Subsidiary shall be
obligated to, and ServiceMaster shall cause Acquisition Subsidiary to, accept
for payment, and pay for as promptly as practicable after the expiration of the
Offer, all ARS Shares validly tendered pursuant to the Offer and not withdrawn,
subject only to the conditions with respect to the Offer set forth in Section
9.1 (any of which may be waived in whole or in part by Acquisition Subsidiary in
its sole discretion); provided that, without the consent of ARS, Acquisition
Subsidiary shall not waive the Minimum Condition. Acquisition Subsidiary
expressly reserves the right to modify the terms of the Offer, except that,
without the consent of ARS, Acquisition Subsidiary shall not (i) reduce the
number of ARS Shares subject to the Offer, (ii) reduce the Offer Price below
$5.75 per ARS Share, net to the seller in cash, (iii) add to the conditions with
respect to the Offer set forth in Section 9.1, (iv) except as provided in the
next sentence, extend the Offer, (v) change the form of consideration payable in
the Offer or (vi) amend any other term of the Offer in any manner adverse to the
holders of the ARS Shares. Notwithstanding the foregoing, Acquisition Subsidiary
may, without the consent of ARS, (A) 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 Section 9.1 shall not be satisfied or waived,
until such time as such conditions are satisfied or waived, (B) extend the Offer
for any period required by any rule, regulation, interpretation or position of
the Securities and Exchange Commission (the "SEC") or the staff thereof
applicable to the Offer and (C) 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 (A) or (B) of this
sentence, if on such expiration date there shall not have been tendered at least
90 percent of the outstanding ARS Shares. ServiceMaster will (and will cause
Acquisition Subsidiary to) consummate the Merger as soon as practicable after
the consummation of the Offer.
(b) On the date of commencement of the Offer, ServiceMaster and
Acquisition Subsidiary shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer, which shall
contain an offer to purchase and a related letter of transmittal and summary
advertisement (such Schedule 14D-1 and the documents included therein pursuant
to which the Offer will be made, together with any supplements or amendments
thereto, the "Offer Documents"). ServiceMaster and Acquisition Subsidiary agree
that the Offer Documents shall comply as to form in all material respects with
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder and the Offer Documents, on the
date first published, sent or given to the stockholders of ARS, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by ServiceMaster
or
2
<PAGE>
Acquisition Subsidiary with respect to information supplied by ARS or any of its
affiliates or representatives specifically for inclusion or incorporation by
reference in the Offer Documents. Each of ServiceMaster, Acquisition Subsidiary
and ARS agree promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and ServiceMaster and Acquisition
Subsidiary further agree to take all steps reasonably necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to the stockholders of ARS, in each
case as and to the extent required by applicable federal securities laws. ARS
and its counsel shall be given reasonable opportunity to review and comment upon
the Offer Documents prior to their filing with the SEC or dissemination to the
stockholders of ARS. ServiceMaster and Acquisition Subsidiary agree to provide
ARS and its counsel any comments ServiceMaster, Acquisition Subsidiary or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) ServiceMaster shall provide or cause to be provided to Acquisition
Subsidiary on a timely basis the funds necessary to accept for payment, and to
pay for, any ARS Shares that Acquisition Subsidiary becomes obligated to accept
for payment, and to pay for, pursuant to the Offer.
Section 1.2 ARS Actions.
(a) ARS hereby approves of and consents to the Offer and represents
that the board of directors of ARS, at a meeting duly called and held, duly and
unanimously adopted resolutions approving this Agreement, the Offer and the
Merger, determining, as of the date of such resolutions, that the terms of the
Offer and the Merger are fair to, and in the best interests of, the stockholders
of ARS, unanimously recommending that the stockholders of ARS accept the Offer,
tender their shares pursuant to the Offer and adopt this Agreement if such
adoption is required and approving the acquisition of ARS Shares by Acquisition
Subsidiary pursuant to the Offer and the other transactions contemplated by this
Agreement. ARS believes that each of its directors currently intends to tender
all ARS Shares (other than ARS Shares, if any, held by such person that, if
tendered, could cause such person to incur liability under the provisions of
Section 16(b) of the Exchange Act) owned by such person pursuant to the Offer.
(b) On the date the Offer Documents are filed with the SEC, ARS shall
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with
respect to the Offer (such Schedule 14D-9, as supplemented or amended from time
to time, the "Schedule 14D-9") containing, subject to the terms of this
Agreement, the recommendation described in paragraph (a) of this Section and
shall mail the Schedule 14D-9 to the stockholders of ARS; provided that the
board of directors of ARS may, prior to the purchase of the ARS Shares pursuant
to the Offer, withdraw or modify such recommendation if the board of directors
of ARS, after having consulted with outside counsel, determines that the refusal
to do so would constitute a breach by the board of
3
<PAGE>
directors of ARS of its fiduciary duties under applicable laws; provided further
that the board of directors of ARS may not approve or recommend (and in
connection therewith, withdraw or modify the recommendation described in
paragraph (a) of this Section) an Acquisition Transaction (as hereinafter
defined) other than the Offer and the Merger unless such Acquisition Transaction
is a bona fide unsolicited written proposal from a third party that constitutes
a Qualified Competing Proposal (as hereinafter defined) under the criteria
prescribed in Section 6.4(c). The Schedule 14D-9 shall comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the stockholders of ARS, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by ARS with
respect to information supplied by ServiceMaster or any of its Subsidiaries (as
hereinafter defined) or representatives specifically for inclusion or
incorporation by reference in the Schedule 14D-9. Each of ARS, ServiceMaster and
Acquisition Subsidiary agrees promptly to correct any information provided by it
for use in the Schedule 14D-9 if and to the extent that such information shall
have become false or misleading in any material respect, and ARS further agrees
to take all steps necessary to amend or supplement the Schedule 14D-9 and to
cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC
and disseminated to the stockholders of ARS, in each case as and to the extent
required by applicable federal securities laws. ServiceMaster and its counsel
shall be given reasonable opportunity to review and comment upon the Schedule
14D-9 prior to its filing with the SEC or dissemination to stockholders of ARS.
ARS agrees to provide ServiceMaster and its counsel any comments ARS or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, ARS shall cause its
transfer agent to furnish Acquisition Subsidiary promptly with mailing labels
containing the names and addresses of the record holders of ARS Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the possession or
control of ARS regarding the beneficial owners of ARS Shares, and shall furnish
to Acquisition Subsidiary such information and assistance (including updated
lists of stockholders, security position listings and computer files) as
ServiceMaster may reasonably request in communicating the Offer to the
stockholders of ARS. Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, ServiceMaster and Acquisition
Subsidiary and their agents shall hold in confidence the information contained
in any such labels, listings and files, will use such information only in
connection with the Offer and the Merger and, if the Offer and this Agreement
shall be terminated, will deliver, and will use their reasonable efforts to
cause their agents to deliver, to ARS all copies and any extracts or summaries
from such information then in their possession or control.
4
<PAGE>
ARTICLE 2
THE MERGER
Section 2.1 The Merger. Subject to the last two sentences of this
Section 2.1, upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), Acquisition Subsidiary shall be merged with and into
ARS at the Effective Time (as hereinafter defined). Following the Effective
Time, the separate corporate existence of Acquisition Subsidiary shall cease and
ARS shall continue as the surviving corporation (the "Surviving Corporation")
and shall succeed to and assume all the rights and obligations of Acquisition
Subsidiary in accordance with Delaware Law. At the election of ServiceMaster,
to the extent that any such action would not cause a failure of a condition to
the Offer or the Merger, (i) any direct or indirect wholly-owned subsidiary of
ServiceMaster may be substituted for and assume all of the rights and
obligations of Acquisition Subsidiary as a constituent corporation in the Merger
or (ii) ARS may be merged with and into Acquisition Subsidiary with Acquisition
Subsidiary continuing as the Surviving Corporation with the effects set forth
above and in Section 2.4. In either such event, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect the foregoing.
Section 2.2 Closing. The closing (the "Closing") of the Merger will take
place at 10:00 a.m. (Chicago time) on a date to be specified by ServiceMaster or
Acquisition Subsidiary, which shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in Section 9.2 (the
"Closing Date"), at the offices of Kirkland & Ellis, unless another date, time
or place is agreed to in writing by the parties hereto.
Section 2.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall file with the Delaware Secretary of State a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of Delaware Law and shall make all
other filings or recordings required under Delaware Law. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Delaware Secretary of State, or at such other time as Acquisition Subsidiary
and ARS shall agree should be specified in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as the "Effective
Time").
Section 2.4 Effects of the Merger.
(a) The Merger shall have the effects set forth in Section 259 of
Delaware Law.
(b) The certificate of incorporation of ARS shall be amended and
restated at the Effective Time of the Merger to be identical to the certificate
of incorporation of Acquisition Subsidiary (except that the name of the
Surviving Corporation shall remain American Residential
5
<PAGE>
Services, Inc.) and as so amended and restated it shall be the restated
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
(c) The bylaws of Acquisition Subsidiary in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
For purposes of this Agreement, "Person" or "person" means an individual, a
corporation, a limited liability company, a partnership, an association, a trust
or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof. For purposes of this
Agreement, the word "Subsidiary" when used with respect to any Person means any
other corporation or other entity of which a majority of the securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are directly or
indirectly owned by such Person.
ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS;
PAYMENT OF MERGER CONSIDERATION; ARS STOCK OPTIONS
Section 3.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any ARS
Shares or any shares of capital stock of Acquisition Subsidiary:
(a) Each issued and outstanding share of capital stock of Acquisition
Subsidiary shall be converted into and become one fully paid and nonassessable
share of Common Stock, par value $0.01 per share, of the Surviving Corporation.
(b) Each ARS Share that is owned by ARS or by any Subsidiary of ARS
and each ARS Share that is owned by ServiceMaster, Acquisition Subsidiary or any
other Subsidiary of ServiceMaster shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(c) Subject to paragraph (d) of this Section, each issued and
outstanding ARS Share, other than ARS Shares to be canceled in accordance with
paragraph (b) of this Section, shall be converted into the right to receive from
the Surviving Corporation in cash, without interest, the Offer Price (the
"Merger Consideration").
(d) Notwithstanding anything in this Agreement to the contrary, any
issued and outstanding ARS Shares held by a person (a "Dissenting Stockholder")
who complies with all the provisions of Delaware Law concerning the right of
holders of ARS Shares to require appraisal of
6
<PAGE>
their ARS Shares ("Dissenting Shares") shall not be converted as described in
Section 3.1(c), but shall be converted into the right to receive such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to Delaware Law. If, after the Effective Time, such Dissenting
Stockholder withdraws his demand for appraisal or fails to perfect or otherwise
loses his right to appraisal, in any case pursuant to Delaware Law, his ARS
Shares shall be deemed to be converted as of the Effective Time into the right
to receive the Merger Consideration, without interest. ARS shall give
ServiceMaster (i) prompt notice of any demands for appraisal of ARS Shares
received by ARS or the receipt by ARS of any documents or instruments with
respect to rights of appraisal pursuant to Delaware Law and (ii) the opportunity
to participate in and direct all negotiations and proceedings with respect to
any such demands. ARS shall not, without the prior written consent of
ServiceMaster, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
(e) From and after the Effective Time, all ARS Shares converted in
accordance with Section 3.1 shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate formerly representing any such ARS Shares (other than any Dissenting
Shares) shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration without interest.
Section 3.2 Payment of Merger Consideration.
