<PAGE>
Filed Pursuant to Rule 424(B)(5)
Registration No. 333-32167
PROSPECTUS SUPPLEMENT
(To Prospectus dated February 25, 1998)
THE SERVICEMASTER COMPANY LOGO
$150,000,000
7.10% Notes due March 1, 2018
ISSUE PRICE: 99.768%
$150,000,000
7.25% Notes due March 1, 2038
ISSUE PRICE: 99.200%
Interest on the 7.10% Notes due March 1, 2018 (the "2018 Notes") and on the
7.25% Notes due March 1, 2038 (the "2038 Notes") (collectively, the "Notes")
is payable semi-annually on March 1 and September 1 of each year, commencing
September 1, 1998. The 2018 Notes and 2038 Notes may be redeemed at any time
at the option of The ServiceMaster Company, a Delaware corporation
("ServiceMaster" or the "Company"), in whole or in part, at a redemption price
equal to the greater of (i) 100% of their principal amount or (ii) the sum of
the present values of the Remaining Scheduled Payments (as defined herein)
thereon discounted to the redemption date, on a semi-annual basis, at the
Treasury Yield (as defined herein) plus 20 basis points (for the redemption of
the 2018 Notes) or 20 basis points (for the redemption of the 2038 Notes), to-
gether with all accrued but unpaid interest, if any, to the date of redemption
in either case. See "Description of Notes--Optional Redemption of 2018 and
2038 Notes" herein.
Each series of Notes will be represented by a Registered Global Security (as
defined in the Indenture) registered in the name of The Depository Trust Com-
pany (the "Depositary") or its nominee. Interest in the Registered Global Se-
curities will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary (with respect to beneficial in-
terests of participants) or by participants or persons that hold interests
through participants (with respect to beneficial interests of beneficial own-
ers). Except as described in the accompanying Prospectus, Notes in certifi-
cated form will not be issued. See "Description of Debt Securities--Global Se-
curities" in the accompanying Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (1)(3)
- ---------------------------------------------------------
<S> <C> <C> <C>
Per 2018 Note 99.768% .875% 98.893%
- ---------------------------------------------------------
Total $149,652,000 $1,312,500 $148,339,500
- ---------------------------------------------------------
Per 2038 Note 99.200% .875% 98.325%
- ---------------------------------------------------------
Total $148,800,000 $1,312,500 $147,487,500
- ---------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from March 2, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting" herein.
(3) Before deducting expenses of the Company estimated at $500,000.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriters and subject to approval of certain legal matters by Davis Polk &
Wardwell, counsel for the Underwriters. It is expected that delivery of the
Notes will be made in book-entry form only on or about March 2, 1998 through
the facilities of the Depositary, against payment therefor in immediately
available funds.
J.P. MORGAN & CO. GOLDMAN, SACHS & CO.
BANCAMERICA ROBERTSON STEPHENS
FIRST CHICAGO CAPITAL MARKETS, INC.
NATIONSBANC MONTGOMERY
February 25, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY,
THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID
FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or by any Underwriter.
This Prospectus Supplement and the accompanying Prospectus do not constitute an
offer to sell or the solicitation of an offer to buy the Notes by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder and thereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or thereof or that
the information contained or incorporated by reference herein or therein is
correct as of any time subsequent to the date of such information.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
ServiceMaster.............................................................. S-3
Use of Proceeds............................................................ S-6
Description of the Notes................................................... S-7
Underwriting............................................................... S-8
Legal Opinions............................................................. S-9
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Information by Reference.......................... 2
ServiceMaster.............................................................. 4
Ratio of Earnings to Fixed Charges......................................... 4
Use of Proceeds............................................................ 5
Description of Debt Securities............................................. 5
Plan of Distribution....................................................... 11
Validity of Debt Securities................................................ 13
Experts.................................................................... 13
</TABLE>
S-2
<PAGE>
Unless otherwise indicated or the context otherwise requires, all references
herein to "ServiceMaster" or the "Company" refer to The ServiceMaster Company,
a Delaware corporation, and its subsidiaries and their respective predecessors.
The ServiceMaster Company is the corporate successor to the operations of
ServiceMaster Limited Partnership (the "Parent Partnership") and its immediate
subsidiary, The ServiceMaster Company Limited Partnership (the "Operating
Partnership").
SERVICEMASTER
ServiceMaster provides a range of services to individual consumers, businesses
and institutions in the United States and over 30 other countries throughout
the world. ServiceMaster is functionally divided into three operating units:
Consumer Services, Management Services and Employer Services. Consumer Services
and Management Services are the principal operating units.
CONSUMER SERVICES
ServiceMaster Consumer Services provides specialty services to homeowners and
commercial facilities through eight market-leading companies. The services
provided by these companies include: lawn care, tree and shrub services and
indoor plant maintenance services under the "TruGreen-ChemLawn" and "Barefoot"
service marks; termite and pest control services under the "Terminix" service
mark; home systems and appliance warranty contracts under the "American Home
Shield" service mark; plumbing and drain cleaning services under the "Rescue
Rooter" service mark; residential and commercial cleaning and disaster
restoration services under the "ServiceMaster" service mark; domestic
housekeeping services under the "Merry Maids" service mark; home inspection
services under the "AmeriSpec" service mark; and on-site furniture repair and
restoration under the "Furniture Medic" service mark.
ServiceMaster focuses on providing easy access to its various services and
establishing relationships to provide one or more of these services on a
repetitive basis to customers. Since 1986, the number of customers served by
ServiceMaster Consumer Services has increased from fewer than one million
domestic customers to more than 9.6 million worldwide customers. The services
provided by the eight Consumer Services companies are part of the ServiceMaster
"Quality Service Network" and can be accessed by calling a single toll-free
telephone number: 1-800-WE SERVE or by contacting the individual companies
directly.
TruGreen-ChemLawn. As of December 31, 1997, TruGreen-ChemLawn was operating in
48 states through 206 company-owned branches and 84 franchised branches. With
over 3 million residential and commercial customers, TruGreen-ChemLawn is the
leading provider of lawn care services in the United States and also provides
interior plantscape services to commercial customers. TruGreen-ChemLawn also
provides lawn, tree and shrub care services in Canada and in Saudi Arabia
through a licensing arrangement. The TruGreen-ChemLawn businesses are seasonal
in nature.
In February 1997, ServiceMaster, for the benefit of TruGreen-ChemLawn,
completed the acquisition of Barefoot Inc. ("Barefoot") for aggregate
consideration having a value of approximately $237 million. At the time of the
transaction, Barefoot was the second largest provider of professional lawn care
services in the United States.
Terminix. With over 3 million residential and commercial customers worldwide,
Terminix is the leading provider of termite and pest control services in the
United States. As of December 1997, Terminix was providing these services in 45
states and in Mexico through 290 company-owned branches and 241 franchised
branches. Terminix also provides termite and pest control services through a
subsidiary in Mexico and through local licensees in 7 other countries. The unit
also operates Terminix Peter Cox Ltd., a leading pest control and wood
preservation company in the United Kingdom and Ireland; Terminix Protekta B.V.
and Riwa B.V., each a leading pest control company in the Netherlands and
Belgium; Anticimex Development AB, a holding company for the leading pest
control company in Sweden, which also operates in Norway; and a group of pest
control companies in Germany. The Terminix business is seasonal in nature.
American Home Shield. American Home Shield ("AHS") is a leading provider of
home service warranty contracts in the United States. AHS warranty contracts
cover the repair or replacement of built-in appliances, hot water heaters and
electrical, plumbing, central heating, and central air conditioning systems
that malfunction by reason of normal wear and tear. Service contracts are sold
through participating real estate brokerage offices in conjunction with resales
S-3
<PAGE>
of single-family residences to homeowners. AHS also sells service warranty
contracts directly to non-moving homeowners by renewing existing contracts and
through various other distribution channels which are currently being expanded.
As of December 31, 1997, AHS was providing services to approximately 568,000
homes through approximately 13,000 independent repair maintenance contractors
in 49 states and the District of Columbia. AHS also provides home service
warranty contracts through licensing arrangements with local service providers
in three other countries.
Rescue Rooter. In January 1998, the Company acquired Rescue Rooter, which is a
leading provider of plumbing and drain cleaning services. Rescue Rooter
operates 20 company-owned locations and has one franchise location and
performed services for approximately 400,000 customers in 1997.
ServiceMaster Residential/Commercial Services ("Res/Com"). ServiceMaster,
through Res/Com, is the leading franchiser in the United States in the
residential and commercial cleaning field. Res/Com provides carpet and
upholstery cleaning and janitorial services, disaster restoration services and
window cleaning services to approximately 1.7 million residential and
commercial customers worldwide through a network of over 4,500 independent
franchisees. Res/Com provides its services through subsidiaries in Germany,
Canada, Ireland and the United Kingdom, and through licensees in 6 other
countries.
Merry Maids. Merry Maids provides domestic house cleaning services. With
approximately 352,000 worldwide customers, Merry Maids is the leading provider
of domestic house cleaning services in the United States. As of December 31,
1997, these services were provided through 26 company-owned branches in 18
states and 797 licensees operating in all 50 states. Merry Maids also provides
domestic housecleaning services in the United Kingdom and Canada through
subsidiaries, and in 3 other countries through licensing arrangements with
local service providers.
AmeriSpec. AmeriSpec is a leading provider of home inspection services in the
United States. During 1997, AmeriSpec conducted approximately 100,000 home
inspections through licensees in 41 states and Canada.
