SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant To Section 13 Or 15(d)
Of The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997. Commission File number 1-14762
THE SERVICEMASTER COMPANY
(Exact Name of Registrant as Specified in its Certificate)
(Successor to ServiceMaster Limited Partnership)
Delaware 36-3858106
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
One ServiceMaster Way, Downers Grove, Illinois 60515-1700
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (630) 271-1300
Securities registered pursuant to Section 12(b) of the Act: 195,259,782
Name of Each Exchange
Title of Each Class On Which Registered
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Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by Check Mark Whether the Registrant (1) Has Filed All Reports
Required to Be Filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such Shorter Period That the
Registrant Was Required to File Such Reports), and (2) Has Been Subject to Such
Filing Requirements for the Past 90 Days. Yes X No
The Aggregate Market Value of Shares Held by Non-Affiliates of the
Registrant As of March 24, 1998 was $4,965,812,051.
DOCUMENTS INCORPORATED BY REFERENCE
Certain parts of the Registrant's Annual Report to Stockholders for the
year ended December 31, 1997 are incorporated into Part I, Part II and Part IV
of this Form 10-K.
Certain parts of the Registrant's Definitive Proxy Statement for the May 1,
1998 Annual Meeting of Stockholders is incorporated into Part III of this Form
10-K.
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PART I
Item 1. Business
The Company as Successor to ServiceMaster Limited Partnership
This annual report on Form 10-K is filed by The ServiceMaster Company,
a Delaware corporation (hereinafter sometimes called the "Registrant"). The
Registrant is the corporate successor to ServiceMaster Limited Partnership, a
Delaware limited partnership (the "Parent Partnership"). For the period January
1, 1987 to December 26, 1997, the Parent Partnership was the publicly traded
parent entity in the ServiceMaster enterprise. On December 26, 1997, by means of
a statutory merger in which a subsidiary of the Registrant merged with and into
the Parent Partnership (the "Reincorporating Merger"), the Registrant succeeded
to and became substituted for the Parent Partnership as the publicly traded
parent entity in the ServiceMaster enterprise. Pursuant to the Reincorporating
Merger, on December 26, 1997 the shares of limited partner interest in the
Parent Partnership converted to shares of common stock of the Registrant on a
one-for-one basis. On January 1, 1998, the Parent Partnership was merged with
and into the Registrant and the Parent Partnership thereby went out of
existence.
This Form 10-K for the year 1997, although necessarily filed by the
Registrant, pertains to the organization and business of the ServiceMaster
enterprise as headed by the Parent Partnership for virtually all of the year
1997. However, the Reincorporating Merger provided for a carryover to the
Registrant of all directors and officers of ServiceMaster Management Corporation
(the managing general partner of the Parent Partnership), the Parent Partnership
and The ServiceMaster Company Limited Partnership. Accordingly, references
herein to directors and executive officers are to such persons in their
capacities as directors and officers of the Registrant and its predecessor
entities. The Registrant and its affiliated entities are hereinafter referred to
as "ServiceMaster" or the "Company" or the "ServiceMaster enterprise".
Forward-Looking Statements
In accordance with the Private Securities Litigation Reform Act of
1995, the Company notes that statements in this Annual Report on Form 10-K that
look forward in time, which include everything other than historical
information, involve risks and uncertainties that may affect the Company's
actual results of operations. Factors that could cause actual results to differ
materially from the Company's plans or expectations include the following (among
others): weather conditions adverse to certain of the Company's businesses, the
entry of additional competitors in any of the markets served by the Company,
labor shortages, consolidation of hospitals in the healthcare market, changes in
Medicare reimbursement regulations, the condition of the United States economy,
and other factors listed from time to time in the Company's filings with the
Securities and Exchange Commission.
The Company; Principal Business Groups
The Company itself is a holding company whose shares of common stock
are traded on the New York Stock Exchange. Through its subsidiaries, the Company
is engaged in providing a variety of specialty services to homeowners and
commercial facilities and supportive management services in several markets,
including the healthcare market, the education market and certain segments of
the business and industry market.
The Company is organized into three principal operating groups:
Consumer Services, Management Services, and Employer Services. Each of these
operating groups is headed by a limited partnership or a corporation which has
its own group of operating subsidiaries. The parent companies for the operating
groups are ServiceMaster Consumer Services Limited Partnership, which was formed
in the summer of 1990; ServiceMaster Management Services Limited Partnership,
which was formed in December 1991; and ServiceMaster Employer Services, Inc.
which was formed in August 1997. All of the parent companies for the operating
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groups are wholly owned by the Company. All subsidiaries of the operating group
parent companies are wholly owned. Reference is made to the information under
the caption "Business Unit Reporting" on page 34 of the ServiceMaster Annual
Report to Shareholders for 1997 (the "1997 Annual Report") for detailed
financial information on these three groups.
Trademarks and Service Marks; Franchises
The Company's trademarks and service marks are important for all
elements of the Company's business, although such marks are particularly
important in the advertising and franchising activities conducted by the
operating subsidiaries of ServiceMaster Consumer Services L.P. Such marks are
registered and are renewed at each registration expiration date.
Within ServiceMaster Consumer Services, franchises are important for
the TruGreen-ChemLawn, Terminix, ServiceMaster Residential/Commercial, Merry
Maids, AmeriSpec and Furniture Medic businesses. Nevertheless, revenues and
profits derived from franchise-related activities constitute less than 10% of
the revenue and profits of the consolidated ServiceMaster enterprise. Franchise
agreements made in the course of these businesses are generally for a term of
five years. ServiceMaster's renewal history is that most of the franchise
agreements which expire in any given year are renewed.
ServiceMaster Consumer Services
ServiceMaster Consumer Services provides specialty services to homeowners
and commercial facilities through eight companies: TruGreen L.P.
("TruGreen-ChemLawn"); The Terminix International Company L.P. ("Terminix");
ServiceMaster Residential/Commercial Services L.P. ("Res/Com"); Merry Maids L.P.
("Merry Maids"); American Home Shield Corporation ("American Home Shield" or
"AHS"); AmeriSpec, Inc. ("AmeriSpec"); Furniture Medic L.P. ("Furniture Medic");
and Rescue Rooter L.L.C. ("Rescue Rooter"). Rescue Rooter was acquired by
ServiceMaster Consumer Services on January 1, 1998. 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;
residential and commercial cleaning and disaster restoration services under the
"ServiceMaster" service mark; domestic housekeeping services under the "Merry
Maids" service mark; home systems and appliance warranty contracts under the
"American Home Shield" service mark; home inspection services under the
"AmeriSpec" service mark; on-site furniture repair and restoration under the
"Furniture Medic" service mark; and plumbing and drain cleaning services under
the "Rescue Rooter" service mark.
The services provided by the eight Consumer Services companies are part
of the ServiceMaster "Quality Service Network" and are accessed by calling a
single toll-free telephone number: 1-800-WE SERVE. ServiceMaster focuses on
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.
For most of 1997, the first-tier subsidiary of the ServiceMaster parent
entity was primarily responsible for overseeing the Consumer Services businesses
which were conducted in foreign markets. However, at the end of 1997,
responsibility for such businesses was transferred to the appropriate subsidiary
of ServiceMaster Consumer Services L.P.
TruGreen-ChemLawn. TruGreen-ChemLawn is a wholly owned subsidiary of
ServiceMaster Consumer Services L.P. As of December 31, 1997, TruGreen-ChemLawn
had 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. TruGreen-ChemLawn provides lawn,
tree and shrub care services in Saudi Arabia and Turkey through licensing
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arrangements and in Canada through a subsidiary. TruGreen-ChemLawn also provides
interior plantscape services to commercial customers. The TruGreen-ChemLawn
businesses are seasonal in nature.
On February 24, 1997, the Company's predecessor, for the benefit of
TruGreen-ChemLawn, completed the acquisition of 99.38% of the outstanding stock
of Barefoot Inc. ("Barefoot") through a tender offer. On February 26, 1997, the
remaining 0.62% of the Barefoot stock was acquired through a statutory merger.
In these transactions, Barefoot stockholders collectively received approximately
$84,800,000 in cash and 8,621,055 limited partner shares (post-June 1997 3-for-2
share split) of the Company's predecessor. For purposes of these transactions,
the Barefoot stock was valued at $16.00 per share and the Company's shares were
valued at $16.9389 per share (post-June 1997 3-for-2 share split). The aggregate
value of the Barefoot transaction (including the amount paid in redemption of
the Barefoot shareholders rights plan and transaction expenses) was
approximately $237,000,000. At the time of the transaction, Barefoot was the
second largest provider of professional lawn care services in the United States.
Subsequent to the completion of this acquisition, a portion of the Barefoot
operations were transferred to TruGreen-ChemLawn; the balance of the Barefoot
operations were placed in a new subsidiary corporation of ServiceMaster Consumer
Services with headquarters in Columbus, Ohio, from which support has been
provided to certain holders of franchises granted by Barefoot.
Terminix. Terminix is a wholly owned subsidiary of ServiceMaster
Consumer Services L.P. With over 3 million residential and commercial customers,
Terminix, through its company-owned branches and through franchisees, is the
leading provider of termite and pest control services in the United States. As
of December 31, 1997, Terminix was providing these services through 290
company-owned branches in 45 states and Mexico and through 241 franchised
branches in 28 states. Terminix also manages the following European pest control
companies, all of which are subsidiaries of TMX-Europe B.V., a wholly owned
subsidiary of the Registrant: 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 B.V., a holding company for the
leading pest control company in Sweden and which also operates in Norway; and
the Stenglein Group, a group of pest control companies in Germany. Terminix also
provides termite and pest control services through licensing arrangements with
local service providers in seven other countries. The Terminix business is
seasonal in nature.
Res/Com. Res/Com is a wholly owned subsidiary of ServiceMaster Consumer
Services L.P. ServiceMaster, through Res/Com, is the leading franchisor 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. As of December 31, 1997, these services
were provided 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 Canada, Germany, Ireland and the
United Kingdom, and through licensing arrangements with local service providers
in six other countries.
Merry Maids. Merry Maids is a wholly owned subsidiary of ServiceMaster
Consumer Services L. P. Merry Maids is the organization through which
ServiceMaster 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 27 company-owned branches in 19 states and
through 797 licensees operating in all 50 states. Merry Maids also provides
domestic house cleaning services through subsidiaries in Canada and the United
Kingdom and through licensing arrangements with local service providers in three
other countries.
American Home Shield. AHS is a wholly owned subsidiary of ServiceMaster
Consumer Services L.P. AHS is a leading provider of home systems and appliance
warranty contracts ("warranty contracts") in the United States, providing
homeowners with contracts covering the repair or replacement of built-in
appliances, hot water heaters and electrical, plumbing, central heating, and
central air conditioning systems which malfunction by reason of normal wear and
tear. Warranty contracts are sold through participating real estate brokerage
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offices in conjunction with resales of single-family residences to homeowners.
AHS also sells 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 warranty contracts
provided for services to approximately 568,000 homes through approximately
13,000 independent repair maintenance contractors in 49 states and the District
of Columbia, with operations in California, Texas and Arizona accounting for
27%, 18% and 6%, respectively, of gross contracts written by AHS. AHS also
provides home service warranty contracts through licensing arrangements with
local service providers in three other countries.
AmeriSpec. AmeriSpec is a wholly owned subsidiary of AHS. AmeriSpec is
a leading provider of home inspection services in the United States. During
1997, AmeriSpec conducted approximately 100,000 home inspections in 42 states
and Canada, with operations in California, New York and Illinois accounting for
23%, 6%, and 5%, respectively, of the gross number of inspections conducted
through AmeriSpec.
Furniture Medic. Furniture Medic is a wholly owned subsidiary of
ServiceMaster Consumer Services L.P. 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 through
licensing arrangements with local service providers in two other countries.
Rescue Rooter. Rescue Rooter is a wholly-owned subsidiary of
ServiceMaster Consumer Services L.P. Rescue Rooter acquired the business and
assets of Rescue Industries, Inc. on January 1, 1998. Rescue Rooter provides
plumbing and drain cleaning services in ten states through 20 company-owned
branches and one franchise location. In 1997, Rescue Rooter's predecessor
performed services for approximately 400,000 customers. ServiceMaster expects to
put into place in the Spring of 1998 a plan under which certain key employees of
Rescue Rooter will be afforded the opportunity to collectively purchase up to a
10% equity interest in Rescue Rooter pursuant to a management equity plan. Such
interest will be subject to reciprocal put and call rights which will become
exercisable on January 1, 2003 and which will be consummated on the basis of the
then fair market value.
ServiceMaster Management Services
ServiceMaster pioneered the providing of supportive management services
to health care facilities by instituting housekeeping management services in
1962. Since then, ServiceMaster has expanded its management services business
such that it now provides a variety of supportive management services to health
care, education and business and industrial customers (including 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). ServiceMaster's general 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.
Management Services L.P. is organized into three divisions, each of which
provides service on a nationwide basis within its market. These markets are:
Healthcare Management Services; Education Management Services; and Business and
Industry Management Services.
For most of 1997, the first-tier subsidiary of the ServiceMaster parent
entity was primarily responsible for overseeing the Management Services
businesses which were conducted in foreign markets. However, at the end of 1997,
responsibility for such businesses was transferred to ServiceMaster Management
Services L.P.
As of December 31, 1997, ServiceMaster was providing supportive
management services to approximately 1,568 health care customers and to
approximately 375 educational and commercial customers. These services were
being provided in all 50 states and the District of Columbia. Outside of the
United States, ServiceMaster was providing management services through
subsidiaries in Canada and Japan, through an affiliated company in Mexico, and
through licensing arrangements with local service providers in nineteen other
countries.
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ServiceMaster Healthcare Management Services. The ServiceMaster
Healthcare Services division of ServiceMaster Management Services L. P. combines
the resources of the healthcare segment of ServiceMaster Management Services
L.P., Diversified Health Services, and their respective subsidiaries to form a
comprehensive health services organization which provides management services to
acute care and long-term care facilities; freestanding, hospital-based, and
government-owned nursing homes; skilled nursing facilities; assisted living
facilities; and hospital-based home health care agencies (as well as the direct
operation of freestanding home health care agencies). Various other healthcare
related services are provided by operating units within the Healthcare Services
division. As of December 31, 1997, the ServiceMaster Healthcare Services
companies had management services contracts with 1,568 customers in all 50
states.
ServiceMaster Education Management Services. The Education division of
ServiceMaster Management Services L.P. is a leading provider to the education
market of maintenance, custodial and grounds services. The facilities which
comprise the education market include primary schools, secondary schools and
school districts, private specialty schools and colleges and universities. As of
December 31, 1997, ServiceMaster was serving 273 educational customers.
ServiceMaster believes there is potential for expansion in the education market
due to its current relatively low penetration of that market and the trend of
educational facilities to consider outsourcing more of their service
requirements. However, a majority of the educational facilities continue to
assume direct responsibility for managing their support functions.
ServiceMaster Business & Industry Management Services. The Business &
Industry division of ServiceMaster Management Services L.P. is a leading
provider of plant operations and maintenance, custodial and grounds management
services to business and industrial customers in selected markets. Such markets
include the food processing, transportation, healthcare products and automotive
markets. ServiceMaster believes that there is potential for expansion in these
business and industrial markets due to ServiceMaster's current low penetration
of those markets, the trend of businesses to consider outsourcing more of their
service requirements and the trend of governmental units to privatize parts of
their operations. As of December 31, 1997, ServiceMaster was serving in
approximately 100 business or industrial customers.
ServiceMaster Employer Services
ServiceMaster Employer Services, through its subsidiary, Certified
Systems, Inc., is one of the nation's largest professional employer
organizations. It provides more than 790 clients with administrative processing
of payroll, worker's compensation insurance, health insurance, unemployment
insurance and other employee benefits.
International Operations
Supportive management services and consumer services in international
markets are provided through licensing arrangements with local service providers
and ownership of foreign operating companies. Except as noted below, these
activities in Europe, Latin America and the Middle East are administered as part
of the operations of ServiceMaster Management Services L.P. and ServiceMaster
Consumer Services L.P., respectively. Operating arrangements and market
expansion efforts in the Pacific Rim are administered by the parent company.
In 1997, ServiceMaster disposed of its interests in the
Tarmac/ServiceMaster management services joint venture in England and the Raab
Karcher/ServiceMaster management services joint venture in Germany. These
dispositions resulted in a small profit on the Company's investment.
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Other Activities
Supporting Departments. The Company has various departments responsible
for technical, engineering, management information, planning and market
services, and product and process development activities. Various administrative
support departments provide personnel, public relations, administrative,
education, accounting, financial and legal services.
Manufacturing Division. ServiceMaster has a manufacturing division
which formulates, combines and distributes supplies, products and equipment that
are used internally in providing management services to customers and which are
sold to licensees for use in the operation of their businesses. ServiceMaster
has a small share of the market for the manufacture and distribution of cleaning
equipment, chemicals and supplies.
Venture Fund. ServiceMaster Venture Fund L.L.C., a subsidiary of the
parent company (the "Venture Fund"), invests in emerging growth companies which
show an ability to provide innovative service technologies to ServiceMaster's
current and new customers. The Venture Fund is managed so as not to be intrusive
to the ongoing operations of the Company's operating units.
Industry Position, Competition and Customers
The following information is based solely upon estimates made by the
management of ServiceMaster and cannot be verified. In considering
ServiceMaster's industry and competitive positions, it should be recognized that
ServiceMaster competes with many other companies in the sale of its services,
franchises and products and that some of these competitors are larger or have
greater financial and marketing strength than ServiceMaster.
The principal methods of competition employed by ServiceMaster in the
Consumer Services business are name recognition, assurance of customer
satisfaction and a history of providing quality services to homeowners. The
principal methods of competition employed by ServiceMaster in each of the
operating units in the Management Services business are price, quality of
service and experience in providing management services. The principal methods
of competition employed by ServiceMaster in the Employer Services business are
name recognition, assurance of customer satisfaction and financial strength.
Consumer Services
Subsidiaries of Consumer Services provide a variety of residential and
commercial services under their respective names on the basis of their and
ServiceMaster's reputation, the strength of their service marks, their size and
financial capability, and their training and technical support services. The
markets served by Terminix and TruGreen-ChemLawn are seasonal in nature.
Lawn Care Services. TruGreen-ChemLawn, both directly and through
franchisees, provides lawn care services to residential and commercial
customers. Competition within the lawn care market is strong, coming mainly from
regional and local, independently owned firms and from homeowners who elect to
care for their lawns through their own personal efforts. TruGreen-ChemLawn is
the leading national lawn care company within this market. TruGreen-ChemLawn
also provides indoor plant maintenance to commercial customers.
Lawn care services are regulated by law in most of the states in which
TruGreen-ChemLawn provides such services. These laws require licensing which is
conditional on a showing of technical competence and adequate bonding and
insurance. The lawn care industry is regulated at the federal level under the
Federal Insecticide, Fungicide and Rodenticide Act, and lawn care companies
(such as TruGreen-ChemLawn) which apply herbicides and pesticides are regulated
under the Federal Environmental Pesticide Control Act of 1972. Such laws,
together with a variety of state and local laws and regulations, may limit or
prohibit the use of certain herbicides and pesticides, and such restrictions may
adversely affect the business of TruGreen-ChemLawn.
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Termite and Pest Control Services. The market for termite and pest
control services to commercial and residential customers includes many
competitors. Terminix is the leading national termite and pest control company
within this market. Competition within the termite and pest control market is
strong, coming mainly from regional and local, independently owned firms
throughout the United States and from one other large company which operates on
a national basis.
Termite and pest control services are regulated by law in most of the
states in which Terminix provides such services. These laws require licensing
which is conditional on a showing of technical competence and adequate bonding
and insurance. The extermination industry is regulated at the federal level
under the Federal Insecticide, Fungicide and Rodenticide Act, and pesticide
applicators (such as Terminix) are regulated under the Federal Environmental
Pesticide Control Act of 1972. Such laws, together with a variety of state and
local laws and regulations, may limit or prohibit the use of certain pesticides,
and such restrictions may adversely affect the business of Terminix.
House Cleaning Services. The market for domestic house cleaning
services is highly competitive. In urban areas the market involves numerous
local companies and a few national companies. ServiceMaster believes that its
share of the total potential market for such services is small and that there is
significant potential for further expansion of its housecleaning business
through continued internal expansion and greater penetration of the
housecleaning market. Through its company-owned branches and its franchisees,
ServiceMaster has a small share of the market for the cleaning of residential
and commercial buildings.
Home Systems and Appliance Warranty Contracts. The market for home
systems and appliance warranty contracts is relatively new. ServiceMaster
believes that AHS maintains a favorable position in its industry due to the
system developed and used by AHS for accepting, dispatching and fulfilling
service calls from homeowners through a nationwide network of independent
contractors. AHS also has a computerized information system developed and owned
by AHS, and an electronic digital voice communication system through which AHS
handled more than 7.5 million calls in 1997.
Home Inspection Services. AmeriSpec is a leading provider of home
inspection services in the United States. Competition within this market is
strong, coming mainly from regional and local, independently owned firms.
Furniture Repair Services. The market for on-site furniture repair
services is relatively new. ServiceMaster believes that Furniture Medic
maintains a favorable position in its industry due to its patented
environmentally sensitive procedure for repairing furniture in the customer's
home.
Plumbing and Drain Cleaning Services. The market for plumbing and drain
cleaning services is highly competitive in both the residential and commercial
sectors. Rescue Rooter believes that its share of the total potential market for
such services is small and that there is significant potential for future
expansion and penetration. Plumbing is regulated by most states in which Rescue
Rooter provides such services. The level of licensing varies from state to
state. There are no state or federal guidelines regulating drain cleaning
services.
Management Services
Health Care. Within the market consisting of general health care
facilities having 50 or more beds, ServiceMaster is the leading supplier of
plant operations and maintenance, housekeeping, clinical equipment maintenance,
and laundry and linen management services. As of December 31, 1997,
ServiceMaster was serving approximately 1,568 customers and managing
approximately 1,900 health care facilities. The majority of health care
facilities within this market not currently served by ServiceMaster assume
direct responsibility for managing their own non-medical support functions.
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ServiceMaster believes that its management services for health care
facilities may expand by the addition of facilities not presently served, by
initiating additional services at facilities which use only a portion of the
services now offered, by the development of new services and by growth in the
size of facilities served. At the same time, industry consolidation, changes in
use and methods of health care delivery and payment for services (including in
particular changes in Medicare reimbursement regulations) continue to affect the
health care environment.
Education. ServiceMaster is a leading provider to the education market
of maintenance, custodial and grounds services. The facilities which comprise
the education market served by ServiceMaster include primary schools, secondary
schools and school districts, private specialty schools and colleges and
universities. As of December 31, 1997, ServiceMaster was serving approximately
273 customers and managing approximately 5,362 facilities. ServiceMaster
believes there is potential for expansion in the education market due to its
current relatively low penetration of that market and the trend of educational
facilities to consider outsourcing more of their service requirements. However,
a majority of the educational facilities continue to assume direct
responsibility for managing their support functions.
Business and Industry. ServiceMaster is a leading provider of plant
operations and maintenance, custodial and grounds management services to
business and industrial customers in selected markets. ServiceMaster believes
that there is potential for expansion in those business and industrial markets
which ServiceMaster has elected to emphasize due to ServiceMaster's low current
penetration of those markets, the trend of businesses to consider outsourcing
more of their service requirements and the trend of governmental units to
privatize parts of their operations. The emphasized markets include the food
processing, transportation, healthcare products, and automotive markets. As of
December 31, 1997, ServiceMaster was serving approximately 100 customers and
managing approximately 530 business or industrial facilities.
Major Customers
ServiceMaster has no single customer which accounts for more than 10%
of its total revenues. No part of the Company's business is dependent on a
single customer or a few customers, the loss of which would have a material
adverse effect on the Company as a whole. Revenues from governmental sources are
not material.
Employees
On December 31, 1997, ServiceMaster had a total of approximately 45,825
employees.
ServiceMaster provides its employees with annual vacation, medical,
hospital and life insurance benefits and the right to participate in additional
benefit plans which are described in the Notes to Financial Statements included
in the 1997 Annual Report.
Year 2000 Computer Program Compliance
Certain computer programs use two digits rather than four to define the
applicable year and consequently many systems may not function properly beyond
the year 1999 unless they are remediated. In addition, certain computer programs
are unable to recognize the year 2000 as a leap year. ServiceMaster has
conducted a review of its computer systems to identify systems that could be
affected by the year 2000 problem and has determined that the Company will need
to replace or remediate many of its systems to facilitate their continuing
reliable operation. The Company currently believes that expenses directly
related to this effort will not have a material impact on the results of its
operations.
Although the Company believes that critical remediation efforts will be
completed prior to the year 2000, the untimely completion of these efforts
could, in certain circumstances, have a material adverse effect on the
operations of the Company.
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In addition, the Company is in the process of determining whether the
external parties and systems with which the Company interacts and external
systems for which the Company has certain maintenance responsibilities are in
compliance and whether non-compliance of these systems could have a material
adverse impact on the Company.
Item 2. Properties
The headquarters facility of ServiceMaster, which also serves as
headquarters for ServiceMaster Management Services, is owned by The
ServiceMaster Company and is located on a ten-acre tract at One ServiceMaster
Way, Downers Grove, Illinois. The initial structure was built in 1963, and two
additions were completed in 1968 and 1976. In early 1988, ServiceMaster
completed construction of a two-story 15,000 square foot addition for office
space, food service demonstrations and dining facilities. The building contains
approximately 118,900 square feet of air conditioned office space and 2,100
square feet of laboratory space. In the Spring of 1992, ServiceMaster completed
the conversion of approximately 30,000 square feet of space formerly used as a
warehouse to offices for Management Services and for The Kenneth and Norma
Wessner Training Center.
ServiceMaster owns a seven-acre, improved tract at 2500 Warrenville
Road, Downers Grove, Illinois, which is adjacent to its headquarters facility.
In 1993, ServiceMaster substantially remodeled the building and thereafter
leased approximately half the space (50,000 square feet) to a commercial tenant.
The balance of the space is utilized by ServiceMaster personnel.
ServiceMaster leases a 50,000 square foot facility near Aurora,
Illinois which is used by ServiceMaster as a warehouse/distribution center.
ServiceMaster believes that the facilities described in the preceding
three paragraphs will satisfy the Company's needs for administrative and
warehouse space in the Chicago area for the immediate future.
ServiceMaster owns four properties in Cairo, Illinois, consisting of a
36,000 square foot, three-story building used for manufacturing and warehousing
equipment, supplies and products used in the business; a warehouse and package
facility comprising 30,000 square feet; a three-story warehouse and
manufacturing building consisting of 43,000 square feet; and a 2,500 square foot
building used for a machine shop. ServiceMaster leases a 44,000 square foot
manufacturing facility in Lancaster, Pennsylvania, which is used to provide
products and equipment primarily to customers of Management Services in the
eastern part of the United States. Management believes that the foregoing
manufacturing and warehouse facilities are adequate to support the current needs
of ServiceMaster.
The headquarters for ServiceMaster Consumer Services L.P. are located
in leased premises at 860 Ridge Lake Boulevard, Memphis, Tennessee. The 860
Ridge Lake Boulevard facility also serves as the headquarters for
TruGreen-ChemLawn, Terminix, Res/Com, Merry Maids, American Home Shield,
AmeriSpec and Furniture Medic. The headquarters for Rescue Rooter are located in
leased premises at 4850 Pacific Highway, San Diego, California.
TruGreen-ChemLawn owns 5 buildings which are used as branch sites for
lawn care services. These facilities are located in Texas (2 properties),
Colorado (1 property), Ohio (1 property), and Georgia (1 property).
Terminix owns 20 buildings which are used as branch sites for termite
and pest control services. These properties are all one-story buildings that
contain both office and storage space. These properties are located in New
Jersey (2 properties), California (2 properties), Florida (10 properties),
Georgia (1 property), Illinois (1 property) and Texas (4 properties).
Page 9
<PAGE>
American Home Shield has retained some leased space in the building at
90 South E Street, Santa Rosa, California, for administrative and sales
operations. Certain of American Home Shield's service and data processing
departments are located in premises owned by the company in Carroll, Iowa. This
facility consists of a 43,000 square foot building on a seven-acre site.
American Home Shield owns approximately 56 acres of land in Santa Rosa,
California of which 39 acres are under contracts for sales to occur in mid to
late 1998. This land is held for investment purposes and has been and will
continue to be offered for sale, with the timing of sales being affected by,
among other things, market demand, zoning regulations, and the availability of
financing to purchasers.
Rescue Rooter owns two buildings which are used for branch operations
to provide plumbing and drain cleaning services. These facilities are located,
respectively in Phoenix, Arizona and St. Louis, Missouri.
In 1997, Diversified Health Services completed the construction of a
new headquarters facility at 3839 Forest Hill-Irene Road, Memphis, Tennessee.
This facility also serves as the headquarters of ServiceMaster Employer
Services. DHS leases other administrative facilities in St. Augustine, Florida;
Atlanta, Georgia; Minneapolis, Minnesota; Plymouth Meeting, Pennsylvania;
Memphis, Tennessee; and Dallas, Texas. As of December 31, 1997, DHS had an
ownership interest in a nursing home facility through a joint venture
arrangement in which DHS has a 50% interest.
The headquarters for ServiceMaster Employer Services are located at
3839 Forest Hill-Irene Road, Memphis, Tennessee. The company leases other
administrative facilities in Little Rock, Arkansas and Memphis, Tennessee. Its
subsidiary, Certified Systems, Inc., leases administrative facilities in
Mesquite, Texas.
Item 3. Legal Proceedings
In the ordinary course of conducting its business activities,
ServiceMaster becomes involved in judicial and administrative proceedings which
involve both private parties and governmental authorities. As of March 6, 1998,
these proceedings included a number of general liability actions and
employment-related proceedings.