(a) Prior to the Effective Time, ServiceMaster shall appoint an agent
reasonably acceptable to ARS (the "Exchange Agent") for the purpose of
exchanging certificates formerly representing ARS Shares for the Merger
Consideration. Immediately following the Effective Time, ServiceMaster shall
deposit with the Exchange Agent, for the benefit of the holders of certificates
formerly representing ARS Shares, the Merger Consideration issuable pursuant to
Section 3.1(c). Promptly after the Effective Time, ServiceMaster will send, or
will cause the Exchange Agent to send, to each holder of ARS Shares at the
Effective Time (i) a letter of transmittal for use in such exchange (which shall
specify that delivery of the Merger Consideration shall be effected, and risk of
loss and title to the certificates representing ARS Common Stock shall pass,
only upon proper deliver of the certificates formerly representing ARS Shares to
the Exchange Agent) and (ii) instructions for use in effecting the surrender of
the certificates formerly representing ARS Shares in exchange for the Merger
Consideration.
(b) Each holder of ARS Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to the Exchange Agent of a
certificate or certificates formerly representing such ARS Shares, together with
a properly completed and duly executed letter of transmittal covering such ARS
Shares and such other documents as may reasonably be required by the Exchange
Agent, will be entitled to receive the Merger Consideration payable in respect
of such ARS Shares. Until so surrendered, each such certificate shall, after
the Effective Time, represent for all purposes only the right to receive the
Merger Consideration without interest.
7
<PAGE>
(c) If any portion of the Merger Consideration is to be paid to a
Person other than the registered holder of the ARS Shares formerly represented
by the certificate or certificates surrendered in exchange therefor, it shall be
a condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such ARS Shares formerly represented by the certificate or
certificates so surrendered or establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
(d) After the Effective Time, there shall be no further registration
of transfers of ARS Shares. If, after the Effective Time, certificates formerly
representing ARS Shares are presented to the Surviving Corporation, they shall
be canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 3.2(a) that remains unclaimed by the holders
of certificates formerly representing ARS Shares one year after the Effective
Time shall be returned to ServiceMaster, upon demand, and any such holder who
has not exchanged his certificates formerly representing ARS Shares for the
Merger Consideration in accordance with this Section prior to that time shall
thereafter look only to ServiceMaster for payment of the Merger Consideration.
Neither ServiceMaster, ARS nor the Exchange Agent shall be liable to any person
in respect of any Merger Consideration delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any certificate
formerly representing ARS Shares shall not have been surrendered prior to two
years after the Effective Time, or immediately prior to such earlier date on
which any Merger Consideration would otherwise escheat to or become the property
of any Governmental Entity (as hereinafter defined), any such Merger
Consideration shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(f) The Exchange Agent shall invest any cash deposited with the
Exchange Agent, as directed by ServiceMaster, on a daily basis. Any interest
and other income resulting from such investments shall be paid to ServiceMaster.
(g) If any certificate representing ARS Shares outstanding as of the
Effective Time shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond in such reasonable amount as the Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such certificate, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed certificate the Merger Consideration due to such
person pursuant to this Agreement.
8
<PAGE>
Section 3.3 Stock Options.
(a) Upon consummation of the Merger, (i) every outstanding stock
option granted by ARS (the "ARS Stock Options") under its 1996 Incentive Plan or
under its 1997 Employee Incentive Plan (the "ARS Option Plans") and (ii) the
March 6, 1996 warrant of ARS held by Equus II Incorporated, if such warrant is
outstanding at the Effective Time (the "ARS Warrant") shall automatically
convert so that: (i) common stock, par value $0.01 per share, of ServiceMaster
(the "ServiceMaster Common Stock") shall be substituted for ARS Common Stock as
the security purchasable under the option or warrant; (ii) the number of shares
of ServiceMaster 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 ARS 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 ServiceMaster Common
Stock shall be purchasable immediately after the Merger shall be equal to
quotient derived by dividing the exercise price per share at which ARS 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 ServiceMaster Common Stock
on the New York Stock Exchange (the "NYSE") Composite Transaction Tape (as
reported in The Wall Street Journal or, if not reported thereby, any other
authoritative source reasonably designated by the Chief Financial Officer of
ServiceMaster), on the 20 consecutive Trading Days (as hereinafter defined)
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).
"Trading Day" means any day on which the NYSE is open for trading.
(b) All ARS Stock Options and the ARS Warrant as modified pursuant to
this Section 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 ARS Stock Options or ARS Warrant, shall remain in effect
(except that for purposes of this Agreement, the ARS Stock Options granted to
non-employee directors of ARS shall be treated as if the respective director had
resigned with the consent of the majority of the other directors).
(c) As soon as practicable after the Effective Time, ServiceMaster
shall deliver to the holders of ARS Stock Options appropriate notices setting
forth the rights of such holders pursuant to the respective ARS Option Plans and
the agreements evidencing the grants of such ARS Stock Options. ARS has
concurrent with the execution and delivery of this Agreement delivered to
ServiceMaster a true and correct agreement (originally executed) of the holder
of the ARS Warrant which contains the consent and agreement of such holder to
the treatment of the ARS Warrant contemplated by paragraph (a) above.
9
<PAGE>
(d) ServiceMaster shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of ServiceMaster Common Stock
for delivery on exercise of the ARS Stock Options and the ARS Warrant assumed in
accordance with this Section. As soon as reasonably practicable after the
Effective Time, ServiceMaster shall file a registration statement on Form S-8
(or any successor or other appropriate form) with respect to the shares of
ServiceMaster Common Stock subject to such ARS Stock Options and shall use
reasonable efforts to maintain the effectiveness of such registration statement
for so long as any such ARS Stock Options remain outstanding.
ARTICLE 4
ARS WARRANTIES
References in this Agreement to the "ARS Disclosure Schedule" and in this
Article to "Schedule" mean the document captioned "ARS Disclosure Schedule" as
constituted upon its delivery to ServiceMaster prior to ServiceMaster's
execution and delivery of this Agreement. ARS warrants to ServiceMaster and
Acquisition Subsidiary as follows, subject in the case of the warranties in each
particular section below to the exceptions set forth in the corresponding
section of the ARS Disclosure Schedule.
The term "ARS Material Adverse Effect" means any change or effect that
would be materially adverse to the business, financial condition or results of
operations of ARS and its Subsidiaries taken as a whole, other than any change
or effect to the extent it results from (i) the announcement and performance of
this Agreement and the transactions contemplated hereby and the compliance with
the covenants set forth herein, (ii) any actions required under this Agreement
to obtain any approval or authorization under applicable antitrust or
competition laws for the consummation of the Merger, (iii) changes in any tax
laws or regulations or applicable accounting regulations or principles or (iv)
changes in weather patterns adverse to ARS or in corporate interest rates.
Section 4.1 Organization. Each of ARS and its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority and governmental approvals would not have an ARS
Material Adverse Effect. Each of ARS and its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not have an ARS
Material Adverse Effect.
10
<PAGE>
Section 4.2 Corporate Authorization; Validity of Agreement; Board Action.
ARS has full corporate power and authority to execute and deliver this Agreement
and, subject to obtaining, if required by applicable law, the adoption of this
Agreement by an affirmative vote of the holders of a majority of the outstanding
ARS Shares (the "ARS Stockholder Approval"), to consummate the transactions
contemplated hereby. The execution, delivery and performance by ARS of this
Agreement, and the consummation by it of the transactions contemplated hereby,
have been duly and validly authorized by its board of directors and, except for
obtaining the ARS Stockholder Approval if such is required, no other corporate
action or proceedings on the part of ARS is necessary to authorize the execution
and delivery by ARS of this Agreement, and the consummation by it of the
transactions contemplated hereby. The ARS Stockholder Approval if such is
required is the only vote of the holders of any class or series of the capital
stock of ARS which is necessary to adopt this Agreement. This Agreement has been
duly executed and delivered by ARS and, assuming this Agreement constitutes a
valid and binding obligation of ServiceMaster and Acquisition Subsidiary,
constitutes a valid and binding obligation of ARS, enforceable against ARS in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. Except for all filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act of 1933,
as amended (the "Securities Act"), the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the NYSE, the state securities or "blue
sky" laws and any applicable state takeover laws, and except for the ARS
Stockholder Approval if such is required and the filing of the Certificate of
Merger as required by Delaware Law, neither the execution, delivery or
performance of this Agreement nor the consummation by ARS of the transactions
contemplated hereby nor compliance by ARS with any of the provisions hereof
will:
(a) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws (or other organizational documents with
respect to entities that are not corporations) of ARS or of any of its
Subsidiaries;
(b) require any filing with, or permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative agency or commission
or other governmental or other regulatory authority, commission or agency (a
"Governmental Entity"), except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not have an
ARS Material Adverse Effect and would not, or would not be reasonably likely to,
materially impair the ability of ARS or, to the knowledge of ARS, ServiceMaster
or Acquisition Subsidiary to consummate the transactions contemplated by this
Agreement;
11
<PAGE>
(c) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness (collectively, the "Debt Instruments"), lease,
license, contract, agreement or other instrument or obligation to which ARS or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound (an "ARS Agreement"), except for any
violation, breach or default which would not have an ARS Material Adverse
Effect;
(d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to ARS, any of its Subsidiaries or any of their properties
or assets, except for any violation which would not have an ARS Material Adverse
Effect; or
(e) result in the creation or imposition of any mortgage, lien,
pledge, charge, encumbrance or other security interest on any asset of ARS or
any of its Subsidiaries, except for any such results which would not have an ARS
Material Adverse Effect.
Section 4.4 Capitalization.
(a) The authorized capital stock of ARS consists of 50,000,000 shares
of ARS Common Stock and 10,000,000 shares of Preferred Stock, par value $0.001
per share ("ARS Preferred Stock"). As of the close of business on the date
hereof, (i) 15,887,704 shares of ARS Common Stock were issued and outstanding
and 24,744 shares of ARS Common Stock were held in treasury and (ii) no shares
of ARS Preferred Stock were issued and outstanding or held in treasury. All
outstanding shares of the capital stock of ARS are, and all shares which may be
issued pursuant to the exercise of ARS Stock Options will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and non-assessable.
(b) As of the date hereof, options to acquire an aggregate of
2,780,491 shares of ARS Common Stock are outstanding under the ARS Option Plans.
Schedule 4.4(b) lists each holder of an option under the ARS Option Plans, the
number of shares of ARS Common Stock issuable with respect to each such option
(assuming full vesting) and the exercise price of such option. 85,000 of the ARS
Stock Options were issued under the caption "incentive stock options" and the
balance of the ARS Stock Options were issued under the caption "nonqualified
stock options."
(c) There are no bonds, debentures, notes or other indebtedness having
voting rights (or convertible into securities having such rights) ("Voting
Debt") of ARS or any of its Subsidiaries issued and outstanding. There are no
shares of capital stock of ARS authorized, issued or outstanding, and there are
no existing options, warrants, calls, preemptive rights, subscriptions or other
rights, convertible securities, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of ARS or any of its
Subsidiaries, obligating ARS or
12
<PAGE>
any of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, ARS or any of its Subsidiaries or securities convertible
into or exchangeable for such shares or equity interests or obligations of ARS
or any of its Subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, convertible security, agreement,
arrangement or commitment.
(d) There are no outstanding contractual obligations of ARS or any of
its Subsidiaries requiring ARS or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any capital stock of ARS or any Subsidiary or affiliate of
ARS or to provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary or any other entity. None of ARS or
its Subsidiaries is required to redeem, repurchase or otherwise acquire shares
of capital stock of ARS, or any of its Subsidiaries, respectively, as a result
of the transactions contemplated by this Agreement.