Furniture Medic. Furniture Medic provides on-site furniture repair and
restoration services in 47 states. As of December 31, 1997, these services were
provided through 513 licensees. Furniture Medic also provides its services
through subsidiaries in Canada and the United Kingdom and in two other
countries through licensing arrangements with local service providers.
MANAGEMENT SERVICES
ServiceMaster Management Services is organized into three principal operating
units, each providing a separate functional service on a nationwide basis.
These units are: Healthcare Services (including Diversified Health Services);
Education Management Services; and Business and Industry Management Services.
The services provided by the Healthcare Management Services unit and the
services provided by ServiceMaster Diversified Health Services have been
integrated to provide a coordinated range of services to the health care
market.
ServiceMaster pioneered the providing of management of support services to
health care facilities by introducing housekeeping management services in 1962.
Since then, ServiceMaster has expanded its management services business to
include the management of housekeeping, plant operations and maintenance,
laundry and linen, grounds and landscaping, clinical equipment maintenance,
food service, energy management and total facility management to healthcare,
educational and commercial facilities. The Diversified Health Services' portion
of Healthcare Services provides management and other services to nursing homes,
skilled nursing facilities, assisted living facilities and home health care
agencies. ServiceMaster's programs and systems free the customer to focus on
its core business activity with confidence that the support services are being
managed and performed in an efficient manner.
As of December 31, 1997, ServiceMaster was providing management of support
services to approximately 1,800 health care facilities and to approximately 400
educational and commercial facilities. These services were being provided in
all 50 states and the District of Columbia. Outside of the United States,
ServiceMaster provides management services through subsidiaries in Japan and
Canada, and through licensees in 19 other countries.
EMPLOYER SERVICES
The Employer Services unit is one of the nation's largest professional employer
organizations and provides more than 790 clients with administrative processing
of payroll, worker's compensation insurance, health insurance, unemployment
insurance and other employee benefits.
S-4
<PAGE>
BACKGROUND
The Company is the successor to a business which began operations in 1947. The
principal executive offices of the Company are located at One ServiceMaster
Way, Downers Grove, Illinois 60515-9969. The Company's telephone number is
(630) 271-1300.
S-5
<PAGE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be approximately $295 million.
The Company expects to use the net proceeds from the sale of the Notes to repay
a portion of its borrowings under its revolving bank credit facility. The
revolving bank credit facility matures on April 1, 2002 and bears interest at
floating rates (equal to approximately 6% at December 31, 1997).
Affiliates of J.P. Morgan Securities Inc., BancAmerica Robertson Stephens,
First Chicago Capital Markets, Inc. and NationsBanc Montgomery Securities
L.L.C. are lenders under the revolving bank credit facility. See
"Underwriting."
S-6
<PAGE>
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered hereby
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Debt Securities set forth in the
Prospectus, to which description reference is hereby made.
GENERAL
The Notes will be issued under the Indenture (the "Indenture") dated as of
August 15, 1997 among the Company (as successor to The ServiceMaster Company
Limited Partnership and ServiceMaster Limited Partnership) and Harris Trust and
Savings Bank, as trustee (the "Trustee"). The Notes will rank pari passu with
all other unsubordinated indebtedness of the Company. Capitalized terms not
defined herein have meanings as set forth in the Indenture.
The 2018 Notes will be limited to $150,000,000 aggregate principal amount and
will mature on March 1, 2018 (the "2018 Notes Maturity Date") at 100% of their
principal amount, unless earlier redeemed pursuant to the terms thereof. See
"Optional Redemption of 2018 Notes and 2038 Notes" below. The 2038 Notes will
be limited to $150,000,000 aggregate principal amount and will mature on March
1, 2038 (the "2038 Notes Maturity Date") at 100% of their principal amount,
unless earlier redeemed pursuant to the terms thereof. See "Optional Redemption
of 2018 Notes and 2038 Notes" below.
The Notes will bear interest at the rate per annum set forth on the cover page
of this Prospectus Supplement from March 2, 1998 or from the most recent
interest payment date to which interest has been paid or provided for, payable
semi-annually on March 1 and September 1 of each year (an "Interest Payment
Date"), beginning September 1, 1998 until the 2018 Notes Maturity Date or the
2038 Notes Maturity Date, as the case may be. Interest will be payable to the
persons in whose names the Notes are registered at the close of business on the
February 15 or August 15, as the case may be, next preceding such Interest
Payment Date.
The Notes will be issued as Registered Global Securities. See "Book-Entry
System" below. Principal of and interest on the Notes will be payable, and the
transfer of Notes will be registerable, through The Depository Trust Company,
as Depositary (the "Depositary"), as described under "Description of Debt
Securities--Global Debt Securities" in the Prospectus.
The Notes are not subject to any sinking fund.
OPTIONAL REDEMPTION OF 2018 AND 2038 NOTES
The 2018 Notes and the 2038 Notes will be redeemable in whole or in part, at
the option of the Company, upon not less than 30 or more than 60 days prior
written notice, at any time, at a redemption price equal to the greater of (i)
100% of their principal amount or (ii) the sum of the present values of the
Remaining Scheduled Payments (as hereinafter defined) thereon discounted to the
redemption date, on a semi-annual basis, at the Treasury Yield plus 20 basis
points (for the redemption of the 2018 Notes) or 20 basis points (for the
redemption of the 2038 Notes), together with all accrued but unpaid interest,
if any, to the date of redemption in either case; provided, however, that
interest installments due on an Interest Payment Date which is on or prior to
the date of redemption will be payable to holders who are holders of record of
such 2018 Notes or 2038 Notes, as the case may be, as of the close of business
on the relevant record date for such installments.
"Treasury Yield" means, with respect to any redemption date, the rate per annum
equal to the semi-annual equivalent yield to maturity of the Comparable
Treasury Issue, assuming a price of the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable Treasury Price
for such redemption date.
"Comparable Treasury Issue" means the United States Treasury security selected
by the Independent Investment Banker as having a maturity most comparable to
the remaining term of the 2018 Notes or the 2038 Notes, as the case may be,
that would be utilized, at the time of selection and in accordance with
customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term of the 2018 Notes or
the 2038 Notes, as the case may be.
"Independent Investment Banker" means J.P. Morgan Securities Inc. or, if such
firm is unwilling or unable to select the Comparable Treasury Issue, an
independent investment banking institution of national standing in the United
States appointed by the Board of Directors of the Company in good faith.
S-7
<PAGE>
"Comparable Treasury Price" means, with respect to any redemption date, (i) the
average of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) on the third
business day preceding such redemption date, as set forth in the daily
statistical release (or any successor release) published by the Federal Reserve
Bank of New York and designated "Composite 3:30 p.m. Quotations for U.S.
Government Securities" or (ii) if such release (or any successor release) is
not published or does not contain such prices on such business day, the average
of the Reference Treasury Dealer Quotations for such third business day.
"Reference Treasury Dealer" means each of J.P. Morgan Securities Inc. and its
respective successors; provided, however, that if such firm ceases to be a
primary U.S. Government securities dealer in New York, New York (a "Primary
Treasury Dealer") or otherwise fails to provide a Reference Treasury Dealer
Quotation, the Company will substitute therefor any other Primary Treasury
Dealer.
"Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issues
(express in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New
York, New York time, on the third business day preceding such redemption date.
"Remaining Scheduled Payments" means, with respect to any Notes, the remaining
scheduled payments of the principal thereof to be redeemed and interest thereon
that would be due after the related redemption date but for such redemption;
provided, however, that, if such redemption date is not an Interest Payment
Date with respect to such Note, the amount of the next succeeding scheduled
interest payment thereon will be reduced by the amount of interest accrued
thereon to such redemption date.
BOOK-ENTRY SYSTEM
Upon issuance, all 2018 Notes and all 2038 Notes will be represented
respectively by one or more Registered Global Securities. Each Registered
Global Security representing any of the Notes will be deposited with, or on
behalf of, the Depositary and registered in the name of a nominee of the
Depositary. The provisions set forth under "Description of Debt Securities--
Global Debt Securities" in the accompanying Prospectus will be applicable to
the Notes. Accordingly, beneficial interests in the Notes will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary and its participants. Except as described under "Description of Debt
Securities--Global Debt Securities" in the accompanying Prospectus, owners of
beneficial interests in the Registered Global Security will not be entitled to
receive Notes in certificated form and will not be considered holders of Notes.
Ownership of beneficial interests in the Registered Global Security will be
limited to institutions that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants.
Payments of principal, premium, if any, and interest will be made in
immediately available funds to the Depositary's nominee as the registered owner
of the Registered Global Security. Under the terms of the Indenture, the
Company and the Trustee will treat the person in whose name the Registered
Global Security is registered as the owner of the Notes for the purpose of
receiving payments of principal, premium, if any, and interest and for all
other purposes. Therefore, neither the Company, the Trustee nor any other agent
will have any direct responsibility or liability for the payment of principal,
premium, if any, or interest to owners of beneficial interests in the
Registered Global Security.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
dated the date hereof (the "Underwriting Agreement"), the Company has agreed to
sell to each of the underwriters named below (the "Underwriters"), and each of
the Underwriters has severally agreed to purchase, the principal amount of
Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF NOTES
-------------------------
NAME 2018 NOTES 2038 NOTES
---- ------------ ------------
<S> <C> <C>
J.P. Morgan Securities Inc.................... $ 67,500,000 $ 67,500,000
Goldman, Sachs & Co........................... 67,500,000 67,500,000
BancAmerica Robertson Stephens................ 5,000,000 5,000,000
First Chicago Capital Markets, Inc............ 5,000,000 5,000,000
NationsBanc Montgomery Securities L.L.C....... 5,000,000 5,000,000
------------ ------------
Total..................................... $150,000,000 $150,000,000
============ ============
</TABLE>
S-8
<PAGE>
Under the terms and conditions of the Underwriting Agreement, the Underwriters
are obligated to take and pay for all of the Notes if any are taken.