Environmental Matters. Terminix was one of several defendants named in
a suit filed by the United States Environmental Protection Agency (the "EPA") on
November 3, 1986 in the United States District Court for the Western District of
Tennessee, to recover the costs of remediation at two sites in Tennessee which
had been designated by the EPA as "Superfund sites" under the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"). In January
1992, the EPA issued a Unilateral Administrative Order for Remedial Design and
Remedial Action which required Terminix and other initial defendants and third
party defendants to clean up one of these sites. Terminix agreed, on an interim
basis, to a 10% allocation of the cost of the remediation work. The parties to
the interim allocation agreement remained in disagreement with the EPA over the
most appropriate remediation procedures to be followed at the site and they were
in disagreement among themselves regarding the final allocations of
responsibility. With respect to the second site, the companies cited by the EPA
all disclaimed responsibility. Two of the defendant parties settled their
disagreement with the EPA but, until March 20, 1997, Terminix had not resolved
its disagreement with the other two defendant parties as to Terminix's proper
participation. However, on March 20, 1997, Terminix settled this matter with the
other two parties as to all past costs and agreed to arbitrate any disagreement
over the allocation of future costs. On October 22, 1997, the time expired in
which a demand for arbitration could be filed. Accordingly, Terminix's share of
future remediation costs was established at 10%. The aggregate financial
commitment of Terminix is well within the parameters set forth in the
discussions of this matter in previous Form 10-K reports and is not material to
Terminix's business, financial condition or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders.
Page 10
<PAGE>
PART II
Item 5. Market for Registrant's Shares and Related Shareholder Matters
Except for the information set forth in the second and third sentences
of this Item 5, the portions of the ServiceMaster Annual Report to Shareholders
for 1997 under the captions "Statements of Shareholders' Equity" (page 33) and
"Cash Distributions Per Share" and "Price Per Share" in the Quarterly Operating
Results table (page 41) supply the information required by this item and such
portions are hereby incorporated herein by reference. The Registrant's shares of
common stock are listed and traded on the New York Stock Exchange under the
symbol "SVM". At March 6, 1998, the Registrant's shares of common stock were
held of record by approximately 71,000 persons.
Item 6. Selected Financial Data
The portion of the ServiceMaster Annual Report to Shareholders for 1997
in the Financial Statements and Management Discussion section ("FSMD Section")
under the caption "Eleven Year Financial Summary" (pages 26-27) supplies the
information required by this item and such portion is hereby incorporated herein
by reference.
Item 7. Management Discussion and Analysis of Financial Condition and Results
of Operations
Management Discussion and Analysis of Financial Condition and Results
of Operations for the three years ended December 31, 1997, is contained in the
FSMD Section of the ServiceMaster Annual Report to Shareholders for 1997 on
pages 21-25 and is hereby incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The consolidated statements of financial position of ServiceMaster as
of December 31, 1997 and 1996, and the consolidated statements of income, cash
flows and shareholders' equity for the years ended December 31, 1997, 1996, and
1995 and notes to the consolidated financial statements are contained in the
FSMD Section of the ServiceMaster Annual Report to Shareholders for 1997 on
pages 28-41 are incorporated herein by reference. The report of Arthur Andersen
LLP thereon dated January 26, 1998, and the summary of significant accounting
policies are contained in the FSMD Section of the ServiceMaster Annual Report to
Shareholders for 1997 on pages 28-29 and are hereby incorporated herein by
reference.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
Page 11
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The information contained under the heading "Election of Directors" in
the definitive proxy statement for the Company's May 1, 1998 Annual Meeting of
Stockholders is incorporated herein by reference.
Senior Management Advisers
The Bylaws of the Company provide that the Board of Directors may
appoint officers of the Company or a subsidiary and other persons having a
special relationship to ServiceMaster to serve as Senior Management Advisers.
Senior Management Advisers attend the meetings of the Board and advise the Board
but do not have the power to vote. The Board has determined that providing a
greater number of officers the opportunity to advise and interact with the Board
is in the best interest of ServiceMaster as well as the individual officers. The
Senior Management Advisers receive no special compensation for their services in
this capacity.
The Board of Directors has appointed the persons listed below as Senior
Management Advisers effective as of the 1997 annual meeting of the shareholders
of ServiceMaster Management Corporation to serve in such capacity until the
annual meeting of stockholders of the Company in 1998 or until otherwise
determined by the Board of Directors.
Robert D. Erickson, age 54, is an Executive Vice President. Mr.
Erickson was a director of ServiceMaster from May 1987 to May 1993. He
previously served as a director of ServiceMaster from May 1981 to June 1984. He
served as the President and Chief Operating Officer of ServiceMaster's
International business unit from October 1993 to December 1997, Executive Vice
President and Chief Operating Officer of the International division of
ServiceMaster from November 1992 to October 1993 and as Executive Vice President
and Chief Operating Officer, People Services, from January 1990 to October 1992.
Donald K. Karnes, age 47, is Group President of TruGreen-ChemLawn and
Terminix. He served as President and Chief Operating Officer of
TruGreen-ChemLawn from January 1992 to December 1995. From January 1, 1990 to
December 31, 1991, he was Senior Vice President, TruGreen Limited Partnership.
Robert F. Keith, age 41, is President and Chief Operating Officer,
ServiceMaster Management Services. He served as President and Chief Operating
Officer, ServiceMaster Consumer Services from July 1994 to December 31, 1996 and
as Group President, ServiceMaster Consumer Services, from November 1992 to July
1994. He was Vice President, Treasurer and Chief Financial Officer of The
ServiceMaster Company L. P. from November 1989 to October 1992.
Jerry D. Mooney, age 44, is President and Chief Operating Officer,
ServiceMaster Employer Services. Previously, he was President, Health Care New
Business Initiatives, and President and Chief Executive Officer of ServiceMaster
Diversified Health Services, Inc. He is also a director, chairman of the audit
committee and member of the compensation committee of Concord EFS, Inc.,
Memphis, Tennessee, involved primarily in the electronic processing of debit and
credit card transactions. He also serves on an Advisory Board for SouthTrust
Corporation.
Page 12
<PAGE>
Ernest J. Mrozek, age 44, is President and Chief Operating Officer,
ServiceMaster Consumer Services. He served as Senior Vice President and Chief
Financial Officer of the Registrant from January 1, 1995 to December 31, 1996.
He served as Vice President and Chief Financial Officer of the Registrant from
May 1994 to December 1994, as Vice President, Treasurer and Chief Financial
Officer from November 1, 1992 to April 30, 1994, and as Vice President and Chief
Accounting Officer, from January 1, 1990 to October 31, 1992.
Brian D. Oxley, age 47, is Executive Vice President, New Business
Initiatives. He served as President and Chief Operating Officer of ServiceMaster
Management Services and ServiceMaster Healthcare Services from January 1994 to
December 31, 1996. From November 1992 to December 31, 1993, he served as the
President and Chief Executive Officer of the International and New Business
Development Group. He served as Executive Vice President, New Business
Development from January 1991 to November 11, 1992 and as President of
International Services from January 1, 1988 to November 11, 1992.
Steven C. Preston, age 37, has served as Senior Vice President and
Chief Financial Officer since April 1, 1997. From August 1993 to March 1997, he
was Senior Vice President and Corporate Treasurer for First Data Corporation,
Atlanta, Georgia. From October 1985 to August 1993, he served as an investment
banker at Lehman Brothers, New York, New York.
Page 13
<PAGE>
Executive Officers of ServiceMaster
The following table shows: (i) the names and ages (as of March 6, 1998)
of the present executive officers of the Company; (ii) all positions presently
held by each officer; and (iii) the year each person became an officer. Each
person named has served as an officer of the Company and its predecessor company
continuously since the year shown. There are no arrangements or understandings
between any executive officer and any other person pursuant to which the officer
was or is to be selected as an officer.
<TABLE>
<S> <C> <C> <C>
First Became
Name Age Present Position An Officer
C. William Pollard 59 Chairman and Director 1977
Carlos H. Cantu 64 President and Chief Executive Officer and Director 1986
Charles W. Stair 57 Vice Chairman and Director 1973
Phillip B. Rooney 53 Vice Chairman and Director 1997
Ernest J. Mrozek 44 President and Chief Operating Officer, Consumer Services, and a
Senior Management Adviser 1987
Robert F. Keith 41 President and Chief Operating Officer, Management Services, and 1986
a Senior Management Adviser
Robert D. Erickson 54 Executive Vice President and a Senior Management Adviser 1976
Brian D. Oxley 47 Executive Vice President and a Senior Management Adviser 1983
Vernon T. Squires 63 Senior Vice President and General Counsel 1987
Steven C. Preston 37 Senior Vice President and Chief Financial Officer 1997
Eric R. Zarnikow 38 Vice President and Treasurer 1994
Deborah A. O'Connor 35 Vice President and Controller 1993
</TABLE>
Messrs. Pollard, Cantu, Stair and Rooney are also Directors of the Company.
See "Election of Directors" in the definitive proxy statement for the Company's
1998 Annual Meeting of Stockholders for biographical information with respect to
these persons. Messrs. Mrozek, Keith, Erickson, Oxley and Preston are Senior
Management Advisers. See pages 12-13 for biographical information with respect
to these persons.
Vernon T. Squires, age 63, has served as Senior Vice President and
General Counsel since January 1, 1988. He served as Vice President and General
Counsel from April 1, 1987 until December 31, 1987. He was an associate and
partner with the law firm of Wilson & McIlvaine in Chicago, specializing in
corporate and tax law, from 1960 to April 1, 1987. He is presently of counsel to
that firm.
Eric R. Zarnikow, age 38, has served as Vice President and Treasurer
since May 1, 1994. From August 1991 to April 1994, he served as Vice President
and Treasurer of Gaylord Container Corporation.
Page 14
<PAGE>
Deborah A. O'Connor, age 35, has served as Vice President and
Controller since January 1, 1993. From July 1991 to December 1992, she was
Manager of Financial Projects. She previously had practiced public accounting
with Arthur Andersen LLP since 1984.
Compliance With Section 16(a) of The Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
ServiceMaster's shares, to file reports of ownership and changes in ownership
with the Securities and Exchange Commission (the "Commission") and the New York
Stock Exchange. The Commission's regulations require certain officers, directors
and greater-than-ten-percent shareholders to furnish to the Company copies of
all Section 16(a) forms that they file. During 1997, the Company's predecessor
received Section 16(a) forms from such officers and directors. As of January 1,
1998, the Company did not have any shareholders with an interest greater than
ten percent.
Based solely on a review of the copies of Section 16(a) forms received
by the Company and its predecessor or on written representations from certain
reporting persons that no Form 5 was required for those persons, the Company
believes that during 1997 the officers and directors of the Company and its
predecessor complied with applicable filing requirements, except that one report
covering one February 1997 transaction for 943 shares was filed late by Mr.
Mrozek and one report covering one December 1997 transaction for 3,194,609
shares was filed late by Mr. Peterson.
Item 11. Executive Compensation
The information contained under the heading "Executive Compensation"
(except those portions relating to Item 13 below) in the definitive proxy
statement for the Company's May 1, 1998 Annual Meeting of Stockholders is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information contained under the heading "Principal Stockholders"
and "Management Ownership" in the definitive proxy statement for the Company's
May 1, 1998 Annual Meeting of Stockholders is incorporated herein by reference.
Item 13. Certain Relationships and Related Miscellaneous Transactions
The information contained under the heading "Executive Compensation"
(except those portions relating to Item 11 above) and the subheadings
"Compensation of Directors" and "Ownership Information" in the definitive proxy
statement for the Company's May 1, 1998 Annual Meeting of Stockholders is
incorporated herein by reference.
Page 15
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial Statements, Schedules and Exhibits
1. Financial Statements
The documents shown below are contained in the Financial
Statements and Management Discussion and Analysis section of
the ServiceMaster Annual Report to Shareholders for 1997, on
pages 21 - 41 and are incorporated herein by reference:
Summary of Significant Accounting Policies
Report of Independent Public Accountants
Consolidated Statements of Income for the three years
ended December 31, 1997, 1996 and 1995
Consolidated Statements of Financial Position as of
December 31, 1997 and 1996
Consolidated Statements of Cash Flows for the three
years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Shareholders' Equity for
the three years ended December 31, 1997, 1996 and
1995
Notes to the Consolidated Financial Statements
2. Financial Statements Schedules
Schedule IV--Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees other than Related
Parties. The items required by this Schedule are incorporated
into the information relating to Share Grants on page 29 of
the definitive proxy statement for the Company's May 1, 1998
Annual Meeting of Stockholders.
Included in Part IV of this Report:
Schedule VIII--Valuation and Qualifying Accounts
Report of Independent Public Accountants on Schedules
Exhibit 23 -- Consent of Independent Public Accountants
Other schedules are omitted because of the absence of conditions under
which they are required or because the required information is presented in the
financial statements or notes thereto.
Page 16
<PAGE>
3. Exhibits
The exhibits filed with this report are listed on pages 24 -
28 herein (the "Exhibit Index").
The following entries in the Exhibit Index are management
contracts or compensatory plans in which a director or any of
the named executive officers of the Registrant does or may
participate. Reference is made to the Exhibit Index for the
filings with the Commission which contain such contracts or
plans.
<TABLE>
<CAPTION>
Exhibit Contract or Plan
------- ----------------------------------------------------------------------
<C> <S>
10.2 Deferred Directors Fee Agreement.
10.3 Incentive Reward Compensation Plan.
10.4 ServiceMaster Profit Sharing, Savings & Retirement Plan as amended and
restated effective January 1, 1987.
10.6 ServiceMaster 10-Plus Plan. See also Item 10.11. *
10.8 Directors Deferred Fees Plan (ServiceMaster Shares Alternative).
10.11 ServiceMaster 10-Plus Plan as amended September 3, 1991. *
10.13 ServiceMaster 1994 Non-Employee Directors Share Option Plan.**
10.15 ServiceMaster 1997 Share Option Plan. *
10.17 ServiceMaster 1998 Equity Incentive Plan (subject to shareholder approval).
10.20 ServiceMaster 1998 Non-Employee Directors
Discounted Stock Option Plan (subject to
shareholder approval).
10.21 ServiceMaster 1998 Long-Term Performance Award Plan (subject to
shareholder approval).
---------
* To be superceded by Item 10.17
** To be superceded by Item 10.20
</TABLE>
Page 17
<PAGE>
(b) Reports on Form 8-K filed during the last quarter of 1997
1. Current Report on Form 8-K filed by ServiceMaster Limited
Partnership on December 27, 1997.
Announcement of (i) the adoption by The ServiceMaster Company
of an Amended and Restated Certificate of Incorporation and
the filing thereof with the Secretary of State of the State of
Delaware; (ii) adoption by The ServiceMaster Company of
Bylaws, a Shareholders Rights Plan and an Agreement of Merger
and Reorganization as amended and restated as of October 3,
1997; and (iii) the filing by ServiceMaster Limited
Partnership of a certificate of merger with the Secretary of
State of the State of Delaware.
Financial Statements: none
2. Current Report on Form 8-K filed by ServiceMaster Limited
Partnership on December 29, 1997 on behalf of The
ServiceMaster Company.
Announcement that The ServiceMaster Company had become the
parent entity in the ServiceMaster enterprise effective
December 26, 1997 at 11:59 P.M., Eastern Standard Time, that
limited partner units of ServiceMaster Limited Partnership had
converted to shares of common stock of The ServiceMaster
Company on a one-for-one basis, and that no exchange of
certificates for partnership units for certificates for shares
of common stock is required.
Financial Statements: none
Certain Undertakings With Respect To Registration Statements on Form S-8
For the purpose of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into each of the Registrant's Registration Statements on Form S-8,
including No. 33-19763 and No. 2-75851:
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Page 18
<PAGE>
SCHEDULE VIII
THE SERVICEMASTER COMPANY
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Additions Deductions
Balance at Charged to Write-offs of
Beginning of Costs and Uncollectible Balance at
Description Period Expenses Accounts End of Period
<S> <C> <C> <C> <C>
AS OF DECEMBER 31, 1997:
Allowance for doubtful accounts--
Accounts receivable (current) $24,117 20,183 16,756 $27,544
------- ------- ------- -------
Notes receivable (current) $ 2,170 2,507 0 $ 4,677
------- ------- ------- --------
AS OF DECEMBER 31, 1996:
Allowance for doubtful accounts--
Accounts receivable (current) $18,029 20,517 14,429 $24,117
------- ------ ------ -------
Notes receivable (current) $ 2,439 59 328 $ 2,170
------- ------- ------ --------
AS OF DECEMBER 31, 1995
Allowance for doubtful accounts--
Accounts receivable (current) $17,610 16,878 16,459 $18,029
------- ------- ------ -------
Notes receivable (current) $ 2,504 350 415 $ 2,439
------- ------- ------ -------
</TABLE>
Page 19
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of ServiceMaster Limited Partnership:
We have audited in accordance with generally accepted auditing standards, the
financial statements included in The ServiceMaster Company's annual report to
shareholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated January 26, 1998. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole. The schedules included
in Part IV in the Form 10-K are the responsibility of the Company's management
and are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
supporting schedules have been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
January 26, 1998
Page 20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
THE SERVICEMASTER COMPANY
Registrant
Date: March 20, 1998 By /s/ C. WILLIAM POLLARD
-----------------------
C. William Pollard
Chairman
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in their capacities and on the date indicated.
<TABLE>
<CAPTION>
Signature Title Date
<C> <S> <C>
/s/ C. WILLIAM POLLARD Chairman and Director March 20, 1998
- ---------------------------
C. William Pollard
/s/ CARLOS H. CANTU President and Chief Executive March 20, 1998
- ---------------------------
Carlos H. Cantu Officer and Director
/s/ CHARLES W. STAIR Vice Chairman and Director March 20, 1998
- ---------------------------
Charles W. Stair
/s/ STEVEN C. PRESTON Senior Vice President and March 20, 1998
- ---------------------------
Steven C. Preston Chief Financial Officer (Principal
Financial Officer)
/s/ DEBORAH A. O'CONNOR Vice President and March 20, 1998
- -----------------------
Deborah A. O'Connor Controller (Principal
Accounting Officer)
/s/ PAUL W. BEREZNY, JR. Director March 20, 1998
Paul W. Berezny, Jr.
Page 21
<PAGE>
/s/ HENRY O. BOSWELL Director March 20, 1998
- ----------------------
Henry O. Boswell
/s/ BRIAN GRIFFITHS Director March 20, 1998
Brian Griffiths
/s/SIDNEY E. HARRIS Director March 20, 1998
Sidney E. Harris
/s/ HERBERT P. HESS Director March 20, 1998
- ---------------------------
Herbert P. Hess
/s/ MICHELE M. HUNT Director March 20, 1998
- ---------------------------
Michele M. Hunt
/s/ GUNTHER H. KNOEDLER Director March 20, 1998
- -----------------------
Gunther H. Knoedler
/s/ JAMES D. McLENNAN Director March 20, 1998
- ----------------------
James D. McLennan
/s/ VINCENT C. NELSON Director March 20, 1998
- ----------------------
Vincent C. Nelson
/s/ DALLEN W. PETERSON Director March 20, 1998
- ---------------------------
Dallen W. Peterson
Page 22
<PAGE>
/s/ STEVEN S REINEMUND Director March 20, 1998
- --------------------------------
Steven S Reinemund
/s/ PHILLIP B. ROONEY Vice Chairman and Director March 20, 1998
- -------------------------------
Phillip B. Rooney
/s/ BURTON E. SORENSEN Director March 20, 1998
- ------------------------------------
Burton E. Sorensen
/s/ DAVID K. WESSNER Director March 20, 1998
- -------------------------------
David K. Wessner
</TABLE>
Page 23
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of
Exhibit
1.1 Underwriting Agreement dated as of August 6, 1997 among The
ServiceMaster Company and J.P. Morgan Securities Inc., is
incorporated by reference to Exhibit 1.1 to the ServiceMaster
Limited Partnership, The ServiceMaster Company Limited Partnership
and ServiceMaster Incorporated of Delaware Registration Statement
on Form S-3 filed with the Securities and Exchange Commission on
July 28, 1997 (the "July 28, 1997 Registration Statement").
1.2 Underwriting Agreement dated as of February 25, 1998 among The
ServiceMaster Company and J.P. Morgan Securities Inc., Goldman,
Sachs & Co., BancAmerica Robertson Stephens, First Chicago Capital
Markets, Inc. and NationsBanc Mongtomgery Securities L.L.C. is
incorporated by reference to Exhibit 1 to the Current Report on
Form 8-K as filed by The ServiceMaster Company on February 27, 1998
(the "Company February 27, 1998 8-K").
2.1 Acquisition Agreement dated December 5, 1996 by and among
ServiceMaster Limited Partnership, ServiceMaster Acquisition
Corporation and Barefoot Inc. is incorporated by reference to
Annex A-1 to the Offering Circular/Prospectus included as part of
the Registration Statement on Form S-4 as filed by ServiceMaster
Limited Partnership on January 17, 1997 (SEC Registration No.
333-17759).
2.2 Plan and Agreement of Merger dated December 5, 1996 by and among
ServiceMaster Limited Partnership, ServiceMaster Acquisition
Corporation and Barefoot Inc. is incorporated by reference to
Annex A-2 to the Offering Circular/Prospectus included as part of
the Registration Statement on Form S-4 as filed by ServiceMaster
Limited Partnership on January 17, 1997 (SEC Registration No.
333-17759).
2.3 Merger and Reorganization Agreement as amended and restated on
October 3, 1997 is incorporated by reference to Exhibit 5 to the
Current Report on Form 8-K as filed by ServiceMaster Limited
Partnership on December 29, 1997 (the "SMLP December 29, 1997
8-K") and to Exhibit 5 to the Current Report on Form 8-K as filed
by The ServiceMaster Company on Form 8-K on February 26, 1998
second of three 8-K reports filed on that date (the "Company
February 26, 1998 8-K, No. 2").
2.4 Certificate of Merger of NewSub B, Inc. into ServiceMaster Limited
Partnership in accordance with Section 17-211 of the Delaware
Revised Uniform Limited Partnership Act (the "Reincorporating
Merger"), the filing of which was certified by the Secretary of
State of the State of Delaware on December 17, 1997 and the
effective date and time of which was December 26, 1997 at 11:59
P.M., Eastern Standard Time.
2.5 Certificate of Merger of ServiceMaster Limited Partnership and The
ServiceMaster Company Limited Partnership with and into The
ServiceMaster Company, a Delaware corporation, in accordance with
the General Corporation Law of the State of Delaware, the filing
of which was certified by the Secretary of State of the State of
Delaware on December 18, 1997 and the effective date and time of
which was January 1, 1998 at 12:01 A.M., Eastern Standard Time.
3.1 Amended and Restated Certificate of Incorporation of The
ServiceMaster Company, a Delaware corporation, as filed with the
Secretary of State, State of Delaware, on November 6, 1997 is
incorporated by reference to Exhibit 1 to the SMLP December 29,
1997 8-K and to Exhibit 1 to the Company February 26, 1998 8-K,
No. 2.
Page 24
<PAGE>
3.2 Bylaws of The ServiceMaster Company as adopted on November 3, 1997
are incorporated by reference to Exhibit 2 to the SMLP December
29, 1997 8-K and to Exhibit 2 to the Company February 26, 1998
8-K, No. 2.
4.1 Shareholder Rights Agreement between The ServiceMaster Company and
the Harris Trust and Savings Bank as adopted on December 12,1997
is incorporated by reference to Exhibit 3 to the SMLP December 29,
1997 8-K and to Exhibit 3 to the Company February 26, 1998 8-K,
No. 2.
4.2 The ServiceMaster Company: Certificate of Designation, Preferences
and Rights of Junior Participating Preferred Stock, Series A, is
incorporated by reference to Exhibit 4 to the SMLP December 29,
1997 8-K and to Exhibit 4 to the Company February 26, 1998 8-K,
No. 2.
4.3 Indenture dated as of August 15, 1997 among The ServiceMaster
Company (as successor to ServiceMaster Limited Partnership and The
ServiceMaster Company Limited Partnership) and the Harris Trust and
Savings Bank as trustee is incorporated by reference to Exhibit 4.1
to the July 28, 1997 Registration Statement.
4.4 First Supplemental Indenture dated as of August 15, 1997 among The
ServiceMaster Company (as successor to ServiceMaster Limited
Partnership and The ServiceMaster Company Limited Partnership) and
the Harris Trust and Savings Bank as trustee.
4.5 Second Supplemental Indenture dated as of January 1, 1998 among
The ServiceMaster Company (as successor to ServiceMaster Limited
Partnership and The ServiceMaster Company Limited Partnership) and
the Harris Trust and Savings Bank as trustee is incorporated by
reference to Exhibit 2 to the Current Report on Form 8-K as filed
by The ServiceMaster Company on Form 8-K on February 26, 1998
first of three 8-K reports filed on that date (the "Company
February 26, 1998 8-K, No. 1").
4.6 Third Supplemental Indenture dated as of March 2, 1998 among The
ServiceMaster Company and the Harris Trust and Savings Bank as
trustee is incorporated by reference to Exhibit 4.3 to the Current
Report on Form 8-K as filed by The ServiceMaster Company on
February 27, 1998 (the "Company February 27, 1998 8-K").
4.7 Form of 6.95% Note due August 14, 2007 is incorporated by reference to
Exhibit 4.1 to the July 28, 1997 Registration Statement.
4.8 Form of 7.45% Note due August 14, 2027 is incorporated by reference to
Exhibit 4.2 to the July 28, 1997 Registration Statement.
4.9 Form of 7.10% Note due March 1, 2018 is incorporated by reference to
Exhibit 4.1 to the Company February 27, 1998 8-K.
4.10 Form of 7.25% Note due March 1, 2038 is incorporated by reference to
Exhibit 4.2 to the Company February 27, 1998 8-K.
Page 25
<PAGE>
10.1 $300,000,000 Credit Agreement between ServiceMaster and certain
Lenders dated August 31, 1995 and amendment thereto dated October
15, 1996 is incorporated by reference to Exhibit 10.33 to the
Registration Statement on Form S-4 as filed by ServiceMaster
Limited Partnership on January 17, 1997 (SEC Registration No.
333-17759).
10.2 $750,000,000 Five-Year Credit Agreement dated as of April 1, 1997
among The ServiceMaster Company Limited Partnership, the First
National Bank of Chicago and Morgan Guaranty Trust Company.
10.3 $250,000,000 364-Day Credit Agreement dated as of April 1, 1997
among The ServiceMaster Company Limited Partnership, the First
National Bank of Chicago and Morgan Guaranty Trust Company.
10.4 Form of Deferred Directors Fee Agreement as assumed by The ServiceMaster
Company in the Reincorporating Merger is incorporated by reference to
Exhibit 10(c)(4) to the Annual Report on Form 10-K for the year ended
December 31, 1980 as filed by ServiceMaster Limited Partnership (the "1980
10-K").
10.5 Incentive Reward Compensation Plan as assumed by The ServiceMaster
Company in the Reincorporating Merger is incorporated by reference
to Exhibit 10(c)(6) to the 1980 10-K.
10.6 ServiceMaster Profit Sharing, Savings and Retirement Plan as
assumed by The ServiceMaster Company in the Reincorporating Merger
amended and restated effective January 1, 1987 is incorporated by
reference to the exhibit so captioned to the Annual Report on Form
10-K for the year ended December 31, 1987 as filed by
ServiceMaster Limited Partnership (the "1987 10-K").
10.7 The Terminix International Company L.P. Profit Sharing Retirement
Plan (previously known as Cook International, Inc. Profit Sharing
Retirement Plan) effective January 1, 1984; Amendment No. One to
The Terminix International Company L.P. Profit Sharing Retirement
Plan effective January 1, 1986 and April 1, 1986; Amendment No.
Two, effective April 1, 1986; Amendment No. Three, effective
January 1, 1987 and January 1, 1988; The Terminix International
Company L.P. Profit Sharing Retirement Trust, all of which are
incorporated by reference to Exhibit 10.15 to the 1987 10-K.
10.8 ServiceMaster 10-Plus Plan as assumed by The ServiceMaster Company
in the Reincorporating Merger is incorporated by reference to
Exhibit 4.2 to the ServiceMaster Limited Partnership Registration
Statement on Form S-8 (No. 33-39148) filed with the SEC on February
26, 1991 (the "10-Plus Registration Statement").
10.9 Form of Option Agreement for the ServiceMaster 10-Plus Plan is
incorporated by reference to Exhibit 4.3 to the 10-Plus
Registration Statement.
10.10 Form of Directors Deferred Fees Plan (ServiceMaster Shares
Alternative) as assumed by The ServiceMaster Company in the
Reincorporating Merger is incorporated by reference to Exhibit
10.18 to the Annual Report on Form 10-K for the year ended December
31, 1990 (the "1990 10-K")
10.11 Form of Directors Deferred Fees Agreement (ServiceMaster Shares
Alternative) as assumed by The ServiceMaster Company in the
Reincorporating Merger is incorporated by reference to Exhibit
10.19 of the 1990 10-K.
Page 26
<PAGE>
10.12Form of ServiceMaster Deferred Fees Plan Trust is incorporated by reference
to Exhibit 10.20 of the 1990 10-K.
10.13 ServiceMaster 10-Plus Plan as amended September 3, 1991 and as
assumed by The ServiceMaster Company in the Reincorporating Merger
is incorporated by reference to Exhibit 10.21 to the Annual Report
on Form 10-K for the year ended December 31, 1991 (the "1991
10-K").
10.14Form of Option Agreement for the ServiceMaster 10-Plus Plan as amended
September 3, 1991 is incorporated by reference to Exhibit 10.22 to the 1991
10-K.
10.15 ServiceMaster 1994 Non-Employee Directors Share Option Plan as
assumed by The ServiceMaster Company in the Reincorporating Merger
is incorporated by reference to Exhibit 4.2 to the ServiceMaster
Limited Partnership Registration Statement on Form S-8 filed with
the Securities and Exchange Commission on October 5, 1994 (the
"Directors Share Plan Registration Statement").
10.16 Form of Option Agreement for the ServiceMaster 1994 Non-Employee
Director Share Option Plan is incorporated by reference to Exhibit
4.3 to the Directors Share Plan Registration Statement.