(e) There are no voting trusts or other agreements or understandings
to which ARS or any of its Subsidiaries is a party with respect to the voting of
the capital stock of ARS or any of its Subsidiaries. To the knowledge of ARS,
there are no voting trusts or other agreements or understandings to which any
stockholder of ARS is a party with respect to the voting of the capital stock of
ARS.
Section 4.5 Subsidiaries; Capitalization of Subsidiaries. Schedule 4.5
sets forth a complete and correct list of the direct and indirect Subsidiaries
of ARS. All of the outstanding shares of capital stock of, or other ownership
interests in, each Subsidiary of ARS is owned by ARS, directly or indirectly,
free and clear of any mortgage, lien, pledge, charge, encumbrance or other
security interest (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests), and all
such shares or other ownership interests have been validly issued and are fully
paid and nonassessable.
Section 4.6 SEC Reports and Financial Statements.
(a) ARS has filed with the SEC and has heretofore made available to
ServiceMaster true and complete copies of all forms, reports, schedules,
statements and other documents required to be filed by it and its Subsidiaries
under the Exchange Act and the Securities Act since the date of the initial
public offering of the ARS Common Stock (as such documents have been amended
since the time of their filing, collectively, the "ARS SEC Documents"). As of
their respective dates or, if amended, as of the date of the last such
amendment, the ARS SEC Documents, including, without limitation, any financial
statements and schedules included therein, (i) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (ii) complied
in all material respects with the applicable
13
<PAGE>
requirements of the Exchange Act and the Securities Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such ARS SEC
Documents.
(b) Each of the consolidated financial statements included in ARS SEC
Documents and the Annual Financial Statements (as hereinafter defined) was
prepared from, and is in accordance with, the books and records of ARS and/or
its consolidated Subsidiaries, complies in all material respects with the
published rules and regulations of the SEC with respect thereto, was prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Regulation S-X of the SEC and for the exclusion of footnotes
therein) and fairly presents in all material respects the consolidated financial
position and the consolidated results of operations (and changes in financial
position, if any) of ARS and its consolidated Subsidiaries as at the dates
thereof or for the periods presented therein (subject, in the case of unaudited
interim financial statements, to normal year end adjustments, other adjustments
discussed therein (if any) and lack of footnote disclosures). "Annual Financial
Statements" means the unaudited consolidated balance sheets and statements of
income, changes in stockholders' equity and statements of cash flows of ARS as
of and for the fiscal year ended December 31, 1998 contained in the ARS
Disclosure Schedule corresponding to this Section.
(c) The consolidated financial statements included in the January 1999
Financial Statements (as hereinafter defined) were prepared in accordance with
the books and records of ARS and/or its consolidated Subsidiaries and with GAAP
applied on a consistent basis and fairly present in all material respects the
consolidated results of operations of ARS and its consolidated Subsidiaries for
the period presented therein (subject to normal year end adjustments, other
adjustments discussed therein (if any) and lack of footnote disclosures).
"January 1999 Financial Statements" means the consolidated financial statements
for the fiscal month ended January 31, 1999 contained in the ARS Disclosure
Schedule corresponding to this Section.
Section 4.7 Information Supplied. None of the information supplied or to be
supplied by ARS or any of its affiliates or representatives specifically for
inclusion or incorporation by reference in (i) the Offer Documents, (ii) the
Schedule 14D-9 or the Proxy Statement (as hereinafter defined) or (iii) the
information to be filed by ARS in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (the "Information Statement"),
will, in the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the stockholders of ARS, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Schedule 14D-9 and the
Information Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by ARS with respect to
statements made or incorporated by
14
<PAGE>
reference therein based on information supplied by ServiceMaster or any of its
Subsidiaries or representatives specifically for inclusion or incorporation by
reference therein.
Section 4.8 Absence of Certain Changes. Except as set forth in the
Annual Financial Statements, except as set forth or incorporated in the ARS SEC
Documents filed prior to the date of this Agreement or except as expressly
permitted by this Agreement, since September 30, 1998, ARS and its Subsidiaries
have conducted their respective businesses and operations in the ordinary course
of business and there has not occurred:
(a) any events, changes or effects (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having, or which would be reasonably likely to have, in the aggregate, an ARS
Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the equity
interests of ARS or of any of its Subsidiaries, other than dividends paid by
wholly-owned Subsidiaries;
(c) any material change by ARS or any of its Subsidiaries in
accounting principles or methods, except for any such change required by reason
of a change in GAAP;
(d) any amendment of any material term of any outstanding security of
ARS or any of its Subsidiaries that would materially increase the obligations of
ARS or of such Subsidiary under such security;
(e) any incurrence or assumption by ARS or any of its Subsidiaries of
any indebtedness for borrowed money, other than (i) indebtedness that can be
repaid at any time without any prepayment penalty or other similar fee or (ii)
borrowings under credit facilities of ARS existing on the date hereof;
(f) any guarantee, endorsement or other incurrence or assumption of
liability (whether directly, contingently or otherwise) by ARS or any of its
Subsidiaries for the obligations of any other person (other than any wholly-
owned Subsidiary of ARS), other than in the ordinary course of business;
(g) any making of any loan, advance or capital contribution to or
investment in any person by ARS or any of its Subsidiaries other than (i) loans,
advances or capital contributions to or investments in wholly-owned Subsidiaries
of ARS or (ii) loans or advances to employees of ARS or any of its Subsidiaries
made in the ordinary course of business;
(h) any commitment by ARS or any of its Subsidiaries to any contract
or agreement relating to any material acquisition or disposition of any assets
or business or any
15
<PAGE>
modification, amendment, assignment, termination or relinquishment by ARS or any
of its Subsidiaries of any contract, license or other right (including any
insurance policy naming it or any of its Subsidiaries as a beneficiary or a loss
payable payee) that would have an ARS Material Adverse Effect; or
(i) any employment, deferred compensation, severance, retirement or
other similar agreement with any director, officer or employee of ARS or any of
its Subsidiaries (or any amendment to any such existing agreement), grant of any
severance or termination pay to any director, officer or employee of ARS or any
of its Subsidiaries or change in compensation or other benefits payable to any
director, officer or employee of ARS or any of its Subsidiaries pursuant to any
severance or retirement plans or policies thereof, except in each case in the
ordinary course of business with respect to any employee who is not also an
officer or director of ARS.
Section 4.9 No Undisclosed Liabilities. Neither ARS nor any of its
Subsidiaries has incurred any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, that have, or would be reasonably
likely to have, individually or in the aggregate, an ARS Material Adverse
Effect, other than (i) any liability or obligation reflected on the balance
sheet contained in the Annual Financial Statements (or reflected in the notes
thereto), (ii) any liability or obligation disclosed in the ARS 1997 SEC
Information (as hereinafter defined) and (iii) any liability or obligation
permitted to be incurred by ARS under this Agreement or caused by the
transactions contemplated by this Agreement. "ARS 1997 SEC Information" means
the Form 10-K of ARS with respect to its fiscal year ended December 31, 1997 and
its Form 10-Q for each of the fiscal quarters ended March 31, 1998, June 30,
1998 and September 30, 1998, but excluding all risk factor and forward-looking
statements contained therein and all exhibits filed therewith. Schedule 4.9
sets forth each instrument evidencing indebtedness of ARS and its Subsidiaries
which will accelerate or become due or payable, or result in a right of
redemption or repurchase on the part of the holder of such indebtedness, or with
respect to which any other payment or amount will become due or payable, in any
such case with or without due notice or lapse of time, as a result of this
Agreement or the transactions contemplated hereby.
Section 4.10 Employee Benefit Plans.
(a) Schedule 3.10(a) contains an accurate and complete list of (i)
each "employee benefit plan" (as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
contributed to, maintained or sponsored by ARS or any of its Subsidiaries, or
with respect to which ARS or any of its Subsidiaries has any liability or
potential liability; and (ii) each other retirement, savings, thrift, deferred
compensation, severance, stock ownership, stock purchase, stock option,
performance, bonus, incentive, vacation or holiday pay, travel, fringe benefit,
hospitalization or other medical, disability, life or other insurance, and any
other welfare benefit policy, trust, understanding or arrangement of any kind,
whether written or oral, contributed to, maintained or sponsored by ARS or any
of its Subsidiaries for the benefit of any
16
<PAGE>
present or former employee, officer or director of ARS or any of its
Subsidiaries, or with respect to which ARS or any of its Subsidiaries has any
liability or potential liability. Each item listed on Schedule 3.10(a) is
referred to herein as a "Benefit Plan."
(b) Schedule 3.10(b) contains an accurate and complete list of each
collective bargaining agreement and each other agreement, arrangement,
commitment, understanding, plan, or policy of any kind, whether written or oral,
of ARS or any Subsidiary of ARS or to which ARS or any of its Subsidiaries may
have any liability, with or for the benefit of any current or former employee,
officer, director or consultant of ARS or any of its Subsidiaries (including,
without limitation, each employment, compensation, termination or consulting
agreement or arrangement). Each item listed on Schedule 3.10(b) is referred to
herein as a "Compensation Commitment."
(c) Each Benefit Plan that is intended to be qualified within the
meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and each trust which forms a part of any such Benefit Plan (i) has
received a determination from the Internal Revenue Service (the "IRS") that such
Benefit Plan is qualified under Section 401(a) of the Code and that such related
trust is exempt from taxation under Section 501(a) of the Code, and nothing has
occurred since the date of such determination that could adversely affect the
qualification of such Benefit Plan or the exemption from taxation of such
related trust; and (ii) is in compliance with the requirements of Sections
401(a)(4) and 410(b) of the Code for each plan year of such Benefit Plan
commencing on or before the Closing Date.
(d) Neither ARS nor any of its Subsidiaries currently contribute to,
maintain, sponsor or have any liability with respect to any "employee pension
benefit plan" (as such term is defined in Section 3(2) of ERISA) that is subject
to Section 302 of ERISA or Section 412 of the Code, and neither ARS nor any of
its Subsidiaries has contributed to, maintained or sponsored or has any
liability with respect to any such employee pension benefit plan for any time
during the six years preceding the Closing Date.
(e) None of the Benefit Plans or Compensation Commitments obligates
ARS or any of its Subsidiaries to pay any separation, severance, termination or
similar benefit solely as a result of any transaction contemplated by this
Agreement or solely as a result of a change in control or ownership within the
meaning of Section 280G of the Code.
(f) (i) Each Benefit Plan and any related trust, insurance contract or
fund has been maintained, funded and administered in compliance with its
respective terms and the terms of any applicable collective bargaining
agreements and in compliance with all applicable laws and regulations,
including, but not limited to, ERISA and the Code; (ii) there has been no
application for or waiver of the minimum funding standards imposed by Section
412 of the Code with respect to any Benefit Plan, and neither ARS nor any of its
Subsidiaries is aware of any facts or circumstances that would materially change
the funded status of any such Benefit Plan; (iii) no asset of ARS or any
17
<PAGE>
of its Subsidiaries that is to be acquired by ServiceMaster, directly or
indirectly, pursuant to this Agreement is subject to any lien under ERISA or the
Code; (iv) neither ARS nor any of its Subsidiaries has incurred any liability
under Title IV of ERISA (other than for contributions not yet due) or to the
Pension Benefit Guaranty Corporation (other than for payment of premiums not yet
due); and (v) there are no pending or threatened actions, suits, investigations
or claims with respect to any Benefit Plan or Compensation Commitment (other
than routine claims for benefits) which could result in liability to ARS or any
of its Subsidiaries (whether direct or indirect), and neither ARS nor any of its
Subsidiaries has knowledge of any facts which could give rise to (or be expected
to give rise to) any such actions, suits, investigations or claims.