The Underwriters propose to offer the Notes directly to the public initially at
the initial public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession
not in excess of .50% of the principal amount of the 2018 Notes and .50% of the
principal amount of the 2038 Notes. The Underwriters may allow, and such
dealers may re-allow, a concession not in excess of .25% of the principal
amount of the 2018 Notes or .25% of the principal amount of the 2038 Notes to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed by the Underwriters.
The Notes are new issues of securities with no established trading market and
will not be listed on any national securities exchange. The Company has been
advised by the Underwriters that the Underwriters intend to make a market for
the Notes, but are not obligated to do so and may discontinue market making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
In connection with this offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Notes.
Specifically, the Underwriters may overallot the offering, creating a syndicate
short position. In addition, the Underwriters may bid for, and purchase, Notes
in the open market to cover the syndicate short position or to stabilize the
price of the Notes. Finally, the underwriting syndicate may reclaim selling
concessions allowed for distributing the Notes in the offering if the syndicate
repurchases previously distributed Notes in transactions to cover syndicate
short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Notes above
independent market levels. The Underwriters are not required to engage in these
activities, and may end these activities at any time.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or contribute to payments which the Underwriters may be required to
make in respect thereof.
When more than 10% of the proceeds of a public offering of certain securities
are to be paid to members of the National Association of Securities Dealers,
Inc. ("NASD") participating in such public offering or to affiliates of such
members, Rule 2710(c)(8) of the NASD's Rules of Fair Practice requires
disclosure of such fact.
Each of J.P. Morgan Securities Inc., BancAmerica Robertson Stephens, First
Chicago Capital Markets, Inc. and NationsBanc Montgomery Securities L.L.C.
and/or certain affiliates thereof is a member of the NASD. The Underwriters
and/or their affiliates may indirectly receive more than 10% of the net
proceeds from the offering of the Notes as a result of the use of such proceeds
to repay borrowings by the Company under a five-year revolving bank credit
facility. See "Use of Proceeds."
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged and may in the future engage in commercial
banking and investment banking transactions with ServiceMaster and its
affiliates.
LEGAL OPINIONS
Certain legal matters in connection with the Notes will be passed upon for the
Company by Vernon T. Squires, Esq., Senior Vice President and General Counsel
of the Company, and for the Underwriters by Davis Polk & Wardwell, New York,
New York. As of December 31, 1997, Mr. Squires holds 322,821 shares and options
to acquire 90,000 shares of Common Stock of the Company.
S-9
<PAGE>
PROSPECTUS
THE SERVICEMASTER COMPANY
DEBT SECURITIES
The ServiceMaster Company, a Delaware corporation (the "Company" or
"ServiceMaster") may offer from time to time in one or more series its debt
securities consisting of debentures, notes or other evidence of indebtedness
(the "Debt Securities"), in amounts as may be sold for an aggregate public
offering price of up to $950,000,000 on terms to be determined at the time of
each offering. The Debt Securities may be issued as unsecured Debt Securities
and will not be subordinated to other obligations of the Company. The Debt
Securities will be offered separately or together, in separate series, in
amounts, at prices and on terms determined by market conditions at the time of
sale and to be set forth in one or more supplements to this Prospectus (each,
a "Prospectus Supplement").
The specific terms of the Debt Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement, which
will include, where applicable: the specific title, aggregate principal
amount, authorized denominations, maturity (which may be fixed or extendible),
interest rate or rates (which may be fixed or variable) (or manner of
calculation thereof), if any, the time of payment of interest, if any, any
terms of redemption at the option of the Company or repayment at the option of
the holder, any terms for sinking fund payments, additional covenants, initial
public offering price, purchase price and other terms with respect to the Debt
Securities. The Debt Securities may be issued as Original Issue Discount
Securities to be sold at a substantial discount below their principal amount
and, if issued, certain terms thereof will be set forth in the Prospectus
Supplement related thereto. The Debt Securities will be represented by global
notes registered in the name of a nominee of The Depository Trust Company, as
Depositary. Beneficial interests in the Debt Securities will be shown on, and
transfers thereof will be effected only through, records maintained by the
Depositary (with respect to participants' interests) and its participants.
Except as described in this Prospectus, Debt Securities in certificated form
will not be issued in exchange for the global notes. See "Description of Debt
Securities--Global Debt Securities."
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Debt Securities
covered by such Prospectus Supplement.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The Debt Securities may be offered directly to one or more purchasers,
through agents designated from time to time by the Company or to or through
underwriters or dealers. If any agents or underwriters are involved in the
sale of the Debt Securities, their names, and any applicable purchase price,
fee, commission or discount arrangement between or among them, will be set
forth, or will be calculable from the information set forth, in the applicable
Prospectus Supplement. See "Plan of Distribution." No Debt Securities may be
sold without delivery of a Prospectus Supplement describing the method and
terms of the offering of such Debt Securities.
----------------
The date of this Prospectus is February 25, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") Registration Statement (file number 333-32167) on Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act"), for the
registration of, among other things, the Debt Securities offered hereby. This
Prospectus does not contain all of the information set forth in the
Registration Statement, certain items of which are contained in exhibits and
schedules to, or incorporated by reference in, the Registration Statement as
permitted by the rules and regulations of the Commission. For further
information with respect to the Company and the Debt Securities offered
hereby, reference is made to the Registration Statement, including the
exhibits thereto, and financial statements and notes filed as a part thereof
or incorporated by reference therein. Statements made in this Prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed with the Commission as an
exhibit to, or incorporated by reference in, the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). In accordance
therewith, the Company files consolidated reports, proxy statements and other
information with the Commission. Reports, proxy statements and other
information filed by the Company may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material
may be obtained by mail from the Public Reference Branch of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding the Company.
In addition, such material may also be inspected and copied at the offices of
the New York Stock Exchange. The Company's common stock is listed on the New
York Stock Exchange.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed with the Commission by the Company's
predecessor, ServiceMaster Limited Partnership, or the Company, as the case
may be, and are incorporated by reference in this Prospectus: (i) the Annual
Report on Form 10-K (File No. 1-9378) for the year ended December 31, 1996
(the "1996 Form 10-K"), (ii) the Quarterly Report on Form 10-Q for the period
ended March 31, 1997, (iii) the Quarterly Report on Form 10-Q for the period
ended June 30, 1997, (iv) the Quarterly Report on Form 10-Q for the period
ended September 30, 1997, and (v) the Current Reports on Form 8-K, dated
February 19, 1997, February 20, 1997, March 4, 1997, August 12, 1997, December
12, 1997, December 29, 1997, January 2, 1998 and February 25, 1998. All
documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Debt Securities and the other securities
registered on the Registration Statement shall be deemed to be incorporated
herein by reference and to be a part hereof from the respective dates of
filing of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon written or oral request. Copies of this
Prospectus, as amended or supplemented from time to time, and any other
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documents (or parts of documents) that constitute part of the Prospectus under
Section 10(a) of the Securities Act will also be provided without charge to
each such person, upon written or oral request. Requests should be directed to
ServiceMaster at One ServiceMaster Way, Downers Grove, Illinois 60515-9969,
Attention: Investor Relations (telephone number: (630) 271-1300).
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES
NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITY OTHER THAN THE DEBT SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO
SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY
SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
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<PAGE>
Unless otherwise indicated or the context otherwise requires, all references
herein to the "Company" or "ServiceMaster" refers to The ServiceMaster Company
and all of its subsidiaries and their respective predecessors. The
ServiceMaster Company is the corporate successor to the operations of
ServiceMaster Limited Partnership (the "Parent Partnership") and its immediate
subsidiary, The ServiceMaster Company Limited Partnership.
SERVICEMASTER
ServiceMaster provides a range of services to individual consumers,
businesses and institutions in the United States and 30 other countries
throughout the world. ServiceMaster is divided into three operating units:
Consumer Services, Management Services and Employer Services. Consumer
Services and Management Services are the principal operating units.
ServiceMaster Consumer Services L.P. is a wholly owned first-tier subsidiary
of the Company and provides services to over 9 million residential and
commercial customers through eight leading companies: TruGreen L.P., which
provides lawn care, tree and shrub services and indoor plant maintenance under
the "TruGreen," "ChemLawn," "TruGreen-ChemLawn" and "Barefoot" service marks;
The Terminix International Company, L.P., which provides termite and pest
control services under the "Terminix" service mark; American Home Shield
Corporation, which provides home system and appliance warranty contracts and
home inspection services under the "American Home Shield" and "AmeriSpec"
service marks; Rescue Rooter L.L.C., which provides plumbing and drain
clearing services under the "Rescue Rooter" service mark; ServiceMaster
Residential/Commercial Services L.P., which provides residential and
commercial cleaning and disaster restoration services under the
"ServiceMaster" service mark; Merry Maids L.P., which provides domestic
housekeeping services under the "Merry Maids" service mark; and Furniture
Medic L.P., which provides in-home furniture repair and restoration services
under the "Furniture Medic" service mark. These services are part of the
"ServiceMaster Quality Network" and may be accessed by calling a single toll-
free telephone number: 1-800-WE SERVE.
ServiceMaster Management Services L.P. is a wholly owned first-tier
subsidiary of the Company and is organized into three principal operating
units: ServiceMaster Healthcare Management Services, Education Management
Services and Business and Industry Management Services. Each of these three
units provides to its respective customers a variety of supportive management
services, including the management of housekeeping, plant operations and
maintenance, clinical equipment maintenance, laundry and linen, grounds and
landscaping, energy management services and food service. In addition,
Healthcare Management Services provides management and other services to the
long-term care, assisted living and home health care markets.