10.17 ServiceMaster 1997 Share Option Plan as assumed by The
ServiceMaster Company in the Reincorporating Merger is
incorporated by reference to Exhibit 10.28 to the Annual Report on
Form 10-K for the year ended December 31,1996 as filed by
ServiceMaster Limited Partnership (the "1996 10-K").
10.18Form of Option Agreement for the ServiceMaster 1997 Share Option Plan is
incorporated by reference to Exhibit 10.29 to the 1996 10-K.
10.19 ServiceMaster 1998 Equity Incentive Plan as adopted on December
11, 1997 (subject to shareholder approval) is incorporated by
reference to Exhibit A to the Definitive Proxy Statement for the
Registrant's May 1, 1998 Annual Meeting of Stockholders (the "1998
Proxy Statement").
10.20Form of Option Agreement for the ServiceMaster 1998 Equity Incentive Plan
(Non-Qualifying Stock Options)
10.21Form of Option Agreement for the ServiceMaster 1998 Equity Incentive Plan
(Incentive Stock Options)
10.22 ServiceMaster 1998 Non-Employee Directors Discounted Stock Option
Plan as adopted on December 11, 1997 (subject to shareholder
approval) is incorporated by reference to Exhibit B to the 1998
Proxy Statement.
10.23 ServiceMaster 1998 Long-Term Performance Award Plan as adopted on
December 11, 1997 (subject to shareholder approval) is
incorporated by reference to Exhibit C to the 1998 Proxy
Statement.
11 Exhibit regarding detail of income per share computation for each of the
three years ended December 31, 1997, 1996 and 1995 is incorporated by
reference to the footnote on page 39 of the 1997 Annual Report (defined in
Ex. 13).
13 The ServiceMaster Annual Report to Shareholders for the year ended
December 31, 1997 (the "1997 Annual Report"). The parts of the 1997
Annual Report which are expressly incorporated into this report by
reference shall be deemed filed with this report. All other parts
of the 1997 Annual Report are furnished for the information of the
Commission and are not filed with this report.
Page 27
<PAGE>
21 Subsidiaries of Registrant
23 Consent of Arthur Andersen LLP
27 Financial Data Schedule (EDGAR filing only)
99.1 Amended and Restated Agreement of Limited Partnership for
ServiceMaster Consumer Services Limited Partnership dated November
8, 1990 is incorporated by reference to Exhibit 4.4 to the Current
Report on Form 8-K as filed by ServiceMaster Limited Partnership on
November 21, 1990.
99.2 Amended and Restated Agreement of Limited Partnership of
ServiceMaster Management Services Limited Partnership dated
December 1991 is incorporated by reference to Exhibit 28.10 to the
1991 10-K.
99.3 Amended and Restated Agreement of Limited Partnership of
ServiceMaster Consumer Services Limited Partnership effective June
30, 1992 is incorporated by reference to Exhibit 28.12 to the
Annual Report on Form 10-K for the year ended December 31,1992 as
filed by ServiceMaster Limited Partnership.
Page 28
<PAGE>
Graphics Appendix
This appendix describes the graphics which could not be put into
electronic format and which have been filed with the Securities and Exchange
Commission as a paper filing.
A Performance Graph is set forth on page 28 of the Company's definitive
proxy statement for the Annual Meeting of Stockholders to be held on May 1, 1998
which consists of a line graph which compares the yearly percentage change in
ServiceMaster's cumulative total shareholder return on its limited partner
shares (computed in accordance with the Item 302(d) of Reg. S-K) with the
cumulative return on the stocks of the companies within the S&P 500 Index and
with the Dow Jones Consumer Services Index over the five year period from
January 1, 1993 to December 31, 1997. The chart shows that ServiceMaster
outperformed both indices in 1993, 1994, 1995, 1996 and 1997 by wide margins
over the last four years.
Page 29
Exhibit 2.4 to 1997 Form 10-K
CERTIFICATE OF MERGER
OF
NEWSUB B, INC.
(a Delaware corporation)
INTO
SERVICEMASTER LIMITED PARTNERSHIP
(a Delaware limited partnership)
in accordance with Section 17-211 of the Delaware Revised
Uniform Limited Partnership Act
* * * * *
SERVICEMASTER LIMITED PARTNERSHIP, a limited partnership duly organized
and existing under and by virtue of the laws of the State of Delaware, desiring
to merge NewSub B, a Delaware corporation, with and into itself pursuant to the
provisions of Section 17-211 of the Delaware Revised Uniform Limited Partnership
Act, DOES HEREBY CERTIFY as follows:
First: The name and state of organization of each constituent
business entity of the merger (the "Merger") are as follows:
Name State of Organization
ServiceMaster Limited Partnership Delaware
NewSub B, Inc. Delaware
Second: A Merger and Reorganization Agreement (the "Merger Agreement")
has been approved, adopted, certified, executed and acknowledged by each
constituent business entity in accordance with Section 263 of the General
Corporation Law of the State of Delaware and in accordance with Section 17-211
of the Delaware Revised Uniform Limited Partnership Act.
Third: The name of the surviving business entity of the Merger is
ServiceMaster Limited Partnership (the "Surviving Business Entity").
Fourth: The merger shall be effective on December 26, 1997 at 11:59
P.M., Eastern Standard Time.
<PAGE>
Fifth: Anything herein or elsewhere to the contrary notwithstanding,
the Merger Agreement may be amended or terminated and abandoned by the
constituent business entities at any time prior to the date of filing the
Certificate of Merger with the Secretary of State of the State of Delaware.
Sixth: An executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Business Entity, the address of
which is: One ServiceMaster Way, Downers Grove, Illinois 60515.
Seventh: A copy of the Merger Agreement will be furnished by the
Surviving Business Entity on request and without cost to any person holding any
interest in the constituent business entities.
* * * * *
IN WITNESS WHEREOF, the undersigned, for the purposes of effectuating
the Merger of the constituent business entities pursuant to the Delaware Revised
Uniform Limited Partnership Act, under penalties of perjury does hereby declare
and certify that this is the act and deed of ServiceMaster Limited Partnership
and the facts stated herein are true and accordingly has hereunto signed this
Certificate of Merger this 17th day of December 1997.
SERVICEMASTER LIMITED PARTNERSHIP
By: ServiceMaster Management Corporation
(managing general partner)
ATTEST: By: /s/ Vernon T. Squires
Its Sr. Vice President and
General Counsel
/s/ S. D. Baker
Secretary
Exhibit 2.5 to 1997 Form 10-K
CERTIFICATE OF MERGER
OF
SERVICEMASTER LIMITED PARTNERSHIP
(a Delaware limited partnership)
AND
THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP
(a Delaware limited partnership)
WITH AND INTO
THE SERVICEMASTER COMPANY
in accordance with Section 263 General Corporation Law
of the State of Delaware
* * * * *
THE SERVICEMASTER COMPANY, a corporation duly organized and existing
under and by virtue of the laws of the State of Delaware, desiring to merge
ServiceMaster Limited Partnership, a Delaware limited partnership, and The
ServiceMaster Company Limited Partnership, a Delaware limited partnership, with
and into itself pursuant to the provisions of Section 263 of the General
Corporation Law of the State of Delaware, DOES HEREBY CERTIFY as follows:
First: The name and state of organization of each constituent
business entity of the merger (the "Merger") is as follows:
Name State of Organization
ServiceMaster Limited Partnership Delaware
The ServiceMaster Company
Limited Partnership Delaware
The ServiceMaster Company Delaware
Second: A Merger and Reorganization Agreement (the "Merger Agreement")
has been approved, adopted, certified, executed and acknowledged by each
constituent business entity in accordance with Section 263 of the General
Corporation Law of the State of Delaware and in accordance with Section 17-211
of the Delaware Revised Uniform Limited Partnership Act.
<PAGE>
Third: The name of the surviving business entity of the Merger is The
ServiceMaster Company (the "Surviving Business Entity").
Fourth: The Certificate of Incorporation of The ServiceMaster Company,
a Delaware corporation, which is surviving the merger, shall be the Certificate
of Incorporation of the Surviving Business Entity.
Fifth: The merger shall be effective on January 1, 1998 at 12:01 A.M.,
Eastern Standard Time.
Sixth: Anything herein or elsewhere to the contrary notwithstanding,
the Merger Agreement may be amended or terminated and abandoned by the
constituent business entities at any time prior to the date of filing the
Certificate of Merger with the Secretary of State of the State of Delaware.
Seventh: An executed copy of the Merger Agreement is on file at the
principal place of business of the Surviving Business Entity, the address of
which is: One ServiceMaster Way, Downers Grove, Illinois 60515.
Eighth: A copy of the Merger Agreement will be furnished by the
Surviving Business Entity on request and without cost to any person holding any
interest in the constituent business entities.
* * * * *
IN WITNESS WHEREOF, the undersigned, for the purposes of effectuating
the Merger of the constituent business entities pursuant to the General
Corporation Law of the State of Delaware, under penalties of perjury does hereby
declare and certify that this is the act and deed of The ServiceMaster Company
and the facts stated herein are true and accordingly has hereunto signed this
Certificate of Merger this 18th day of December 1997.
THE SERVICEMASTER COMPANY
ATTEST: By: /s/ Vernon T. Squires
Its Sr. Vice President
and General Counsel
/s/William T. McCormick
Assistant Secretary
Exhibit 4.4 to 1997 Form 10-K
THE SERVICEMASTER COMPANY
LIMITED PARTNERSHIP
as the Company,
SERVICEMASTER LIMITED PARTNERSHIP
as the Guarantor,
and
HARRIS TRUST AND SAVINGS BANK
as Trustee
FIRST SUPPLEMENTAL INDENTURE
Dated as of August 15, 1997
(Supplemental to Indenture Dated as of August 15, 1997)
<PAGE>
FIRST SUPPLEMENTAL INDENTURE dated as of August 15, 1997 among The
ServiceMaster Company Limited Partnership, a Delaware limited partnership, as
the Company (hereinafter called the "Company"), ServiceMaster Limited
Partnership, a Delaware limited partnership, as the Guarantor (hereinafter
called the "Guarantor"), and Harris Trust and Savings Bank, an Illinois banking
corporation, as Trustee (hereinafter called the "Trustee").
WHEREAS, each of the Company and the Guarantor executed and delivered
an Indenture dated as of August 15, 1997 (hereinafter called the "Original
Indenture") between the Company and the Trustee providing for the issuance from
time to time of its debentures, notes or other evidences of indebtedness in one
or more series (hereinafter called the "Securities"); and
WHEREAS, Section 10.01(5) of the Original Indenture provides that the
Original Indenture may be amended without the consent of the holders of the
Securities in order to establish the form or forms or terms of Securities of any
series or of the coupons appertaining to such Securities pursuant to Section
2.03 of the Original Indenture;
WHEREAS, the Guarantor desires to make the Guarantees (as defined in
the Original Indenture) as provided in the Original Indenture; and
WHEREAS, all conditions and requirements necessary to make this First
Supplemental Indenture a valid and binding instrument in accordance with its
terms and the terms of the Original Indenture have been satisfied.
NOW, THEREFORE:
In consideration of the premises and of the mutual covenants herein
contained, and in order to provide for payment of the principal of (and premium,
if any) and interest on all of the Securities, according to their tenor, the
Company, the Guarantor and the Trustee hereby covenant and agree:
SECTION 1. For all purposes of this First Supplemental Indenture,
except as otherwise expressly provided or unless the context otherwise requires,
all capitalized terms used and not defined herein that are defined in the
Original Indenture shall have the meanings assigned to them in the Original
Indenture.
Section 1.01 of the Indenture is amended as follows: The following
definitions supplement the definitions in Section 1.01 of the Original
Indenture.
Page 1
<PAGE>
"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 2007 Notes or the 2027 Notes (each as
herein defined), 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 2007 Notes or the 2027 Notes, as the case may be.
"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 redemption price.
"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.
"Managing General Partner" means ServiceMaster Management Corporation, a
Delaware corporation.
"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
(expressed 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.
Page 2
<PAGE>
"Remaining Scheduled Payments" means, with respect to the 2007 Notes
and the 2027 Notes, as the case may be, 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.
"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.
SECTION 2. Pursuant to Sections 2.01 and 2.03 of the Original
Indenture, the Company shall issue and the Guarantor shall guarantee (pursuant
to Article 4 of the Original Indenture) the following series of Securities, the
form of each Security of each series to be substantially in the form set forth
in Exhibits 1 and 2:
(a) A series of notes under the Original Indenture designated as the
6.95% Notes due August 15, 2007 (the "2007 Notes"). The series of 2007 Notes
will be limited to $100,000,000 aggregate principal amount and will mature on
August 15, 2007 at 100% of their principal amount, unless earlier redeemed. The
2007 Notes will be issuable in denominations of $1,000 or integral multiples
thereof. Each 2007 Note will bear interest from August 19, 1997 at the rate of
6.95% per annum, payable semi-annually (to holders of record at the close of
business on February 1 or August 1 immediately preceding the interest payment
date) on February 15 and August 15 of each year beginning February 15, 1998. The
2007 Notes will be redeemable, at any time prior to maturity at the option of
the Company, in whole or in part, upon not less than 30 or more than 60 days
prior written notice, 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 thereon discounted to the redemption date, on a semi-annual
basis, at the Treasury Yield plus 15 basis points, 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 that is on
or prior to the date of redemption will be payable to holders who are holders of
record of such notes as of the close of business on the fifteenth day next
preceding such interest payment date. The 2007 Notes will be issued only as
Registered Global Securities, without coupons, held by the Depositary, which
will be the Depository Trust Company, and will not be issued in definitive
registered form except pursuant to Section 2.07 of the Original Indenture.
Page 3
<PAGE>
(b) A series of notes under the Original Indenture designated as the
2027 Notes due August 15, 2027 (the "2027 Notes"). The series of 2027 Notes will
be limited to $200,000,000 aggregate principal amount and will mature on August
15, 2027 at 100% of their principal amount, unless earlier redeemed. The 2027
Notes will be issuable in denominations of $1,000 or integral multiples thereof.
Each 2027 Note will bear interest from August 19, 1997 at the rate of 7.45% per
annum, payable semi-annually (to holders of record at the close of business on
the February 1 or August 1 immediately preceding the interest payment date) on
February 15 and August 15 of each year beginning February 15, 1998. The 2027
Notes will be redeemable, at any time prior to maturity at the option of the
Company, in whole or in part, upon not less than 30 or more than 60 days prior
written notice, 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 thereon discounted to the redemption date, on a semi-annual
basis, at the Treasury Yield plus 20 basis points, 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 that is on
or prior to the date of redemption will be payable to holders who are holders of
record of such notes as of the close of business on the fifteenth day next
preceding such interest payment date. The 2027 Notes will be issued only as
Registered Global Securities, without coupons, held by the Depositary, which
will be the Depository Trust Company, and will not be issued in definitive
registered form except pursuant to Section 2.07 of the Original Indenture.
SECTION 3. Nothing in this First Supplemental Indenture, expressed or
implied, is intended or shall be construed to confer upon or give to any person
or corporation, other than the parties hereto and the holders of the 2007 Notes
and 2027 Notes any right, remedy or claim under or by reason of this First
Supplemental Indenture or any covenant, stipulation, promise or agreement
contained herein; all the covenants, stipulations, promises and agreements
contained herein being for the sole and exclusive benefit of the parties hereto
and their successors, and the holders from time to time of the Securities.
SECTION 4. This First Supplemental Indenture shall form a part of the
Original Indenture for all purposes and every holder of Securities heretofore or
hereafter authenticated and delivered under the Original Indenture shall be
bound hereby. The Original Indenture as supplemented by this First Supplemental
Indenture is hereby in all respects ratified and confirmed.
Page 4
<PAGE>
SECTION 5. The Trustee, for itself and its successor or successors,
accepts the trust of the Original Indenture as amended by this First
Supplemental Indenture, and agrees to perform the same, but only upon the terms
and conditions set forth in the Original Indenture, including the terms and
provisions defining and limiting the liabilities and responsibilities of the
Trustee, which terms and provisions shall in like manner define and limit its
liabilities and responsibilities in the performance of the trust created by the
Original Indenture, and, without limiting the generality of the foregoing, the
recitals contained herein shall be taken as the statements of the Company and
the Guarantor, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
First Supplemental Indenture other than as to the validity of its execution and
delivery by the Trustee.
SECTION 6. This First Supplemental Indenture may be executed in any
number of counterparts, each of which shall be an original; but such
counterparts shall together constitute but one and the same instrument.
Page 5
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture to be duly executed, all as of the date first written above.
The ServiceMaster Company Limited
Partnership, as the Company
By ServiceMaster Management Corporation,
its General Partner
By: /s/
Title:
ServiceMaster Limited Partnership,
as the Guarantor
By ServiceMaster Management Corporation,
its General Partner
By: /s/
Title:
Harris Trust and Savings Bank,
as Trustee
By: /s/
Title:
Page 6
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF DUPAGE )
BEFORE ME, the undersigned authority, on this ___ day of August, 1997,
personally appeared ______________________, _______________________ of
ServiceMaster Management Corporation, the general partner of The ServiceMaster
Company Limited Partnership, a Delaware limited partnership (the "Company"),
known to me (or proved to me by introduction upon the oath of a person known to
me) to be the person and officer whose name is subscribed to the foregoing
instrument, and acknowledged to me that he/she executed the same as the act of
such general partner on behalf of the Company for the purposes and consideration
herein expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS ____ DAY OF AUGUST, 1997.
(SEAL)
NOTARY PUBLIC, STATE OF ILLINOIS
Print Name:
Commission Expires:
STATE OF ILLINOIS )
)
COUNTY OF DUPAGE )
BEFORE ME, the undersigned authority, on this ___ day of August, 1997,
personally appeared _______________________, _______________________ of
ServiceMaster Management Corporation, the general partner of ServiceMaster
Limited Partnership, a Delaware limited partnership (the "Guarantor"), known to
me (or proved to me by introduction upon the oath of a person known to me) to be
the person and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same as the act of such general
partner on behalf of the Guarantor for the purposes and consideration herein
expressed and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL THIS _____ DAY OF AUGUST, 1997.
(SEAL)
NOTARY PUBLIC, STATE OF ILLINOIS
Print Name:
Commission Expires:
Page 7
<PAGE>
STATE OF ILLINOIS )
)
COUNTY OF COOK )
BEFORE ME, the undersigned authority, on this ___ day of August, 1997,
personally appeared _______________________, _______________________ of Harris
Trust and Savings Bank, an Illinois banking corporation, known to me (or proved
to me by introduction upon the oath of a person known to me) to be the person
and officer whose name is subscribed to the foregoing instrument, and
acknowledged to me that he/she executed the same as the act of such trust for
the purposes and consideration herein expressed and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL THIS _____ DAY OF AUGUST, 1997.
(SEAL)
NOTARY PUBLIC, STATE OF ILLINOIS
Print Name:
Commission Expires:
Page 8
<PAGE>
[FORM OF FACE OF NOTE]
Exhibit 1
No. $
The ServiceMaster Company
Limited Partnership
% Note
Due [ ], 2007
The ServiceMaster Company Limited Partnership, a Delaware limited
partnership (the "Company", which term includes any successor corporation under
the Indenture hereinafter referred to), for value received, hereby promises to
pay to , or registered assigns, at the office or agency of the Company in New
York, New York, the principal sum of
on , in the coin or currency of the United States, and to pay
interest, semi-annually on , and of each year, commencing
, on said principal sum at said office or agency, in like coin
or currency, at the rate per annum specified in the title of this Note, from the
or the
, as the case may be, next preceding the date of this Note to
which interest has been paid or duly provided for, unless the date hereof is a
date to which interest has been paid or duly provided for, in which case from
the date of this Note, or unless no interest has been paid or duly provided for
on these Notes, in which case from , until payment of said principal sum has
been made or duly provided for; provided, that payment of interest may be made
at the option of the Company by check mailed to the address of the person
entitled thereto as such address shall appear on the Security Register or by
wire transfer as provided in the Indenture. Notwithstanding the foregoing, if
the date hereof is after the first day of or , as the case may be, and before
the following
or , this Note shall bear interest from such or ; provided,
that if the Company shall default in the payment of interest due on such or ,
then this Note shall bear interest from the next preceding or , to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for on these Notes, from
. The interest so payable on any or will, subject to certain
Exh. 1, Page 1
<PAGE>
exceptions provided in the Indenture referred to on the reverse hereof, be paid
to the person in whose name this Note is registered at the close of business on
or , as the case may be, next preceding such or , whether or
not such day is a Business Day.
Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee under the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, The ServiceMaster Company Limited Partnership has
caused this instrument to be signed manually or by facsimile by its duly
authorized officers.
Dated:
THE SERVICEMASTER COMPANY
LIMITED PARTNERSHIP
By ServiceMaster Management Corporation,
its General Partner
By
Name:
Title:
By
Name:
Title:
Attest:
Exh. 1, Page 2
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
Dated: Harris Trust and Savings Bank,
as Trustee
By
Authorized Signatory
Exh. 1, Page 3
<PAGE>
[FORM OF GUARANTEE]
ServiceMaster Limited Partnership (the "Guarantor") hereby
unconditionally guarantees to the holder of this Note duly authenticated and
delivered by the Trustee, the due and punctual payment of the principal, and
premium, if any, of (including any amount in respect of original issue
discount), and interest (including, in the event the Company defaults on a
payment of interest on the Securities, defaulted interest plus (to the extent
lawful) any interest payable on the defaulted interest), if any (together with
any additional amounts payable pursuant to the terms of this Note), on this Note
and the due and punctual payment of the sinking fund payments, if any, and
analogous obligations, if any, provided for pursuant to the terms of this Note,
when and as the same shall become due and payable, whether at maturity or upon
redemption or upon declaration of acceleration or otherwise according to the
terms of this Note and of the Indenture. In case of default by the Company in
the payment of any such principal (including any amount in respect of original
issue discount), interest (including, in the event the Company defaults on a
payment of interest on the Securities, defaulted interest plus (to the extent
lawful) any interest payable on the defaulted interest), if any (together with
any additional amounts payable pursuant to the terms of this Note), sinking fund
payment, or analogous obligation, the Guarantor agrees duly and punctually to
pay the same. The Guarantor hereby agrees that its obligations hereunder shall
be absolute and unconditional irrespective of any extension of the time for
payment of this Note, any modification of this Note, any invalidity,
irregularity or unenforceability of this Note or the Indenture, any failure to
enforce the same or any waiver, modification or indulgence granted to the
Company with respect thereto by the holder of this Note or the Trustee, or any
other circumstances which may otherwise constitute a legal or equitable
discharge of a surety or guarantor. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Company, any right to require a demand or proceeding
first against the Company, protest or notice with respect to this Note or the
indebtedness evidenced thereby and all demands whatsoever, and covenants that
this guarantee will not be discharged as to this Note except by payment in full
of the principal of (including any amount payable in respect of original issue
discount), and interest (including, in the event the Company defaults on a
payment of interest on the Securities, defaulted interest plus (to the extent
lawful) any interest payable on the defaulted interest), if any (together with
any additional amounts payable pursuant to the terms of this Note), thereon.
Exh. 1, Page 4
<PAGE>
Upon making any payment hereunder, the Guarantor shall be subrogated to
the rights of a Holder against the Company with respect to such payment;
provided that the Guarantor shall not enforce any payment by way of subrogation
until all amounts of Principal of and interest on the Securities and all other
amounts payable by the Company under this Indenture have been paid in full.
This guarantee shall not be valid or become obligatory for any purpose
with respect to this Note until the certificate of authentication on this Note
shall have been signed by the Trustee.
IN WITNESS WHEREOF, ServiceMaster Limited Partnership has caused this
guarantee to be signed manually or by facsimile by its duly authorized officers.
SERVICEMASTER LIMITED PARTNERSHIP
By ServiceMaster Management Corporation,
its General Partner
By ________________________________
Name:
Title:
By ________________________________
Name:
Title:
Exh. 1, Page 5
<PAGE>
REVERSE OF NOTE
The ServiceMaster Company
Limited Partnership
% Note
Due [ ], 2007
This Note is one of a duly authorized issue of debentures, notes, bonds
or other evidences of indebtedness of the Company (hereinafter called the
"Securities") of the series hereinafter specified, all issued or to be issued
under and pursuant to an indenture dated as of August 15, 1997 (as supplemented
by the First Supplemental Indenture dated as of August 15, 1997, the
"Indenture"), among the Company, ServiceMaster Limited Partnership, as Guarantor
and Harris Trust and Savings Bank, as Trustee (herein called the "Trustee"), to
which Indenture and all indentures supplemental thereto and all terms of a
particular series of Securities established pursuant to Section 2.03 of the
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the Holders of the Securities. The Securities may be issued in one
or more series, which different series may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption provisions (if any), may
be subject to different sinking, purchase or analogous funds (if any) and may
otherwise vary as in the Indenture provided. This Note is one of a series
designated as the % Notes Due [ ], 2007 of the Company, limited in aggregate
principal amount to $100,000,000.
Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal and, to the
extent lawful, on overdue installments of interest at the rate per annum borne
by this Note. If a payment date is not a Business Day as defined in the
Indenture at a place of payment, payment may be made at that place on the next
succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.
In case an Event of Default as defined in the Indenture, with respect
to the % Notes [ ], 2007, shall have occurred and be continuing, the principal
hereof and the interest accrued hereon, if any, may be declared, and upon such
declaration shall become, due and payable in the manner, with the effect and
subject to the conditions provided in the Indenture.
Exh. 1, Page 6
<PAGE>
The Indenture contains provisions which provide that, without prior
notice to any Holders, the Company and the Trustee may amend the Indenture and
the Securities of any series with the written consent of the Holders of a
majority in aggregate principal amount of the outstanding Securities of all
series affected (all such series voting as one class), and the Holders of a
majority in aggregate principal amount of the outstanding Securities of all
series to be affected (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 Securities of such series; provided that, without the consent
of each Holder of the Securities of each series affected thereby, an amendment
or waiver, including a waiver of past defaults, 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 or the amount
thereof provable in bankruptcy, or change any place of payment where, or the
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 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 or 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 the Indenture governing supplemental indentures
with the consent of Securityholders 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.
It is also provided in the Indenture that, subject to certain
conditions, the Holders of at least a majority in aggregate principal amount of
the outstanding 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 Securities of such series and its consequences, except a Default
in the payment of principal of or interest on any Security 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 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.
Exh. 1, Page 7
<PAGE>
The Indenture provides that a series of Securities may include one or
more tranches (each a "tranche") of Securities, including Securities issued in a
periodic offering. The Securities of different tranches may have one or more
different terms, including authentication dates and public offering prices, but
all the Securities within each such tranche shall have identical terms,
including authentication date and public offering price. Notwithstanding any
other provision of the Indenture, subject to certain exceptions, with respect to
sections of the Indenture concerning the execution, authentication and terms of
the Securities, redemption of the Securities, Events of Default of the
Securities, defeasance of the Securities and amendment of the Indenture, if any
series of Securities includes more than one tranche, all provisions of such
sections applicable to any series of Securities shall be deemed equally
applicable to each tranche of any series of Securities in the same manner as
though originally designated a series unless otherwise provided with respect to
such series or tranche pursuant to a board resolution or a supplemental
indenture establishing such series or tranche.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note in the manner, at the place, at the respective times, at the rate
and in the coin or currency herein prescribed.
The Notes are issuable initially only in registered form without
coupons in denominations of $1,000 and any multiple of $1,000 at the office or
agency of the Company in the Borough of Manhattan, The City of New York, and in
the manner and subject to the limitations provided in the Indenture, but,
without the payment of any service charge, Notes may be exchanged for a like
aggregate principal amount of Notes of other authorized denominations.
The Notes will be redeemable, at any time prior to maturity at the
option of the Company, in whole or in part, upon not less than 30 or more than
60 days prior written notice, 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 thereon discounted to the redemption date, on a
semi-annual basis, at the Treasury Yield plus [____] basis points, 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 that is on or prior to the date of redemption will be payable to holders
who are holders of record of such notes as of the close of business on the
fifteenth day next preceding such interest payment date.
Exh. 1, Page 8
<PAGE>
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture, without charge except for any tax
or other governmental charge imposed in connection therewith.
The Company, the Guarantor, the Trustee and any agent of the Company or
the Trustee may deem and treat the registered Holder hereof as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and,
subject to the provisions hereof, interest hereon, and for all other purposes,
and neither the Company nor the Guarantor nor the Trustee nor any agent of the
Company, the Guarantor or the Trustee shall be affected by any notice to the
contrary.
No recourse under or upon any obligation, covenant or agreement of the
Company, the Guarantor or the Managing General Partner in the Indenture or any
indenture supplemental thereto or in any Note, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, stockholder, officer
or director, as such, past, present, or future, of the Company, the Guarantor or
the Managing General Partner or any successor corporation of any of them, either
directly or through the Company, the Guarantor or the Managing General Partner
or any successor corporation of any of them, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance hereof and as part of the consideration for the
issue hereof.
Terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.
Exh. 1, Page 9
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
[PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]
[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]
_______________________________________________
_______________________________________________
_______________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such Note on the books of the
Company, with full power of substitution in the premises.
Dated:
NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the within Note in every
particular without alteration or enlargement or any change
whatsoever.