(g) (i) ARS and each of its Subsidiaries has complied with the health
care continuation requirements of Part 6 of Title I of ERISA; and (ii) ARS and
its Subsidiaries have no obligation under any Benefit Plan or otherwise to
provide health benefits to former employees of ARS or any of its Subsidiaries or
any other person, except as specifically required by Part 6 of Title I of ERISA.
(h) (i) Neither ARS nor any of its Subsidiaries has incurred any
liability on account of a "partial withdrawal" or a "complete withdrawal"
(within the meaning of Sections 4205 and 4203, respectively, of ERISA) from any
Benefit Plan subject to Title IV of ERISA which is a "multiemployer plan" (as
such term is defined in Section 3(37) of ERISA) (a "Multiemployer Plan"), nor,
to the knowledge of ARS or any of its Subsidiaries, has any such liability been
asserted, and there are no events or circumstances which could result in any
such partial or complete withdrawal; and (ii) neither ARS nor any of its
Subsidiaries is bound by any contract or agreement or has any obligation or
liability described in Section 4204 of ERISA. To the best knowledge of ARS and
each of its Subsidiaries, each Multiemployer Plan complies in form and has been
administered in accordance with the requirements of ERISA and, where applicable,
the Code; and each Multiemployer Plan is qualified under Section 401(a) of the
Code.
(i) The actions contemplated by this Agreement will not give rise to
any liability with respect to any "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that is a "multiemployer plan" (as such
term is defined in Section 3(37) of ERISA) with regard to which ARS or any of
its Subsidiaries has any contribution obligation or other liabilities
thereunder.
(j) Neither ARS nor any ERISA Affiliate has any liability or potential
liability with respect to any "employee benefit plan" (as defined in Section
3(3) of ERISA) solely by reason of being treated as a single employer under
Section 414 of the Code with any trade, business or entity.
(k) Neither ARS nor any of its Subsidiaries has, contributes to,
maintains or sponsors or has any liability with respect to any employee benefit
plan, agreement or arrangement
18
<PAGE>
applicable to employees of ARS or any of its Subsidiaries located outside the
United States (the "Foreign Plans").
(l) With respect to each Benefit Plan and each Compensation
Commitment, ARS or the appropriate Subsidiary of ARS has made available to
ServiceMaster true, complete and correct copies of (to the extent applicable)
(i) all documents pursuant to which the Benefit Plan or Compensation Commitment
is maintained, funded and administered, (ii) the most recent annual report (Form
5500 series) filed with the IRS (with applicable attachments), (iii) the most
recent financial statement, (iv) the most recent actuarial valuation of benefit
obligations, and (v) the most recent determination letter received from the IRS
and the most recent application to the IRS for such determination letter.
Section 4.11 Compliance with Law. Except with regard to occupational
safety and health, environmental, Taxes (as hereinafter defined) and ERISA (the
representations and warranties in respect of which are set forth in Sections
4.10, 4.14 and 4.17), ARS and its Subsidiaries have complied with all laws,
statutes, regulations, rules, ordinances and judgments, decrees, orders, writs
and injunctions, of any court or Governmental Entity relating to any of the
property owned, leased or used by them, or applicable to their business,
including, but not limited to, equal employment opportunity, discrimination,
insurance, regulatory and antitrust laws, except to the extent that any such
non-compliance would not have an ARS Material Adverse Effect.
Section 4.12 Litigation. There is no suit, claim, action or proceeding
pending or, to the knowledge of ARS, threatened against or affecting, ARS or any
of its Subsidiaries, or, to the knowledge of ARS, any review or investigation
pending or threatened against or affecting ARS or any of its Subsidiaries, which
would be reasonably likely to have an ARS Material Adverse Effect or would
prevent ARS from consummating the transactions contemplated by this Agreement.
Section 4.13 No Default. The business of ARS and each of its
Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (a) its respective certificate of incorporation or
bylaws or similar organizational documents, or (b) any ARS Agreement, excluding
from the foregoing clause (b) defaults or violations that would not have an ARS
Material Adverse Effect and would not, or would not be reasonably likely to,
materially impair the ability of ARS or, to the knowledge of ARS, ServiceMaster
or Acquisition Subsidiary to consummate the transactions contemplated by this
Agreement.
Section 4.14 Taxes.
(a) Definitions. For purposes of all of Section 4.14:
19
<PAGE>
(i) The term "ARS" includes ARS and each Subsidiary of ARS,
including without limitation any corporation or other
entity that became or becomes a Subsidiary of ARS prior to
the Effective Time.
(ii) The term "Tax" means any federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative
minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal
property, capital stock, social security, unemployment,
disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing.
(iii) The term "Return" means any returns, declarations, reports,
claims for refund, amended returns, information returns or
other documents (including any related or supporting
schedules, statements or information) filed or required to
be filed in connection with the determination, assessment
or collection of any Tax, or the administration of any
laws, regulations or administrative requirements relating
to any Tax.
(b) Tax Filings and Payments.
------------------------
(i) All federal Returns and all material state, local and
foreign Returns required to be filed on or before the date
hereof and the date of the Closing by or on behalf of ARS
have been or will be duly filed on a timely basis (taking
into account any extensions) and such Returns are or will
be true, correct and complete in all material respects.
(iii) ARS has timely paid or will pay or made or will make
adequate provision for all Taxes (whether or not shown on
or reportable on the Returns) described in Section
4.14(b)(i), except as would not, individually or in the
aggregate, have an ARS Material Adverse Effect.
(iii) ARS has made or will make adequate provision for all Taxes
payable for any periods that end on or before the Closing
for which no Returns have yet been filed and for any
periods that begin before the Closing and end after the
Closing to the extent such Taxes are attributable to the
portion of any such period ending at the Closing.
20
<PAGE>
(iv) The charges, accruals and reserves for current Taxes
(excluding reserves for deferred Taxes) reflected on the
books of ARS are not materially less than the Tax
liabilities accruing or payable by ARS in respect of
periods prior to the date hereof, and the charges,
accruals and reserves for current Taxes (excluding
reserves for deferred Taxes) reflected on the Annual
Financial Statements are not materially less than the Tax
liabilities accruing or payable by ARS in respect of the
period covered by the Annual Financial Statements.
(v) ARS is not delinquent in the payment of any material Taxes
and has not requested any extension of time within which
to file or send any material Return, which Return has not
since been filed or sent and which Taxes have not been
paid.
(vi) No deficiencies exist for any Taxes nor have any been
proposed, asserted, or assessed against ARS that are not
adequately reserved for.
(vii) There is no dispute or claim concerning any material Tax
liability of ARS either (A) claimed or raised by any
taxing authority in writing or (B) as to which ARS has
knowledge based upon personal contact with any agent of a
taxing authority.
(viii) There is no currently pending audit, examination, or, to
ARS's knowledge, any investigation of any Return by any
taxing authority nor has ARS received any written notice
of such audit, examination, or investigation.
(ix) ARS has not agreed in writing to waive any statute of
limitations in respect of Taxes or agreed in writing to
any extension of the limitations period applicable to the
assessment or collection of Taxes.
(x) ARS is not subject to liability for Taxes of any person
(other than ARS or any other member of the affiliated
group of corporations that is included in a consolidated
federal income tax return of which ARS is the common
parent), including, without limitation, liability arising
from the application of U.S. Treasury Regulation section
1.1502-6 or any analogous provision of state, local or
foreign law.
(xi) ARS is not nor has it ever been a party to any tax sharing
agreement with any entity.
21
<PAGE>
(xii) No written claim has ever been made by an authority in a
jurisdiction where ARS does not file Returns that it is or
may be subject to taxation by that jurisdiction.
(xiii) There are no liens on any of the assets of ARS that arose
in connection with any failure (or alleged failure) to pay
any Taxes other than Taxes which are not yet delinquent.
(xiv) ARS has complied in all material respects with applicable
Tax laws relating to the withholding of Taxes and the
payment thereof to the appropriate taxing authorities, and
has complied with all material information reporting and
backup withholding requirements, including, without
limitation, maintenance of required records with respect
thereto, in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder,
or other third party.
(xv) ARS has provided or made available to ServiceMaster or its
representatives (A) correct and complete copies of the
consolidated federal income tax Returns of ARS for the
taxable periods ended December 31, 1996 and 1997, (B)
complete and correct copies of the separate, consolidated
and combined state, local and foreign income tax Returns
of ARS for the taxable periods ended December 31, 1996 and
1997 and (C) all examination reports, closing agreements
and statements of deficiencies, if any, relating to the
audit of such Tax Returns by the IRS or the relevant
state, local or foreign taxing authorities.
(xvi) ARS is not a party to any safe harbor lease within the
meaning of Section 168(f)(8) of the Code, as in effect
prior to the amendment by the Tax Equity and Fiscal
Responsibility Act of 1982.
(c) Tax Characteristics of ARS.
--------------------------
(i) To ARS's knowledge, no stockholder of ARS who owns more
than 5% of ARS's Common Stock is a "foreign person" (as
that term is defined in Section 1445(f)(3) of the Code).
(ii) ARS is not a "consenting corporation" under Section 341(f)
of the Code.
22
<PAGE>
(iii) ARS has not entered into any compensatory agreement with
respect to the performance of services which payment
thereunder would result in a nondeductible expense to ARS
pursuant to Sections 162(m) of the Code or an excise tax
to the recipient of such payment pursuant to Section 4999
of the Code.
(iv) ARS has not agreed, nor is it required to make, any
adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise.
(v) ARS has not executed any "closing agreement" described in
Section 7121 of the Code (or any corresponding provision
of state, local or foreign income Tax law) that requires
ARS to include any item of income in, or exclude any item
of deduction from, taxable income for any taxable period
(or portion thereof) ending after the Closing.
(vi) ARS will not be required as a result of any deferred
intercompany gain described in Treasury Regulation Section
1.1502-13 or any excess loss account described in Treasury
Regulation Section 1.1502-19 (or any corresponding or
similar provision or administrative rule of federal,
state, local or foreign income tax law) to include any
item of income in taxable income for any period (or
portion thereof) ending after the Closing Date.
Section 4.15 Contracts. Each material ARS Agreement is valid, binding and
enforceable and is in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have an ARS
Material Adverse Effect, and there are no defaults thereunder, except those
defaults that would not have an ARS Material Adverse Effect. Neither ARS nor any
of its Subsidiaries is a party to any agreement that expressly and materially
limits the ability of ARS or any of its Subsidiaries to compete in or conduct
any line of business or compete with any person or in any geographic area or
during any period of time. No material contract of ARS or any of its
Subsidiaries will cease to be legal, valid, binding and enforceable as a result
of the Merger.
Section 4.16 Transactions with Affiliates. Except to the extent disclosed
in ARS SEC Documents filed prior to the date of this Agreement, since September
30, 1998 there have been no material transactions, agreements, arrangements or
understandings between ARS or its Subsidiaries, on the one hand, and the
affiliates of ARS (other than wholly-owned Subsidiaries of ARS) or other
Persons, on the other hand, that would be required to be disclosed under Item
404 of Regulation S-K under the Securities Act.