The Employer Services unit is one of the nation's largest professional
employer organizations and provides more than 790 clients with administrative
processing of payroll, worker's compensation insurance, health insurance,
unemployment insurance and other employee benefits.
RATIO OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges for
the Company for the nine months ended September 30, 1996 and 1997 and each of
the fiscal years 1992 through 1996:
<TABLE>
<CAPTION>
NINE
MONTHS
ENDED
SEPTEMBER
30, YEAR ENDED DECEMBER 31,
---------- ----------------------------
1997 1996 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated ratios of earnings to
fixed charges....................... 3.78x 5.04x 5.16x 4.83x 4.72x 4.55x 3.85x
</TABLE>
The Company's consolidated ratios of earnings to fixed charges were computed
by dividing earnings by fixed charges. For this purpose, "earnings" consist of
income from continuing operations before income taxes,
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fixed charges (excluding capitalized interest) and minority interest expenses
of subsidiaries with fixed charges and "fixed charges" consist of interest and
amortization of debt expense, including the interest portion of rental
obligations deemed representative of the interest factor.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Debt
Securities for general business purposes, which may include, but are not
limited to, repayment, redemption or repurchase of outstanding indebtedness;
repurchase of outstanding shares issued by the Company; acquisitions, capital
expenditures and working capital requirements; and such other purposes as may
be specified in the relevant Prospectus Supplement. A description of any
indebtedness to be refinanced with the proceeds from the sale of the Debt
Securities will be set forth in the applicable Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under an Indenture (the "Indenture"),
dated as of August 15, 1997, as amended, among the Company, as issuer (and as
successor to the Parent Partnership and The ServiceMaster Company Limited
Partnership) and Harris Trust and Savings Bank, as trustee (the "Trustee").
The following description of certain provisions of the Indenture and the Debt
Securities summarizes the material terms thereof but does not purport to be
complete, and such summary is subject to the detailed provisions of the
Indenture to which reference is hereby made, including the definition of
certain terms used herein, and for other information regarding the Debt
Securities. The Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. Numerical references in
parentheses below are to sections in the Indenture. Wherever particular
sections or defined terms of the Indenture are referred to, such sections or
defined terms are incorporated herein by reference as part of the statement
made, and the statement is qualified in its entirety by such reference. Any
Debt Securities offered by this Prospectus and the accompanying Prospectus
Supplement are referred to herein as the "Offered Debt Securities." As used
below in this "Description of Debt Securities" section, the "Company" means
The ServiceMaster Company, but not any of its subsidiaries, unless the context
requires otherwise.
GENERAL
The Indenture provides for issuance of Debt Securities by the Company in an
unlimited amount from time to time in one or more series. Debt Securities may
be denominated and payable in foreign currencies or units based on or relating
to foreign currencies. Special United States federal income tax considerations
applicable to any Debt Securities so denominated will be described in the
relevant Prospectus Supplement.
The Debt Securities will be unsecured obligations of the Company. The
Indenture does not limit the amount of additional indebtedness that the
Company may incur and does not contain provisions which would afford the
holders (the "Holders") of the Debt Securities protection in the event of a
decline in the Company's credit quality resulting from highly leveraged or
other transactions involving the Company.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Offered Debt Securities (to the extent such
terms are applicable to such Offered Debt Securities): (i) the specific
designation, aggregate principal amount, purchase price and denomination; (ii)
currency or units based on or relating to currencies in which such Offered
Debt Securities are denominated and in which principal of, premium, if any,
and any interest on such Offered Debt Securities will or may be payable; (iii)
any date of maturity; (iv) interest rate or rates, which may be fixed or
variable, and the method by which such rate or rates will be determined, if
any; (v) the dates on which any such interest will be payable; (vi) the place
or places where the principal of, premium, if any, and any interest on the
Offered Debt Securities will be payable; (vii) any redemption, repayment or
sinking fund provisions; (viii) whether the Offered Debt Securities will be
issuable in
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registered form or bearer form ("Bearer Securities") or both and, if Bearer
Securities are issuable, any restrictions applicable to the exchange of one
form for another and to the offer, sale and delivery of Bearer Securities;
(ix) any applicable United States federal income tax consequences, including
whether and under what circumstances the Company will pay additional amounts
on Offered Debt Securities held by a person who is not a U.S. person (as
defined in the Prospectus Supplement) in respect of any tax, assessment or
governmental charge withheld or deducted and, if so, whether the Company will
have the option to redeem such Offered Debt Securities rather than pay such
additional amounts; and (x) any other specific terms of the Offered Debt
Securities, including any additions to or modifications or deletions of any
events of default or covenants provided for with respect to such Offered Debt
Securities, and any terms which may be required by or be advisable under
applicable laws or regulations (Section 2.03).
Debt Securities may be presented for exchange and registered Debt Securities
may be presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Debt Securities and the Prospectus Supplement.
Subject to the limitations provided in the Indenture, such services will be
provided without charge, other than any tax or other governmental charge
payable in connection therewith. Debt Securities in bearer form and the
coupons, if any, appertaining thereto will be transferable by delivery.
Debt Securities will bear interest at a fixed rate (a "Fixed Rate Security")
or a floating rate (a "Floating Rate Security"). Debt Securities bearing no
interest or interest at a rate that at the time of issuance is below the
prevailing market rate will be sold at a discount below their stated principal
amount. Special United States federal income tax considerations applicable to
any such discounted Debt Securities or to certain Debt Securities issued at
par which are treated as having been issued at a discount for United States
federal income tax purposes will be described in the relevant Prospectus
Supplement.
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on
any interest payment date, to be determined by reference to one or more
currency exchange rates, commodity prices, equity indices or other factors.
Holders of such Debt Securities may receive a principal amount on any
principal payment date, or a payment of interest on any interest payment date,
that is greater than or less than the amount of principal or interest
otherwise payable on such dates, depending upon the value on such dates of the
applicable currency, commodity, equity index or other factors. Information as
to the methods for determining the amount of principal or interest payable on
any date, the currencies, commodities, equity index, or other factors to which
the amount payable on such date is linked and certain additional tax
considerations will be set forth in the applicable Prospectus Supplement.
RANKING
The Debt Securities, when issued, will rank pari passu in right of payment
with all other unsecured and unsubordinated indebtedness of the Company
(Section 2.03).
The Debt Securities may, under certain circumstances, be equally and ratably
secured with other senior indebtedness of the Company. See "--Certain
Covenants of the Company--Restrictions on Liens."
GLOBAL DEBT SECURITIES
The registered Debt Securities of a series may be issued in the form of one
or more fully registered global Debt Securities (a "Registered Global
Security") that will be deposited with a depository (a "Depositary") or with a
nominee for a Depositary identified in the Prospectus Supplement relating to
such series and registered in the name of the Depositary or a nominee thereof.
In such case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding registered Debt Securities of the series to be
represented by such Registered Global Security or Registered Global
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in debenture registered form, a Registered Global Security may not
be transferred except as a whole by the Depositary for such Registered Global
Security to a nominee of such Depositary or by a nominee of such Depositary to
such
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<PAGE>
Depositary or another nominee of such Depositary or such Depositary or any
such nominee to a successor of such Depositary or a nominee of such successor.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such
series. The Company anticipates that the following provisions will apply to
all depositary arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the
Depositary for such Registered Global Security will credit, on its book-entry
registration and transfer systems the participants' accounts with the
respective principal amounts of the Debt Securities represented by such
Registered Global Security beneficially owned by such participants. The
accounts to be credited will be designated by any dealers, underwriters or
agents participating in the distribution of such Debt Securities. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership interests will be effected only through,
records maintained by the Depositary for such Registered Global Security (with
respect to interests of participants) and on the records of participants (with
respect to interests of persons holding through participants). The laws of
some states may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to own, transfer or pledge beneficial interests in
registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the owner of record of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the Debt Securities represented by such Registered Global Security for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in a Registered Global Security will not be entitled to have the
Debt Securities represented by such Registered Global Security registered in
their names, and will not receive or be entitled to receive physical delivery
of such Debt Securities in definitive form and will not be considered the
owners or holders thereof under the Indenture. Accordingly, each person owning
a beneficial interest in a Registered Global Security must rely on the
procedures of the Depositary for such Registered Global Security and, if such
person is not a participant, on the procedures of the participant through
which such person owns its interest to exercise any rights of a holder of
record under the Indenture. The Company understands that under existing
industry practices, if the Company requests any action of holders or if any
owner of a beneficial interest in a Registered Global Security desires to give
or take any action which a holder is entitled to give or take under the
Indenture, the Depositary for such Registered Global Security would authorize
the participants holding the relevant beneficial interests to give or take
such action, and such participants would authorize beneficial owners owning
through such participants to give or take such action or would otherwise act
upon the instruction of beneficial owners holding through them.
Payments of principal of, premium, if any, and any interest on Debt
Securities represented by a Registered Global Security registered in the name
of a Depositary or its nominee will be made to such Depositary or its nominee,
as the case may be, as the registered owner of such Registered Global
Security. None of the Company, the Trustee or any other agent of the Company
or agent of the Trustee will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in such Registered Global Security or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depositary for any Debt Securities represented
by a Registered Global Security, upon receipt of any payment of principal,
premium, if any, or interest in respect of such Registered Global Security,
will immediately credit participants' accounts with payments in amounts
proportionate to their respective beneficial interests in such Registered
Global Security as shown on the records of such Depositary. The Company also
expects that payments by participants to owners of beneficial interests in
such Registered Global Security held through such participants will be
governed by standing customer instructions and customary
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<PAGE>
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name," and will be the
responsibility of such participants.