Exh. 1, Page 10
<PAGE>
[FORM OF FACE OF NOTE]
Exhibit 2
No. $
The ServiceMaster Company
Limited Partnership
% Note
Due [ ], 2027
The ServiceMaster Company Limited Partnership, a Delaware limited
partnership (the "Company", which term includes any successor corporation under
the Indenture hereinafter referred to), for value received, hereby promises to
pay to , or registered assigns, at the office or agency of the Company in New
York, New York, the principal sum of
on , in the coin or currency of the United States, and to pay
interest, semi-annually on , and of each year, commencing
, on said principal sum at said office or agency, in like coin
or currency, at the rate per annum specified in the title of this Note, from the
or the
, as the case may be, next preceding the date of this Note to
which interest has been paid or duly provided for, unless the date hereof is a
date to which interest has been paid or duly provided for, in which case from
the date of this Note, or unless no interest has been paid or duly provided for
on these Notes, in which case from , until payment of said principal sum has
been made or duly provided for; provided, that payment of interest may be made
at the option of the Company by check mailed to the address of the person
entitled thereto as such address shall appear on the Security Register or by
wire transfer as provided in the Indenture. Notwithstanding the foregoing, if
the date hereof is after the first day of or , as the case may be, and before
the following
or , this Note shall bear interest from such or ; provided,
that if the Company shall default in the payment of interest due on such or ,
then this Note shall bear interest from the next preceding or , to which
Exh. 2, Page 1
<PAGE>
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for on these Notes, from
. The interest so payable on any or will, subject to certain
exceptions provided in the Indenture referred to on the reverse hereof, be paid
to the person in whose name this Note is registered at the close of business on
or , as the case may be, next preceding such or , whether or
not such day is a Business Day.
Reference is made to the further provisions of this Note set forth on
the reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place.
This Note shall not be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been manually signed by the
Trustee under the Indenture referred to on the reverse hereof.
IN WITNESS WHEREOF, The ServiceMaster Company Limited Partnership has
caused this instrument to be signed manually or by facsimile by its duly
authorized officers.
Dated:
THE SERVICEMASTER COMPANY
LIMITED PARTNERSHIP
By ServiceMaster Management Corporation,
its General Partner
By
Name:
Title:
By
Name:
Title:
Attest:
Exh. 2, Page 2
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
Dated:
Harris Trust and Savings Bank,
as Trustee
By
Authorized Signatory
Exh. 2, Page 3
<PAGE>
[FORM OF GUARANTEE]
ServiceMaster Limited Partnership (the "Guarantor") hereby
unconditionally guarantees to the holder of this Note duly authenticated and
delivered by the Trustee, the due and punctual payment of the principal, and
premium, if any, of (including any amount in respect of original issue
discount), and interest (including, in the event the Company defaults on a
payment of interest on the Securities, defaulted interest plus (to the extent
lawful) any interest payable on the defaulted interest), if any (together with
any additional amounts payable pursuant to the terms of this Note), on this Note
and the due and punctual payment of the sinking fund payments, if any, and
analogous obligations, if any, provided for pursuant to the terms of this Note,
when and as the same shall become due and payable, whether at maturity or upon
redemption or upon declaration of acceleration or otherwise according to the
terms of this Note and of the Indenture. In case of default by the Company in
the payment of any such principal (including any amount in respect of original
issue discount), interest (including, in the event the Company defaults on a
payment of interest on the Securities, defaulted interest plus (to the extent
lawful) any interest payable on the defaulted interest), if any (together with
any additional amounts payable pursuant to the terms of this Note), sinking fund
payment, or analogous obligation, the Guarantor agrees duly and punctually to
pay the same. The Guarantor hereby agrees that its obligations hereunder shall
be absolute and unconditional irrespective of any extension of the time for
payment of this Note, any modification of this Note, any invalidity,
irregularity or unenforceability of this Note or the Indenture, any failure to
enforce the same or any waiver, modification or indulgence granted to the
Company with respect thereto by the holder of this Note or the Trustee, or any
other circumstances which may otherwise constitute a legal or equitable
discharge of a surety or guarantor. The Guarantor hereby waives diligence,
presentment, demand of payment, filing of claims with a court in the event of
merger or bankruptcy of the Company, any right to require a demand or proceeding
first against the Company, protest or notice with respect to this Note or the
indebtedness evidenced thereby and all demands whatsoever, and covenants that
this guarantee will not be discharged as to this Note except by payment in full
of the principal of (including any amount payable in respect of original issue
discount), and interest (including, in the event the Company defaults on a
payment of interest on the Securities, defaulted interest plus (to the extent
lawful) any interest payable on the defaulted interest), if any (together with
any additional amounts payable pursuant to the terms of this Note), thereon.
Exh. 2, Page 4
<PAGE>
Upon making any payment hereunder, the Guarantor shall be subrogated to
the rights of a Holder against the Company with respect to such payment;
provided that the Guarantor shall not enforce any payment by way of subrogation
until all amounts of Principal of and interest on the Securities and all other
amounts payable by the Company under this Indenture have been paid in full.
This guarantee shall not be valid or become obligatory for any purpose
with respect to this Note until the certificate of authentication on this Note
shall have been signed by the Trustee.
IN WITNESS WHEREOF, ServiceMaster Limited Partnership has caused this
guarantee to be signed manually or by facsimile by its duly authorized officers.
SERVICEMASTER LIMITED PARTNERSHIP
By ServiceMaster Management Corporation,
its General Partner
By ________________________________
Name:
Title:
By ________________________________
Name:
Title:
Exh. 2, Page 5
<PAGE>
REVERSE OF NOTE
The ServiceMaster Company
Limited Partnership
% Note
Due [ ], 2027
This Note is one of a duly authorized issue of debentures, notes, bonds
or other evidences of indebtedness of the Company (hereinafter called the
"Securities") of the series hereinafter specified, all issued or to be issued
under and pursuant to an indenture dated as of August 15, 1997 (as supplemented
by the First Supplemental Indenture dated as of August 15, 1997, the
"Indenture"), among the Company, ServiceMaster Limited Partnership, as Guarantor
and Harris Trust and Savings Bank, as Trustee (herein called the "Trustee"), to
which Indenture and all indentures supplemental thereto and all terms of a
particular series of Securities established pursuant to Section 2.03 of the
Indenture reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the Holders of the Securities. The Securities may be issued in one
or more series, which different series may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption provisions (if any), may
be subject to different sinking, purchase or analogous funds (if any) and may
otherwise vary as in the Indenture provided. This Note is one of a series
designated as the % Notes Due [ ], 2027 of the Company, limited in aggregate
principal amount to $200,000,000.
Interest will be computed on the basis of a 360-day year of twelve
30-day months. The Company shall pay interest on overdue principal and, to the
extent lawful, on overdue installments of interest at the rate per annum borne
by this Note. If a payment date is not a Business Day as defined in the
Indenture at a place of payment, payment may be made at that place on the next
succeeding day that is a Business Day, and no interest shall accrue for the
intervening period.
In case an Event of Default as defined in the Indenture, with respect
to the % Notes Due [ ], 2027, shall have occurred and be continuing, the
principal hereof and the interest accrued hereon, if any, may be declared, and
upon such declaration shall become, due and payable in the manner, with the
effect and subject to the conditions provided in the Indenture.
Exh. 2, Page 6
<PAGE>
The Indenture contains provisions which provide that, without prior
notice to any Holders, the Company and the Trustee may amend the Indenture and
the Securities of any series with the written consent of the Holders of a
majority in aggregate principal amount of the outstanding Securities of all
series affected (all such series voting as one class), and the Holders of a
majority in aggregate principal amount of the outstanding Securities of all
series to be affected (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 Securities of such series; provided that, without the consent
of each Holder of the Securities of each series affected thereby, an amendment
or waiver, including a waiver of past defaults, 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 or the amount
thereof provable in bankruptcy, or change any place of payment where, or the
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 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 or 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 the Indenture governing supplemental indentures
with the consent of Securityholders 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.
It is also provided in the Indenture that, subject to certain
conditions, the Holders of at least a majority in aggregate principal amount of
the outstanding 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
Exh. 2, Page 7
<PAGE>
respect to the Securities of such series and its consequences, except a Default
in the payment of principal of or interest on any Security 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 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.
The Indenture provides that a series of Securities may include one or
more tranches (each a "tranche") of Securities, including Securities issued in a
periodic offering. The Securities of different tranches may have one or more
different terms, including authentication dates and public offering prices, but
all the Securities within each such tranche shall have identical terms,
including authentication date and public offering price. Notwithstanding any
other provision of the Indenture, subject to certain exceptions, with respect to
sections of the Indenture concerning the execution, authentication and terms of
the Securities, redemption of the Securities, Events of Default of the
Securities, defeasance of the Securities and amendment of the Indenture, if any
series of Securities includes more than one tranche, all provisions of such
sections applicable to any series of Securities shall be deemed equally
applicable to each tranche of any series of Securities in the same manner as
though originally designated a series unless otherwise provided with respect to
such series or tranche pursuant to a board resolution or a supplemental
indenture establishing such series or tranche.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note in the manner, at the place, at the respective times, at the rate
and in the coin or currency herein prescribed.
The Notes are issuable initially only in registered form without
coupons in denominations of $1,000 and any multiple of $1,000 at the office or
agency of the Company in the Borough of Manhattan, The City of New York, and in
the manner and subject to the limitations provided in the Indenture, but,
without the payment of any service charge, Notes may be exchanged for a like
aggregate principal amount of Notes of other authorized denominations.
Exh. 2, Page 8
<PAGE>
The Notes will be redeemable, at any time prior to maturity at the
option of the Company, in whole or in part, upon not less than 30 or more than
60 days prior written notice, 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 thereon discounted to the redemption date, on a
semi-annual basis, at the Treasury Yield plus [____] basis points, 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 that is on or prior to the date of redemption will be payable to holders
who are holders of record of such notes as of the close of business on the
fifteenth day next preceding such interest payment date.
Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture, without charge except for any tax
or other governmental charge imposed in connection therewith.
The Company, the Guarantor, the Trustee and any agent of the Company or
the Trustee may deem and treat the registered Holder hereof as the absolute
owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and,
subject to the provisions hereof, interest hereon, and for all other purposes,
and neither the Company nor the Guarantor nor the Trustee nor any agent of the
Company, the Guarantor or the Trustee shall be affected by any notice to the
contrary.
No recourse under or upon any obligation, covenant or agreement of the
Company, the Guarantor or the Managing General Partner in the Indenture or any
indenture supplemental thereto or in any Note, or because of any indebtedness
evidenced thereby, shall be had against any incorporator, stockholder, officer
or director, as such, past, present, or future, of the Company, the Guarantor or
the Managing General Partner or any successor corporation of any of them, either
directly or through the Company, the Guarantor or the Managing General Partner
or any successor corporation of any of them, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any legal
or equitable proceeding or otherwise, all such liability being expressly waived
and released by the acceptance hereof and as part of the consideration for the
issue hereof.
Terms used herein which are defined in the Indenture shall have the
respective meanings assigned thereto in the Indenture.
Exh. 2, Page 9
<PAGE>
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
[PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]
[PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE]
_______________________________________
_______________________________________
_______________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such Note on the books of the
Company, with full power of substitution in the premises.
Dated:
NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the within Note in every
particular without alteration or enlargement or any change
whatsoever.
Exh. 2, Page 10
Exhibit 10.2 to 1997 Form 10-K
$750,000,000
FIVE-YEAR
CREDIT AGREEMENT
dated as of April 1, 1997
among
THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP,
THE LENDERS
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
and
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
- -------------------------------------------------------------------------------
J.P. MORGAN SECURITIES INC.,
Arranger
BANK OF AMERICA NT & SA
and
NATIONSBANK, N.A.,
as Co-Agents
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1. Defined Terms........................................ 1
1.2. Accounting Terms and Determinations.................. 21
1.3. Rules of Construction................................ 21
1.4. Rounding............................................. 21
ARTICLE II
THE FACILITY
2.1. The Facility......................................... 21
2.1.1. Description of Facility.................... 21
2.1.2. Availability of Facility; Required Payments.22
2.2. Committed Advances................................... 22
2.2.1. Committed Advances..................... 22
2.2.2. Types of Committed Advances............ 23
2.2.3. Method of Selecting Types and Interest
Periods for New Committed Advances..... 23
2.2.4. Conversion and Continuation of Outstanding
Committed Advances..................... 23
2.3. Competitive Bid Advances............................. 25
2.3.1. Competitive Bid Option; Repayment of
Competitive Bid Advances............... 25
2.3.2. Competitive Bid Quote Request.......... 25
2.3.3. Submission and Contents of Competitive
Bid Quotes............................. 26
2.3.4. Acceptance and Notice by the Borrower.. 28
2.3.5. Allocation by the Borrower............. 28
2.3.6. Notice by the Borrower to the
Administrative Agent................... 29
2.4. Facility Fees........................................ 29
2.5. General Facility Terms............................... 29
2.5.1. Method of Borrowing.................... 29
2.5.2. Minimum Amount of Each Committed
Advance................................ 30
2.5.3. Optional Principal Payments............ 30
2.5.4. Interest Periods....................... 30
2.5.5. Rate after Maturity.................... 31
2.5.6. Interest Payment Dates; Interest Basis. 31
2.5.7. Method of Payment...................... 32
2.5.8. Notes.................................. 32
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<TABLE>
<C> <S> <C>
2.5.9. Notification of Advances, Interest Rates and Prepayments................... 33
2.5.10. Non-Receipt of Funds by the Administrative Agent........................... 33
2.5.11. Cancellation............................................................... 33
2.5.12. Lending Installations...................................................... 34
2.5.13. Currency Equivalents....................................................... 34
2.5.14. Taxes...................................................................... 35
2.5.15. Regulation D Compensation.................................................. 37
2.6. Optional Increase in Commitments......................................................... 38
2.7 Letters of Credit........................................................................ 39
2.7.1. Availability..................................................................... 39
2.7.2. Procedure for Issuance........................................................... 40
2.7.3. Reimbursement of Drawings........................................................ 40
2.7.4. Obligations Absolute............................................................. 41
2.7.5. Indemnity........................................................................ 42
2.7.6. Letter of Credit Fees............................................................ 43
2.7.7. Stop Issuance Notice............................................................. 44
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1 Yield Protection......................................................................... 44
3.2. Changes in Capital Adequacy Regulations.................................................. 45
3.3. Availability of Types of Advances........................................................ 46
3.4. Funding Indemnification.................................................................. 47
3.5. Lender Statements; Limit on Retroactivity; Survival of Indemnity......................... 47
3.6. Foreign Subsidiary Costs................................................................. 48
3.7. Replacement of Lenders................................................................... 48
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance or Letter of Credit...................................................... 49
4.2. Initial Advance or Letter of Credit for each Eligible Subsidiary......................... 51
4.3. Each Advance or Letter of Credit......................................................... 51
Page ii
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.1. Organization and Authority............................................................... 52
5.2. Organization and Authority of Subsidiaries............................................... 53
5.3. Organization and Authority of Corporate General Partner.................................. 53
5.4. Business and Property.................................................................... 54
5.5. Financial Statements..................................................................... 54
5.6. Full Disclosure.......................................................................... 54
5.7. Pending Litigation....................................................................... 55
5.8. Loan Documents are Legal, Valid, Binding and Authorized.................................. 55
5.9. Governmental Consent..................................................................... 56
5.10. Taxes.................................................................................... 56
5.11. Employee Retirement Income Security Act of 1974.......................................... 56
5.12. Investment Company Act................................................................... 56
5.13. Compliance with Environmental Laws....................................................... 57
5.14. Regulations U and X...................................................................... 57
ARTICLE VI
COVENANTS
6.1.1. Information................................................................ 57
6.1.2. Use of Parent Information.................................................. 59
6.2. Use of Proceeds.......................................................................... 59
6.3. Notice of Default........................................................................ 59
6.4. Inspection............................................................................... 60
6.5. Legal Existence, Etc..................................................................... 60
6.6. Insurance................................................................................ 60
6.7. Taxes, Claims for Labor and Materials, Compliance with Laws.............................. 60
6.8. Maintenance, Etc......................................................................... 61
6.9. Nature of Business....................................................................... 61
6.10. Restricted Payments...................................................................... 61
6.11. Payment of Dividends by Subsidiaries..................................................... 62
6.12. Transactions with Affiliates............................................................. 62
6.13. Negative Pledge.......................................................................... 62
6.14. Consolidations, Mergers and Sales of Assets.............................................. 64
6.15. Leverage Test............................................................................ 65
6.16. Subsidiary Debt Limitation............................................................... 65
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<PAGE>
ARTICLE VII
DEFAULTS
7.1. .........................................................................................65
7.2. .........................................................................................65
7.3. .........................................................................................66
7.4. .........................................................................................66
7.5. .........................................................................................66
7.6. .........................................................................................66
7.7. .........................................................................................66
7.8. .........................................................................................66
7.9. .........................................................................................67
7.10. .........................................................................................67
7.11. .........................................................................................67
7.12. .........................................................................................67
7.13. .........................................................................................67
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1 Acceleration............................................................................. 68
8.2 Amendments............................................................................... 68
8.3. Preservation of Rights................................................................... 69
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations.............................................................. 70
9.2. Headings................................................................................. 70
9.3. Entire Agreement......................................................................... 70
9.4. Several Obligations...................................................................... 70
9.5. Expenses; Indemnification................................................................ 70
9.6. Numbers of Documents..................................................................... 72
9.7. Severability of Provisions............................................................... 72
9.8. Nonliability of Lenders.................................................................. 72
9.9. CHOICE OF LAW............................................................................ 72
9.10. CONSENT TO JURISDICTION.................................................................. 72
9.11. WAIVER OF JURY TRIAL..................................................................... 73
9.12. Confidentiality.......................................................................... 73
Page iv
<PAGE>
ARTICLE X
THE AGENTS
10.1. Appointment.............................................................................. 73
10.2. Powers................................................................................... 73
10.3. General Immunity......................................................................... 73
10.4. No Responsibility for Loans, Recitals, etc............................................... 74
10.5. Action on Instructions of Lenders........................................................ 74
10.6. Employment of Agents and Counsel......................................................... 74
10.7. Reliance on Documents; Counsel........................................................... 75
10.8. Agent's Reimbursement and Indemnification................................................ 75
10.9. Rights as a Lender....................................................................... 75
10.10. Lender Credit Decision................................................................... 75
10.11. Successor Agent.......................................................................... 76
10.12. Agents' Fees............................................................................. 76
ARTICLE XI
SETOFF RATABLE PAYMENTS
11.1. Setoff................................................................................... 76
11.2. Ratable Payments......................................................................... 77
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns................................................................... 77
12.2. Participations........................................................................... 78
12.2.1. Permitted Participants; Effect............................................. 78
12.2.2. Voting Rights.............................................................. 78
12.3. Assignments.............................................................................. 79
12.3.1. Permitted Assignments...................................................... 79
12.3.2. Effect; Effective Date..................................................... 79
12.4. Dissemination of Information............................................................. 80
12.5. Tax Treatment............................................................................ 80
12.6. Increased Costs.......................................................................... 80
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<PAGE>
ARTICLE XIII
NOTICES
13.1. Giving Notice............................................................................ 80
ARTICLE XIV
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
14.1. Existence and Power...................................................................... 81
14.2. Corporate or Partnership and Governmental Authorization; Contravention................... 81
14.3. Binding Effect........................................................................... 81
14.4. Taxes.................................................................................... 81
ARTICLE XV
GUARANTY
15.1. The Guaranty............................................................................. 82
15.2. Guaranty Unconditional................................................................... 82
15.3. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances.............. 83
15.4. Waiver by the Company.................................................................... 83
15.5. Subrogation.............................................................................. 84
15.6. Stay of Acceleration..................................................................... 84
ARTICLE XVI
COUNTERPARTS; EFFECTIVENESS
</TABLE>
Page vi
<PAGE>
PRICING SCHEDULE
Schedule 6.11 Subsidiary Restrictions
Exhibit "A" Note
Exhibit "B-1" Form of Opinion of Kirkland & Ellis
Exhibit "B-2" Form of Opinion of General Counsel
Exhibit "C" Form of Competitive Bid Quote Request
Exhibit "D" Form of Competitive Bid Quote
Exhibit "E" Form of Assignment Agreement
Exhibit "F" Form of Loan/Credit Related Money Transfer
Instruction
Exhibit "G" Form of Election to Participate
Exhibit "H" Form of Election to Terminate
Exhibit "I" Form of Opinion of Counsel for Eligible
Subsidiary
Exhibit "J" Form of Opinion of Counsel for the Agents
Page vii
<PAGE>
FIVE-YEAR
CREDIT AGREEMENT
This Five-Year Credit Agreement, dated as of April 1, 1997, is
among The ServiceMaster Company Limited Partnership, the Lenders, The First
National Bank of Chicago, as Administrative Agent, and Morgan Guaranty Trust
Company of New York, as Documentation Agent. The parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used in this Agreement:
"Absolute Rate" means, with respect to a Loan made by a given
Lender for the relevant Absolute Rate Interest Period, the rate of interest per
annum (rounded to the nearest 1/100 of 1%) offered by such Lender and accepted
by the Borrower pursuant to Section 2.3.4.
"Absolute Rate Advance" means a borrowing hereunder consisting
of the aggregate amount of the several Absolute Rate Loans made by some or all
of the Lenders to the Borrower at the same time and for the same Absolute Rate
Interest Period.
"Absolute Rate Auction" means a solicitation of Competitive
Bid Quotes setting forth Absolute Rates pursuant to Section 2.3.
"Absolute Rate Interest Period" means, with respect to an
Absolute Rate Advance or an Absolute Rate Loan, a period of not less than 7 days
commencing on a Business Day selected by the Borrower pursuant to this
Agreement. If such Absolute Rate Interest Period would end on a day which is not
a Business Day, such Absolute Rate Interest Period shall end on the next
succeeding Business Day.
"Absolute Rate Loan" means a Loan which bears interest at an
Absolute Rate.
"Acquiring Person" means any Person (other than the Parent,
the Surviving Parent and the Surviving Company) or group of two or more Persons
acting as a partnership, limited partnership, syndicate, or other group for the
purpose of acquiring, holding or disposing of Equity Interests of the Company,
Page 1
<PAGE>
the Surviving Company, the Parent or the Surviving Parent, together with all
affiliates and associates (as defined in Rule 12b-2 under the Securities and
Exchange Act of 1934, as amended) of such Person or Persons.
"Administrative Agent" means The First National Bank of
Chicago in its capacity as contractual representative for the Lenders pursuant
to Article X, and not in its individual capacity as a Lender, and any successor
Administrative Agent appointed pursuant to Article X.
"Administrative Questionnaire" means, with respect to each
Lender, an administrative questionnaire in a form satisfactory to the
Administrative Agent and submitted to the Administrative Agent (with a copy to
the Company) duly completed by each Lender.
"Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Loans made by some or all of the Lenders to the
Borrower of the same Type (or on the same interest basis in the case of
Competitive Bid Advances) and, in the case of Fixed Rate Advances, for the same
Interest Period and includes a Competitive Bid Advance.
"Affected Lender" is defined in Section 3.7.
"Affiliate" means any Person (other than a Subsidiary) which
directly or indirectly controls, or is controlled by, or is under common control
with, the Company. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Equity Interest,
by contract or otherwise.
"Agent" means the Administrative Agent or the Documentation
Agent and "Agents" means both of the foregoing.
"Aggregate Commitment" means the aggregate of the Commitments
of all the Lenders hereunder, as reduced from time to time pursuant to the terms
hereof.
"Agreement" means this Credit Agreement, as it may be amended
or modified and in effect from time to time.
Page 2
<PAGE>
"Alternate Base Rate" means, on any date and with respect to
all Floating Rate Advances, a fluctuating rate of interest per annum equal to
the higher of (i) the Federal Funds Effective Rate most recently determined by
the Administrative Agent plus 1/2% per annum and (ii) the Corporate Base Rate.
Changes in the rate of interest on each Floating Rate Advance will take effect
simultaneously with each change in the Alternate Base Rate. The Administrative
Agent will give notice promptly to the Borrowers and the Lenders of changes in
the Alternate Base Rate, provided, however, that the Administrative Agent's
failure to give any such notice will not affect any Borrower's obligation to pay
interest to the Lenders on Floating Rate Advances at the then effective
Alternate Base Rate.
"Alternative Currency" means British Sterling, German Marks,
French Francs, Japanese Yen, Dutch Guilders, Swedish Kronor and any other
currency (other than Dollars) which is freely transferable and convertible into
Dollars in the London interbank market which has been expressly approved in
writing as an Alternative Currency for purposes hereof by all Lenders.
"Annual Report" is defined in Section 5.4.
"Applicable Margin" means the respective margin percentages
for each Committed Fixed Rate Advance determined in accordance with the Pricing
Schedule.
"Approved Multiple" means (a) in respect of any borrowing or
prepayment of a Floating Rate Advance, $1,000,000 or any larger integral
multiple of $1,000,000, (b) in the case of any other Advance denominated in
Dollars, $5,000,000 or any larger integral multiple of $1,000,000 and (c) in the
case of any Advance denominated in an Alternative Currency, such multiples of
such currency as the Administrative Agent deems appropriate and reasonably
comparable to a $3,000,000 minimum Dollar Amount.
"Article" means an article of this Agreement unless another
document is specifically referenced.
Page 3
<PAGE>
"Assessment Rate" means, for any CD Interest Period, the net
assessment rate per annum payable to the Federal Deposit Insurance Corporation
(or any successor) for the insurance of domestic deposits of the Administrative
Agent during the calendar year in which the first day of such CD Interest Period
falls, as estimated by the Administrative Agent on the first day of such CD
Interest Period.
"Board of Directors" prior to the Effective Date of the
Reorganization means the Board of Directors of the Corporate General Partner and
on or after the Effective Date of the Reorganization means the Board of
Directors of the Company.
"Borrower" means any Obligor in its capacity as borrower of a
Loan or Advance hereunder or as account party in respect of a Letter of Credit
hereunder, and "Borrowers" means all such borrowers and account parties.
References to "the Borrower" in relation to any Loan, Advance or Letter of
Credit are to the Borrower which has borrowed or which proposes to borrow such
Loan or Advance or which is the account party in respect of such Letter of
Credit.
"Borrowing Date" means a date on which an Advance is made or
to be made hereunder.
"British Sterling" means the lawful currency of the United
Kingdom.
"Business Day" means (i) with respect to any borrowing,
payment or rate selection of Eurocurrency Committed Advances or Eurocurrency Bid
Rate Advances, a day other than Saturday or Sunday on which banks are open for
business in Chicago and New York City and on which dealings in the relevant
currency are carried on in the London interbank market and, where funds are to
be paid or made available in an Alternative Currency, on which commercial banks
are open for domestic and international business in the place where such funds
are paid or made available and (ii) for all other purposes, a day other than
Saturday or Sunday on which banks are open for business in Chicago and New York
City.
"CD Interest Period" means, with respect to a Fixed CD Rate
Advance or a Fixed CD Rate Loan, a period of 30, 60, 90 or 180 days commencing
on a Business Day selected by the Borrower pursuant to this Agreement. If such
CD Interest Period would end on a day which is not a Business Day, such CD
Interest Period shall end on the next succeeding Business Day.
Page 4
<PAGE>
"Change of Control" shall be deemed to have occurred:
(a) prior to the Effective Date of the Reorganization, on the date on which:
(i) the Corporate General Partner ceases to have a Controlling
General Partnership Interest in both the Company and the Parent; or
(ii) Voting Stock of the Corporate General Partner sufficient to
elect at least a majority of its board of directors ceases to be
subject to the voting trust arrangement described in the Form 10-K; or
(iii) Continuing Directors cease to constitute a majority of the
board of directors of the Corporate General Partner; or
(iv) an Acquiring Person shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of more than 30% (or if such Acquiring Person is WMX
Technologies, Inc. or one of its subsidiaries, 40%) of the Limited
Partnership Interests in the Company or the Parent; and
(b) on and after the Effective Date of the Reorganization,
on the date on which:
(i) Continuing Directors cease to constitute a majority of the
board of directors of the Surviving Parent or, if the Surviving Parent
and the Surviving Company shall have merged or consolidated, of the
Surviving Company; or
(ii) the Surviving Company shall cease to be a subsidiary of the
Surviving Parent (except by reason of a merger or consolidation between
them or the liquidation of the Surviving Company into the Surviving
Parent); or
(iii) an Acquiring Person shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of more than 30% (or if such Acquiring Person is WMX
Technologies, Inc. or one of its subsidiaries, 40%) of the Voting Stock
in the Surviving Company or the Surviving Parent.
For avoidance of doubt, the Reorganization and related transactions described in
the Proxy Statement do not in and of themselves give rise to a Change of
Control.
Page 5
<PAGE>
"Commitment" means, for each Lender, the obligation of the
Lender to make Loans to the Borrowers and/or to participate in Letters of Credit
for the account of the Borrowers, all in an aggregate amount not exceeding the
amount set forth opposite its signature below or as set forth in an applicable
Assignment Agreement substantially in the form of Exhibit "E" hereto received by
the Administrative Agent under the terms of Section 12.3, as such amount may be
modified from time to time pursuant to the terms of this Agreement.
"Committed Advance" means a borrowing hereunder consisting of
the aggregate amount of the several Committed Loans made by the Lenders to the
Borrower at the same time, of the same Type and, in the case of Fixed Rate
Advances, for the same Interest Period.
"Committed Borrowing Notice" is defined in Section 2.2.3.
"Committed Fixed Rate Advance" means a Fixed CD Rate Advance
or a Eurocurrency Committed Advance.
"Committed Loan" means a Loan made by a Lender pursuant to
Section 2.2.
"Company" means The ServiceMaster Company Limited Partnership,
a Delaware limited partnership and its permitted successors and assigns
including the Surviving Company following the assumption of the obligations of
the Company hereunder pursuant to Section 6.14.
"Competitive Bid Advance" means a borrowing hereunder
consisting of the aggregate amount of the several Competitive Bid Loans made by
some or all of the Lenders to the Borrower at the same time, at the same
interest basis, and for the same Interest Period.
"Competitive Bid Borrowing Notice" isdefined in Section 2.3.4.
"Competitive Bid Loan" means a Eurocurrency Bid Rate Loan or
an Absolute Rate Loan, as the case may be.
"Competitive Bid Margin" means the margin above or below the
applicable Eurocurrency Base Rate offered for a Eurocurrency Bid Rate Loan,
expressed as a percentage (rounded to the nearest 1/100 of 1%) to be added or
subtracted from such Eurocurrency Base Rate.
Page 6
<PAGE>
"Competitive Bid Quote" means a Competitive Bid Quote
substantially in the form of Exhibit "D" hereto completed and delivered by a
Lender to the Borrower in accordance with Section 2.3.3
"Competitive Bid Quote Request" means a Competitive Bid Quote
Request substantially in the form of Exhibit "C" hereto completed and delivered
by the Borrower in accordance with Section 2.3.3.