23
<PAGE>
Section 4.17 Environmental Matters. Except as set forth in ARS SEC
Documents filed prior to the date hereof:
(a) For purposes of this Agreement, "Environmental, Health and Safety
Requirements" shall mean all federal, state, local and foreign statutes,
regulations, ordinances and other rules or orders having the force or effect of
law concerning public health and safety, worker health and safety, and pollution
or protection of the environment, including without limitation all those
relating to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos or polychlorinated biphenyls, each as amended.
(b) Each of ARS and its Subsidiaries has complied and is in compliance
with all Environmental, Health, and Safety Requirements, except for any
noncompliance that would not, in the aggregate, have an ARS Material Adverse
Effect.
(c) Without limiting the generality of the foregoing, each of ARS and
its Subsidiaries has obtained, and is in compliance with, all permits, licenses
and other authorizations that are required pursuant to Environmental, Health and
Safety Requirements ("Environmental Permits") for the occupation of its
facilities and the operation of its business, except for any failure to maintain
or comply with Environmental Permits that would not, in the aggregate, have an
ARS Material Adverse Effect.
(d) Neither ARS, nor any of its Subsidiaries has received any written
or oral notice, report or other information regarding any actual or alleged
violation of Environmental, Health and Safety Requirements, or any actual or
alleged liabilities or potential liabilities, including any investigatory,
remedial or corrective obligations, relating to any of them or their facilities
arising under Environmental, Health and Safety Requirements, or common law, as
it relates to health, safety, pollution or protection of the environment, except
for such notices, reports or other information, the subject of which would not,
in the aggregate, have an ARS Material Adverse Effect.
(e) None of ARS or its Subsidiaries, or to the knowledge of ARS their
respective predecessors, has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any petroleum,
hazardous substance or waste, or owned or operated any property or facility (and
no such property or facility is contaminated by any such substance) in a manner
that has given or would give rise to liabilities, including any liability for
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA"), or any other
Environmental, Health and Safety Requirements, or the common law, as it relates
to health, safety, pollution or
24
<PAGE>
protection of the environment, except for such liabilities that would not, in
the aggregate, have an ARS Material Adverse Effect.
(f) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental, Health and Safety Requirements.
(g) Neither ARS nor its Subsidiaries has, either expressly or, to the
knowledge of ARS, by operation of law, assumed, undertaken or otherwise become
subject to any liability, including without limitation any obligation for
corrective or remedial action, of any other person or entity relating to
Environmental, Health and Safety Requirements except that ARS has acquired
ownership of businesses by merging the entity owning the business with a
subsidiary of ARS or by acquiring the assets of a company or other entity and in
such acquisitions the resulting subsidiary would be subject to the liabilities
to which the merging entity was subject or the subsidiary acquiring the assets
contractually agreed to assume or be responsible for, or became responsible for
by operation of law, liabilities of the company or other entity transferring the
assets.
(h) No facts, events or conditions relating to the past or present
facilities, properties or operations of ARS or its Subsidiaries (or to the
knowledge of ARS any of their predecessors) will prevent continued compliance
with Environmental, Health and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental,
Health and Safety Requirements or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental, Health and Safety Requirements, or the common law, as it relates
to health, safety, pollution or protection of the environment, including without
limitation any relating to onsite or offsite releases or threatened releases of
hazardous materials, substances or wastes, personal injury, property damage or
natural resources damage, except for such liabilities or matters which would
not, in the aggregate, have an ARS Material Adverse Effect.
Section 4.18 Intellectual Property. ARS and its Subsidiaries own or have
adequate rights to use all patents, trademarks, service marks, trade names,
copyrights, trade secrets and other intellectual property rights (collectively,
the "ARS Intellectual Property") necessary to carry on their respective business
as currently conducted; and neither ARS nor any of its Subsidiaries has received
any notice of infringements of or conflict with, and to ARS's knowledge, there
are no infringements of or conflicts with, the rights of others with respect to
the use of any of ARS Intellectual Property that, in either such case, would
have an ARS Material Adverse Effect.
Section 4.19 Opinion of Financial Advisor. ARS has received an opinion from
Jefferies & Company, Inc. ("Jefferies") to the effect that, as of the date
hereof, the consideration to be
25
<PAGE>
received in the Offer and the Merger Consideration to be received by the holders
of ARS Shares in connection with the Merger is fair to such holders from a
financial point of view. ARS shall promptly upon receipt deliver to
ServiceMaster a correct and complete copy of the written fairness opinion of
Jefferies delivered to ARS with respect to such matters.
Section 4.20 Finders and Investment Bankers. No broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission, or to the reimbursement of any of its expenses, in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of ARS, except for the arrangements between ARS and Jefferies. ARS
has supplied to ServiceMaster a correct and complete copy of the engagement
letter for Jefferies and all other agreements or understandings affecting the
amount that may be payable by ARS to Jefferies.
Section 4.21 Takeover Statutes. To the knowledge of ARS, no "fair price,"
"moratorium," "control share acquisition" or other similar antitakeover statute
or regulation (other than Section 203 of Delaware Law) enacted under state or
federal laws in the United States (each, a "Takeover Statute") applicable to ARS
or any of its Subsidiaries is applicable to the Offer, the Merger or the other
transactions contemplated by this Agreement. Assuming the accuracy of the
representation and warranty of ServiceMaster and Acquisition Subsidiary set
forth in Section 5.14, the action of the board of directors of ARS prior to the
execution of this Agreement is sufficient to render inapplicable to the Offer,
the Merger and this Agreement (and the transactions provided for herein) the
restrictions on "business combinations" (as defined in Section 203 of Delaware
Law) set forth in Section 203 of Delaware Law.
Section 4.22 Insurance. The ARS Disclosure Schedule lists the insurance
policies covering ARS on the date hereof and on the date hereof each such policy
is in full force and effect. Neither ARS nor any Subsidiary of ARS is in default
with respect to its obligations under any insurance policy maintained by it, and
neither ARS nor any ARS Subsidiary (since the time any such Subsidiary became a
Subsidiary of ARS) has been denied insurance coverage at any time for any
reason.
Section 4.23 Board Action Regarding ARS Option Plans. The committee acting
under the ARS Option Plans, the board of directors of ARS and all other
necessary persons have taken all actions reasonably necessary to cause the
conversions prescribed by Section 3.3(a) to occur automatically upon
consummation of the Merger and that such conversions will in fact so occur.
Section 4.24 Board Action Regarding Rights Agreement. The board of
directors of ARS has taken all actions reasonably necessary to cause the Rights
Agreement of ARS to not apply to the Offer, the Merger, the acquisition of ARS
Shares by Acquisition Subsidiary pursuant to the Offer and any purchase of ARS
Shares by ServiceMaster or Acquisition Subsidiary subsequent to the purchase of
ARS Shares by Acquisition Subsidiary pursuant to the Offer and the other
transactions
26
<PAGE>
contemplated by this Agreement and to cause it and the rights issued thereunder
to expire prior to the Merger. In addition, the board of directors of ARS has
taken all actions reasonably necessary such that the beneficial ownership of ARS
Common Stock by ServiceMaster or Acquisition Subsidiary shall not cause either a
triggering event or ServiceMaster or Acquisition Subsidiary to become an
acquiring person as contemplated by such Rights Agreement during such time as
this Agreement has not been terminated in accordance with Article 10.
ARTICLE 5
WARRANTIES OF
SERVICEMASTER AND ACQUISITION SUBSIDIARY
References in this Agreement to the "ServiceMaster Disclosure Schedule" and
in this Article to the "Schedules" mean the document captioned "ServiceMaster
Disclosure Schedule" as constituted upon its delivery to ARS prior to ARS's
execution and delivery of this Agreement. ServiceMaster warrants to ARS, subject
in the case of the warranties in each particular section below to the exceptions
set forth in the corresponding section of the ServiceMaster Disclosure Schedule:
The term "ServiceMaster Material Adverse Effect" means any change or effect
that would be materially adverse to the business, financial condition or results
of operations of ServiceMaster and its Subsidiaries taken as a whole, other than
any change or effect to the extent it results from (i) the announcement and
performance of this Agreement and the transactions contemplated hereby and the
compliance with the covenants set forth herein, (ii) any actions required under
this Agreement to obtain any approval or authorization under applicable
antitrust or competition laws for the consummation of the Merger, (iii) changes
in any tax laws or regulations or applicable accounting regulations or
principles or (iv) changes in weather patterns adverse to ServiceMaster or in
corporate interest rates.
Section 5.1 Organization. ServiceMaster is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Acquisition Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of ServiceMaster and
its Subsidiaries has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and governmental approvals would not have a ServiceMaster Material Adverse
Effect. ServiceMaster and each of its Subsidiaries is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not in the aggregate,
have a ServiceMaster Material Adverse Effect.
27
<PAGE>
Acquisition Subsidiary has not heretofore conducted any business other than in
connection with this Agreement and the transactions contemplated hereby.
Section 5.2 Corporate Authorization; Validity of Agreement; Necessary
Action. ServiceMaster and Acquisition Subsidiary have full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
ServiceMaster and Acquisition Subsidiary of this Agreement, and the consummation
by ServiceMaster and Acquisition Subsidiary of the transactions contemplated
hereby, have been duly and validly authorized by their respective boards of
directors and no other corporate action or proceedings on the part of
ServiceMaster and Acquisition Subsidiary is necessary to authorize the execution
and delivery by ServiceMaster and Acquisition Subsidiary of this Agreement, and
the consummation by ServiceMaster and Acquisition Subsidiary of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
ServiceMaster and Acquisition Subsidiary and, assuming this Agreement
constitutes a valid and binding obligation of ARS, constitutes a valid and
binding obligation of each of ServiceMaster and Acquisition Subsidiary,
enforceable against each of them in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. No vote of the
holders of ServiceMaster Common Stock is necessary for ServiceMaster to
consummate the Merger or for Acquisition Subsidiary to consummate the Merger.
The stockholder of Acquisition Subsidiary will adopt by requisite vote the
resolutions necessary to authorize the execution, delivery and performance by
Acquisition Subsidiary of this Agreement.
Section 5.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act, the HSR
Act, the NYSE, state securities or "blue sky" laws and any applicable state
takeover laws, and the filing of the Certificate of Merger as required by
Delaware Law, neither the execution, delivery or performance of this Agreement
by ServiceMaster and Acquisition Subsidiary nor the consummation by
ServiceMaster and Acquisition Subsidiary of the transactions contemplated hereby
nor compliance by ServiceMaster and Acquisition Subsidiary with any of the
provisions hereof will:
(a) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws (or other organizational documents with
respect to entities that are not corporations) of ServiceMaster or Acquisition
Subsidiary or any other Subsidiary of ServiceMaster;
(b) require any filing with, or permit, authorization, consent or
approval of, any Governmental Entity, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings would not
have a ServiceMaster Material Adverse Effect, or would
28
<PAGE>
not be reasonably likely to, materially impair the ability of ServiceMaster or
Acquisition Subsidiary or, to the knowledge of ServiceMaster, ARS to consummate
the transactions contemplated by this Agreement;
(c) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which ServiceMaster or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound other than any violation, breach or default which would not
have a ServiceMaster Material Adverse Effect; or
(d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to ServiceMaster, any of its Subsidiaries or any of their
properties or assets, other than any violation which would not have a
ServiceMaster Material Adverse Effect.