If the Depositary for any Debt Securities represented by a Registered Global
Security notifies the Company that it is at any time unwilling or unable to
continue as Depositary or ceases to be eligible under applicable law, and a
successor Depositary eligible under applicable law is not appointed by the
Company within 90 days, the Company will issue such Debt Securities in
definitive form in exchange for such Registered Global Security. In addition,
the Company may at any time and in its sole discretion determine not to have
any of the Debt Securities of a series represented by one or more Registered
Global Securities and, in such event, will issue Debt Securities of such
series in definitive form in exchange for all of the Registered Global
Security or Registered Global Securities representing such Debt Securities.
Any Debt Securities issued in definitive form in exchange for a Registered
Global Security will be registered in such name or names as the Depositary
shall instruct the Trustee (Section 2.07). It is expected that such
instructions will be based upon directions received by the Depositary from
participants with respect to ownership of beneficial interests in such
Registered Global Security. The Debt Securities of a series may also be issued
in the form of one or more bearer global Debt Securities (a "Bearer Global
Security") that will be deposited with a common depositary for Euroclear and
CEDEL, or with a nominee for such depositary identified in the Prospectus
Supplement relating to such series. The specific terms and procedures,
including the specific terms of the depositary arrangement, with respect to
any portion of a series of Debt Securities to be represented by a Bearer
Global Security will be described in the Prospectus Supplement relating to
such series.
CERTAIN COVENANTS OF THE COMPANY
The following restrictions apply to each series of Debt Securities unless
the terms of such series of Debt Securities provide otherwise.
Restrictions on Liens. The Indenture provides that the Company will not, and
will not permit any Significant Subsidiary to, create, incur or suffer to
exist any lien on any Equity Interests (as defined in the Indenture),
indebtedness or other obligations of a Significant Subsidiary held by the
Company or any Subsidiary or any Principal Property of the Company or a
Significant Subsidiary, whether such Equity Interests, indebtedness or other
obligations of a Significant Subsidiary or Principal Property are owned at the
date of this Indenture or hereafter acquired, unless the Company secures or
causes such Significant Subsidiary to secure the outstanding Debt Securities
equally and ratably with all indebtedness secured by such Lien, so long as
such indebtedness shall be so secured; provided, however, that this covenant
shall not apply in the case of: (i) the creation of any Lien on any Equity
Interests, indebtedness or other obligations of a Significant Subsidiary or
any Principal Property hereafter acquired (including acquisitions by way of
merger or consolidation) by the Company or a Significant Subsidiary
contemporaneously with such acquisition, or within 180 days thereafter, to
secure or provide for the payment or financing of any part of the purchase
price thereof, or the assumption of any Lien upon any Equity Interests,
indebtedness or other obligations of a Significant Subsidiary or any Principal
Property hereafter acquired (including acquisition by way of merger or
consolidation) existing at the time of such acquisition, provided that every
such Lien referred to in this clause (i) shall not attach to the Equity
Interests, indebtedness or other obligations of a Significant Subsidiary or
any Principal Property other than the Equity Interests, indebtedness or other
obligations of the Significant Subsidiary or any Principal Property other than
the Equity Interests, indebtedness or other obligations of the Significant
Subsidiary or any Principal Property so acquired and fixed improvements
thereon; (ii) any Lien on any Equity Interests, indebtedness or other
obligations of a Significant Subsidiary or any Principal Property existing at
the date of this Indenture; (iii) any Lien on any Equity Interests,
indebtedness or other obligations of a Significant Subsidiary or any Principal
Property in favor of the Company or any Significant Subsidiary; (iv) any Lien
on any Principal Property being constructed or improved securing loans to
finance such construction or improvements; (v) any Lien on Equity Interests,
indebtedness or other obligations of a Significant Subsidiary or any Principal
Property incurred in connection with the issuance of tax-exempt governmental
obligations; (vi) Liens on any Principal Property for taxes not yet due or
which are being contested in good faith by appropriate proceedings and with
respect to which adequate
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reserves, to the extent required by GAAP, have been made; (vii) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens on
any Principal Property arising in the ordinary course of business and securing
obligations that are not due and payable or which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves,
to the extent required by GAAP, have been made; (viii) zoning restrictions,
easements, rights-of-way, restrictions on use of real property and other
similar encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and do not materially detract from
the value of the property subject thereto or interfere with the ordinary
conduct of business of any of the Company or any Significant Subsidiary; (ix)
any Lien on Equity Interests, indebtedness or other obligations of a Non-U.S.
Subsidiary held by a Non-U.S. Subsidiary or any Principal Property of a Non-
U.S. Subsidiary; provided that at the time of the creation or incurrence of
any such Lien the aggregate book value of the total assets of the Non-U.S.
Subsidiaries then subject to Liens securing indebtedness for borrowed money
(and after giving effect to the proposed Lien), shall not exceed 25% of the
Total Assets of the Company and its Subsidiaries; (x) any Lien on Equity
Interests, indebtedness or other obligations of a Securitization Subsidiary
created, incurred, assumed or suffered to exist in connection with Permitted
Receivables Financing; (xi) Liens arising by reason of any attachment,
judgment, decree or order of any court or other governmental authority, so
long as any appropriate legal proceedings which may have been initiated for
review of such attachment, judgment, decree or order shall not have been
finally terminated or so long as the period within which such proceedings may
be initiated shall not have expired; (xii) any Lien on Equity Interests,
indebtedness or other obligations of a Significant Subsidiary that was not a
Significant Subsidiary at the time such Lien was created or incurred; and
(xiii) any renewal of or substitution for any Lien permitted by any of the
preceding clauses (i), (ii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi)
or (xii), provided, that the indebtedness secured is not increased (except for
increases in the amount of premiums or fees payable in connection with such
renewal or substitution) nor the Lien extended to any additional assets (other
than assets as to which the creation, incurrence or existence of Liens is not
governed by this clause). (Section 5.03(a))
Notwithstanding the foregoing, the Company or any Significant Subsidiary may
create, incur, assume or suffer to exist Liens in addition to those permitted
above and renew, extend or replace such Liens, provided that at the time of
such creation, incurrence, assumption, renewal, extension or replacement, and
after giving effect thereto, the aggregate outstanding principal or face
amount of all indebtedness secured by Liens not permitted by clauses (i)
through (xiii) above does not exceed 10% of Consolidated Net Worth. (Section
5.03(b))
Restrictions on Sale and Lease-Back Transactions. The Indenture provides
that the Company will not, and will not permit any Significant Subsidiary to,
sell or transfer, directly or indirectly, except to the Company or a
Significant Subsidiary, any Principal Property as an entirety, or any
substantial portion thereof, with the intention of taking back a lease of such
property, except a lease for a period of three years or less at the end of
which it is intended that the use of such property by the lessee will be
discontinued and any transaction for the sale and lease-back of any property
if such lease is entered into within 180 days after the later of the
acquisition, completion of construction or commencement of operation of such
property; provided that, notwithstanding the foregoing, the Company or any
Significant Subsidiary may sell any such Principal Property and lease it back
for a period longer than three years if the Company or such Significant
Subsidiary would be entitled to create a Lien on the property to be leased
securing indebtedness in an amount equal to the Attributable Debt with respect
to such sale and lease-back transaction without equally and ratably securing
the outstanding Debt Securities or the Company promptly informs the Trustee of
such transaction, the net proceeds of such transaction are at least equal to
the fair value (as determined by Board Resolution of the Company) of such
property and the Company causes an amount equal to the net cash proceeds of
the sale to be applied to the retirement, within 120 days after receipt of
such proceeds, of Funded Debt incurred or assumed by the Company or a
Significant Subsidiary (including the Debt Securities); provided further that,
in lieu of applying all of or any part of such net cash proceeds to such
retirement, the Company may, within 75 days after such sale, deliver or cause
to be delivered to the applicable trustee for cancellation either debentures
or notes evidencing Funded Debt of the Company (which may include the Debt
Securities) or of a Significant Subsidiary previously authenticated and
delivered by the applicable trustee, and not theretofore tendered for sinking
fund purposes or called for a sinking fund or otherwise applied as a credit
against an obligation to redeem or retire such notes or debentures, and an
Officers'
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Certificate (which shall be delivered to the Trustee and which need not
contain the statements prescribed by Section 11.04) stating that the Company
elects to deliver or cause to be delivered such debentures or notes in lieu of
retiring Funded Debt as hereinabove provided. If the Company shall so deliver
debentures or notes to the applicable trustee and the Company shall duly
deliver such Officers' Certificate, the amount of cash which the Company shall
be required to apply to the retirement of Funded Debt shall be reduced by an
amount equal to the aggregate of the then applicable optional redemption
prices (not including any optional sinking fund redemption prices) of such
debentures or notes, or, if there are no such redemption prices, the principal
amount of such debentures or notes; provided, that in the case of debentures
or notes which provide for an amount less than the principal amount thereof to
be due and payable upon a declaration of the maturity thereof, such amount of
cash shall be reduced by the amount of principal of such debentures or notes
that would be due and payable as of the date of such application upon a
declaration of acceleration of the maturity thereof pursuant to the terms of
the indenture pursuant to which such debentures or notes were issued. (Section
5.04)
CERTAIN DEFINITIONS
The term "Attributable Debt" as defined in the Indenture means when used in
connection with a sale and lease-back transaction referred to above under "--
Restrictions on Sale and Lease-Back Transactions," on any date as of which the
amount thereof is to be determined, the product of (a) the net proceeds from
such sale and lease-back transaction multiplied by (b) a fraction, the
numerator of which is the number of full years of the term of the lease
relating to the property involved in such sale and lease-back transaction
(without regard to any options to renew or extend such term) remaining on the
date of the making of such computation and the denominator of which is the
number of full years of the term of such lease measured from the first day of
such term.