"Consolidated Debt" means at any date, without duplication,
the Debt of the Company and its Consolidated Subsidiaries, determined on a
consolidated basis as of such date.
"Consolidated EBIT" means, for any fiscal period, without
duplication, Consolidated Net Income for such period plus, to the extent
deducted in determining Consolidated Net Income for such period, the aggregate
amount of (i) Consolidated Interest Expense and (ii) income tax expense.
"Consolidated EBITDA" means, for any fiscal period, without
duplication, Consolidated EBIT for such period plus to the extent deducted in
determining Consolidated Net Income for such period, the aggregate amount of
depreciation and amortization. In the event of a purchase by the Company or a
Consolidated Subsidiary of all or any portion of the minority interest in SMCS,
Consolidated EBITDA for any period of four consecutive fiscal quarters ending on
or after the date of such purchase and prior to the first anniversary thereof
shall be determined as if such purchase had been made on the first day of such
four-quarter period.
"Consolidated Interest Expense" means, for any fiscal period,
without duplication, the interest expense of the Company and its Consolidated
Subsidiaries plus dividends accrued on preferred stock of the Company or a
Consolidated Subsidiary which constitutes Debt, all determined on a consolidated
basis for such period.
"Consolidated Net Income" means, for any fiscal period,
without duplication, the net income of the Company and its Consolidated
Subsidiaries (before dividends on preferred stock of the Company) determined on
a consolidated basis for such period, exclusive of the effect of (i) any
extraordinary or other unusual gain and (ii) any extraordinary or other unusual
losses, write-offs or write-downs to the extent that such losses, write-offs or
write-downs do not represent a cash expenditure in such period and will not
represent a cash expenditure in any future period.
Page 7
<PAGE>
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity which would be consolidated with the Company in its consolidated
financial statements if such statements were prepared as of such date in
accordance with GAAP.
"Continuing Director" means (i) a director of the Corporate
General Partner at the date of this Agreement and (ii) an individual who after
the date of this Agreement becomes a director of the Corporate General Partner
(including any successor Corporate General Partner) or, after the Effective Date
of the Reorganization, of the Company and/or the Parent (x) in connection with
the death, disability or retirement of an incumbent director, or otherwise in
the ordinary course of the affairs of the corporation and (y) whose election was
effected or recommended by a majority of the Continuing Directors then in office
(or by a nominating committee appointed by such a majority of Continuing
Directors). For avoidance of doubt, the foregoing definition contemplates that
the same individuals would successively constitute the Continuing Directors of
the Corporate General Partner, any successor Corporate General Partner and, upon
consummation of the Reorganization, the Parent and/or the Company, subject to
normal turnover.
"Controlling General Partner Interest" means a General
Partnership Interest which permits the owner of such General Partnership
Interest to direct the management of a general partnership or a limited
partnership.
"Conversion/Continuation Notice" is defined in Section 2.2.4.
"Corporate Base Rate" means a rate per annum equal to the
corporate base rate of interest announced by the Administrative Agent from time
to time, changing when and as said corporate base rate changes.
"Corporate General Partner" means ServiceMaster Management
Corporation, a Delaware corporation, and its successors.
Page 8
<PAGE>
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable or accrued expenses arising
in the ordinary course of business, (iv) all obligations of such Person as
lessee which are capitalized in accordance with GAAP, (v) all obligations
(absolute or contingent) of such Person to reimburse any bank or other Person
issuing a letter of credit or similar instrument, (vi) any preferred stock
issued by such Person which is redeemable otherwise than at the sole option of
such Person for consideration other than Equity Interests in such Person, in the
Company or in the Parent, (vii) all Debt secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise an obligation of such Person, and
(viii) all Guaranties by such Person of Debt of others.
"Debt Limit" means, at any date, the product of (a)
Consolidated EBITDA for the period of four consecutive fiscal quarters ending at
the date of the balance sheet most recently delivered (or required to be
delivered) on or prior to such date pursuant to Section 5.5 or 6.1 and (b) the
applicable Leverage Factor.
"Default" means an event described in Article VII.
"Derivatives Obligations" of any Person means all obligations
of such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
Any determination of the amount of Derivatives Obligations owing at any time
shall be calculated net of offsets available at such time under any applicable
netting agreement.
"Disclosure Documents" is defined in Section 5.4.
"Documentation Agent" means Morgan, in its capacity as the
contractual representative for all of the Banks for purposes of this Agreement,
as designated and appointed in accordance with Article X, any successor thereto
as provided herein.
Page 9
<PAGE>
"Dollar Amount" means (i) in relation to any Advance or Letter
of Credit Liabilities denominated in Dollars, the aggregate principal or face
amount thereof and (ii) in relation to any Advance or Letter of Credit
Liabilities denominated in an Alternative Currency, the equivalent amount
thereof in Dollars determined by the Administrative Agent pursuant to Section
2.5.13. The Dollar Amount of any Advance or Letter of Credit Liabilities
denominated in an Alternative Currency at any date is the Dollar Amount thereof
determined as of such date or, if no Dollar Amount is determined as of such date
in accordance with Section 2.5.13, then determined as of the then most recent
date for which such a determination has been made. Any Advance or Letter of
Credit Liabilities denominated in an Alternative Currency shall be deemed
utilization of the Commitments in an amount equal to the Dollar Amount thereof.
"Dollars" and the sign "$" mean the lawful currency of the
United States of America.
"D&P" means Duff & Phelps, Inc.
"Dutch Gilders" means the lawful currency of The Netherlands.
"Effective Date of the Reorganization" means the date upon
which the Reorganization shall be effective.
"Election to Participate" means an Election to Participate
substantially in the form of Exhibit "G" hereto.
"Election to Terminate" means an Election to Terminate
substantially in the form of Exhibit "H" hereto.
"Eligible Subsidiary" means any Subsidiary of the Company as
to which an Election to Participate shall have been delivered to the Agents and
as to which an Election to Terminate shall not have been delivered to the
Agents. Each such Election to Participate and Election to Terminate shall be
duly executed on behalf of such Subsidiary and the Company. The delivery of an
Election to Terminate with respect to an Eligible Subsidiary shall not affect
any obligation of such Eligible Subsidiary theretofore incurred. The
Administrative Agent shall promptly give notice to the Lenders of the receipt of
any Election to Participate or Election to Terminate.
"Equity Interest" means, in the case of a corporation, stock
of any class, and in the case of a partnership or a limited partnership, a
General Partnership Interest or Limited Partnership Interest, but excluding
preferred stock which constitutes Debt.
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Eurocurrency Auction" means a solicitation of Competitive Bid
Quotes setting forth Competitive Bid Margins pursuant to Section 2.3.
"Eurocurrency Base Rate" means, with respect to a Eurocurrency
Committed Advance, a Eurocurrency Committed Loan, a Eurocurrency Bid Rate
Advance or a Eurocurrency Bid Rate Loan for the relevant Eurocurrency Interest
Period, the average of the respective rates per annum at which deposits in
Dollars or, in the case of any Eurocurrency Loan denominated in an Alternative
Currency, the relevant Alternative Currency are offered to each of the Reference
Banks in the London interbank market at approximately 11:00 a.m. (London time)
two Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Loan of such Reference Bank
to which such Interest Period is to apply and for a period of time comparable to
such Interest Period (or, in the case of a Competitive Bid Advance, the amount
which would have been the amount of the Loan of such Reference Bank if such
Advance were a Committed Advance).
"Eurocurrency Bid Rate" means, with respect to a Loan made by
a given Lender for the relevant Eurocurrency Interest Period, the sum of (i) the
Eurocurrency Base Rate and (ii) the Competitive Bid Margin offered by such
Lender and accepted by the Borrower pursuant to Section 2.3.4(i).
"Eurocurrency Bid Rate Advance" means a Competitive Bid
Advance which bears interest at a Eurocurrency Bid Rate.
"Eurocurrency Bid Rate Loan" means a Competitive Bid Loan
which bears interest at a Eurocurrency Bid Rate.
"Eurocurrency Committed Advance" means an Advance which bears
interest at a Eurocurrency Rate requested by the Borrower pursuant to Section
2.2.
"Eurocurrency Committed Loan" means a Loan which bears
interest at a Eurocurrency Rate requested by the Borrower pursuant to Section
2.2.
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"Eurocurrency Interest Period" means, with respect to a
Eurocurrency Committed Advance, a Eurocurrency Committed Loan, a Eurocurrency
Bid Rate Advance or a Eurocurrency Bid Rate Loan, a period of one, two, three or
six months commencing on a Business Day selected by the Borrower pursuant to
this Agreement. Such Eurocurrency Interest Period shall end on the day which
corresponds numerically to such date of commencement one, two, three or six
months thereafter, provided, however, that any such period which begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such period)
shall end on the last Business Day of a calendar month. If a Eurocurrency
Interest Period would otherwise end on a day which is not a Business Day, such
Eurocurrency Interest Period shall end on the next succeeding Business Day,
provided, however, that if such next succeeding Business Day falls in a new
month, such Eurocurrency Interest Period shall end on the immediately preceding
Business Day.
"Eurocurrency Loan" means a Eurocurrency Committed Loan or a
Eurocurrency Bid Rate Loan, as applicable.
"Eurocurrency Rate" means, with respect to a Eurocurrency
Committed Advance or a Eurocurrency Committed Loan for the relevant Eurocurrency
Interest Period, the sum of (a) the Eurocurrency Base Rate applicable to such
Eurocurrency Interest Period plus (b) the Applicable Margin.
"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate per annum equal for each day during such period to (i)
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York; or (ii) if such rate is
not so published for any day which is a Business Day, the average of the
quotations at approximately 10:00 a.m. (Chicago time) for such day on such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by the Administrative Agent.
"Financial Officers" means with respect to the Company and any
Eligible Subsidiary, prior to the Effective Date of the Reorganization, the
Chief Financial Officer or Treasurer of the Corporate General Partner and
subsequent to the Effective Date of the Reorganization, the Chief Financial
Officer or Treasurer of the Company.
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"First Chicago" means The First National Bank of Chicago in
its individual capacity, and its successors and assigns (by merger or
otherwise).
"Fixed CD Base Rate" means, with respect to a Fixed CD Rate
Advance or a Fixed CD Rate Loan for the relevant CD Interest Period, the rate
determined by the Administrative Agent to be the arithmetic average of the rates
reported to the Administrative Agent as the prevailing bid rate for the purchase
at face value at or before 10:00 a.m. (Chicago time) on the first day of such CD
Interest Period by three certificate of deposit dealers in New York or Chicago
of recognized standing selected by the Administrative Agent of certificates of
deposit of each Reference Bank in the approximate amount of such Reference
Bank's relevant Fixed CD Rate Loan and having a maturity approximately equal to
such CD Interest Period.
"Fixed CD Rate" means, with respect to a Fixed CD Rate Advance
or Fixed CD Rate Loan for the relevant CD Interest Period, a rate per annum
equal to the sum of (i) the quotient of (a) the Fixed CD Base Rate applicable to
that CD Interest Period, divided by (b) one minus the Reserve Requirement
(expressed as a decimal) applicable to that CD Interest Period, plus (ii) the
Assessment Rate applicable to that CD Interest Period, plus (iii) the Applicable
Margin.
"Fixed CD Rate Advance" means an Advance which bears interest
at a Fixed CD Rate.
"Fixed CD Rate Loan" means a Loan which bears interest at a
Fixed CD Rate.
"Fixed Rate" means the Fixed CD Rate, the Eurocurrency Rate,
the Eurocurrency Bid Rate or the Absolute Rate.
"Fixed Rate Advance" means an Advance which bears interest at
a Fixed Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed
Rate.
"Floating Rate" means, for any day, a rate per annum equal to
the Alternate Base Rate.
"Floating Rate Advance" means an Advance which bears interest
at the Floating Rate.
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"Floating Rate Loan" means a Loan which bears interest at the
Floating Rate.
"Form 10-K" is defined in Section 5.4.
"French Francs" means the lawful currency of France.
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States of America.
"General Partnership Interest" means the interest of a general
partner in a general partnership and the interest of a general partner in a
limited partnership.
"German Marks" means the lawful currency of Germany.
"Guaranties" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Debt of any other Person (the "primary obligor") in any manner, whether directly
or indirectly, including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (i) to purchase such Debt
or any property or assets constituting security therefor, (ii) to advance or
supply funds (x) for the purchase or payment of such Debt, (y) to maintain
income, working capital or other balance sheet condition or otherwise to advance
or make available funds for the purchase or payment of such Debt, or (iii) to
lease property or to purchase Securities or other property or services primarily
for the purpose of assuring the owner of such Debt of the ability of the primary
obligor to make payment of the Debt, or (iv) otherwise to assure the owner of
the Debt of the primary obligor against loss in respect thereof. For the
purposes of all computations made under this Agreement, a Guaranty in respect of
any Debt shall be deemed to be Debt equal to the principal amount of such Debt
which has been guaranteed.
"Interest Coverage Ratio" means, as at the last day of any
fiscal quarter, the ratio of Consolidated EBIT for the period of four fiscal
quarters then ended to Consolidated Interest Expense for such four-quarter
period.
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"Interest Period" means a CD Interest Period, a Eurocurrency
Interest Period or an Absolute Rate Interest Period.
"Issuing Bank" means any Lender which shall have been
appointed an Issuing Bank for purposes of this Agreement by the Company and
which shall have accepted such appointment in a signed writing. A copy of each
such appointment and acceptance shall be promptly furnished to the
Administrative Agent.
"Issuing Bank Limit" means, with respect to any Issuing Bank,
such amount, if any, less than the Letter of Credit Commitment which such
Issuing Bank and the Company shall have agreed as the limit on the aggregate
Dollar Amount and/or amounts of particular currencies of Letter of Credit
Liabilities at any time in respect of Letters of Credit issued by such Issuing
Bank hereunder.
"Japanese Yen" means the lawful currency of Japan.
"Lenders" means the financial institutions listed on the
signature pages of this Agreement and their respective successors and assigns
including the Issuing Bank in such capacity.
"Lending Installation" means any office, branch, subsidiary or
affiliate of any Lender or the Administrative Agent.
"LC Fee Rate" means a rate per annum for letter of credit fees
determined in accordance with the Pricing Schedule.
"Letter of Credit" means a letter of credit issued or to be
issued hereunder by an Issuing Bank in accordance with Section 2.7.
"Letter of Credit Commitment" means the lesser of (x)
$150,000,000 and (y) the Aggregate Commitment.
"Letter of Credit Liabilities" means, for any Lender and at
any time, such Lender's ratable participation in the sum of (x) the aggregate
amount then owing by the Borrowers in respect of amounts drawn under Letters of
Credit and (y) the aggregate amount then available for drawing under all Letters
of Credit.
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"Leverage Factor" means, with respect to any period of four
consecutive fiscal quarters, if such period ends (a) prior to the fiscal quarter
in which the Effective Date of the Reorganization occurs, 4.25, (b) with the
fiscal quarter in which the Effective Date of the Reorganization occurs, 4.25,
(c) with the fiscal quarter immediately following the fiscal quarter in which
the Effective Date of the Reorganization occurs, 4.05, (d) with the second
fiscal quarter following the fiscal quarter in which the Effective Date of
Reorganization occurs, 3.825 and (e) with any fiscal quarter thereafter, 3.6.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purpose of this Agreement, the Company or any Subsidiary shall be
deemed to own subject to a Lien (i) any asset that it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement or other title retention agreement relating to such asset or any
capital lease or (ii) any account receivable transferred by it with recourse for
collectibility (including any such transfer subject to a holdback or similar
arrangement which effectively imposes the risk of collectibility upon the
transferor).
"Limited Partnership Interest" means the interest of a limited
partner in a limited partnership.
"Loan" means, with respect to a Lender, such Lender's portion,
if any, of any Advance.
"Loan Documents" means this Agreement, the Notes and each
Election to Participate and Election to Terminate.
"Material Adverse Effect" means (i) a material adverse effect
on the properties, business, operations or financial condition of the Company
and its Subsidiaries taken as a whole, (ii) a material adverse effect on the
ability of the Company to perform its obligations under the Loan Documents or
(iii) any material impairment of the rights and remedies of the Agents and the
Lenders against the Obligors under the Loan Documents.
"Material Commitment" means a legally binding commitment by
one or more banks or other financial institutions to extend credit to the
Company and/or its Subsidiaries in an aggregate amount of $25,000,000 or more
pursuant to a written agreement signed by the Company or a Subsidiary.
"Material Subsidiary" means (i) any Eligible Subsidiary and
(ii) any other Subsidiary which has consolidated assets or consolidated annual
revenues of more than $10,000,000.
"Moody's" means Moody's Investors Service, Inc.
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"Morgan" means Morgan Guaranty Trust Company of New York in
its individual capacity, and its successors and assigns.
"Note" means a promissory note in substantially the form of
Exhibit "A" hereto, duly executed and delivered to the Documentation Agent by
the Borrower for the account of a Lender and payable to the order of such
Lender, including any amendment, modification, renewal or replacement of such
promissory note.
"Notice of Issuance" has the meaning set forth in
Section 2.7.2.
"Obligations" means all unpaid principal of and accrued and
unpaid interest on the Notes, all accrued and unpaid fees and all other
reimbursements, indemnities or other obligations of the Obligors to any Lender
or Agent arising under the Loan Documents.
"Obligor" means the Company or any Eligible Subsidiary, and
"Obligors" means all of them.
"Parent" means The ServiceMaster Limited Partnership, a
Delaware limited partnership, and its successors, including any corporate
successor resulting from the Reorganization.
"Partnership Interest" means Limited Partnership Interests and
General PartnershipInterests.
"Payment Date" means the fifteenth day of each March, June,
September, and December.
"Person" means any corporation, limited liability company,
natural person, firm, joint venture, partnership, trust, unincorporated
organization, enterprise, government or any department or agency of any
government.
"Plans" is defined in Section 5.11.
"Pricing Level" is defined in the Pricing Schedule.
"Pricing Schedule" means the Schedule hereto entitled "Pricing
Schedule".
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"Proxy Statement" means the Proxy Statement/Prospectus dated
December 11, 1991 of the Parent.
"Reference Banks" means Bank of America NT & SA, NationsBank,
N.A., First Chicago and Morgan. If any such Reference Bank ceases to be a
Lender, the Company and the Agents shall designate another Lender as a
replacement Reference Bank.
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"Regulations U and X" means Regulations U and X of the Board
of Governors of the Federal Reserve System from time to time in effect and shall
include any successor or other regulations or official interpretations of said
Board of Governors relating to the extension of credit by banks for the purpose
of purchasing or carrying margin stock applicable to member banks of the Federal
Reserve System.
"Reorganization" means the change in the organizational
structure of the ServiceMaster enterprise substantially as described in the
Proxy Statement.
"Replacement Lender" is defined in Section 3.7.
"Required Lenders" means Lenders in the aggregate having at
least 66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has
been terminated, Lenders in the aggregate holding at least 66-2/3% of the sum of
the aggregate unpaid Dollar Amount of the outstanding Advances and the aggregate
Dollar Amount of all Letter of Credit Liabilities.
"Reserve Requirement" means, with respect to a Eurocurrency
Interest Period or a CD Interest Period, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves)
which is imposed under Regulation D on new non-personal time deposits of
$100,000 or more with a maturity equal to that of the CD Interest Period (in the
case of Fixed CD Rate Advances or Fixed CD Rate Loans) or on Eurocurrency
liabilities (in the case of Eurocurrency Committed Advances or Eurocurrency
Committed Loans). The Reserve Requirement shall be adjusted automatically on and
as of the effective date of any change in the applicable reserve requirement.
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"Restricted Payments" means, without duplication:
(a) the declaration or payment by the Company of any
dividends or distributions, either in cash or property, on any
Equity Interest of the Company (except dividends or other
distributions to the extent payable solely in Partnership
Interests of the Company or capital stock of the Company);
(b) the purchase, acquisition, redemption or
retirement by the Company directly or indirectly, or through
any Subsidiary, of any Equity Interest of the Company or the
Parent or any warrants, rights or options to purchase or
acquire any Equity Interest of the Company or the Parent; and
(c) to the extent not included in clause (a) or (b)
above, any other payment or distribution by the Company,
either directly or indirectly or through any Subsidiary, in
respect of any Equity Interest of the Company or the Parent.
"SMCS" means ServiceMaster Consumer Services Limited
Partnership, a Delaware limited partnership.
"SMMS" means ServiceMaster Management Services Limited
Partnership, a Delaware limited partnership.
"Section" means a numbered section of this Agreement, unless
another document is specifically referenced.
"Security" shall have the same meaning as in Section (2)(1) of
the Securities Act of 1933, as amended.
"S&P" means Standard & Poor's Ratings Group.
"Stop Issuance Notice" is defined in Section 2.7.7.
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The term "subsidiary" means, as to any particular parent
business entity, any business entity of which such parent business entity and/or
one or more business entities which are themselves subsidiaries of such parent
business entity, (i) in the case of any corporation, own more than 50% of the
Voting Stock, or (ii) in the case of any partnership other than SMCS and SMMS,
own a Controlling General Partnership Interest and, if any such partnership is a
limited partnership, own more than 50% of the Limited Partnership Interest;
provided, however, SMCS and SMMS shall be deemed subsidiaries of the Company so
long as (i) prior to the Effective Date of the Reorganization the Controlling
General Partnership Interest shall be owned by the Corporate General Partner and
(ii) the Company owns more than 50% of the Partnership Interests therein.
The term "Subsidiary" means a subsidiary of the Company.
"Surviving Company" means ServiceMaster Corporation, a
Delaware corporation, which as part of the Reorganization, shall be a
wholly-owned Subsidiary of the Surviving Parent, and its successors. As part of
the Reorganization the Parent and the Company will be liquidated into the
Surviving Company and the Surviving Company will assume the obligations of the
Company under the Loan Documents pursuant to Section 6.14.
"Surviving Parent" means ServiceMaster Incorporated, a
Delaware corporation, which shall own 100% of the outstanding Voting Stock of
the Company following the consummation of the Reorganization, and its
successors. The Surviving Company and the Surviving Parent may merge or
consolidate as part of or following the Reorganization, in which case the
resulting or surviving entity shall be the Surviving Company for purposes of
this Agreement, or the Surviving Company may liquidate into the Surviving
Parent, in which case the Surviving Parent shall become and be the Surviving
Company, all in accordance with Section 6.14.
"Swedish Kronor" means the lawful currency of the Kingdom of
Sweden.
"Termination Date" means April 1, 2002, unless the Commitments
are earlier terminated pursuant to the terms hereof.
"364-Day Agreement" means the 364-Day Credit Agreement dated
as of April 1, 1997 among the Company, the Lenders listed therein, First
Chicago, as Administrative Agent and Morgan, as Documentation Agent.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Loan or Advance, its nature
as a Floating Rate Advance or Loan, Fixed CD Rate Advance or Loan, Eurocurrency
Committed Advance or Loan in a particular currency, Eurocurrency Bid Rate
Advance or Loan in a particular currency or Absolute Rate Advance or Loan.
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"Unmatured Default" means an event which, but for the lapse of
time or the giving of notice, or both, would constitute a Default.
"Voting Equity Interest" means Voting Stock and General
Partnership Interests.
"Voting Stock" means Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"WMX Repurchase" is defined in Section 6.2.
The foregoing definitions shall be equally applicable to both
the singular and plural forms of the defined terms.
1.2. Accounting Terms and Determinations.2. Accounting Terms
and . Unless otherwise specified herein, all accounting terms used herein shall
be interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with GAAP, applied on a basis consistent (except for changes
concurred in by the Parent's independent public accountants) with the most
recent audited consolidated financial statements of the Parent and its
Consolidated Subsidiaries delivered to the Banks; provided that, if the Company
notifies the Documentation Agent that the Company wishes to amend any covenant
in Article VI to eliminate the fact of any change in GAAP on the operation of
such covenant (or if the Documentation Agent notifies the Company that the
Required Lenders wish to amend Article VI for such purpose), then the Company's
compliance with such covenant shall be determined on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective, until either
such notice is withdrawn or such covenant is amended in a manner satisfactory to
the Company and the Required Lenders.
1.3 Rules of Construction. Any reference contained in any of the Loan
Documents to "knowledge" or "awareness" of the Company or any Eligible
Subsidiary shall be deemed limited to the "knowledge" or "awareness" of one or
more Financial Officers.
1.4 Rounding. All determinations of rates per annum under this Agreement
shall be rounded to the nearest 1/100th of 1% (with 0.0050% being rounded upward
to 0.01%).
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ARTICLE II
THE FACILITY
2.1. The Facility.
2.1.1 Description of Facility. The Lenders grant to the Borrowers a
revolving credit facility pursuant to which, and upon the terms and subject to
the conditions herein set out:
(i) each Lender severally agrees to make Committed Loans in
Dollars or (in the case of Eurocurrency Committed Loans) in Alternative
Currencies to the Borrowers in accordance with Section 2.2;
(ii) each Lender may, in its sole discretion, make bids to make
Competitive Bid Loans in Dollars or (in the case of Eurocurrency Bid
Rate Loans) in Alternative Currencies to the Borrowers in accordance
with Section 2.3;
(iii) each Issuing Bank shall, on the terms and conditions set
forth in Section 2.7, issue Letters of Credit for the account of the
Borrowers, and each Lender shall participate therein ratably in the
proportion which its Commitment bears to the Aggregate Commitment; and
(iv) in no event may the sum of the aggregate Dollar Amount of
all outstanding Advances to all Borrowers (including both the Committed
Advances and the Competitive Bid Advances) plus the aggregate Dollar
Amount of all Letter of Credit Liabilities exceed the Aggregate
Commitment.
2.1.2. Availability of Facility; Required Payments.1.2.
Availability of . Subject to the terms and conditions set forth in this
Agreement, the facility is available from the date of this Agreement to the
Termination Date, and the Borrowers may borrow, repay and reborrow at any time
prior to the Termination Date. The Commitments hereunder shall expire on the
Termination Date and all outstanding Advances and all other unpaid Obligations
shall be paid in full on the Termination Date.
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2.2. Committed Advances
2.2.1. Committed Advances. From and including the date of this
Agreement and prior to the Termination Date, each Lender severally agrees, on
the terms and conditions set forth in this Agreement, to make Committed Loans to
the Borrowers from time to time in Dollar Amounts not to exceed in the aggregate
at any one time outstanding to all Borrowers the amount of such Lender's
Commitment less the aggregate Dollar Amount, at such time, of such Lender's
Letter of Credit Liabilities. Each Committed Advance hereunder shall consist of
borrowings made from the several Lenders ratably in proportion to the ratio that
their respective Commitments bear to the Aggregate Commitment. The Committed
Advances shall be evidenced by the Notes and shall be repaid as provided by the
terms of Section 2.1.2.
2.2.2. The Committed Advances may be Floating Rate Advances,
Fixed CD Rate Advances or Eurocurrency es Committed Advances, or a combination
thereof, selected by the Borrower in accordance with Sections 2.2.3 and 2.2.4.
2.2.3. Method of Selecting Types and Interest Periods for New
Committed . The Borrower shall select the Type of Advance and, in the case of
each Fixed Rate Advance, the Interest Period applicable to each Committed
Advance from time to time. The Borrower shall give the Administrative Agent
notice (a "Committed Borrowing Notice") not later than 10:00 a.m. (Chicago time)
on the Borrowing Date of each Floating Rate Advance, two Business Days before
the Borrowing Date of each Fixed CD Rate Advance, three Business Days before the
Borrowing Date for each Eurocurrency Committed Advance denominated in Dollars
and five Business Days before the Borrowing Date for each Eurocurrency Committed
Advance denominated in an Alternative Currency. A Committed Borrowing Notice
shall specify:
(i) the Borrowing Date, which shall be a Business Day, of such
Committed Advance;
(ii) the aggregate principal amount of such Committed Advance;
(iii) the Type of Committed Advance selected (including, in the case
of a Eurocurrency Committed Advance, the currency in which such Advance
is to be denominated); and
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(iv) in the case of each Committed Fixed Rate Advance, the Interest
Period applicable thereto (which may not end after the Termination
Date).
Subject to Section 3.3, each Committed Borrowing Notice shall be irrevocable.
2.2.4. Conversion and Continuation of Outstanding Committed
Advances. Floating Rate Advances shall continue as Floating Rate Advances unless
and until such Floating Rate Advances are either prepaid in accordance with
Section 2.5.3 or converted into Committed Fixed Rate Advances denominated in
Dollars. Unless sooner prepaid in accordance with Section 2.5.3 or converted in
accordance with this Section, each Committed Fixed Rate Advance of any Type
shall continue as a Fixed Rate Advance of such Type until the end of the then
applicable Interest Period therefor, at which time (x) if such Fixed Rate
Advance is a Committed Fixed Rate Advance denominated in Dollars such Committed
Fixed Rate Advance shall be automatically converted into a Floating Rate Advance
unless the Borrower shall have given the Administrative Agent a timely notice of
prepayment thereof pursuant to Section 2.5.3 or a timely Conversion/Continuation
Notice requesting that, at the end of such Interest Period, such Committed Fixed
Rate Advance either continue as a Committed Fixed Rate Advance of such Type for
the same or another Interest Period or be converted into an Advance of another
Type denominated in Dollars and (y) subject to Section 2.5.13(b), if such Fixed
Rate Advance is a Committed Fixed Rate Advance denominated in an Alternative
Currency, such Committed Fixed Rate Advance shall be automatically continued as
a Committed Fixed Rate Advance in the same Alternative Currency for an
additional Interest Period of one month, unless the Borrower shall have given
the Administrative Agent a timely notice of prepayment thereof pursuant to
Section 2.5.3 or a timely Continuation Notice requesting that at the end of such
Interest Period such Committed Fixed Rate Advance continue as a Committed Fixed
Rate Advance for another Interest Period. If the Administrative Agent does not
receive such timely notice of prepayment or Continuation Notice, it shall notify
the Lenders to such effect on the date such notice is due. Subject to the terms
of Section 2.5.2, the Borrower may elect from time to time to convert all or any
part of a Committed Advance of any Type denominated in Dollars into any other
Type or Types of Committed Advances denominated in Dollars; provided that any
conversion of any Committed Fixed Rate Advance on any day other than the last
day of the Interest Period applicable thereto shall be subject to Section 3.4.