Section 5.4 Capitalization. The authorized capital stock of ServiceMaster
consists of 1,000,000,000 shares of ServiceMaster Common Stock and 11,000,000
shares of preferred stock, par value $0.01 per share (the "ServiceMaster
Preferred Stock"). As of the close of business on February 28, 1999, (a)
299,124,018 shares of ServiceMaster Common Stock were issued and outstanding and
(b) no shares of ServiceMaster Preferred Stock were issued and outstanding. As
of the close of business on February 28, 1999, 547,253 shares of ServiceMaster
Common Stock were held in treasury. All of the issued and outstanding shares of
ServiceMaster Common Stock are duly authorized, validly issued, fully paid and
non-assessable.
Section 5.5 SEC Reports and Financial Statements.
-------------------------------------
(a) ServiceMaster has filed with the SEC and has heretofore made
available to ARS true and complete copies of all forms, reports, schedules,
statements and other documents required to be filed by ServiceMaster and its
Subsidiaries under the Exchange Act and the Securities Act since December 31,
1997 (as such documents have been amended since the time of their filing,
collectively, the "ServiceMaster SEC Documents"). As of their respective dates
or, if amended, as of the date of the last such amendment, ServiceMaster SEC
Documents, including, without limitation, any financial statements and schedules
included therein, (i) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (ii) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such ServiceMaster SEC Documents.
29
<PAGE>
(b) Each of the consolidated financial statements included in
ServiceMaster SEC Documents was prepared from, and is in accordance with, the
books and records of ServiceMaster and/or its consolidated Subsidiaries,
complies in all material respects with the published rules and regulations of
the SEC with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by
Regulation S-X of the SEC) and fairly presents in all material respects the
consolidated financial position and the consolidated results of operations and
cash flows (and changes in financial position, if any) of ServiceMaster and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein (subject, in the case of unaudited interim financial statements, to
normal year end adjustments, other adjustments discussed therein (if any) and
lack of footnote disclosures).
Section 5.6 Absence of Certain Changes. Except as set forth or
incorporated in ServiceMaster SEC Documents filed with the SEC prior to the date
hereof, since September 30, 1998, ServiceMaster and its Subsidiaries have
conducted their respective businesses and operations in the ordinary course of
business consistent with past practice. Since September 30, 1998, there has not
occurred: (i) any events, changes or effects (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having or, which would be reasonably likely to have, in the aggregate, a
ServiceMaster Material Adverse Effect; (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, shares or
property) with respect to the equity interests of ServiceMaster or of any of its
Subsidiaries, other than regular quarterly cash dividends or dividends paid by
wholly-owned Subsidiaries; or (iii) any material change by ServiceMaster or any
of its Subsidiaries in accounting principles or methods, except for any such
change required by reason of a change in GAAP.
Section 5.7 No Undisclosed Liabilities. Except (i) to the extent disclosed
in ServiceMaster SEC Documents filed prior to the date of this Agreement and
(ii) for liabilities and obligations incurred in the ordinary course of business
consistent with past practice, since September 30, 1998, neither ServiceMaster
nor any of its Subsidiaries has incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that have, or would be
reasonably likely to have, individually or in the aggregate, a ServiceMaster
Material Adverse Effect.
Section 5.8 Litigation. There is no suit, claim, action or proceeding
pending or, to the knowledge of ServiceMaster, threatened against or affecting,
ServiceMaster or any of its Subsidiaries, or to the knowledge of ServiceMaster,
any review or investigation pending or threatened against or affecting
ServiceMaster or any of its Subsidiaries, which, individually or in the
aggregate, is reasonably likely to have a ServiceMaster Material Adverse Effect,
or would prevent ServiceMaster or Acquisition Subsidiary from consummating the
transactions contemplated by this Agreement.
30
<PAGE>
Section 5.9 Compliance with Law. ServiceMaster and its Subsidiaries have
complied with all laws, statutes, regulations, rules, ordinances and judgments,
decrees, orders, writs and injunctions, of any court or Governmental Entity
relating to any of the property owned, leased or used by them, or applicable to
their business, including, but not limited to, equal employment opportunity,
discrimination, occupational safety and health, environmental, insurance,
regulatory, antitrust laws, ERISA and laws relating to Taxes, except to the
extent that any such non-compliance would not have a ServiceMaster Material
Adverse Effect.
Section 5.10 No Default. The business of ServiceMaster and each of its
Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (i) its respective certificate of incorporation or
bylaws or similar organizational documents, or (ii) agreements to which
ServiceMaster and its Subsidiaries are parties, excluding from the foregoing
clause (ii) defaults or violations that would not have a ServiceMaster Material
Adverse Effect and would not, or would not be reasonably likely to, materially
impair the ability of ServiceMaster or Acquisition Subsidiary or, to the
knowledge of ServiceMaster, ARS to consummate transactions contemplated by this
Agreement.
Section 5.11 Information Supplied. None of the information supplied or to
be supplied by ServiceMaster or any of its Subsidiaries or representatives
specifically for inclusion or incorporation by reference in (i) the Offer
Documents, (ii) the Schedule 14D-9, (iii) the Information Statement or (iv) the
Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and
the Information Statement, at the respective times the Offer Documents, the
Schedule 14D-9 and the Information Statement are filed with the SEC or first
published, sent or given to the stockholders of ARS, or, in the case of the
Proxy Statement, at the time the Proxy Statement is first mailed to the
stockholders of ARS or at the time of the ARS Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Offer
Documents will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that (other
than with respect to the Proxy Statement) no representation or warranty is made
by ServiceMaster or Acquisition Subsidiary with respect to statements made or
incorporated by reference therein based on information supplied by ARS or any of
its affiliates or representatives specifically for inclusion or incorporation by
reference therein.
Section 5.12 Opinion of Financial Advisor. ServiceMaster has received an
opinion from Goldman, Sachs & Co. dated the date of this Agreement to the effect
that, as of such date, the consideration to be paid in the Offer and the Merger
Consideration to be paid in connection with the Offer and the Merger is fair to
ServiceMaster from a financial point of view.
31
<PAGE>
Section 5.13 Finders and Investment Bankers. ServiceMaster is not a party
to any broker or finder fee agreement or arrangement in connection with the
transactions contemplated by this Agreement which creates any liability or
obligation on the part of ARS or any of its Subsidiaries.
Section 5.14 Ownership of ARS Common Stock. As of the date of this
Agreement, ServiceMaster, Acquisition Subsidiary and the other Subsidiaries of
ServiceMaster do not own (directly or indirectly, beneficially or of record) any
shares of ARS Common Stock and none of ServiceMaster, Acquisition Subsidiary or
the other Subsidiaries of ServiceMaster holds any rights to acquire any shares
of ARS Common Stock except pursuant to this Agreement.
ARTICLE 6
COVENANTS OF ARS
Section 6.1 Conduct of Business by ARS Pending the Merger. ARS covenants
and agrees that prior to the Effective Time or the date, if any, on which this
Agreement is earlier terminated pursuant to Section 10.1 hereof, unless
ServiceMaster and Acquisition Subsidiary shall otherwise consent in writing or
except as otherwise contemplated by this Agreement:
(a) the businesses of ARS and its Subsidiaries will be conducted only
in the ordinary course; ARS 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 ARS will
promptly notify ServiceMaster and Acquisition Subsidiary of any event or
occurrence or emergency not in the ordinary course of the business of ARS or any
of its Subsidiaries that would have an ARS Material Adverse Effect;
(b) ARS will not (i) amend its certificate of incorporation or bylaws
or (ii) split, combine or reclassify the outstanding ARS Shares or declare, set
aside or pay any dividend payable in cash, stock or property with respect to the
ARS Shares, other than dividends paid by any of its Subsidiaries to ARS;
(c) neither ARS 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 ARS to ARS, (ii) with respect to ARS, ARS Shares
issuable upon exercise of ARS Stock Options and ARS warrants outstanding on the
date hereof (together with the related preferred share purchase rights), (iii)
any ARS Shares issuable upon conversion of any convertible note of ARS described
on the ARS Disclosure Schedule (together with the related preferred share
purchase rights), and (iv) in accordance with the Rights Agreement;
32
<PAGE>
(d) neither ARS 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 ARS or any of its Subsidiaries;
(e) except permitted by Section 6.4, ARS 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) ARS 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 change in its
capitalization (it being acknowledged however by ServiceMaster that ARS may
incur indebtedness except as may be prohibited by paragraph (j)(i) of this
Section), or enter, other than in the ordinary course of business, into a
material contract;
(g) neither ARS nor any of its Subsidiaries shall modify, amend or
terminate any of the material ARS 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 Section 3.3, neither ARS nor any of its
Subsidiaries shall: (i) grant any increase in the compensation payable or to
become payable by ARS 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 ARS, grant any
severance or termination pay to any officer, director or employee of ARS or any
of its Subsidiaries; (iv) make any additional contributions to any grantor trust
created by ARS 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 ARS 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 ARS nor any of its Subsidiaries shall: (i) incur or
assume any debt except for borrowings under credit facilities of ARS 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
33
<PAGE>
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 ARS, customary loans or advances to
employees in the ordinary course of business and short-term investments pursuant
to customary cash management systems of ARS 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 ARS's past practices;
(k) neither ARS nor any of its Subsidiaries shall change any of the
accounting principles used by it unless required by GAAP;
(l) ARS shall not make any material Tax election; and
(m) neither ARS nor any Subsidiary of ARS shall agree in writing or
otherwise to take (i) any action that it is prohibited from taking by this
Section 6.1 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.
Section 6.2 ARS Stockholder Approval; Preparation of Proxy Statement
(a) If the ARS Stockholder Approval is required by applicable law, ARS
shall, as soon as practicable following the expiration of the Offer, duly call,
give notice of, convene and hold a meeting of its stockholders (the "ARS
Stockholders Meeting") for the purpose of obtaining the ARS Stockholder
Approval. ARS shall, through its board of directors, unanimously recommend to
its stockholders that the ARS Stockholder Approval be given. Notwithstanding the
foregoing, if ServiceMaster, Acquisition Subsidiary or any other Subsidiary of
ServiceMaster shall acquire at least 90 percent of the outstanding ARS Shares,
the Parties shall take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after the expiration of the Offer
without an ARS Stockholders Meeting in accordance with Section 253 of Delaware
Law.
(b) If the ARS Stockholder Approval is required by applicable law, ARS
shall, as soon as practicable following the expiration of the Offer, prepare and
file a preliminary proxy statement (the "Proxy Statement") with the SEC and
shall use its diligent efforts to respond to any comments of the SEC or its
staff and to cause the Proxy Statement to be mailed to the stockholders of ARS
as promptly as practicable after responding to all such comments to the
satisfaction of the staff, if any. ARS shall notify ServiceMaster promptly of
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply ServiceMaster with copies of all
correspondence between ARS or any of its affiliates or representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the ARS Stockholders Meeting
there shall occur any event that should be set forth in an
34
<PAGE>
amendment or supplement to the Proxy Statement, ARS shall promptly prepare and
mail to its stockholders such an amendment or supplement.
(c) ServiceMaster agrees to cause all ARS Shares purchased pursuant to
the Offer and all other ARS Shares owned by ServiceMaster or any of its
Subsidiaries to be voted in favor of the ARS Stockholder Approval.