The term "Consolidated Net Worth" as defined in the Indenture means, at any
date of determination, the consolidated stockholders' equity of the Company,
as set forth on the then most recently available consolidated balance sheet of
the Company and its consolidated Subsidiaries.
The term "Funded Debt" as defined in the Indenture includes all indebtedness
for money borrowed, including purchase money indebtedness, and indebtedness
pursuant to a mandatory sinking fund or prepayment provision or otherwise,
having a maturity of more than one year from the date of its creation or
having a maturity of less than one year but by its terms being renewable or
extendible, at the option of the obligor in respect thereof, beyond one year
from the date of its creation.
The term "Holder" or "Securityholder" as defined in the Indenture means the
registered holder of any Security with respect to registered Debt Securities
and the bearer of any Unregistered Security or any coupon appertaining
thereto, as the case may be.
"Non-U.S. Subsidiary" as defined in the Indenture means any Subsidiary that
is not a corporation, partnership or other entity created or organized in or
under the laws of the United States of America or any state thereof.
"Original Issue Discount Security" as defined in the Indenture means any
Security that provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity thereof.
"Permitted Receivables Financing" as defined in the Indenture means a
transaction or series of transactions (including amendments, supplements,
extensions, renewals, replacements, refinancings or modifications thereof)
pursuant to which a Securitization Subsidiary purchases Receivables and
Related Assets from the Company or any Subsidiary and finances such
Receivables and Related Assets through the issuance of Equity Interests or
indebtedness (either directly or through a trust) or through the sale of the
Receivables and Related Assets or a fractional undivided interest in the
Receivables and Related Assets; provided that (i) the Board of Directors of
the Company shall have determined in good faith that such Permitted
Receivables Financing is economically
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fair and reasonable to the Company, (ii) all sales of Receivables and Related
Assets to the Securitization Subsidiary are made at fair market value (as
determined in good faith by the Board of Directors of the Company), (iii) the
financing terms, covenants, termination events and other provisions thereof
shall be market terms (as determined in good faith by the Board of Directors
of the Company), (iv) no portion of the indebtedness of a Securitization
Subsidiary will be guaranteed by or will be recourse to the Company or any
Significant Subsidiary (other than recourse for customary representations,
warranties, covenants and indemnities, none of which shall relate to the
collectibility (as opposed to the status) of the Receivables and Related
Assets) and (v) neither the Company nor any Subsidiary shall have any
obligation to maintain or preserve the Securitization Subsidiary's financial
condition.
The term "Principal Property" as defined in the Indenture means the
Company's principal office building and any manufacturing plant or principal
research facility of any of the Company or any Significant Subsidiary which is
located within the United States of America, except any such principal office
building, plant or facility which the Board of Directors by resolution
declares is not of material importance to the total business conducted by the
Company and its respective Subsidiaries as an entirety.
"Receivables and Related Assets" means accounts receivable and instruments,
chattel paper, obligations, general intangibles and other similar assets, in
each case, relating to such receivables, including interest in merchandise or
goods, the sale or lease of which gave rise to such receivables, related
contractual rights, guarantees, insurance proceeds, collections, other related
assets, and proceeds of all of the foregoing.
"Securitization Subsidiary" as defined in the Indenture means a Wholly Owned
Subsidiary which is established for the limited purpose of acquiring and
financing Receivables and Related Assets and engaging in activities ancillary
thereto.
The term "Significant Subsidiary," as defined in the Indenture means at any
time, any Subsidiary that would be a Significant Subsidiary at such time, as
such term is defined in Regulation S-X promulgated by the Commission, as in
effect on the date of the Indenture.
The term "Subsidiary" as defined in the Indenture means with respect to any
Person, any corporation, association or other business entity of which more
than 50% of the outstanding Voting Stock (as defined in the Indenture) or
other ownership interest is owned directly or indirectly, by such Person and
one or more other Subsidiaries of such Persons.
The term "Total Assets" as defined in the Indenture means, at any date of
determination, the total assets of the Company and its Subsidiaries on a
consolidated basis as set forth on the then most recently available
consolidated balance sheet of the Company and its consolidated Subsidiaries.
"Wholly Owned Subsidiary" as defined in the Indenture means a Subsidiary all
of the Equity Interests of which (except directors' qualifying shares) is at
the time owned directly or indirectly by the Company.
RESTRICTIONS ON MERGERS AND SALES OF ASSETS
Under the Indenture, the Company shall not consolidate with, merge with or
into, or sell, convey, transfer, lease or otherwise dispose of all or
substantially all of its property and assets (as an entirety or substantially
as an entirety in one transaction or a series of related transactions) to, any
Person or permit any Person to merge with or into the Company unless: (i)
either (x) the Company shall be the continuing Person or (y) the Person (if
other than the Company) formed by such consolidation or into which the Company
is merged or that acquired or leased such property and assets of the Company
shall be a corporation, partnership or limited liability company organized and
validly existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, all of the obligations of the Company
on all of the Debt Securities and under this Indenture and the Company shall
have delivered to the Trustee an Opinion of Counsel stating that such
consolidation, merger or transfer and such supplemental
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Indenture complies with this provision and that all conditions precedent
provided for herein relating to such transaction have been complied with and
that such supplemental indenture constitutes the legal, valid and binding
obligation of the Company or such successor enforceable against such entity in
accordance with its terms, subject to customary exceptions; and (ii)
immediately after giving effect to such transaction, no Default shall have
occurred and be continuing. (Section 6.01)
EVENTS OF DEFAULT
Events of Default defined in the Indenture with respect to the Debt
Securities of any series are: (a) the Company defaults in the payment of the
principal of any Debt Securities of such series when the same becomes due and
payable at maturity, upon acceleration, redemption or mandatory repurchase,
including as a sinking fund installment, or otherwise; (b) the Company
defaults in the payment of interest on any Debt Securities of such series when
the same becomes due and payable, and such default continues for a period of
30 days; (c) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture with respect to any
Security of such series or in the Debt Securities of such series and such
default or breach continues for a period of 60 consecutive days after written
notice to the Company by the Trustee or to the Company and the Trustee by the
Holders of 25% or more in aggregate principal amount of the Debt Securities of
all series then outstanding affected thereby; (d) an involuntary case or other
proceeding shall be commenced against the Company or any Significant
Subsidiary with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or
any substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60 days; or
an order for relief shall be entered against the Company or any Significant
Subsidiary under the federal bankruptcy laws as now or hereafter in effect;
(e) the Company or any Significant Subsidiary (i) commences a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect or consents to the entry of an order for relief in an
involuntary case under any such law, (ii) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, Trustee,
sequestrator or similar official of the Company or any Significant Subsidiary
or for all or substantially all of the property and assets of the Company or
any Significant Subsidiary or (iii) effects any general assignment for the
benefit of creditors; or (f) any other Event of Default established with
respect to any series of Debt Securities issued pursuant to the Indenture
occurs. (Section 7.01)
The Indenture provides that if an Event of Default described in clauses (a)
or (b) of the immediately preceding paragraph with respect to the Debt
Securities of any series then outstanding occurs and is continuing, then, and
in each and every such case, except for any series of Debt Securities the
principal of which shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount of
the Debt Securities of any such affected series then outstanding under the
Indenture (each such series treated as a separate class) by notice in writing
to the Company (and to the Trustee if given by Securityholders), may declare
the entire principal (or, if the Debt Securities of any such series are
Original Issue Discount Securities, such portion of the principal amount as
may be specified in the terms of such series established pursuant to the
Indenture) of all Debt Securities of such affected series, and the interest
accrued thereon, if any, to be due and payable immediately, and upon any such
declaration the same shall become immediately due and payable. If an Event of
Default described in clauses (c) or (f) of the immediately preceding paragraph
with respect to the Debt Securities of one or more but not all series then
outstanding or with respect to the Debt Securities of all series then
outstanding occurs and is continuing, then, and in each and every such case,
except for any series of Debt Securities the principal of which shall have
already become due and payable, either the Trustee or the Holders of not less
than 25% in aggregate principal amount of the Debt Securities of all such
affected series then outstanding under the Indenture (treated as a single
class) by notice in writing to the Company (and to the Trustee if given by
Securityholders), may declare the entire principal (or, if the Debt Securities
of any such series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of such series established
pursuant to the Indenture) of all Debt Securities of all such affected series,
and the interest accrued thereon, if any, to be due and payable immediately,
and upon any such
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declaration the same shall become immediately due and payable. If an Event of
Default described in clause (d) or (e) of the immediately preceding paragraph
occurs and is continuing, then the principal amount (or, if any Debt
Securities are Original Issue Discount Securities, such portion of the
principal as may be specified in the terms thereof established pursuant to the
Indenture) of all the Debt Securities then outstanding and interest accrued
thereon, if any, shall be and become immediately due and payable, without any
notice or other action by any Holder or the Trustee to the full extent
permitted by applicable law. Upon certain conditions such declarations may be
rescinded and annulled and past defaults may be waived by the Holders of a
majority in principal of the then outstanding Debt Securities of all such
series that have been accelerated (voting as a single class). (Section 7.02)
The Indenture contains a provision under which, subject to the duty of the
Trustee during a default to act with the required standard of care, (i) the
Trustee may rely and shall be protected in acting or refraining from acting
upon any resolution, certificate, officers' certificate, opinion of counsel
(or both), statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper person or persons and the Trustee need not investigate
any fact or matter stated in the document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit; (ii) before the Trustee acts or refrains from acting, it may