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The Borrower shall give the Administrative Agent notice (a
"Conversion/Continuation Notice") of each conversion of a Committed Advance or
continuation of a Committed Fixed Rate Advance not later than 10:00 a.m.
(Chicago time) on the date of, in the case of a conversion into a Floating Rate
Advance, or two Business Days, in the case of a conversion into or continuation
of a Fixed CD Rate Advance, three Business Days, in the case of a conversion
into or continuation of a Eurocurrency Committed Advance denominated in Dollars
or five Business Days, in the case of a continuation of a Eurocurrency Committed
Advance denominated in an Alternative Currency, prior to the date of, the
requested conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation;
(ii) the aggregate amount and Type of the Committed Advance which is
to be converted or continued; and
(iii) the amount and Type(s) of Committed Advance(s) into which such
Committed Advance is to be converted or continued and, in the case of a
conversion into or continuation of a Committed Fixed Rate Advance, the
duration of the Interest Period applicable thereto (which may not end
after the Termination Date).
Subject to Section 3.3, each Conversion/Continuation Notice shall be
irrevocable. Changes in the currency in which an Advance is denominated may not
be effected by a conversion pursuant to this Section 2.2.4.
2.3. Competitive Bid Advances.
2.3.1. Competitive Bid Option; Repayment of Competitive Bid
Advances. In addition to Committed Advances pursuant to Section 2.2, but subject
to the terms and conditions set forth in this Agreement (including, without
limitation, the limitation set forth in Section 2.1.1(iv) as to the maximum
aggregate Dollar Amount of all outstanding Advances and Letter of Credit
Liabilities hereunder and the limitation set forth in Section 4.3(iii) as to the
minimum credit standing for Competitive Bid Advances), any Borrower may, as set
forth in this Section 2.3, request the Lenders, prior to the Termination Date,
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to make offers to make Competitive Bid Advances to such Borrower. Each Lender
may, but shall have no obligation to, make such offers and the Borrower may, but
shall have no obligation to, accept any such offers in the manner set forth in
this Section 2.3. Competitive Bid Advances shall be evidenced by the Notes. Each
Competitive Bid Advance shall be repaid in full by the Borrower on the last day
of the Interest Period applicable thereto.
2.3.2. When the Borrower wishes to request offers to make
Competitive Bid Loans under Section 2.3, it shall transmit to each Lender by
telex or telecopy a Competitive Bid Quote Request so as to be received no later
than (i) 10:00 a.m. (Chicago time) at least five Business Days prior to the
Borrowing Date proposed therein, in the case of a Eurocurrency Auction
denominated in Dollars, (ii) 10:00 a.m. (Chicago time) at least seven Business
Days prior to the Borrowing Date, in the case of a Eurocurrency Auction
denominated in an Alternative Currency or (iii) 10:00 a.m. (Chicago time) at
least one Business Day prior to the Borrowing Date proposed therein, in the case
of an Absolute Rate Auction specifying:
(a) the proposed Borrowing Date, which shall be a Business Day,
for the proposed Competitive Bid Advance;
(b) the aggregate principal amountof such Competitive Bid Advance;
(c) whether the Competitive Bid Quotes requested are to set forth
a Competitive Bid Margin or an Absolute Rate, or both;
(d) in the case of a Eurocurrency Auction, the currency in which
the Loans are to be denominated; and
(e) the Interest Period applicable thereto (which may not end
after the Termination Date).
The Borrower may request offers to make Competitive Bid Loans for more than one
Interest Period and for a Eurocurrency Auction and an Absolute Rate Auction in a
single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be
given within 3 Business Days of any other Competitive Bid Quote Request. Each
Competitive Bid Quote Request shall be in an Approved Multiple.
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2.3.3. Submission and Contents of Competitive Bid Quotes.
(i) Each Lender may, in its sole discretion, submit to the
Borrower a Competitive Bid Quote containing an offer or offers to make
Competitive Bid Loans in response to any Invitation for Competitive Bid Quotes.
Each Competitive Bid Quote must comply with the requirements of this Section
2.3.3 and must be submitted to the Borrower by telecopy at its address specified
in or pursuant to Article XIII not later than (a) 1:00 p.m. (Chicago time) at
least three Business Days prior to the proposed Borrowing Date, in the case of a
Eurocurrency Auction denominated in Dollars, (b) 1:00 p.m. (Chicago time) at
least five Business Days prior to the proposed Borrowing Date, in the case of a
Eurocurrency Auction denominated in an Alternative Currency or (c) 9:00 a.m.
(Chicago time) on the proposed Borrowing Date, in the case of an Absolute Rate
Auction. Subject to Articles IV and VIII, any Competitive Bid Quote so made
shall be irrevocable.
(ii) Each Competitive Bid Quote shall in any case specify:
(a) the proposed Borrowing Date, which shall be the same as
that set forth in the applicable Invitation for Competitive Bid Quotes;
(b) the principal amount of the Competitive Bid Loan for which
each such offer is being made, which principal amount (1) may be
greater than, less than or equal to the Commitment of the quoting
Lender, (2) must be an Approved Multiple and (3) may not exceed the
principal amount of Competitive Bid Loans for which offers were
requested;
(c) in the case of a Eurocurrency Auction, the Competitive Bid
Margin offered for each such Competitive Bid Loan;
(d) the limit, if any, as to the aggregate principal amount of
the Competitive Bid Loans from such Lender which may be accepted by the
Borrower;
(e) in the case of an Absolute Rate Auction, the Absolute Rate
offered for each such Competitive Bid Loan;
(f) the applicable Interest Period; and
(g) the identity of the quoting Lender.
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(iii) The Borrower shall reject any Competitive Bid Quote that:
(a) is not substantially in the form of Exhibit "D" hereto or
does not specify all of the information required by Section 2.3.3(ii);
(b) contains qualifying, conditional or similar language,
other than any such language contained in Exhibit "D" hereto;
(c) proposes terms other than or in addition to those set
forth in the applicable Invitation for Competitive Bid Quotes; or
(d) arrives after the time set forth in Section 2.3.3(i).
If any Competitive Bid Quote shall be rejected pursuant to this Section
2.3.3(iii), then the Borrower shall notify the relevant Lender of such rejection
as soon as practical.
2.3.4. Acceptance and Notice by the Borrower.3.4. Acceptance
and Notice by . Not later than (a) 2:00 p.m. (Chicago time) at least three
Business Days prior to the proposed Borrowing Date, in the case of a
Eurocurrency Auction denominated in Dollars, (b) 2:00 p.m. (Chicago time) at
least five Business Days prior to the proposed Borrowing Date, in the case of a
Eurocurrency Auction denominated in an Alternative Currency or (c) 10:00 a.m.
(Chicago time) on the proposed Borrowing Date, in the case of an Absolute Rate
Auction, the Borrower shall notify each Lender of its acceptance or rejection of
the offers so notified to it pursuant to Section 2.3.3; provided, however, that
the failure by the Borrower to give such notice to any Lender shall be deemed to
be a rejection by the Borrower of all such offers made by such Lender. In the
case of acceptance, such notice (a "Competitive Bid Borrowing Notice") shall
specify the aggregate principal amount of offers for each Interest Period that
are accepted. The Borrower may accept or reject any Competitive Bid Quote in
whole or in part (subject to the terms of Section 2.3.3(ii)(d)); provided that:
(a) the aggregate principal amount of each Competitive Bid
Advance may not exceed the applicable amount set forth in the related
Competitive Bid Quote Request;
(b) acceptance of offers may only be made on the basis of
ascending Competitive Bid Margins or Absolute Rates, as the case may
be; and
(c) the Borrower may not accept any offer of the type
described in Section 2.3.3(iii) or that otherwise fails to comply with
the requirements of this Agreement for the purpose of obtaining a
Competitive Bid Loan under this Agreement.
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2.3.5. Allocation by the Borrower. If offers are made by two or more
Lenders with the same Competitive Bid Margins or Absolute Rates, as the case may
be, for a greater aggregate principal amount than the amount in respect of which
offers are permitted to be accepted for the related Interest Period, the
principal amount of Competitive Bid Loans in respect of which such offers are
accepted shall be allocated by the Borrower among such Lenders as nearly as
possible (in such multiples, not greater than $1,000,000 (or the equivalent in
an Alternative Currency), as the Borrower may deem appropriate) in proportion to
the aggregate principal amount of such offers. Allocations by the Borrower of
the amounts of Competitive Bid Loans shall be conclusive in the absence of
manifest error. The Borrower shall promptly, but in any event on the same
Business Day in the case of Eurocurrency Bid Rate Advances, and by 11:00 a.m.
(Chicago time) in the case of Absolute Rate Advances, notify each Lender that
submitted a Competitive Bid Quote of its receipt of a Competitive Bid Borrowing
Notice and the aggregate principal amount of such Competitive Bid Advance
allocated to each participating Lender.
2.3.6. Notice by the Borrower to the Administrative Agent.3.6.
Notice by the . Promptly, but in any event on the same Business Day that the
Borrower issues any Competitive Bid Borrowing Notice, the Borrower shall give
the Administrative Agent notice of the amount, maturity, applicable interest
rate and Lender for each Competitive Bid Loan accepted by the Borrower pursuant
to such Competitive Bid Borrowing Notice.
2.4. Facility Fees. The Company hereby agrees to pay to the
Administrative Agent for the account of each Lender, ratably in the proportion
that such Lender's Commitment bears to the Aggregate Commitment, a per annum
facility fee at the Facility Fee Rate (determined daily in accordance with the
Pricing Schedule) on the daily amount of the Aggregate Commitment, payable
quarterly in arrears on each Payment Date and on the Termination Date. All
accrued facility fees hereunder shall be payable on the effective date of any
termination of the obligations of the Lenders to make Loans hereunder.
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2.5. General Facility Terms.
2.5.1. Not later than (i) 12:00 noon (Chicago time) on each
Borrowing Date for each Advance denominated in Dollars and (ii) the funding
deadline designated by the Administrative Agent in the case of any Advance
denominated in an Alternative Currency (which shall be no earlier than 10:00
a.m. local time in the place of payment and no later than 12:00 noon (Chicago
time)), each Lender shall make available its Loan or Loans, if any, in
immediately available funds, to the Administrative Agent at its address
specified pursuant to Article XIII or at such other location as the
Administrative Agent shall direct. The Administrative Agent shall promptly
deposit the funds so received from the Lenders in the Borrower's account at the
Administrative Agent's main office in Chicago or as otherwise directed by the
Borrower. Notwithstanding the foregoing provisions of this Section 2.5.1, to the
extent that a Loan made to a Borrower by a Lender matures on the Borrowing Date
of a requested Loan to such Borrower in the same currency, such Lender shall
apply the proceeds of the Loan it is then making to the repayment of principal
of the maturing Loan.
2.5.2. Minimum Amount of Each Committed Advance.5.2. Minimum
Amount of Each . Except as contemplated by Section 2.7.3, each Committed Advance
shall be in an Approved Multiple; provided, however, that any Floating Rate
Advance may be in the aggregate amount of the unused Aggregate Commitment.
2.5.3. The Borrower may from time to time pay all of its
outstanding Committed Advances, or, in an Approved Multiple, any portion of the
outstanding Committed Advances upon (i) in the case of any Floating Rate
Advance, notice to the Administrative Agent not later than 10:00 a.m. (Chicago
time) on the date of prepayment, (ii) in the case of any Fixed CD Rate Advance,
two Business Days' prior notice to the Administrative Agent, (iii) in the case
of any Eurocurrency Committed Advance denominated in Dollars, three Business
Days' prior notice to the Administrative Agent and (iv) in the case of any
Eurocurrency Committed Advance denominated in an Alternative Currency, five
Business Days' prior notice to the Administrative Agent. Any such notice of
prepayment shall be irrevocable. All such payments shall be made in immediately
available funds to the Administrative Agent at the Administrative Agent's
address specified in Article XIII or at any other location specified by the
Administrative Agent in accordance with Section 2.5.7 not later than (i) noon
(Chicago time) on the date of payment for each Advance denominated in Dollars
and (ii) the funding deadline designated by the Administrative Agent in the case
of any Advance denominated in
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an Alternative Currency (which should be no earlier than 10:00 a.m. local time
in the place of payment and no later than 12:00 noon (Chicago time)). Subject to
Section 2.5.13(a), a Competitive Bid Advance may not be prepaid prior to the
last day of its applicable Interest Period without the prior consent of the
Lender which originally made such Loan, which consent may be given or withheld
at the Lender's sole and absolute discretion, provided that no Competitive Bid
Advance may be prepaid if there exists a Default. Any prepayment of a Fixed Rate
Advance prior to the end of its applicable Interest Period shall be subject to
the indemnity provisions of Section 3.4.
2.5.4. Subject to the provisions of Section 2.5.5, each Advance
shall bear interest from and including the first day of the Interest Period
applicable thereto to (but not including) the earlier of (i) the last day of
such Interest Period or (ii) the date of any earlier prepayment as permitted by
Section 2.5.3, at the interest rate determined as applicable to such Advance,
payable in the currency of such Advance.
2.5.5. Except as provided in the next sentence, any Advance not
paid at maturity, whether by acceleration or otherwise, shall bear interest
until paid in full at a rate per annum equal to (i) in the case of an Advance
denominated in Dollars, the Alternate Base Rate plus 2% per annum, payable upon
demand and (ii) in the case of an Advance denominated in an Alternative
Currency, the sum of 2% plus the Applicable Margin for Eurocurrency Committed
Advances for such day plus the quotient obtained by dividing (x) the average of
the respective rates per annum at which one day (or, if such amount due remains
unpaid more than five Business Days, then for such other period of time not
longer than three months as the Administrative Agent may select) deposits in
such Alternative Currency in an amount approximately equal to such overdue
payment due to each of the Reference Banks (or, in the case of a Competitive Bid
Advance, the amount which would have been due to each Reference Bank if such
Advance were a Committed Advance) are offered to such Reference Bank in the
London interbank market for the applicable period determined as provided above
by (y) 1.00 minus the Reserve Requirement. In the case of a Fixed Rate Advance
the maturity of which is accelerated, such Fixed Rate Advance shall bear
interest for the remainder of the applicable Interest Period (or until paid if
paid prior to the end of such Interest Period), at the higher of the rate
otherwise applicable to such Fixed Rate Advance for such Interest Period plus 2%
per annum or the applicable rate specified in the preceding sentence.
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2.5.6. Interest Payment Dates; Interest Basis.5.6. Interest
Payment Dates; . Interest accrued on each Fixed Rate Advance shall be payable on
the last day of its applicable Interest Period, on any date on which such Fixed
Rate Advance is prepaid or converted, and at the maturity of such Advance.
Interest accrued on each Floating Rate Advance shall be payable on each Payment
Date, on any date on which such Floating Rate Advance is prepaid, and at the
maturity of such Advance. Interest accrued on each Fixed Rate Advance having an
Interest Period longer than three months shall also be payable on the last day
of each 90 day interval (in the case of Fixed CD Rate Advances or Absolute Rate
Advances) or three-month interval (in the case of Eurocurrency Committed
Advances or Eurocurrency Bid Rate Advances) during such Interest Period.
Interest on Fixed Rate Loans, facility fees and letter of credit fees hereunder
shall be calculated for actual days elapsed on the basis of a 360-day year.
Interest on Floating Rate Loans shall be calculated for actual days elapsed on
the basis of a 365-day year, or, when applicable, 366-day year. Interest shall
be payable for the day an Advance is made but not for the day of any payment on
the amount paid if payment is received prior to the deadline specified pursuant
to Section 2.5.7. If any payment of principal of or interest on an Advance shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
2.5.7. Subject to the last sentence of Section 2.5.1 and to
Section 2.7.3., all payments of principal, interest, and fees hereunder shall be
made by (i) noon (local time) for each payment in Dollars and (ii) the funding
deadline designated by the Administrative Agent for each payment in an
Alternative Currency (which shall be no earlier than 10:00 a.m. local time in
the place of payment and no later than 12:00 noon (Chicago time)), on the date
when due in immediately available funds to the Administrative Agent at the
Administrative Agent's address specified pursuant to Article XIII, or at any
other location specified in writing by the Administrative Agent to the Borrower
and shall be distributed by the Administrative Agent ratably among all Lenders
in the case of fees and payments in respect of Committed Advances and ratably
among the applicable Lenders in respect of Competitive Bid Advances. Each
payment delivered to the Administrative Agent for the account of any Lender
shall be
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delivered promptly by the Administrative Agent to such Lender in the same type
of funds which the Administrative Agent received at its address specified
pursuant to Article XIII or at any location specified in a notice received by
the Administrative Agent from such Lender. All payments of the principal of and
interest on any Loan shall be made in the currency in which such Loan is
denominated.
2.5.8. Each Lender is hereby authorized to record on the schedule
attached to each of its Notes, or otherwise record in accordance with its usual
practice, the date and amount of each of its Loans evidenced by such Note;
provided, however, that any failure to so record shall not affect the Obligors'
obligations under any Loan Document.
2.5.9. Notification of Advances, Interest Rates and
Prepayments. The Administrative Agent will notify each Lender of the contents of
each Aggregate Commitment reduction notice, Committed Borrowing Notice,
Conversion/Continuation Notice and repayment notice received by it hereunder
promptly and in any event before the close of business on the same Business Day
of receipt thereof (or, in the case of borrowing notices with respect to
Floating Rate Advances and Absolute Rate Advances, within one hour of receipt
thereof). The Administrative Agent will notify each Lender of the interest rate
applicable to each Fixed Rate Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate.
2.5.10. Non-Receipt of Funds by the Administrative Agent.
Unless the Borrower or a Lender, as the case may be, notifies the Administrative
Agent prior to the date on which it is scheduled to make payment to the
Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or
(ii) in the case of the Borrower, a payment of principal, interest or fees to
the Administrative Agent for the account of the Lenders, that it does not intend
to make such scheduled payment, the Administrative Agent may assume that such
scheduled payment has been made. The Administrative Agent may, but shall not be
obligated to, make the amount of such scheduled payment available to the
intended recipient in reliance upon such assumption. If such Lender or the
Borrower, as the case may be, has not in fact made such scheduled payment to
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the Administrative Agent, the recipient of such scheduled payment shall, on
demand by the Administrative Agent, repay to the Administrative Agent the amount
so made available together with interest thereon in respect of each day during
the period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (x) in the case of scheduled payment by a
Lender, the Federal Funds Effective Rate for such day or (y) in the case of
scheduled payment by the Borrower, the interest rate applicable to the relevant
Loan.
2.5.11. The Company may at any time after the date hereof cancel
the Aggregate Commitment, in whole, or in a minimum aggregate amount of
$10,000,000 (and in integral multiples of $1,000,000 if in excess thereof)
ratably among the Lenders upon written notice to the Administrative Agent not
later than 10:00 a.m. (Chicago time) on the effective date of cancellation
specified therein, which notice shall specify the amount of such reduction;
provided, however, no such notice of cancellation shall be effective to the
extent that it would reduce the Aggregate Commitment to an amount which would be
less than the sum of the aggregate Dollar Amount of Loans outstanding at the
time such cancellation is to take effect plus the aggregate Dollar Amount of all
Letter of Credit Liabilities at such time. Any notice of cancellation given
pursuant to this Section 2.5.11 shall be irrevocable and shall specify the date
upon which such cancellation is to take effect.
2.5.12. Subject to Section 12.6, each Lender may, by written
(including telex or telecopy) notice to the Administrative Agent and the
Company, book its Loans and Letter of Credit Liabilities at any Lending
Installation selected by such Lender and may from time to time change its
Lending Installation and for whose account Loan and Letter of Credit payments
are to be made. Each Lender will notify the Administrative Agent and the Company
on or prior to the date of this Agreement of the Lending Installation which it
intends to utilize for each type of Loan and Letter of Credit hereunder.
2.5.13. Currency Equivalents. (a) The Administrative Agent shall
determine the Dollar Amount of each Advance denominated in an Alternative
Currency as of the first day of each Interest Period applicable thereto, and in
the case of any such Interest Period of more than three months, at three month
intervals after the first day thereof. The Administrative Agent shall determine
the Dollar Amount of any Letter of Credit Liabilities denominated in an
Alternative Currency on the date of issuance of the related Letter of Credit and
at three-month intervals thereafter. The Administrative Agent shall promptly
notify the Borrower and the Lenders of each Dollar Amount so determined by it.
Each such determination shall be based on the
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spot rate at which in accordance with normal banking procedures the
Administrative Agent could purchase the Alternative Currency with Dollars in the
interbank market in London at 11:00 a.m. (London time) two Business Days prior
to the date as of which such Dollar Amount is to be determined. If after giving
effect to any such determination of a Dollar Amount, the sum of the aggregate
Dollar Amount of all outstanding Advances plus the aggregate Dollar Amount of
all Letter of Credit Liabilities exceeds the Aggregate Commitment, the Borrowers
shall within five Business Days prepay outstanding Advances (as selected by the
Company) to the extent necessary to eliminate such excess; provided that such
prepayment shall be applied to outstanding Committed Advances to the extent
necessary to prepay such Advances in full before prepayment of any Competitive
Bid Advances pursuant to this Section 2.5.13(a).
(b) If for the purpose of obtaining judgment in any court it
is necessary to convert a sum due from any Obligor hereunder or under any of the
Notes in the currency expressed to be payable herein or under the Notes (the
"specified currency") into another currency, the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures the
Administrative Agent could purchase the specified currency with such other
currency at the Administrative Agent's London office at 11:00 a.m. (London time)
on the Business Day preceding that on which final judgment is given. The
obligations of each Obligor in respect of any sum due to any Lender or the
Administrative Agent hereunder or under any Note shall, notwithstanding any
judgment in a currency other than the specified currency, be discharged only to
the extent that on the Business Day following receipt by such Lender or the
Administrative Agent (as the case may be) of any sum adjudged to be so due in
such other currency such Lender or the Administrative Agent (as the case may be)
may in accordance with normal banking procedures purchase the specified currency
with such other currency; if the amount of the specified currency so purchased
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is less than the sum originally due to such Lender or the Administrative Agent,
as the case may be, in the specified currency, each Obligor agrees, to the
fullest extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the
Administrative Agent, as the case may be, against such loss, and if the amount
of the specified currency so purchased exceeds (a) the sum originally due to any
Lender or the Administrative Agent, as the case may be, in the specified
currency and (b) any amounts shared with other Lenders as a result of
allocations of such excess as a disproportionate payment to such Lender under
Article XI, such Lender or the Administrative Agent, as the case may be, agrees
to remit such excess to the Company for the account of the Obligors.
2.5.14. Taxes. (a) Any and all payments by a Borrower hereunder
or under the Notes shall be made free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto excluding, (i) in the
case of each Lender and Agent, taxes imposed on its income, and franchise or
similar taxes imposed on it, by the jurisdiction under the laws of which such
Lender or Agent is organized or any political subdivision thereof and taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction of
such Lender's applicable Lending Installation or any political subdivision
thereof and (ii) in the case of each Lender, any United States withholding tax
imposed on such payments but only to the extent not attributable to a change in
law, regulation, treaty or interpretation after the time such Lender first
becomes a party to this Agreement (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities arising out of or related to
this Agreement being hereinafter referred to as "Taxes"). If any Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender or Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.5.14) such Lender or Agent (as the case may be) receives an amount equal to
the sum it would have received had no deductions been made, (ii) such Borrower
shall make such deductions and (iii) such Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law and provide such Lender or Agent (as the case may be) with a
receipt or other evidence of such payment.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or under the Notes
or from the execution, delivery, enforcement or registration of, or otherwise
with respect to, the Loan Documents or the Letters of Credit (hereinafter
referred to as "Other Taxes").
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(c) Each Borrower will indemnify each Lender and Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.5.14) paid by such Lender or Agent and any liability including penalties,
interest and expenses arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted by the relevant
taxing authority or other governmental entity. This indemnification shall be
made to the Administrative Agent for the account of such Lender or Agent (as the
case may be) within 30 days from the date such Lender or Agent makes written
demand therefor (with a copy, in the case of a demand by a Lender or the
Documentation Agent, of such demand to the Administrative Agent). If a Lender or
Agent shall become aware that it is entitled to receive a refund in respect of
Taxes or Other Taxes as to which it has been indemnified by a Borrower pursuant
to this Section 2.5.14, it shall promptly notify such Borrower of the
availability of such refund and, unless such Lender or Agent determines in good
faith that it is not in its best interests to do so, shall apply for such
refund. If any Lender or Agent receives a refund in respect of any Taxes or
Other Taxes as to which it has been indemnified by a Borrower pursuant to this
Section 2.5.14, it shall promptly notify such Borrower of such refund and shall
promptly repay such refund to such Borrower (to the extent of amounts that have
been paid by such Borrower under this Section 2.5.14 with respect to such
refund), net of all out-of-pocket expenses of such Lender or Agent in obtaining
such refund; provided that the Borrower, upon the request of such Lender or
Agent agrees to return such refund (plus penalties, interest or other charges)
to such Lender or Agent in the event such Lender or Agent is required to repay
such refund.
(d) Notwithstanding the foregoing, unless, prior to the
initial Borrowing Date (in the case of a Lender listed on the signature pages
hereto), and prior to the effective date of the Assignment and Acceptance by
which it became a Lender (in the case of Lender that became a Lender pursuant to
such Assignment and Acceptance), and in each case from time to time thereafter,
if requested by the Company or the Administrative Agent, each Lender organized
under the laws of a jurisdiction outside the United States shall have provided
the Company and the Administrative Agent with the forms prescribed by the
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Internal Revenue Service of the United States certifying as to such Lender's
status for purposes of determining exemption from United States withholding
taxes with respect to all payments of interest to be made to such Lender
hereunder or other documents satisfactory to the Company which, in each case,
shall indicate that all payments to be made to such Lender hereunder are not
subject to United States withholding tax or are subject to such taxes at a rate
reduced to zero by an applicable tax treaty, neither the Company nor any other
Borrower shall have any obligation under the last sentence of Section 2.5.14(a)
to make any payments to or for the benefit of such Lender in respect of Taxes
imposed by the United States of America unless such Lender is unable to provide
such form as a result of a change in law or treaty after the time such Lender
becomes a party to this Agreement.
2.5.15. For so long as any Lender maintains reserves against
"Eurocurrency liabilities" (or any other category of liabilities which includes
deposits by reference to which interest rate on Eurocurrency Committed Loans is
determined or any category of extensions of credit or other assets which
includes loans by a non-United States office of such Lender to United States
residents), and as a result the cost to such Lender (or its Lending
Installation) of making or maintaining any of its Eurocurrency Committed Loans
is increased, then such Lender may require the Borrower to pay,
contemporaneously with each payment of interest on such Loans, additional
interest on the related Eurocurrency Committed Loan of such Lender at a rate per
annum up to but not exceeding the excess of (i)(A) the applicable Eurocurrency
Base Rate divided by (B) one minus the Reserve Requirement over (ii) the
applicable Eurocurrency Base Rate. Any Lender wishing to require payment of such
additional interest (x) shall so notify the Borrower and the Administrative
Agent, in which case such additional interest on the Eurocurrency Committed
Loans of such Lender shall be payable to such Lender at the place indicated in
such notice with respect to each Interest Period which commences at least three
Business Days after the giving of such notice and (y) shall furnish to the
Borrower at least five Business Days prior to each date on which interest is
payable on the Eurocurrency Committed Loans a certificate setting forth the
amount to which such Lender is then entitled under this Section.
2.6. Optional Increase in Commitments. At any time, if no Default
or Unmatured Default shall have occurred and be continuing, the Company ts. may,
if it so elects, increase the aggregate amount of the Commitments, either by
designating one or more banks or other financial institutions not theretofore a
Lender to become a Lender (such designation to be effective only with the prior
written consent of the Administrative Agent, which
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consent will not be unreasonably withheld, and of each Issuing Bank that (x) has
issued a Letter of Credit as to which there are Letter of Credit Liabilities at
such time or (y) has a commitment to issue Letters of Credit at such time) or by
agreeing with one or more existing Lenders that such Lender's Commitment shall
be increased. Upon execution and delivery by the Company and each such Lender or
bank or other financial institution of an instrument in form reasonably
satisfactory to the Administrative Agent, such existing Lender shall have a
Commitment as therein set forth or such bank or other financial institution
shall become a Lender with a Commitment as therein set forth and all the rights
and obligations of a Lender with such a Commitment hereunder; provided:
(a) that the Company shall provide prompt notice
of such increase to the Administrative Agent, who shall
promptly notify the Lenders;
(b) that the amount of such increase is not less
than $10,000,000;
(c) that the amount of such increase, together
with all other increases in the aggregate amount of the
Commitments pursuant to this Section 2.6 since the date of
this Agreement, does not exceed $250,000,000; and
(d) that after giving effect to such increase,
no Lender has a Commitment in an amount greater than 20% of
the aggregate amount of the Commitments.
Upon any increase in the aggregate amount of the Commitments pursuant to this
Section 2.6, within five Business Days, in the case of each Floating Rate
Advance then outstanding, and at the end of the then current Interest Period
with respect thereto, in the case of each Committed Fixed Rate Advance then
outstanding, the Borrower shall prepay or repay such Advance in its entirety
and, to the extent the Borrower elects to do so and subject to the conditions
specified in Article IV, the Borrower shall reborrow Committed Loans from the
Lenders in proportion to their respective Commitments after giving effect to
such increase, until such time as all outstanding Committed Loans are held by
the Lenders in such proportion.
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2.7 Letters of Credit.