Section 6.3 Access to Information. Subject to any limitations imposed
under confidentiality agreements to which ARS is subject, ARS will give
ServiceMaster, its counsel, financial advisors, auditors and other authorized
representatives full access throughout the period prior to the Effective Time to
all of the offices, properties, business and marketing plans, books, files and
records of ARS and the Subsidiaries of ARS, will furnish to ServiceMaster, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such persons may
reasonably request and will instruct ARS's employees, counsel and financial
advisors to cooperate with ServiceMaster in its investigation of the business of
ARS and its Subsidiaries and to promptly answer and respond to any questions and
inquiries of ServiceMaster, and ServiceMaster shall keep confidential such data
and other information to the extent provided in the letter agreement dated March
18, 1998 entered into by ARS and ServiceMaster. ARS will furnish promptly to
ServiceMaster and Acquisition Subsidiary (a) a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of Federal
or state securities laws and (b) all such other information concerning its
business, properties and personnel as ServiceMaster or Acquisition Subsidiary
may reasonably request; provided that no investigation pursuant to this Section
6.3 shall affect any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
Section 6.4 No Solicitation.
(a) ARS represents to ServiceMaster that the board of directors of ARS
is satisfied that it has made such assessments of ARS's value and has taken such
other actions as to satisfy the fiduciary duties of its board of directors that
must be satisfied to enable ARS to enter into this Agreement and to render this
Agreement binding upon ARS in accordance with its terms.
(b) ARS agrees that, prior to the Effective Time, it shall not, and
shall 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 ARS or the acquisition of all or any material
portion of the assets or capital stock of ARS (an "Acquisition Transaction") or
negotiate, explore or otherwise engage in substantive discussions with any
person (other than ServiceMaster, Acquisition Subsidiary or their respective
directors, officers, employees, agents and representatives), or enter into any
agreement, with respect to any
35
<PAGE>
Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement, other than as
expressly contemplated by this Section. The board of directors of ARS shall not
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
ServiceMaster or Acquisition Subsidiary, the approval or recommendation by such
board of directors of the Offer, subject to the exception contained in the first
sentence of Section 1.2(b).
(c) Notwithstanding subsection (b) above, prior to the consummation of
the Offer, ARS may provide non-public information to and seek to negotiate an
Acquisition Transaction with a person other than ServiceMaster or any of
ServiceMaster's 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 ARS on Superior Terms. For
purposes of this Agreement, terms will be deemed to be "Superior Terms" only if
the proposal of such Competitor is more favorable than the Offer Price to the
stockholders of ARS as determined in good faith by the board of directors of
ARS. A proposal to acquire ARS on Superior Terms is herein called a "Qualified
Competing Proposal."
(d) If prior to the termination of this Agreement in accordance with
its terms, ARS receives an inquiry or proposal relating to an Acquisition
Transaction, it shall advise ServiceMaster 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 ServiceMaster under this
Agreement. ARS shall also promptly advise ServiceMaster in writing of any
actions taken pursuant to Section 6.4(c) hereof and furnish to ServiceMaster
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 ServiceMaster with any other information which is either in
the possession of ARS or available to ARS relating in any way to any possible
Acquisition Transaction as ServiceMaster shall request.
(e) ARS shall prior to entering into any Qualified Competing Proposal
pay or cause to be paid to ServiceMaster the amount specified in Section
10.3(b).
(f) Nothing contained in this Agreement shall prevent the board of
directors of ARS from complying with Rule 14d-9 and Rule 14e-2 under the
Exchange Act with regard to an Acquisition Transaction.
(g) ARS warrants that ARS is not bound by any contract or agreement
that would require it to take any action which would violate any restriction
contained in Section 6.4(b).
Section 6.5 Corporate Organization. Notwithstanding anything to the
contrary contained in this Agreement or in the disclosure schedules hereto, ARS
and each of its operating Subsidiaries
36
<PAGE>
shall take all actions reasonably necessary in order to be duly qualified and in
good standing on the Effective Time with the Secretary of State in each
jurisdiction in which the character of its properties owned or held under lease
or the nature of its activities makes such qualification necessary, except where
the failure to be so qualified and in good standing would not have an ARS
Material Adverse Effect.
Section 6.6 Monthly Financial Statements. As soon as available but in
any event within 45 days after the end of each monthly accounting period in each
fiscal year, ARS shall deliver to ServiceMaster unaudited consolidated
statements of income of ARS and its Subsidiaries for such monthly period and for
the period from the beginning of the fiscal year to the end of such month, and
all such statements shall fairly present in all material respects the
consolidated results of operations of ARS and its consolidated subsidiaries for
the periods presented therein and shall be prepared in accordance with GAAP
consistently applied (subject to the absence of footnote disclosures and to
normal year-end adjustments) and shall set forth EBITA and a calculation thereof
for such monthly period. Each such monthly statement of income shall be
presented in such detail as is comparable to the January 1999 Financial
Statements.
Section 6.7 Resignation of ARS Directors. Prior to or simultaneously
with the acceptance for payment of, and payment for, ARS Shares by Acquisition
Subsidiary pursuant to the Offer, (i) ARS shall cause the directors of ARS and
its Subsidiaries to resign their positions as such upon such consummation of the
Offer and (ii) shall arrange for the appointment of Phillip B. Rooney, Ernest J.
Mrozek and Vernon T. Squires (or such other persons designated in writing by
ServiceMaster) as directors of ARS upon the consummation of the Offer. Subject
to applicable law, ARS shall take all action requested by Acquisition Subsidiary
necessary to effect any such requested election, including sending to its
stockholders the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and ARS agrees to make such mailing with the
mailing of the Schedule 14D-9 (provided that Acquisition Subsidiary shall have
provided to ARS on a timely basis all required information with respect to the
designees of Acquisition Subsidiary).
ARTICLE 7
COVENANTS OF SERVICEMASTER
Section 7.1 Obligations of Acquisition Subsidiary. Subject to the terms
and conditions in this Agreement, ServiceMaster will take all action necessary
to cause Acquisition Subsidiary to perform its obligations under this Agreement
and to consummate the Offer and the Merger on the terms and conditions set forth
in this Agreement.
Section 7.2 Indemnification.
37
<PAGE>
(a) From and after the Effective Time, ServiceMaster and the Surviving
Corporation jointly and severally shall indemnify, to the full extent permitted
under Delaware Law, the present and former directors and officers of ARS 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 ARS 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 Surviving Corporation,
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.
(b) For not less than six years after the Effective Time,
ServiceMaster or the Surviving Corporation shall maintain in effect directors'
and officers' liability insurance covering the persons who are currently covered
by ARS's existing directors' and officers' liability insurance 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
hereof under ARS's existing directors' and officers' liability insurance;
provided, however, that in no event shall ServiceMaster or the Surviving
Corporation be required to pay in any year an amount to maintain such insurance
covering the Indemnified Parties in excess of twice the amount paid by ARS as of
the Closing Date for such coverage; provided further that if the annual premiums
of such insurance coverage exceed such amount, ServiceMaster shall be obligated
to obtain a policy with a premium equal to such amount.
ARTICLE 8
COVENANTS OF SERVICEMASTER AND ARS
Section 8.1 Diligent Efforts. Subject to the terms and conditions of
this Agreement, each party will use its diligent efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement; provided that
nothing herein shall require ServiceMaster to hold, manage or operate any assets
separately or to enter into any sale or divestiture of assets. ARS,
ServiceMaster and Acquisition Subsidiary shall each furnish to one another and
to one another's counsel all such information as may be required in order to
accomplish the foregoing actions. In connection with and without limiting the
foregoing, ARS and ServiceMaster shall (i) take all action reasonably necessary
to ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Offer, the Merger, this Agreement or any of the other
transactions contemplated hereby and (ii) if any state takeover statute or
similar
38
<PAGE>
statute or regulation becomes applicable to the Offer, the Merger, this
Agreement or any of the other transactions contemplated hereby, take all action
reasonably necessary to ensure that the Offer, the Merger and the other
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated by this Agreement and otherwise to minimize the effect
of such statute or regulation on the Offer, the Merger and the other
transactions contemplated by this Agreement.
Section 8.2 Certain Filings. ARS and ServiceMaster shall cooperate with
one another (i) in connection with the preparation of all documents and filings
contemplated by this Agreement, (ii) in determining whether any other action by
or in respect of, or filing with, any governmental body, agency or official, or
authority or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts in connection with the
consummation of the transactions contemplated by this Agreement and (iii) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with any of
the documents and filings contemplated by this Agreement and seeking timely to
obtain any such actions, consents, approvals or waivers.
Section 8.3 Public Announcements. ServiceMaster and ARS will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.
Section 8.4 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of ARS or Acquisition Subsidiary,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf ARS or Acquisition Subsidiary, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets of ARS acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
Section 8.5 Notices of Certain Events. ARS and ServiceMaster shall
promptly notify the other of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement;
39
<PAGE>
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened against, relating to or
involving or otherwise affecting ARS or any of its Subsidiaries, on the one
hand, or ServiceMaster or Acquisition Subsidiary, on the other hand, which
relate to the consummation of the transactions contemplated by this Agreement;
and
(d) any action, event or occurrence that would constitute a breach of
any representation, warranty, covenant or agreement of it set forth in this
Agreement.
Section 8.6 Regulatory Matters and Approvals. Each of ARS and
ServiceMaster shall (and ServiceMaster shall cause Acquisition Subsidiary to)
give any notices to, make any filings with and use its diligent efforts to
obtain any authorizations, consents and approvals of, Governmental Entities in
connection with the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, ARS and ServiceMaster shall each file
any Notification and Report Forms and related material that it may be required
to file in connection with the transactions contemplated by this Agreement with
the Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the HSR Act, shall each use its diligent efforts to
obtain an early termination of the applicable waiting period, and shall each
make any further filings pursuant thereto that may be necessary, proper or
advisable.
Section 8.7 Representations. Each of ARS, on the one hand, and
ServiceMaster and Acquisition Subsidiary, on the other, (i) will use their
diligent efforts to take all action necessary to render true and correct as of
the Closing, its representations and warranties contained in this Agreement and
(ii) will refrain from taking any action that would render any such
representation or warranty untrue or incorrect as of such time.
Section 8.8 Material Consents. Between the date of this Agreement and
the Closing Date, ARS and ServiceMaster and each of their respective
Subsidiaries shall in good faith use their diligent efforts to obtain all
consents and approvals of all lenders, lessors, vendors, customers and other
persons necessary to permit the transactions contemplated by this Agreement to
be consummated without violating any loan agreement, lease or other material
contract to which ARS, ServiceMaster or any of their respective Subsidiaries is
a party or by which ARS, ServiceMaster or any of their respective Subsidiaries
is bound.
ARTICLE 9
CONDITIONS
Section 9.1 Conditions to the Offer. Acquisition Subsidiary 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 ARS Shares tendered pursuant to the Offer, and may
terminate the Offer if:
40
<PAGE>
(a) there shall not have been validly tendered and not withdrawn prior to
the expiration of the Offer such number of ARS Shares that would
constitute at least 52 percent of the then outstanding ARS Shares (the
"Minimum Condition");
(b) any waiting period under the HSR Act applicable to the purchase of ARS
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 ServiceMaster to
terminate this Agreement under any of the provisions in Section 10.1
of this Agreement.
The foregoing conditions are for the sole benefit of ServiceMaster and
Acquisition Subsidiary and may, subject to the terms of this Agreement, be
waived by ServiceMaster and Acquisition Subsidiary in whole or in part at any
time and from time to time in their sole discretion. The failure by
ServiceMaster or Acquisition Subsidiary 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.
Section 9.2 Conditions to the Merger. The obligations of ServiceMaster and
Acquisition Subsidiary to consummate the Merger are subject to the satisfaction
of the following conditions: (i) if required by applicable law, this Agreement
shall have been adopted by the stockholders of ARS in accordance with Delaware
Law; and (ii) Acquisition Subsidiary shall have previously accepted payment and
paid for ARS Shares pursuant to the Offer.