require an officers' certificate and/or an opinion of counsel, which shall
conform to the requirements of the Indenture and the Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such certificate or opinion; subject to the terms of the Indenture, whenever
in the administration of the trusts of the Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking
or suffering or omitting any action under the Indenture, such matter (unless
other evidence in respect thereof shall be specifically prescribed in the
Indenture) may, in the absence of wilful misconduct on the part of the
Trustee, be deemed to be conclusively proved and established by an officers'
certificate delivered to the Trustee, and such certificate, in the absence of
wilful misconduct on the part of the Trustee, shall be full warrant to the
Trustee for any action taken, suffered or omitted by it under the provisions
of the Indenture upon the faith thereof; (iii) the Trustee may act through its
attorneys and agents not regularly in its employ and shall not be responsible
for the misconduct or negligence of any agent or attorney appointed with due
care; (iv) any request, direction, order or demand of the Company mentioned in
the Indenture shall be sufficiently evidenced by an officers' certificate
(unless other evidence in respect thereof be specifically prescribed in the
Indenture); and any Board Resolution may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company;
(v) the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by the Indenture at the request, order or direction of any
of the Holders, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities
that might be incurred by it in compliance with such request or direction;
(vi) the Trustee shall not be liable for any action it takes, or omits to take
in good faith that it believes to be authorized or within its rights or powers
or for any action it takes or omits to take in accordance with the direction
of the Holders in accordance with the Indenture relating to the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee, under
the Indenture; (vii) the Trustee may consult with counsel and the written
advice of such counsel or any opinion of counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it under the Indenture in good faith and in reliance thereon;
(viii) prior to the occurrence of an Event of Default under the Indenture and
after the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, officers' certificate, opinion of counsel, Board
Resolution, statement, instrument, opinion, report, notice, request, consent
order, approval, appraisal, bond, debenture, note, coupon, security, or other
paper or document unless requested in writing so to do by the Holders of not
less than a majority in aggregate principal amount of the Debt Securities of
all series affected then outstanding; provided that, if the payment within a
reasonable time to the Trustee of the costs, expenses or liabilities likely to
be incurred by it in the making of such investigation is, in the opinion of
the Trustee, not reasonably assured to the Trustee by the security afforded to
it by the terms of the Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; (ix) the
Trustee shall not be required to give any bond or surety in respect of the
performance of its powers and
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duties hereunder; (x) the Trustee shall not be bound to ascertain or inquire
as to the performance or observance of any covenants, conditions or agreements
on the part of the Company, except as otherwise set forth herein, but the
Trustee may require of the Company reasonable information and advice as to the
performance of the covenants, conditions and agreements contained herein and
shall be entitled in connection herewith to examine the books, records and
premises of the Company; (xi) the permissive rights of the Trustee to do
things enumerated in this Indenture shall not be construed as a duty and the
Trustee shall not be answerable for other than its negligence or willful
misconduct; (xii) except for any event of which the Trustee has "actual
knowledge" and which event, with the giving of notice or the passage of time
or both, would constitute an Event of Default under this Indenture, the
Trustee shall not be deemed to have notice of any default or event unless
specifically notified in writing of such event by the Company or the Holders
of not less than 25% of the Outstanding Securities; as used herein, the term
"actual knowledge" means the actual fact or statement of knowing, without any
duty to make any investigation with regard thereto. (Section 8.02)
Subject to such provisions in the Indenture for the indemnification of the
Trustee and certain other limitations, the Holders of at least a majority in
aggregate principal amount (or, if any Debt Securities are Original Issue
Discount Securities, such portion of the principal as may be specified in the
terms thereof established pursuant to the Indenture) of the outstanding Debt
Securities of all series affected (voting as a single class) may direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on this Trustee with
respect to the Debt Securities of such series by the Indenture; provided, that
the Trustee may refuse to follow any direction that conflicts with law or the
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders not joining in the giving of such direction, it being understood that
the Trustee shall have no duty to ascertain whether or not such actions or
forbearance are unduly prejudicial to such Holders and provided further, that
the Trustee may take any other action it deems proper that is not inconsistent
with any directions received from Holders of Debt Securities pursuant to this
paragraph. (Section 7.05)
Subject to various provisions in the Indenture, the Holders of at least a
majority in principal amount (or, if the Debt Securities are Original Issue
Discount Securities, such portion of the principal as may be specified in the
terms thereof established pursuant to the Indenture) of the outstanding Debt
Securities of all series affected (voting as a single class), by notice to the
Trustee, may waive an existing Default or Event of Default with respect to the
Debt Securities of such series and its consequences, except a Default in the
payment of principal of or interest on any Security as specified in clauses
(a) or (b) of Section 6.1 of the Indenture or in respect of a covenant or
provision of the Indenture which cannot be modified or amended without the
consent of the Holder of each outstanding Security affected. Upon any such
waiver, such Default shall cease to exist, and any Event of Default with
respect to the Debt Securities of such series arising therefrom shall be
deemed to have been cured, for every purpose of the Indenture; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereto. (Section 7.04)
The Indenture provides that no Holder of any Debt Securities of any series
may institute any proceeding, juridical or otherwise, with respect to the
Indenture or the Debt Securities of such series, or for the appointment of a
receiver or trustee, or for any other remedy under the Indenture, unless: (i)
such Holder has previously given to the Trustee written notice of a continuing
Event of Default with respect to the Debt Securities of such series; (ii) the
Holders of at least 25% in aggregate principal amount of outstanding Debt
Securities of all such series affected shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee under the Indenture; (iii) such Holder or Holders have
offered to The Trustee indemnity reasonably satisfactory to the Trustee
against any costs, liabilities or expenses to be incurred in compliance with
such request; (iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and (v) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of all such affected
series have not given the Trustee a direction that is inconsistent with such
written request. A Holder may not use the Indenture
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to prejudice the rights of another Holder or to obtain a preference or
priority over such other Holder. (Section 7.06)
The Indenture provides that the Company will file with the Trustee, within
15 days after the Company is required to file the same with the Commission,
copies of the annual reports and of the information, documents and other
reports which the Company may be required to file with the Commission pursuant
to Section 13 or Section 15(d) of the Exchange Act. (Sections 5.06 and 5.09)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides with respect to each series of Debt Securities that
the Company may terminate its obligations under the Debt Securities of a
series and the Indenture with respect to Debt Securities of such series if:
(i) all Debt Securities of such series previously authenticated and delivered,
with certain exceptions, have been delivered to the Trustee for cancellation
and the Company has paid all sums payable by it under the Indenture; or (ii)
(A) the Debt Securities of such series mature within one year or all of them
are to be called for redemption within one year under arrangements
satisfactory to the Trustee for giving the notice of redemption, (B) the
Company irrevocably deposits in trust with the Trustee, as trust funds solely
for the benefit of the Holders of such Debt Securities, for that purpose,
money or U.S. Government Obligations or a combination thereof sufficient
(unless such funds consist solely of money, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee), without consideration of any
reinvestment, to pay principal of and interest on the Debt Securities of such
series to maturity or redemption, as the case may be, and to pay all other
sums payable by it under the Indenture, and (C) the Company delivers to the
Trustee an officers' certificate and an opinion of counsel in each case
stating that all conditions precedent provided for in the Company's Indenture
relating to the satisfaction and discharge of the Indenture with respect to
the Debt Securities of such series have been complied with. With respect to
the foregoing clause (i), only the Company's obligations to compensate and
indemnify the Trustee under the Indenture shall survive. With respect to the
foregoing clause (ii), only the Company's obligations to execute and deliver
Debt Securities of such series for authentication, to set the terms of the
Debt Securities of such series, to maintain an office or agency in respect of
the Debt Securities of such series, to have moneys held for payment in trust,
to register the transfer or exchange of Debt Securities of such series, to
deliver Debt Securities of such series for replacement or to be canceled, to
compensate and indemnify the Trustee and to appoint a successor trustee, and
its right to recover excess money held by the Trustee shall survive until such
Debt Securities are no longer outstanding. Thereafter, only the Company's
obligations to compensate and indemnify the Trustee, and its right to recover
excess money held by the Trustee shall survive. (Section 9.01)
The Indenture provides that the Company (i) will be deemed to have paid and
will be discharged from any and all obligations in respect of the Debt
Securities of any series, and the provisions of the Indenture will, except as
noted below, no longer be in effect with respect to the Debt Securities of
such series ("legal defeasance") and (ii) may omit to comply with any term,
provision or condition of the Indenture described above under "--Certain
Covenants" (or any other specific covenant relating to such series provided
for in a Board Resolution or supplemental indenture which may by its terms be
defeased pursuant to the Indenture), and such omission shall be deemed not to
be an Event of Default under clauses (c) or (f) of the first paragraph of "--
Events of Default" with respect to the outstanding Debt Securities of a series
("covenant defeasance"); provided that the following conditions shall have
been satisfied: (A) the Company has irrevocably deposited in trust with the
Trustee as trust funds solely for the benefit of the Holders of the Debt
Securities of such series, for payment of the principal of and interest on the
Debt Securities of such series, money or U.S. Government Obligations or a
combination thereof sufficient (unless such funds consist solely of money, in
the opinion of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee) without
consideration of any reinvestment and after payment of all federal, state and
local taxes or other charges and assessments in respect thereof payable by the