2.7.1. Availability. Subject to the terms and conditions
hereof, each Issuing Bank agrees to issue Letters of Credit hereunder from time
to time before the tenth day before the Termination Date upon the request of any
Borrower; provided that, immediately after each Letter of Credit is issued, (i)
the Letter of Credit Liabilities in respect of Letters of Credit issued by such
Issuing Bank shall not exceed its Issuing Bank Limit, (ii) the aggregate Dollar
Amount of all Letter of Credit Liabilities shall not exceed the Letter of Credit
Commitment and (iii) the aggregate Dollar Amount at such time of the Letter of
Credit Liabilities plus the aggregate Dollar Amount of all outstanding Advances
shall not exceed the Aggregate Commitment. Upon the date of issuance by an
Issuing Bank of a Letter of Credit, the Issuing Bank shall be deemed, without
further action by any party hereto, to have sold to each Lender, and each Lender
shall be deemed, without further action by any party hereto, to have purchased
from such Issuing Bank, a participation in such Letter of Credit and the related
Letter of Credit Liabilities in the proportion their respective Commitments bear
to the Aggregate Commitment.
2.7.2. Procedure for Issuance. The Borrower shall give the
Issuing Bank notice at least three Business Days prior to the requested issuance
of a Letter of Credit specifying the date such Letter of Credit is to be issued,
specifying the currency in which such Letter of Credit is to be denominated
(which shall be Dollars or an Alternative Currency) and the amount thereof, and
describing the other terms of such Letter of Credit and the nature of the
transactions to be supported thereby (such notice, including any such notice
given in connection with the extension of a Letter of Credit, a "Notice of
Issuance"). Upon receipt of a Notice of Issuance, the Issuing Bank shall
promptly notify the Administrative Agent, and the Administrative Agent shall
promptly notify each Lender of the contents thereof and of the amount of such
Lender's participation in such Letter of Credit. The issuance by the Issuing
Bank of each Letter of Credit shall, in addition to the conditions precedent set
forth in Article IV, be subject to the conditions precedent that such Letter of
Credit shall be in such form and contain such terms as shall be satisfactory to
the Issuing Bank (consistent with its
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customary procedures and policies for the issuance of letters of credit
generally) and that the Borrower and (if other than the Borrower) the Company
shall have executed and delivered such other instruments and agreements relating
to such Letter of Credit as the Issuing Bank shall have reasonably requested.
The Borrower shall also pay to the Issuing Bank for its own account issuance,
drawing, amendment and extension charges in the amounts and at the times agreed
between the Borrower and the Issuing Bank. The extension or renewal of any
Letter of Credit shall be deemed to be an issuance of such Letter of Credit. If
any Letter of Credit contains a provision pursuant to which it is automatically
extended unless notice of termination is given by the Issuing Bank, the Issuing
Bank shall timely give such notice of termination if a Stop Issuance Notice is
in effect. No Letter of Credit shall have a term extending or be so extendible
beyond the fifth Business Day preceding the Termination Date.
2.7.3. Reimbursement of Drawings. Upon receipt from the
beneficiary of any Letter of Credit of any notice of a drawing under such Letter
of Credit, the Issuing Bank shall notify the Administrative Agent and the
Adminis-trative Agent shall promptly notify the Borrower and each other Lender
as to the amount to be paid as a result of such demand or drawing and the
payment date. The Borrower shall be irrevocably and unconditionally obligated to
reimburse the Issuing Bank on such payment date for any amounts paid by the
Issuing Bank upon any drawing under any Letter of Credit, without presentment,
demand, protest or other formalities of any kind. All such amounts paid by the
Issuing Bank and remaining unpaid by the Borrower shall bear interest, payable
on demand, for each day from the date of payment by the Issuing Bank until paid
in full by the Obligors at the rate per annum specified in Section 2.5.5 for the
relevant currency. In addition, each Lender will pay to the Administrative
Agent, for the account of the Issuing Bank, immediately upon the Issuing Bank's
demand at any time during the period from the date of payment by the Issuing
Bank until reimbursement therefor in full by the Obligors, an amount equal to
such Lender's ratable share of such drawing (in proportion to its participation
therein), together with interest on such amount for each day from the date of
the Issuing Bank's demand for such payment (or, if such demand is made less than
two hours prior to the funding deadline for the relevant currency on such date
specified pursuant to Section 2.5.7, from the next succeeding Business Day) to
the date of payment by such Lender of such amount at the applicable rate per
annum specified in Section 2.5.10 for the relevant currency. The Issuing Bank
will pay to each Lender ratably all amounts received from the Obligors for
application in payment of their reimbursement obligations in respect of any
Letter of Credit, but only to the extent such Lender has made payment to the
Issuing Bank in respect of such Letter of Credit pursuant hereto. In the case of
a drawing under a Letter of Credit denominated in Dollars, the Borrower shall,
unless it gives not less than one Business Day's notice to the Administrative
Agent to the contrary, be deemed to have timely given a Committed Borrowing
Notice for a Floating Rate Advance on the date of such drawing in the exact
amount due the Issuing Bank hereunder on such date, and the Administrative Agent
shall apply the proceeds of such Advance to make payment thereof.
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2.7.4. Obligations Absolute. The obligations of the Borrower and
each Lender under Section 2.7.3 shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement, under all circumstances whatsoever, including without limitation
the following circumstances:
(a) any lack of validity or enforce-ability of
this Agreement or any Letter of Credit or any document related
hereto or thereto;
(b) any amendment, waiver of or any consent to
departure from all or any of the provisions of this Agreement,
any Letter of Credit or any document related hereto or
thereto;
(c) the use which may be made of the Letter of
Credit by, or any acts or omission of, a beneficiary of a
Letter of Credit (or any Person for whom the beneficiary may
be acting);
(d) the existence of any claim, set-off, defense
or other rights that any Obligor may have at any time against
a beneficiary of a Letter of Credit (or any Person for whom
the beneficiary may be acting), the Lenders (including the
Issuing Bank) or any other Person, whether in connection with
this Agreement or the Letter of Credit or any document related
hereto or thereto or any unrelated transaction;
(e) any statement or any other document
presented under a Letter of Credit proving to be forged,
fraudulent or invalid in any respect or any statement therein
being untrue or inaccurate in any respect whatsoever;
(f) payment under a Letter of Credit to the
beneficiary of such Letter of Credit against presentation to
the Issuing Bank of a draft or certificate that does not
comply with the terms of the Letter of Credit; or
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(g) any other act or omission to act or delay of
any kind by any Lender (including the Issuing Bank), the
Administrative Agent or any other Person or any other event or
circumstance whatsoever that might, but for the provisions of
this subsection (g), constitute a legal or equitable discharge
of any Obligor's or Lender's obligations hereunder;
provided that the provisions of this Section 2.7.4 shall not relieve the Issuing
Bank from responsibility for its own gross negligence or wilful misconduct.
2.7.5. Indemnity. The Company hereby indemnifies and holds
harmless each Lender (including each Issuing Bank) and the Administrative Agent
from and against any and all claims, damages, losses, liabilities, costs or
expenses which such Lender or the Administrative Agent may incur (including,
without limitation, any claims, damages, losses, liabilities, costs or expenses
which any Issuing Bank may incur by reason of or in connection with the failure
of any other Lender to fulfill or comply with its obligations to such Issuing
Bank hereunder (but nothing herein contained shall affect any rights the Company
may have against such defaulting Lender)), and none of the Lenders (including an
Issuing Bank) nor the Administrative Agent nor any of their officers or
directors or employees or agents shall be liable or responsible, by reason of or
in connection with the execution and delivery or transfer of or payment or
failure to pay under any Letter of Credit, including without limitation any of
the circumstances enumerated in Section 2.7.4 above, as well as (i) any error,
omission, interruption or delay in transmission or delivery of any messages, by
mail, cable, telegraph, telex or otherwise, (ii) any error in interpretation of
technical terms, (iii) any loss or delay in the transmission of any document
required in order to make a drawing under a Letter of Credit, (iv) any
consequences arising from causes beyond the control of the Issuing Bank,
including without limitation any government acts, or any other circumstances
whatsoever in making or failing to make payment under such Letter of Credit;
provided that the Company shall not be required to indemnify the Issuing Bank
for any claims, damages, losses, liabilities, costs or expenses, and the Company
shall have a claim for direct (but not conse-quential) damage suffered by it, to
the extent found by a court of competent jurisdiction to have been caused by (x)
the willful misconduct or gross negligence of the Issuing Bank in determining
whether a request presented under any Letter of Credit complied with the terms
of such Letter of Credit or (y) the Issuing Bank's failure to pay under any
Letter of Credit after the presentation to it of a request strictly complying
with the terms and conditions of the Letter of Credit. Nothing in this Section
2.7.5 is intended to limit the obligations of any Obligor under any other
provision of this Agreement. To the extent the Company does not indemnify an
Issuing Bank as required by this subsection, the Lenders agree to do so ratably
in accordance with their Commitments.
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2.7.6. Letter of Credit Fees. The Company shall pay to the
Administrative Agent (i) for the account of the Lenders ratably a letter of
credit fee accruing daily on the aggregate amount then available for drawing
under all Letters of Credit at the LC Fee Rate and (ii) for the account of each
Issuing Bank a Letter of Credit fronting fee accruing daily on the aggregate
amount then available for drawing under all Letters of Credit issued by such
Issuing Bank at a rate per annum as determined from time to time by the Company
and such Issuing Bank. Accrued fees under this Section in respect of each Letter
of Credit shall be payable in the currency in which such Letter of Credit is
denominated quarterly in arrears on each Payment Date and upon the date of
termination of the Commitments in their entirety.
2.7.7. Stop Issuance Notice. If the Required Lenders determine at
any time that the conditions set forth in Section 4.3 would not be satisfied at
such time, then the Required Lenders may request that the Administrative Agent
issue a "Stop Issuance Notice", and the Adminis-trative Agent shall issue such
notice to the Company and to each Issuing Bank. Such Stop Issuance Notice shall
be withdrawn upon a determination by the Required Lenders that the circumstances
giving rise thereto no longer exist. No Letter of Credit shall be issued while a
Stop Issuance Notice is in effect.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If, after the date of this Agreement, the
adoption of any law or the application of any governmental or quasi-governmental
rule, regulation, policy, guideline or directive (whether or not having the
force of law), or any change therein, or any change in the interpretation or
administration thereof, or the compliance of any Lender therewith,
(i) with respect to Committed Loans bearing interest at a
Fixed Rate, or Letters of Credit, imposes or increases or deems
applicable any reserve, assessment, insurance charge, special deposit
or similar requirement against assets of, deposits with or for the
account of, or credit extended by, any Lender or any applicable Lending
Installation (other than reserves and assessments taken into account in
determining the interest rate applicable to Committed Advances bearing
interest at a Fixed Rate or for which such Lender is compensated
pursuant to Section 2.5.15), or
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(ii) with respect to Committed Loans bearing interest at a Fixed
Rate, or Letters of Credit, imposes any other condition,
the result of which is to increase the cost to any Lender or any applicable
Lending Installation of making, funding or maintaining such Loans, or of
issuing, maintaining or participating in Letters of Credit, or reduces any
amount receivable by any Lender or any applicable Lending Installation in
connection therewith, or requires any Lender or any applicable Lending
Installation to make any payment calculated by reference to the amount of such
Loans held by it, such Letters of Credit participated in by it or such amounts
received by it, by an amount deemed material by such Lender, then, within 30
days of demand by such Lender, the Borrower shall pay such Lender that portion
of such increased expense incurred or reduction in an amount received which such
Lender reasonably and in good faith determines is attributable to the making,
funding and maintaining of such Loans by it or to issuing, maintaining or
participating in Letters of Credit.
3.2. Changes in Capital Adequacy Regulations. If a Lender
reasonably and in good faith determines that the amount of
capital required or expected to be maintained by such Lender, any Lending
Installation of such Lender or any corporation controlling such Lender
attributable to this Agreement, the Loans or the Letters of Credit or its
obligation to make Loans or to issue or participate in Letters of Credit
hereunder is increased as a result of a Change (as hereafter defined), then,
within 15 days of demand by such Lender, the Company shall pay such Lender the
amount which such Lender reasonably and in good faith determines is necessary to
compensate it for any reduction in the rate of return on capital to an amount
below that which such Lender could have achieved but for such Change and is
attributable to this Agreement, the Loans or the Letters of Credit or its
obligation to make Loans or to issue or participate in Letters of Credit
hereunder, provided, however, that the effect of any Change shall be determined
based on the effect on such Lender that would be applicable to such Lender if
such Lender was maintaining the highest credit quality as determined by the
applicable regulatory authorities at the time of such Change. "Change" means (i)
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any change after the date of this Agreement in the Risk-Based Capital Guidelines
or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) of general applicability
after the date of this Agreement which affects the amount of capital required or
expected to be maintained by any Lender or any Lending Installation or any
corporation controlling any Lender. "Risk-Based Capital Guidelines" means (i)
the risk-based capital guidelines in effect in the United States on the date of
this Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If the Required Lenders
reasonably and in good faith determine that (i) deposits of a type and vances
maturity appropriate to match fund Committed Advances bearing interest at a
Fixed Rate are not available or (ii) solely in the case of a Eurocurrency
Committed Advance denominated in an Alternative Currency, the interest
applicable to such Committed Advance does not accurately reflect the funding
cost of such Committed Advance, then the Administrative Agent shall forthwith
give notice thereof to the Company and the Lenders, whereupon until the
Administrative Agent notifies the Company that the circumstances giving rise to
such suspension no longer exist, the obligations of the Lenders to make Fixed CD
Rate Loans or Eurocurrency Loans (in the affected currency), or to convert
outstanding Loans into such Loans or continue outstanding Loans as such Loans
for an additional Interest Period, shall be suspended and (i) any affected
outstanding Committed Advance denominated in Dollars shall be converted into a
Floating Rate Advance on the last day of the then current Interest Period
applicable thereto, (ii) any affected Committed Advance denominated in Dollars
for which a Committed Borrowing Notice has previously been given shall instead
be made as a Floating Rate Advance, unless the Borrower elects not to borrow
such Advance by giving one Business Day's notice to the Administrative Agent to
such effect, (iii) any affected outstanding Committed Advance denominated in an
Alternative Currency shall mature and be due and payable on the last day of the
then current Interest
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Period applicable thereto and (iv) any affected Eurocurrency Advance denominated
in an Alternative Currency for which a Committed Borrowing Notice or a
Competitive Bid Borrowing Notice has previously been given shall be canceled.
Nothing in this Section 3.3 shall affect any right of the Borrower to borrow or
convert outstanding Loans into Loans of a Type not affected by the circumstances
described above under and in accordance with the other applicable provisions of
this Agreement. If any Lender determines that maintenance of any of its
Eurocurrency Loans would violate any applicable law, rule, regulation or
directive, whether or not having the force of law, then such Lender may by
notice to the Company, through the Administrative Agent, require that such
Eurocurrency Loans be converted to an unaffected Type of Loan on the last day of
the then current Interest Period applicable thereto, if such Lender may lawfully
maintain such Loan to such date, or on such earlier date as such Lender may
require if it is not able lawfully to maintain such Loan to such date.
3.4. Funding Indemnification. If any payment of a Fixed Rate Loan
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or any Fixed Rate Loan
is converted to a Loan of a different Type on a date which is not the last day
of the applicable Interest Period (except pursuant to the last sentence of
Section 3.3), or the Borrower fails to prepay any Fixed Rate Loan after notice
of prepayment has been given in accordance with Section 2.5.3, or a Fixed Rate
Advance is not made, converted or continued on the date specified by the
Borrower for any reason other than default by the Lenders, the Borrower will
indemnify each Lender for any loss or cost incurred by it resulting therefrom,
including, without limitation, any loss or cost in liquidating or employing
deposits acquired to fund or maintain the Fixed Rate Advance.
3.5. Lender Statements; Limit on Retroactivity; Survival of
Indemnity. To the extent reasonably possible, each Lender shall designate an
alternate Lending Installation with respect to its Fixed Rate Loans or Letters
of Credit to reduce any liability of the Borrower or the Company to such Lender
under Section 3.1, 3.2 or 3.6 or to avoid the unavailability of a Type of
Committed Advance under Section 3.3, so long as such designation is not
disadvantageous to such Lender. Each Lender shall deliver a written statement of
such Lender as to the amount due, if any, under Section 3.1, 3.2, 3.3, 3.4 or
3.6. Such written statement shall set forth in reasonable detail the
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calculations upon which such Lender determined such amount and shall be final,
conclusive and binding in the absence of manifest error. Determination of
amounts payable under such Sections in connection with a Fixed Rate Loan shall
be calculated as though each Lender funded its Fixed Rate Loan through the
purchase of a deposit of the type and maturity corresponding to the deposit used
as a reference in determining the Fixed Rate applicable to such Loan, whether in
fact that is the case or not. The Borrower or the Company, as the case may be,
shall only be obligated to compensate any Lender under Section 3.1, 3.2, 3.4 or
3.6 for any amount arising or accruing during (i) any time or period commencing
not more than 90 days prior to the date on which such Lender notifies the
Administrative Agent and the Company that it proposes to demand such
compensation and identifies to the Administrative Agent and the Company the
statute, regulation or other basis upon which the claimed compensation is or
will be based and (ii) any time or period during which, because of the
retroactive application of such statute, regulation or other such basis, such
Lender did not know that such amount would arise or accrue. Unless otherwise
provided herein, the amount specified in the written statement shall be payable
on demand after receipt by the Borrower or the Company, as the case may be, of
the written statement. The obligations of the Obligors under Sections 3.1, 3.2,
3.4 and 3.6 shall survive payment of any other of the Obligations and the
termination of this Agreement.
3.6. Foreign Subsidiary Costs. If any Lender determines reasonably and
in good faith that the cost to such Lender of making or maintaining any Loan to
an Eligible Subsidiary or of issuing, maintaining or participating in any Letter
of Credit for the account of any Eligible Subsidiary is increased, or the amount
of any sum received or receivable by any Lender (or its Lending Installation) is
reduced by an amount deemed by such Lender to be material, by reason of the fact
that such Eligible Subsidiary is incorporated in, or conducts business in, a
jurisdiction outside the United States of America, the Company shall indemnify
such Lender for such increased cost or reduction within 30 days after demand by
such Lender (with a copy to the Administrative Agent). A certificate of such
Lender claiming compensation under this Section 3.6 and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error.
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3.7. Replacement of Lenders. In the event a Lender (an "Affected
Lender") shall have: (i) failed to either fund its ratable share of any
Committed Advance which such Lender is obligated to fund under the terms of
Section 2.2 or its share of any Competitive Bid Advance which such Lender is
obligated to fund under the terms of Section 2.3, and in either case such
failure has not been cured within five Business Days, (ii) either repudiated its
obligations under this Agreement or failed to reaffirm such obligations in
writing within ten Business Days of a written request therefor from the Company
(with a copy to each Agent), or (iii) made demand for additional amounts
pursuant to Sections 2.5.14, 3.1, 3.2 or 3.6, as a result of any condition
described in any such Section, then, unless such Affected Lender has theretofore
taken steps to remove or cure, and has removed or cured within ten Business
Days, such failure or the conditions creating the cause for such demand for such
additional amounts, as the case may be, the Company may require the Affected
Lender to transfer and assign without recourse (in accordance with and subject
to the restrictions contained in Sections 12.1, 12.2 and 12.3) all its
interests, rights and obligations under this Agreement to a bank designated by
the Company and which is reasonably acceptable to the Agents (such bank being
herein called a "Replacement Lender"); provided, that (i) no such assignment
shall conflict with any law, rule or regulation or order of any state, federal
or local governmental authority, (ii) the Replacement Lender shall pay to the
Affected Lender in immediately available funds on the date of such assignment
the principal of and interest accrued to the date of payment on the Loans made
by it hereunder and all other amounts accrued for its account or owed to it
hereunder (including, without limitation, any amount which would be payable
pursuant to Section 3.4 in connection with a prepayment in full of the Loans of
the Affected Lender on the date of such assignment) and (iii) such Replacement
Lender shall be satisfactory to each Issuing Bank. Each Lender agrees to use its
best efforts to notify the Company as promptly as practicable upon such Lender's
becoming aware that circumstances exist which would cause any Obligor to become
obligated to pay additional amounts to such Lender pursuant to Sections 2.5.14,
3.1, 3.2 or 3.6.
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ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance or Letter of Credit. No Lender shall be
required to make the initial Advance hereunder and no Issuing Bank shall be
obligated to issue (or shall issue) any Letter of Credit unless the Company has
furnished or caused to be furnished to the Documentation Agent:
(i) Copies of (x) the limited partnership agreement of the
Company, together with all amendments thereto, and (y) the Company's
Certificate of Limited Partnership as filed with the Secretary of State
of Delaware, all certified by a Financial Officer or the President of
the Company.
(ii) Copies, certified by a Financial Officer, of the Corporate
General Partner's Certificate of Incorporation, By-Laws and Board of
Directors' resolutions authorizing the execution, delivery and
performance of the Loan Documents on behalf of the Company.
(iii) An incumbency certificate, executed by a Financial Officer,
which shall identify by name and title and bear the signature of the
Financial Officers authorized to sign the Loan Documents and to make
borrowings and request issuance of Letters of Credit hereunder, upon
which certificate the Lenders shall be entitled to rely until informed
of any change in writing by the Company.
(iv) Copies of a long-form certificate of the Secretary of State of
the State of Delaware, dated reasonably near the date hereof, listing
the Certificate of Limited Partnership of the Company and each
amendment, if any, thereto, on file in the office of the Secretary of
State of the State of Delaware and stating that such documents are the
only charter documents of the Company on file in the office of the
Secretary of State of the State of Delaware and that the Company is a
limited partnership in good standing in the State of Delaware.
(v) A written opinion of the Company's special counsel, Kirkland &
Ellis, in substantially the form of Exhibit "B-l" hereto.
(vi) A written opinion of the General Counsel to the Company, Vernon
T. Squires, Esq., in substantially the form of Exhibit "B-2" hereto.
(vii) The Notes of the Company payable to the order of each of the
Lenders.
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(viii) A certificate, signed by a Financial Officer, (i) stating that
no Default or Unmatured Default has occurred and is continuing and (ii)
setting forth the Pricing Level as at the date of delivery of such
certificate.
(ix) A duly completed Loan/Credit Related Money Transfer
Instruction for the Company in substantially the form of Exhibit "F"
hereto.
(x) A written opinion of Davis Polk & Wardwell, special counsel for
the Agents, in substantially the form of Exhibit "J" hereto.
(xi) Such other documents as the Documentation Agent or its counsel
may have reasonably requested.
The Documentation Agent shall promptly notify the other parties hereto of its
receipt of the foregoing documents.
4.2. Initial Advance or Letter of Credit for each Eligible
Subsidiary. No Lender shall be required to make the initial Advance hereunder to
any Eligible Subsidiary and no Issuing Bank shall be obligated to issue (or
shall issue) the initial Letter of Credit for the account of any Eligible
Subsidiary unless such Eligible Subsidiary has furnished or caused to be
furnished to the Documentation Agent:
(i) The Notes of such Eligible Subsidiary payable to the order of
each Lender.
(ii) An opinion of counsel for such Eligible Subsidiary reasonably
acceptable to the Documentation Agent, substantially in the form of
Exhibit "I" hereto and covering such additional matters relating to the
transactions contemplated hereby as the Documentation Agent or the
Required Lenders may reasonably request.
(iii) All documents which the Documentation Agent may reasonably
request relating to the existence of such Eligible Subsidiary, the
corporate or partnership authority for and the validity of the Election
to Participate of such Eligible Subsidiary, this Agreement and the
Notes of such Eligible Subsidiary, and any other matters relevant
thereto, all in form and substance reasonably satisfactory to the
Documentation Agent.
(iv) A duly completed Loan/Credit Related Money Transfer
Instruction for such Eligible Subsidiary in substantially the form of
Exhibit "F" hereto.
The Documentation Agent shall promptly notify the other parties hereto of its
receipt of the foregoing documents.
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4.3. Each Advance or Letter of Credit. No Lender shall be required to
make any Advance (including, without limitation, the initial Advance hereunder)
and no Issuing Bank shall be required to issue (or renew or extend the term of)
any Letter of Credit (including, without limitation, the initial Letter of
Credit hereunder), unless on the applicable Borrowing Date or date of issuance:
(i) Prior to and after giving effect to such Advance or
issuance there exists no Default or Unmatured Default.
(ii) The representations and warranties of the Company and (if
other than the Company) the Borrower contained in Articles V and XIV of
this Agreement are true and correct in all material respects as of such
date, other than (x) Sections 5.4, 5.5(a) and 5.6, which
representations and warranties are made only as of the date of this
Agreement and (y) in the case of any Committed Advance which does not
result in an increase in the aggregate Dollar Amount of Committed
Advances at the time outstanding, Sections 5.5(b) and 5.7.
(iii) In the case of any Competitive Bid Advance, the
Company's senior unsecured debt without third-party credit enhancement
is rated at least BBB-(Baa3) by at least one of S&P, Moody's or D&P.
(iv) In the case of any issuance of a Letter of Credit, no
Stop Issuance Notice shall be in effect.
Each borrowing of an Advance and request for issuance of a
Letter of Credit shall constitute a representation and warranty by the Company
and (if other than the Company) the Borrower that the conditions contained in
Section 4.3(i) and (ii) have been satisfied.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Lenders that:
5.1. Organization and Authority.
(a) prior to the Effective Date of the Reorganization, is a
limited partnership duly organized and validly existing under the laws
of the State of Delaware and on and after the Effective Date of the
Reorganization, will be duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted;
(c) is duly licensed or qualified and is in good standing as a
foreign limited partnership (to the extent qualification as a foreign
limited partnership is permitted by statute), or, on and after the
Reorganization, as a foreign corporation, in each jurisdiction wherein
the failure to be so qualified would reasonably be expected to have a
Material Adverse Effect; and
(d) does not believe that the inability of the Company to
qualify as a foreign limited partnership in any state in which such
qualification is not permitted by law will have a Material Adverse
Effect.
5.2. Organization and Authority of Subsidiaries.
Each Material Subsidiary:
(a) is a limited partnership, general partnership or
corporation, duly organized, validly existing and, where applicable, in
good standing under the laws of its jurisdiction of incorporation or
the jurisdiction where organized, as the case may be;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation or partnership (to the extent qualification as a
foreign partnership is permitted by statute), as the case may be, in
each jurisdiction wherein the failure to be so qualified would
reasonably be expected to have a Material Adverse Effect.
The Company does not believe that the inability of any Material Subsidiary which
is a partnership to qualify as a foreign partnership in any state in which such
qualification is not permitted by law will have a Material Adverse Effect.
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5.3. Organization and Authority of Corporate General
Partner. The Corporate General Partner:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the failure to be so
qualified would reasonably be expected to have a Material Adverse
Effect.
5.4. Business and Property. The Lenders have each heretofore been
furnished with a copy of the Annual Report of the Parent on Form 10-K for the
fiscal year ended December 31, 1996 (the "Form 10-K"), the Annual Report to
Shareholders of the Parent for the fiscal year ended December 31, 1996 (the
"Annual Report") and the Information Memorandum dated March, 1997 (the
"Information Memorandum") of the Company, which Information Memorandum generally
sets forth the business conducted by the Company and its Subsidiaries and the
principal properties of the Company and its Subsidiaries. The Form 10-K, the
Annual Report, and the Information Memorandum are hereinafter referred to as the
"Disclosure Documents."
5.5. Financial Statements. (a) The consolidated balance sheets of
the Parent and its subsidiaries as of December 31, 1996, and the statements of
income and cash flows for the fiscal year ended on said date accompanied by a
report thereon containing an opinion unqualified as to scope limitations imposed
by the Parent and otherwise without qualification except as therein noted, by
Arthur Andersen LLP, have been prepared in accordance with GAAP consistently
applied except as therein noted, fairly present in all material respects the
financial position of the Company and its Subsidiaries as of such date and the
results of their operations and cash flows for such period.
(b) Since December 31, 1996, no event or condition has occurred which
has had or which would reasonably be expected to have a material adverse effect
on the properties, business, operations or financial condition of the Company
and its Subsidiaries taken as a whole.
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5.6. Full disclusure. The financial statements referred to in
Section 5.5 do not, nor do the Disclosure Documents or any other written
statement furnished by the Parent or any Obligor to the Agents or the Lenders in
connection with the negotiation of the Loan Documents, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading as of the dates thereof.
There is no fact peculiar to the Company or its Subsidiaries which the Company
has not disclosed to the Lenders in writing which materially affects adversely
nor, so far as the Company can foresee, will materially affect adversely the
properties, business, operations or financial condition of the Company and its
Subsidiaries taken as a whole.
5.7. Pending Litigation. There are no proceedings pending or, to
the knowledge of the Company threatened, against or affecting the Company, any
of its General Partners, its Parent or any Subsidiary in any court or before any
governmental authority or arbitration board or tribunal which would reasonably
be expected to have a Material Adverse Effect. Neither the Company nor any
Subsidiary is in default with respect to any order of any court or governmental
authority or arbitration board or tribunal which would reasonably be expected to
have a Material Adverse Effect.
5.8. Loan Documents are Legal, Valid, Binding and
Authorized. The execution and delivery of the Loan Documents by the Company and
compliance by the Company with all of the provisions of the Loan Documents
(a) are within the power of the Company and have been duly
authorized by proper action on the part of the Company; and
(b) will not violate in any material respect any provisions of
any law or any order of any court or governmental authority or agency
and will not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under the limited
partnership agreement of the Company or any indenture or other
agreement or instrument governing Debt or any other material agreement
or instrument to which the Company is a party or by which it may be
bound or result in the imposition of any liens or encumbrances on any
property of the Company.
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The execution and delivery by the Company of the Loan Documents and the
performance of its obligations thereunder have been duly authorized by proper
corporate and partnership proceedings, and the Loan Documents constitute legal,
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
5.9. Government Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution, delivery and performance by the
Company of the Loan Documents or compliance by the Company with any of the
provisions of the Loan Documents.