ARTICLE 10
TERMINATION
Section 10.1 Termination. This Agreement may be terminated prior to the
purchase of ARS Shares pursuant to the Offer:
(a) by mutual written consent of ARS and ServiceMaster;
(b) by either ServiceMaster or ARS, in the event the Offer shall have
terminated or expired in accordance with its terms without Acquisition
Subsidiary having accepted for payment any ARS Shares pursuant to the
Offer or in the event Acquisition Subsidiary shall not have accepted
for payment any ARS Shares pursuant to the
41
<PAGE>
Offer prior to June 30, 1999 (except as otherwise indicated below, the
"Deadline") as a result of any of the conditions specified in Section
9.1 not being satisfied; provided, however, that (i) the right to
terminate this Agreement pursuant to this paragraph (b) shall not be
available to any party whose failure (including, in the case of
ServiceMaster, a failure by Acquisition Subsidiary) to perform any of
its obligations under this Agreement shall have been the primary and
but-for reason for the failure of the satisfaction of any such
conditions or the termination of the Offer without acceptance of any
ARS Shares; (ii) in the event that there has been any public
disclosure of a possible Acquisition Transaction other than the Offer
and in ServiceMaster's reasonable judgment 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, ARS shall not have a right to terminate under this clause
(b) until and unless ServiceMaster 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
ServiceMaster from consummating the Offer, then the Deadline shall be
extended until 30 business days after such prohibition shall cease be
apply;
(c) by either ARS or ServiceMaster, if any judgment, injunction, order or
decree enjoining ServiceMaster, Acquisition Subsidiary or ARS from
consummating the transactions contemplated by this Agreement
(including the Merger, the Offer and the acquisition of ARS Shares by
Acquisition Subsidiary pursuant to the Offer) is entered and such
judgment, injunction, order or decree shall have become final and
nonappealable;
(d) by ServiceMaster if the board of directors of ARS shall (i) withdraw,
modify or change its recommendation or approval in respect of the
Offer in a manner not approved by ServiceMaster or (ii) have
recommended any proposal other than by ServiceMaster or Acquisition
Subsidiary in respect of an Acquisition Transaction;
(e) by ServiceMaster if a "Flip-In Event," a "Flip-Over Event," a
"Distribution Date" or a "Stock Acquisition Date" occurs under the
Rights Agreement of ARS;
(f) by ServiceMaster if ARS takes any action that would permit any Person
(other than ServiceMaster or Acquisition Subsidiary) to acquire in
excess of 15 percent of the outstanding shares of ARS 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 ARS;
(g) by ServiceMaster if ARS shall have breached in any material respect
any of its representations or warranties contained herein (which
representations and warranties
42
<PAGE>
for purposes of determining if ServiceMaster can terminate this
Agreement pursuant to this clause (g) 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 (g) to have been made as of the
particular date);
(h) by ServiceMaster if ARS shall have breached in any material respect
any of its covenants or agreements contained in Section 6.1(b), (c) or
(e) or its warranties in Section 4.24;
(i) by ServiceMaster if ARS shall have breached in any material respect
any of its covenants or agreements contained herein, other than the
covenants and agreements contained in Section 6.1(b), (c) or (e);
(j) by ARS if a Qualified Competing Proposal is made to ARS, subject to
the restrictions set forth in Section 6.4, provided that the right to
terminate described in this subsection shall not be effective unless
and until ARS shall have paid to ServiceMaster the fee described in
Section 10.3(b);
(k) by ARS if ServiceMaster or Acquisition Subsidiary shall have breached
in any material respect any of its covenants or agreements contained
herein or any of its representations or warranties contained herein
(which representations and warranties for purposes of determining if
ARS can terminate this Agreement pursuant to this clause (k) 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 (k)
to have been made as of the particular date);
(l) by ServiceMaster if (i) in ServiceMaster's good faith judgment there
shall be a reasonable possibility that ARS 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 ServiceMaster, a material adverse effect on ARS
and its subsidiaries taken as a whole;
(m) by ServiceMaster, if the directors of ARS do not resign and take all
other actions necessary to accomplish all of the results specified in
Section 6.7;
(n) by ServiceMaster, if the "loss before income taxes, discontinued
operations and extraordinary items" of ARS as shown in ARS' definitive
audited financial statements for the fiscal year ended December 31,
1998 exceeds $3.9 million;
43
<PAGE>
provided that the ServiceMaster termination right set forth in this
paragraph (n) 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
ServiceMaster of those definitive audited 1998 financial statements of
ARS together with a written notice from ARS that such delivery is
intended to begin the two business day time limit specified in this
clause (n); or
(o) by ServiceMaster, if ServiceMaster or Acquisition Subsidiary is
entitled to terminate the Offer pursuant to Section 9.1.
Any right of termination under this Section 10.1 shall be exercised by written
notice of termination given by the terminating party to the other parties hereto
in the manner hereinafter provided. In the event ServiceMaster shall terminate
this Agreement under clause (l) of this Section 10.1, ServiceMaster shall at the
time of such termination identify in writing for ARS the grounds which
ServiceMaster believes entitles it to effect such termination under clause (l).
Any right of termination shall not be an exclusive remedy hereunder but shall be
in addition to any other legal or equitable remedies that may be available to
any non-defaulting party hereto arising out of any default hereunder by any
other party hereto.
Section 10.2 Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken by or pursuant to resolutions of their
respective boards of directors, may (but shall not be required to) (i) extend
the time for the performance of any of the obligations or other acts of the
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
Section 10.3 Effect of Termination; Termination Fee.
(a) If this Agreement is terminated pursuant to Section 10.1 hereof,
this Agreement shall become void and of no effect with no liability on the part
of any party hereto, except that the agreements contained in Sections 10.3(b)
and (c) and 11.4 hereof shall survive the termination hereof and except that no
such termination shall relieve any party from liability for breach of this
Agreement or failure by it to perform its obligations hereunder. Without
limiting by implication the generality of the preceding sentence, ServiceMaster
shall not be obligated to continue the Offer after any termination of this
Agreement pursuant to any provision in Section 10.1.
(b) If this Agreement shall be terminated pursuant to clause (d), (f),
(h), (j) or (m) in Section 10.1, then (i) ARS shall promptly, but in no event
later than two business days after the date of such termination, pay
ServiceMaster a termination fee equal to $3.25 million and (ii)
44
<PAGE>
ServiceMaster shall be entitled to the termination fee in the amount specified
in this subsection (b) regardless of whether any other ground for termination
shall exist under or by reason of this Agreement. In no event shall ARS be
required to pay more than one termination fee pursuant to this Section 10.3(b)
and if any fee shall be payable under this Subsection (b), then no additional
amount shall be separately payable under Section 10.3(c).
(c) If this Agreement shall be terminated pursuant to clause (g) or
(i) in Section 10.1, then (except as otherwise specified in Section 10.3(b)) ARS
shall pay ServiceMaster an amount, not to exceed $1,000,000, equal to the
reasonable and documented actual out-of-pocket expenses incurred by
ServiceMaster directly attributable to the proposed acquisition of ARS,
including negotiation and execution of this Agreement and the attempted
completion of the Offer and the Merger. Each such expense shall be paid within
thirty days after ServiceMaster shall have submitted the written request for
payment of such expense except that in the event ARS shall in good faith raise
any question as to whether any particular expense is payable by ARS under this
subsection (c), then ARS shall be entitled to delay payment of such expense
until ServiceMaster shall supply documentation sufficient to establish that the
particular expense is payable under the standards specified in this subsection
(c). In no event shall any request for additional documentation to which ARS
shall be entitled under this subsection (c) of itself entitle ARS to delay
payment of any other expense owed by ARS under this subsection (c).
(d) If ARS shall for any reason fail to make the payment specified
under Section 10.3(b) or Section 10.3(c) at the time required by that Section,
then ARS shall pay ServiceMaster 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 ServiceMaster and shall also reimburse ServiceMaster for all
attorney's fees and other expenses which ServiceMaster shall reasonably incur to
enforce its rights to such payment.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile, telex or similar
writing) and shall be given,
If to ServiceMaster or Acquisition Subsidiary, to:
One ServiceMaster Way
Downers Grove, IL 60515
Attention: General Counsel
Facsimile: (630) 271-5870
45
<PAGE>
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Robert H. Kinderman
Facsimile: (312) 861-2200
If to ARS, to:
Post Oak Tower
Suite 725
5051 Westheimer Road
Houston, TX 77056
Attention: General Counsel
Facsimile: (713) 599-0200
with a copy to:
Fulbright & Jaworski L.L.P.
1301 McKinney, Suite 5100
Houston, TX 77010-3095
Attention: Charles L. Strauss
Facsimile: (713) 651-5246
or such other address, telecopy or telex number as such party may hereafter
specify for the purpose by notice to the other parties hereto. Each such
notice, request or other communication shall be effective (a) if given by
facsimile or telex, upon confirmation of receipt, or (b) if given by any other
means, when delivered at the address specified in this Section 11.1.
Section 11.2 Survival of Representations and Warranties. The
representations and warranties contained herein shall not survive the Effective
Time.
Section 11.3 Amendments; No Waivers.
(a) This Agreement may be amended by the parties hereto, by duly
authorized action taken, at any time before or after obtaining the ARS
Stockholder Approval, but, after the purchase of ARS Shares pursuant to the
Offer, no amendment shall be made which decreases the Merger Consideration and,
after the ARS Stockholder Approval, no amendment shall be made which by law
requires further approval by such stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the Parties hereto or, in the case of a waiver, by
the party against whom the waiver is to be effective. Following the election or
appointment of the designees of Acquisition Subsidiary pursuant to Section 6.7
and prior to the Effective Time, this Agreement shall not be amended or
terminated.
46
<PAGE>
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 11.4 Expenses. Each party shall pay its own costs and expenses
relating to this Agreement and the transactions contemplated hereby, except that
each of ServiceMaster and ARS shall bear and pay one-half of the costs and
expenses incurred in connection with the filing, printing and mailing of the
Offer Documents and the Schedule 14D-9 (including SEC filing fees).
Section 11.5 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
Section 11.6 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
Section 11.7 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts (including by means of telecopied signature
pages), each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
Section 11.8 Headings. Section headings used in this Agreement are for
convenience only and shall be ignored in the construction and interpretation
hereof.
Section 11.9 No Third Party Beneficiaries. Except for Section 7.2
hereof, no provision of this Agreement is intended to, or shall, confer any
third party beneficiary or other rights or remedies upon any person other than
the parties hereto.
* * * * *
47
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE SERVICEMASTER COMPANY
By: _________________________________
Name: Phillip B. Rooney
Title: Vice Chairman
SVM M9 ACQUISITION CORPORATION
By: _________________________________
Name: Ernest J. Mrozek
Title: President
AMERICAN RESIDENTIAL SERVICES, INC.
By: _________________________________
Name: Thomas N. Amonett
Title: President and Chief Executive Officer
<PAGE>
SERVICEMASTER DISCLOSURE SCHEDULE
Schedule 4.6
1. George Lurgrin et al. vs. American Home Shield of Texas, Inc. et al., In
the District Court of Harris County, Texas, 295/th/ Judicial District, No.
97-55341 and Edward Thorn III vs. American Home Shield of Texas, Inc. et
al., 165/th/ Judicial District Court, No. 9835324.
Schedule 4.7
See item 1 under Schedule 4.6
Schedule 4.8
See item 1 under Schedule 4.6
Schedule 4.9
See item 1 under Schedule 4.6