Trustee, to pay and discharge the principal of and accrued interest on the
outstanding Debt Securities of such series to maturity or earlier redemption
(irrevocably provided for under arrangements satisfactory to the Trustee), as
the case may be; (B) such deposit will not result
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in a breach or violation of, or constitute a default under, the Indenture or
any other material agreement or instrument to which the Company is a party or
by which it is bound; (C) no Default with respect to such Debt Securities of
such series shall have occurred and be continuing on the date of such deposit;
(D) the Company shall have delivered to the Trustee an opinion of counsel that
(1) the Holders of the Debt Securities of such series will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its option under this provision of the Indenture and
will be subject to federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such deposit and
defeasance had not occurred and (2) the Holders of the Debt Securities of such
series have a valid security interest in the trust funds subject to no prior
liens under the Uniform Commercial Code; and (E) the Company has delivered to
the Trustee an officers' certificate and an opinion of counsel, in each case
stating that all conditions precedent provided for in the Indenture relating
to the defeasance contemplated have been complied with. In the case of legal
defeasance under clause (i) above, the opinion of counsel referred to in
clause (D)(1) above may be replaced by a ruling directed to the Trustee
received from the Internal Revenue Service to the same effect. Subsequent to
legal defeasance under clause (i) above, the Company's obligations to execute
and deliver Debt Securities of such series for authentication, to set the
terms of the Debt Securities of such series, to maintain an office or agency
in respect of the Debt Securities of such series, to have moneys held for
payment in trust, to register the transfer or exchange of Debt Securities of
such series, to deliver Debt Securities of such series for replacement or to
be canceled, to compensate and indemnify the Trustee and to appoint a
successor trustee, and its right to recover excess money held by the Trustee
shall survive until such Debt Securities are no longer outstanding. After such
Debt Securities are no longer outstanding, in the case of legal defeasance
under clause (i) above, only the Company's obligations to compensate and
indemnify the Trustee and its right to recover excess money held by the
Trustee shall survive. (Sections 9.02 and 9.03)
MODIFICATION OF THE INDENTURE
The Indenture provides that the Company and the Trustee may amend or
supplement the Indenture or the Debt Securities of any series without notice
to or the consent of any Holder: (1) to cure any ambiguity, defect or
inconsistency in the Indenture; provided that such amendments or supplements
shall not materially and adversely affect the interests of the Holders; (2) to
comply with Article 6 of the Indenture; (3) to comply with any requirements of
the Commission in connection with the qualification of the Indenture under the
Trust Indenture Act; (4) to evidence and provide for the acceptance of
appointments under the Indenture with respect to the Debt Securities of any or
all series by a successor Trustee; (5) to establish the form or forms or terms
of Debt Securities of any series or of the coupons appertaining to such Debt
Securities as permitted under the Indenture or the Guarantees; (6) to provide
for uncertificated or Unregistered Securities and to make all appropriate
changes for such purpose; and (7) to make any change that does not-materially
and adversely affect the rights of any Holder. (Section 10.01)
The Indenture also contains provisions whereby the Company and the Trustee,
subject to certain conditions, without prior notice to any Holders, may amend
the Indenture, the outstanding Debt Securities of any series with the written
consent of the Holders of a majority in principal amount of the Debt
Securities then outstanding of all series affected by such supplemental
indenture (all such series voting as one class), and the Holders of a majority
in principal amount of the outstanding Debt Securities of all series affected
thereby (all such series voting as one class) by written notice to the Trustee
may waive future compliance by the Company with any provision of the Indenture
or the Debt Securities of such series. Notwithstanding the foregoing
provisions, without the consent of each Holder affected thereby, an amendment
or waiver, including a waiver pursuant to Section 7.04 of the Indenture, may
not: (i) extend the stated maturity of the principal of, or any sinking fund
obligation or any installment of interest on, such Holder's Security, or
reduce the principal amount thereof or the rate of interest thereon (including
any amount in respect of original issue discount), or any premium payable with
respect thereto, or adversely affect the rights of such Holder under any
mandatory redemption or repurchase provision or any right of redemption or
repurchase at the option of such Holder, or reduce the amount of the principal
of an Original Issue Discount Security that would be due and payable upon an
acceleration of the maturity thereof or the amount thereof provable in
bankruptcy, or change any place of payment where, or the
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currency in which, any Security or any premium or the interest thereon is
payable, or impair the right to institute suit for the enforcement of any such
payment on or after the due date therefor; (ii) reduce the percentage in
principal amount of outstanding Debt Securities of the relevant series the
consent of whose Holders is required for any such supplemental indenture, for
any waiver of compliance with certain provisions of the Indenture of certain
Defaults and their consequences provided for in the Indenture; (iii) waive a
Default in the payment of principal of or interest on any Security of such
Holder; or (iv) modify any of the provisions of this section of the Indenture,
except to increase any such percentage or to provide that certain other
provisions of the Indenture cannot be modified or waived without the consent
of the Holder of each outstanding Security affected thereby. A supplemental
indenture which changes or eliminates any covenant or other provision of the
Indenture which has expressly been included solely for the benefit of one or
more particular series of Debt Securities, or which modifies the rights of
Holders of Debt Securities of such series with respect to such covenant or
provision, shall be deemed not to affect the rights under the Indenture of the
Holders of Debt Securities of any other series or of the coupons appertaining
to such Debt Securities. It shall not be necessary for the consent of any
Holder under this section of the Indenture to approve the particular form of
any proposed amendment supplement or waiver, but it shall be sufficient if
such consent approves the substance thereof. After an amendment, supplement or
waiver under this section of the Indenture becomes effective, the Company
shall give to the Holders affected thereby a notice briefly describing the
amendment, supplement or waiver. The Company will mail supplemental indentures
to Holders upon request. Any failure of the Company to mail such notice, or
any defect therein, shall not, however, in any way impair or affect the
validity of any such supplemental indenture or waiver. (Section 10.02)
CONCERNING THE TRUSTEE
Harris Trust and Savings Bank is the Trustee under the Indenture. The
Trustee performs other services for ServiceMaster in the ordinary course of
business.
PLAN OF DISTRIBUTION
ServiceMaster may sell the Debt Securities in or outside the United States
through underwriters or dealers, directly to one or more purchasers, or
through agents. The Prospectus Supplement with respect to the Debt Securities
will set forth the terms of the offering of the Debt Securities, including the
name or names of any underwriters, dealers or agents, the purchase price of
the Debt Securities and the proceeds to ServiceMaster from such sale, any
delayed delivery arrangements, any underwriting discounts and other items
constituting underwriters' compensation, the initial public offering price,
any discounts or concessions allowed or re-allowed or paid to dealers, and any
securities exchanges on which the Debt Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Debt Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Debt Securities will be named
in the Prospectus Supplement relating to such offering, and, if an
underwriting syndicate is used, the managing underwriter or underwriters will
be set forth on the cover of such Prospectus Supplement. Unless otherwise set
forth in the Prospectus Supplement relating thereto, the obligations of the
underwriters or agents to purchase the Debt Securities will be subject to
conditions precedent, and the underwriters will be obligated to purchase all
the Debt Securities if any are purchased. The initial public offering price
and any discounts or concessions allowed or re-allowed or paid to dealers may
be changed from time to time.
If dealers are used in the sale of Debt Securities with respect to which
this Prospectus is delivered, ServiceMaster will sell such Debt Securities to
the dealers as principals. The dealers may then resell such Debt
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Securities to the public at varying prices to be determined by such dealers at
the time of resale. The names of the dealers and the terms of the transaction
will be set forth in the Prospectus Supplement relating thereto.
Debt Securities may be sold directly by ServiceMaster or through agents
designated by ServiceMaster from time to time at fixed prices, which may be
changed, or at varying prices determined at the time of sale. Any agent
involved in the offer or sale of the Debt Securities with respect to which
this Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its
appointment.
Debt Securities may be sold directly by ServiceMaster to institutional
investors or others, who may be deemed to be underwriters within the meaning
of the Securities Act with respect to any resale thereof. The terms of any
such sales will be described in the applicable Prospectus Supplement.
In connection with the sale of the Debt Securities, underwriters or agents
may receive compensation from ServiceMaster or from purchasers of Debt
Securities for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters, agents and dealers participating in
the distribution of the Debt Securities may be deemed to be underwriters, and
any discounts or commissions received by them from ServiceMaster and any
profit on the resale of the Debt Securities by them may be deemed to be
underwriting discounts or commissions under the Securities Act.
If so indicated in the Prospectus Supplement, ServiceMaster will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase Debt Securities from ServiceMaster at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in
the future. Such contracts will be subject only to those conditions set forth
in the Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents, dealers and underwriters may be entitled under agreements entered
into with ServiceMaster to indemnification by ServiceMaster against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers, or
underwriters may be required to make with respect thereto. Agents, dealers,
and underwriters may be customers of, engage in transactions with or perform
services for ServiceMaster and its subsidiaries in the ordinary course of
business.
Some or all of the Debt Securities may be new issues of securities with no
established trading market. Any underwriters to whom Debt Securities are sold
by ServiceMaster for public offering and sale may make a market in such Debt
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of or the trading markets for any Debt Securities.
Certain of the underwriters, dealers or agents and their affiliates may be
customers of, engage transactions with and perform services for ServiceMaster
and its subsidiaries in the ordinary course of business.
VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities will be passed upon for the
ServiceMaster by Vernon T. Squires, Esq., Senior Vice President and General
Counsel of ServiceMaster. As of December 31, 1997, Vernon T. Squires owned
322,821 shares and options to acquire 90,000 shares of common stock of
ServiceMaster.
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