5.10. Taxes. All United States Federal income tax returns and all
other material tax returns required to be filed by the Parent, the Company or
any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, and
all material assessments, fees and other governmental charges upon the Parent,
the Company or any Subsidiary or upon any of their respective properties, income
or franchises, which are shown to be due and payable in such returns have been
paid. The Company does not know of any proposed additional tax assessment
against the Parent, the Company or any Subsidiary for which adequate provision
has not been made on its accounts. To the best of the Company's knowledge, the
provisions for taxes on the books of the Parent, the Company and each Subsidiary
are adequate for all open years, and for its current fiscal period.
5.11. Employee Retirement Income Security Act of 1974.
The consummation of the transactions provided for in this Agreement
and compliance by the Company with the provisions of the Loan Documents will not
involve any prohibited transaction within the meaning of the ERISA or Section
4975 of the Code. No "employee pension benefit plans", as defined in ERISA
("Plans"), maintained by the Company or any Person which is under common control
with the Company within the meaning of Section 4001(b) of ERISA, nor any trusts
created thereunder, have incurred any "accumulated funding deficiency" as
defined in Section 302 of ERISA. Neither the Company nor, to the best of the
Company's knowledge, any Person which is under common control with the Company,
within the meaning of Section 4001(b) of ERISA, maintains any "qualified defined
benefit plan" as defined in ERISA.
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5.12. Investment Company Act. Neither the Company nor any
Subsidiary is an "investment company" or an "affiliated person" thereof or an
"affiliated person" of such affiliated person as such terms are defined in the
Investment Company Act of 1940, as amended.
5.13. Compliance with Environmental Laws. Neither the Company nor
any Subsidiary is in violation of any applicable Federal, state, or local Laws
laws, statutes, rules, regulations or ordinances relating to public health,
safety or the environment, including, without limitation, relating to releases,
discharges, emissions or disposals to air, water, land or ground water, to the
withdrawal or use of ground water, to the use, handling or disposal of
polychlorinated biphenyls (PCB's), asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of hazardous substances (including,
without limitation, petroleum, crude oil or any fraction thereof, or other
hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or
other controlled, prohibited or regulated substances which violation would
reasonably be expected to have a Material Adverse Effect.
5.14. Regulations U and X. Margin stock (as defined in Regulations U and X)
constitutes less than 25% of those assets of the Company and its Subsidiaries
which are subject to any limitation on sale, pledge, or other restriction
hereunder.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders shall
otherwise consent in writing:
6.1.1. Information. The Company will deliver to each of the Lenders:
(a) as soon as available and in any event within 120 days
after the end of each fiscal year of the Company, consolidated and
consolidating balance sheets of the Company and its Consolidated
Subsidiaries (subject to Section 6.1.2) as of the end of such fiscal
year and the related consolidated and consolidating statements of
income and cash flows for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year, such
consolidated statements to be reported on in a manner which satisfies
the financial reporting requirements of the Securities and Exchange
Commission by a firm of independent public accountants of nationally
recognized standing;
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(b) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the
Company, the internally prepared consolidated and consolidating balance
sheets of the Company and its Consolidated Subsidiaries (subject to
Section 6.1.2) as of the end of such quarter and the related
consolidated and consolidating statements of income and cash flows for
such quarter and for the portion of the Company's fiscal year ended at
the end of such quarter, setting forth in the case of such statements
of income and cash flows in comparative form the figures for the
corresponding quarter and the corresponding portion of the Company's
previous fiscal year, all certified (subject to normal year-end
adjustments and the absence of footnotes) as to fairness of
presentation, GAAP and consistency by a Financial Officer of the
Company;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of a
Financial Officer of the Company (i) setting forth in reasonable detail
the calculations required to establish whether the Company was in
compliance with the requirements of Sections 6.10, 6.15 and 6.16 on the
date of such financial statements, (ii) stating whether any Default or
Unmatured Default exists on the date of such certificate and, if any
Default or Unmatured Default then exists, setting forth the details
thereof and the action which the Company is taking or proposes to take
with respect thereto and (iii) setting forth the Interest Coverage
Ratio as at the date of such financial statements and the Pricing Level
as at the date of delivery of such certificate;
(d) promptly upon the mailing thereof to the securityholders
of the Parent generally, copies of all financial statements, reports
and proxy statements so mailed;
(e) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the Company or
the Parent shall have filed with the Securities and Exchange
Commission; and
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(f) from time to time such additional information regarding
the financial position or business of the Company and its Subsidiaries
as the Administrative Agent, at the request of any Lender, may
reasonably request.
6.1.2. Use of Parent Information. If the certificate furnished
pursuant to Section 6.1(c) shall state that (i) the financial on statements of
the Parent and its subsidiaries fairly present in all material respects the
financial condition of the Company and its Consolidated Subsidiaries for the
period in respect of which such certificate shall be given and (ii) the
consolidated revenue of the Company and its Consolidated Subsidiaries
constitutes at least 98% of the consolidated revenues of the Parent and its
subsidiaries and that the combined assets of the Company and its Consolidated
Subsidiaries constitute at least 98% of the consolidated assets of the Parent
and its subsidiaries, then the Company may furnish consolidated financial
statements of the Parent otherwise complying with the requirements of subsection
(a) or (b) above, as applicable, in lieu of the consolidated financial
statements of the Company specified therein. The consolidating financial
statements required by such subsections shall be prepared in substantially the
same format as those set forth in the Information Memorandum.
6.2. Use of Proceeds. The Company will, and will cause each of its
Subsidiaries to, use the proceeds of the Advances for general corporate
purposes, including a distribution by the Company to the Parent in the
approximate amount of $626,000,000 to provide funds to enable the Parent to
repurchase from WMX Technologies, Inc. and its subsidiaries ("WMX") limited
partnership interests in the Parent and options to acquire limited partnership
interests in the Parent held by WMX (the "WMX Repurchase"). The Letters of
Credit will be used for general corporate purposes. The Company will not, nor
will it permit any Subsidiary to, use the proceeds of any Advance or Letter of
Credit in violation of Regulations U and X.
6.3. Notice of Default. Upon the obtaining of actual knowledge thereof
by a Financial Officer, the Company will, and will cause each of its
Subsidiaries to, give prompt notice in writing to the Administrative Agent of
(i) the occurrence of any Default or Unmatured Default and what actions the
Company proposes to take with respect thereto, if any, and (ii) any other
development, financial or otherwise, which would reasonably be expected to have
a material adverse effect on the properties, business, operations or financial
condition of the Company and its Subsidiaries taken as a whole.
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6.4. Inspection. The Company will, and will cause each Subsidiary to,
permit the Lenders, by their respective representatives and agents, to inspect
any of the properties, corporate books and financial records of the Company and
each Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Company and each Subsidiary, and to discuss the
affairs, finances and accounts of the Company and each Subsidiary with, and to
be advised as to the same by, their respective officers at such reasonable times
and intervals as the Lenders may reasonably designate.
6.5. Legal Existence, Etc. The Company will preserve and keep in force
and effect, and will cause each Material Subsidiary to preserve and keep in
force and effect, its legal existence as a limited partnership, general
partnership or as a corporation, as the case may be, and all licenses and
permits necessary to the proper conduct of its business, provided that the
foregoing shall not prevent (x) any transaction permitted by Section 6.14
(including without limitation the Reorganization), (y) the merger or
consolidation of any Eligible Subsidiary with, or the liquidation of any
Eligible Subsidiary into, any other Eligible Subsidiary or, subject to Section
6.14, the Company or (z) the merger or consolidation of any other Material
Subsidiary with or the liquidation of any other Material Subsidiary into any
other Subsidiary or, subject to Section 6.14, the Company.
6.6. Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers in such forms and amounts and against such risks as are customary for
companies of similar size and financial strength engaged in the same or similar
business activities and owning and operating similar properties.
6.7. Taxes, Claims for Labor and Materials, Compliance with Laws.
The Company will promptly pay and discharge, and will cause each Subsidiary
promptly to pay and discharge all material lawful taxes, assessments and
governmental charges or levies imposed upon the Company or such Subsidiary,
respectively, or upon or in respect of all or any material part of the property
or business of the Company or such Subsidiary, all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a lien or charge upon any
material property of the Company or such Subsidiary, provided the Company or
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such Subsidiary shall not be required to pay any such tax, assessment, charge,
levy, account payable or claim if (i) the validity, applicability or amount
thereof is being contested in good faith by appropriate actions or proceedings
which will prevent the forfeiture or sale of any material property of the
Company or such Subsidiary or any material interference with the use thereof by
the Company or such Subsidiary, and (ii) the Company or such Subsidiary shall
set aside on its books, reserves deemed by it to be adequate with respect
thereto. The Company will promptly comply, and will cause each Subsidiary to
comply, in all material respects with all laws, ordinances or governmental rules
and regulations to which it is subject, including without limitation, ERISA, the
Occupational Safety and Health Act of 1970, Federal Insecticide, Fungicide and
Rodenticide Act and Federal Environmental Pesticide Control Act of 1972 and all
laws, ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions, the violation of which would
reasonably be expected to have a Material Adverse Effect.
6.8. Maintenance, Etc. The Company will maintain, preserve and keep,
and will cause each Subsidiary to maintain, preserve and keep, its properties
which are used in the conduct of its business (whether owned in fee or a
leasehold interest) in good repair and working order and from time to time will
make all necessary repairs, replacements, renewals and additions so that at all
times (in the Company's reasonable judgment) the efficiency thereof shall be
maintained, except where the failure to do so would not reasonably be expected
to have a Material Adverse Effect.
6.9. Nature of Business. Neither the Company nor any Subsidiary will
engage in any business if, as a result, the general nature of the business,
taken on a consolidated basis, which would then be engaged in by the Company and
its Subsidiaries would be substantially changed from the general nature of the
business engaged in by the Company and its Subsidiaries and described in the
Annual Report.
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6.10. Restricted Payments. The Company will not make any Restricted
Payment if at the time of such Restricted Payment and after the giving effect
thereto a Default shall have occurred and be continuing. In addition, the
Company will not make any Restricted Payment if after giving effect thereto the
aggregate amount of Restricted Payments made during the period from and after
April 1, 1995 to and including the date of the making of the Restricted Payment
in question would exceed the sum of (i) Consolidated Net Income for such period,
computed on a cumulative basis for such entire period, (ii) the net proceeds
(whether cash or other property, and in the case of other property, at a value
determined by the Company reasonably and in good faith) to the Company from the
issue or sale of Equity Interests in the Company or the Parent on or after April
1, 1995 and (iii) $100,000,000.
For the purposes of this Section 6.10 the amount of any
Restricted Payment declared, paid or distributed in property of the Company
shall be deemed to be the greater of the book value or fair market value (as
determined in good faith by the Board of Directors) of such property at the time
of the making of the Restricted Payment in question.
6.11. Payment of Dividends by Subsidiaries. The Company will
not and will not permit any Subsidiary to enter into any agreement which
restricts the ability of any Subsidiary to declare any dividend or to make any
distribution on any Equity Interest of such Subsidiary, other than the
restrictions set forth in Schedule 6.11.
6.12. Transactions with Affiliates. The Company will not, and
will not permit any Subsidiary to, enter into or be a party to, any tes.
material transaction or arrangement with any Affiliate (including without
limitation, the purchase from, sale to or exchange of property with, or the
rendering of any service by or for, any Affiliate), except in the ordinary
course of and pursuant to the reasonable requirements of the Company's or such
Subsidiary's business and upon fair and reasonable terms no less favorable to
the Company or such Subsidiary than would reasonably be expected to be obtained
in a comparable arm's-length transaction with a Person other than an Affiliate;
provided that the foregoing shall not prevent the transactions described in the
Proxy Statement relating to the Reorganization. For the purposes of this Section
6.12, the incurrence of Debt which is payable to the Parent or the Surviving
Parent shall not be prohibited so long as such Debt is permitted pursuant to
Section 6.15 and shall have terms which are comparable to the terms which would
reasonably be expected to be obtained in an arm's-length transaction with a
Person other than an Affiliate. It is understood that the relationship between
the Company and the Corporate General Partner established by the Company's
agreement of limited partnership, and the performance of such agreement by the
parties thereto, do not contravene this Section 6.12.
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6.13. Negative Pledge. Neither the Company nor any Subsidiary will
create, assume or suffer to exist any Lien on any asset now owned or hereafter
acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement;
(b) any Lien existing on any asset of any corporation or other
entity at the time such corporation or other entity becomes a
Subsidiary and not created in contemplation of such event;
(c) any Lien on any asset securing Debt incurred or assumed
for the purpose of financing all or any part of the cost of acquiring
such asset, provided that such Lien attaches to such asset concurrently
with or within 90 days after the acquisition thereof;
(d) any Lien on any asset of any corporation or other entity
existing at the time such corporation or other entity is merged or
consolidated with or into the Company or a Subsidiary and not created
in contemplation of such event, provided that such Lien does not extend
to any additional assets;
(e) any Lien existing on any asset prior to the acquisition
thereof by the Company or a Subsidiary and not created in contemplation
of such acquisition;
(f) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing clauses of this Section, provided that such Debt is
not increased and is not secured by any additional assets;
(g) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Company in accordance with
GAAP;
(h) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 30 days or that
are being contested in good faith and by appropriate proceedings and
Liens securing judgments but only to the extent for an amount and for a
period not resulting in a Default under Section 7.6 hereof;
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(i) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(j) deposits to secure the performance of bids, trade
contracts (other than for Debt or Derivatives Obligations), leases,
statutory obligations, surety bonds, appeal bonds with respect to
judgments not exceeding $25,000,000, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
(k) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that do
not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the business
of the Company and its Subsidiaries;
(l) other Liens arising in the ordinary course of its business
which (i) do not secure Debt or Derivatives Obligations, (ii) do not
secure any obligation in an amount exceeding $25,000,000 and (iii) do
not in the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business;
(m) Liens arising from receivables financings accounted for as
sales under generally accepted accounting principles; provided that the
aggregate unrecovered investment of the purchasers shall at no time
exceed $100,000,000 (plus accrued interest);
(n) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $10,000,000;
and
(o) Liens not otherwise permitted by the foregoing clauses of
this Section securing Debt in an aggregate principal or face amount at
any date not to exceed $25,000,000.
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6.14. Consolidations, Mergers and Sales of Assets.
(a) The Company will not (i) consolidate or merge with or into any other
Person or (ii) sell, lease or otherwise transfer all or substantially all of its
assets to any other Person, provided that the foregoing provisions of this
Section 6.14 shall not preclude (w) consummation of the Reorganization, (x) the
liquidation of the Surviving Company into the Surviving Parent, (y) any merger
or consolidation to which the Company is a party or (z) with the prior written
consent of the Required Lenders, the sale or other transfer of all or
substantially all of the assets of the Company so long as, in the case of each
of (w), (x), (y) and (z), (i) at the time the Surviving Company, in the case of
the Reorganization, the Surviving Parent, in the case of a liquidation of the
Surviving Company into it, the surviving entity, in the case of a merger or
consolidation, or the transferee, in the case of a sale of all or substantially
all of the assets of the Company, is organized under the laws of the United
States of America or a state thereof and (except in the case of a merger in
which the Company is the surviving entity) expressly assumes all obligations of
the Company under the Loan Documents pursuant to an instrument in form and
substance reasonably satisfactory to the Required Lenders and (ii) after giving
effect thereto, no Default or Unmatured Default shall have occurred and be
continuing.
(b) The Company will not sell, lease or otherwise transfer,
directly or indirectly, in any period of four consecutive fiscal quarters assets
having an aggregate net book value greater than 20% of the consolidated total
assets of the Company and its Subsidiaries at the commencement of such period;
provided that this subsection (b) shall not apply to sale or other disposition
in the ordinary course of business of inventory or obsolete equipment.
6.15. Leverage Test. Consolidated Debt shall at no time exceed the
Debt Limit.
6.16. Subsidiary Debt Limitation. The aggregate Debt of Subsidiaries,
exclusive of (i) Debt under this Agreement and the 364-Day Agreement and (ii)
Debt owing to the Company or a Subsidiary, shall at no time exceed 20% of the
Debt Limit.
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ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events
shall constitute a Default:
7.1. Any representation or warranty made or deemed made under Article IV by
any Obligor to the Lenders or the Administrative Agent under or in connection
with this Agreement or any certificate or other document delivered in connection
with this Agreement or any other Loan Document shall be materially false on the
date as of which made or deemed made.
7.2 Nonpayment of principal of any Note or any Letter of Credit Liability
when due, or nonpayment of interest upon any Note or of any facility fee or
letter of credit fee or other obligations under any of the Loan Documents within
five days after the same becomes due.
7.3 The breach by the Company of any of the terms or provisions of Sections
6.10 through 6.16.
7.4 The breach by the Company (other than a breach which constitutes a
Default under Section 7.1, 7.2 or 7.3) of any of the terms or provisions of this
Agreement which is not remedied within thirty days after the earlier of (a) any
Financial Officer of the Company having knowledge of such breach or (b) written
notice from the Administrative Agent or any Lender.
7.5 Default by the Company or any Subsidiary in the payment of the
principal of or interest on any Debt and/or Derivatives Obligations in an
aggregate amount of $25,000,000 or more, as and when the same shall become due
and payable by the lapse of time, by declaration, by call for redemption or
otherwise, and such default shall continue beyond the period of grace, if any,
allowed with respect thereto.
7.6 Default or the happening of any event shall occur under any indenture,
agreement, or other instrument under which any Material Commitment is made or
any Debt of the Company or any Subsidiary in an aggregate amount of $25,000,000
or more is outstanding and such default or event shall continue for a period of
time sufficient to permit the acceleration of the maturity of any Debt of the
Company or any Subsidiary outstanding thereunder or to permit termination of any
Material Commitment, provided any such default which exists solely on account of
the Reorganization shall not constitute a Default or Unmatured Default under
this Section 7.6 once such default shall have been waived by the holders of such
Debt or the makers of such Material Commitment.
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7.7 The Corporate General Partner shall withdraw from the Company (except
in connection with the Reorganization) and no successor Corporate General
Partner shall have been elected prior thereto or substantially simultaneously
therewith in accordance with Section 12.1 of the limited partnership agreement
of the Company.
7.8 A custodian, trustee or receiver is appointed for the Company, the
Corporate General Partner or any Material Subsidiary or for the major part of
the property of any of the foregoing and is not discharged within 30 days after
such appointment.
7.9 Final judgment or judgments for the payment of money aggregating in
excess of $25,000,000 is or are outstanding against the Company or any
Subsidiary and such judgments have remained unpaid, unvacated, unbonded or
unstayed by appeal or otherwise for a period of 30 days.
7.10 The Company, the Corporate General Partner or any Material Subsidiary
becomes insolvent or bankrupt, is generally not paying its debts as they become
due or makes an assignment for the benefit of creditors, or the Company, the
Corporate General Partner or any Material Subsidiary causes or suffers an order
for relief to be entered with respect to it under applicable Federal bankruptcy
law or applies for or consents to the appointment of a custodian, trustee or
receiver for the Company, the Corporate General Partner or such Material
Subsidiary or for the major part of the property of any of the foregoing.
7.11 Bankruptcy, reorganization, arrangement or insolvency proceedings, or
other proceedings for relief under any bankruptcy or similar law or laws for the
relief of debtors, are instituted by or against the Company, the Corporate
General Partner or any Material Subsidiary, and, if instituted against the
Company, the Corporate General Partner or any Material Subsidiary, are consented
to or are not dismissed within 60 days after such institution.
7.12 Any Change of Control shall occur.
7.13.The Guaranty of the Company under Article XV shall cease to be in full
force and effect or the Company shall contest in any manner the validity,
binding nature or enforceability of Article XV, in either case at a time when
any Loans are outstanding hereunder to an Eligible Subsidiary.
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ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. (a) If any Default described in Section 7.8, 7.10
or 7.11 occurs with respect to the Company, the obligations of the Lenders to
make Loans hereunder and of the Issuing Banks to issue Letters of Credit
hereunder shall automatically terminate and the Obligations shall immediately
become due and payable without presentment, demand, protest or notice of any
kind (all of which the Company hereby expressly waives) or any other election or
action on the part of the Administrative Agent or any Lender. If any other
Default occurs, the Required Lenders may terminate or suspend the obligations of
the Lenders to make Loans hereunder and of the Issuing Banks to issue Letters of
Credit hereunder, or declare the Obligations to be due and payable, or both, in
either case upon written notice to the Company, whereupon the Obligations shall
become immediately due and payable, without presentment, demand, protest or
further notice of any kind, all of which each Obligor hereby expressly waives.
(b) Each Borrower agrees, in addition to the provisions of Section
8.1(a) hereof, that upon the occurrence and during the continuance of any
Default, it shall, if requested by the Administrative Agent upon the instruction
of the Required Lenders, pay to the Administrative Agent an amount in
immediately available funds (which funds shall be held as collateral pursuant to
arrangements satisfactory to the Administrative Agent) equal to the respective
aggregate amounts of Dollars and Alternative Currencies available for drawing
under all outstanding Letters of Credit issued for the account of such Borrower,
provided that, upon the occurrence of any Event of Default specified in Section
7.10 or 7.11 with respect to such Borrower, such Borrower shall pay such amount
forthwith without any notice or demand or any other act by any Agent or Lender
(including any Issuing Bank).
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8.2. Amendments. Subject to the provisions of this Article VIII, the
Loan Documents may be amended to add or modify any provisions thereof or change
in any manner the rights of the Lenders or the Obligors thereunder or waive any
Default thereunder, but only in a writing signed by the Required Lenders (or the
Documentation Agent with the consent in writing of the Required Lenders) and the
Company (and, if the rights of any Issuing Bank are affected thereby, it);
provided, however, that no such supplemental agreement shall, without the
consent of each Lender affected thereby:
(i) Postpone the date fixed for payment of any Loan or Note or
amount to be reimbursed in respect of any Letter of Credit or
reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon or fees under
Section 2.4. or 2.7.
(ii) Change the percentage of the Commitments or the aggregate
unpaid principal amount, or the number of Lenders, which shall
be required for the Lenders or any of them to take any action
under this Section 8.2 or any other provision (including any
definition) of this Agreement.
(iii)Extend the Termination Date or increase the amount of the Commitment of any
Lender hereunder, or permit any Borrower to assign its rights or
obligations under this Agreement except in connection with the
Reorganization and in compliance with the terms of Section 6.5 and 6.14.
(iv) Amend Section 2.5.13(a), Section 8.1 or this Section 8.2.
(v) Release the Company from its obligations under Article XV.
No amendment of any provision of this Agreement relating to either Agent shall
be effective without the written consent of such Agent. The Administrative Agent
may waive payment of the fee required under Section 12.3.2 without obtaining the
consent of any of the Lenders. No amendment shall, unless signed by an Eligible
Subsidiary, (w) subject such Eligible Subsidiary to any additional obligation,
(x) increase the principal of or rate of interest on any outstanding Loan of
such Eligible Subsidiary, (y) accelerate the stated maturity of any outstanding
Loan of such Eligible Subsidiary or (z) change this proviso.
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8.3. Preservation of Rights. No delay or omission of any Lender or
Agent to exercise any right under the Loan Documents shall impair such right or
be construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agents and the Lenders until the Obligations have been paid in
full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and warranties
of the Obligors contained in this Agreement shall survive (i) delivery of the
Notes (ii) the making of the Loans and (iii) issuance of the Letters of Credit
herein contemplated.
9.2. Headings. Section headings in the Loan Documents are for
convenience of reference only,
and shall not govern the interpretation of any of the provisions of the Loan
Documents.
9.3. Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Obligors, the Agents and the Lenders and supersede
all prior agreements and understandings among the Obligors, the Agents and the
Lenders relating to the subject matter thereof except as contemplated in Section
10.12.
9.4. Several Obligations. The respective obligations of the Lenders
hereunder are several and not joint and no Lender shall be the partner or agent
of any other (except to the extent to which either Agent is authorized to act as
such). The failure of any Lender to perform any of its obligations hereunder
shall not relieve any other Lender from any of its obligations hereunder. No
Lender shall have any liability for the failure of any other Lender to perform
its obligations hereunder. This Agreement shall not be construed so as to confer
any right or benefit upon any Person other than the parties to this Agreement
and their respective successors and assigns.
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9.5. Expenses; Indemnification. (a) The Company shall reimburse (i)
the Agents for any reasonable costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees of Davis Polk & Wardwell, special counsel
for the Agents) paid or incurred by either Agent in connection with the
preparation, review, execution, delivery, amendment, modification and
administration of the Loan Document and (ii) the Agents and the Lenders for any
reasonable costs, internal charges and out-of-pocket expenses (including
reasonable attorneys' fees and allocated costs of inside counsel for the Agents
and the Lenders) paid or incurred by either Agent or any Lender in connection
with the collection and enforcement of the Loan Documents, any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or any insolvency or bankruptcy proceedings in respect of
any Obligor.
(b) The Company further agrees to indemnify each Agent and
each Lender, their respective affiliates, and the respective directors,
officers, employees and agents of the foregoing, against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or not
the Agent or any Lender is a party thereto) (collectively, the "Indemnified
Amounts") which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the Letters of Credit, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan or Letter of Credit hereunder; provided
that it is understood that the Company shall not, in respect of the legal
expenses of the Lenders in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Lenders designated by
the Agents (except if and to the extent that, owing to existing or potential
conflicts of interest among them, such counsel shall advise that representation
of all Lenders by a single firm would not be appropriate); and provided,
further, that the Company shall not be liable to any Lender for any Indemnified
Amounts (x) resulting from the gross negligence or willful misconduct of such
Lender, its affiliates or any of their respective officers, directors, employees
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and agents or (y) constituting the costs and expenses of prosecuting a suit or
proceeding commenced by such Lender which is finally determined adversely to
such Lender (any counterclaim asserted against such Lender being treated as a
separate proceeding for this purpose). The obligations of the Company under this
Section 9.5 shall survive the termination of this Agreement.
9.6. Numbers of Documents. All statements, notices, closing documents,
and requests hereunder shall be furnished to the Agent with sufficient
counterparts so that the Agents may furnish one to each of the Lenders.
9.7. Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.8. Nonliability of Lenders. The relationship between the Obligors
and the Lenders and the Agents shall be solely that of debtor and creditor.
Neither Agent nor any Lender shall have any fiduciary responsibilities to any
Obligor. Neither Agent nor any Lender undertakes any responsibility to any
Obligor to review or inform any Obligor of any matter in connection with any
phase of its business or operations.
9.9. Choice of Law. THE LOAN DOCUMENTS SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF
THE STATE OF NEW YORK.
9.10. Consent to Jurisdiction. EACH OBLIGOR HEREBY IRREVOCABLY
SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF
ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW YORK CITY IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND
EACH OBLIGOR HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION
OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVES TO THE EXTENT ALLOWED BY LAW ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE
AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT
OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE
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RIGHT OF EITHER AGENT OR ANY LENDER TO BRING PROCEEDINGS AGAINST ANY OBLIGOR IN
THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY ANY OBLIGOR
AGAINST EITHER AGENT OR ANY LENDER OR ANY AFFILIATE OF EITHER AGENT OR ANY
LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT
IN NEW YORK CITY, UNLESS SUCH OBLIGOR IS UNABLE TO OBTAIN SUCH JURISDICTION.
9.11. Waiver of Jury Trial. EACH OBLIGOR, AGENT AND LENDER HEREBY
WAIVES TO THE EXTENT ALLOWED BY LAW TRIAL BY JURY IN ANY JUDICIAL PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.
9.12. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Parent, the Company or any of its
Subsidiaries pursuant to this Agreement in confidence, except for disclosure (i)
to other Lenders and their respective Affiliates, (ii) to legal counsel,
accountants, and other professional advisors to that Lender, (iii) to regulatory
officials upon their request or otherwise pursuant to law or regulation, (iv) as
requested pursuant to or as required by law, regulation, or legal process, (v)
in connection with any legal proceeding to which that Lender is a party, and
(vi) permitted by Section 12.4. The restrictions in this Section 9.12 shall not
apply to any information which is or becomes generally available to the public
other than as a result of disclosure by a Lender or a Lender's representatives.
ARTICLE X
THE AGENTS
10.1. Appointment. First Chicago and Morgan are hereby appointed
Administrative Agent and Documentation Agent, respectively, hereunder and under
each other Loan Document, and each of the Lenders irrevocably authorizes each
such Agent to act as the contractual representative of such Lender. Each such
Agent agrees to act as such upon the express conditions contained in this
Article X. Neither Agent shall have a fiduciary relationship in respect of any
Lender by reason of this Agreement.
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10.2. Powers. Each Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to such Agent by the terms
thereof, together with such powers as are reasonably incidental thereto. Neither
Agent shall have any implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided by
the Loan Documents to be taken by such Agent.
10.3. General Immunity. Neither Agent nor any of its affiliates nor
any of their respective directors, officers, agents or employees shall be liable
to any Obligor or any Lender for any action taken or omitted to be taken by it
or them in their respective agency capacities under or in connection with this
Agreement except for its own gross negligence or willful misconduct.
10.4. No Responsibility for Loans, Recitals, etc. Neither Agent nor
any of its affiliates nor any of their respective directors, officers, agents or
employees shall be responsible for or have any duty to ascertain, inquire into,
or verify (i) any statement, warranty or representation made in connection with
any Loan Document or any borrowing hereunder; (ii) the performance or observance
of any of the covenants or agreements of any Obligor under any Loan Document;
(iii) the satisfaction of any condition specified in Article IV, except receipt
of items required to be delivered to such Agent; or (iv) the validity,
effectiveness or genuineness of any Loan Document or any other instrument or
writing furnished in connection therewith, except for the authority of such
Agent's signatory to this Agreement.
10.5. Action on Instructions fo Lenders. Each Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder s and
under any other Loan Document in accordance with written instructions signed by
the Required Lenders (or, where so specified herein, all the Lenders), and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Lenders and on all holders of Notes. Each Agent shall be
fully justified in failing or refusing to take any action hereunder and under
any other Loan Document unless it shall first be indemnified to its satisfaction
by the Lenders pro rata against any and all liability, cost and expense that it
may incur by reason of taking or continuing to take any such action, provided
that, such indemnity need not include liability, costs and expenses arising
solely from the gross negligence or willful misconduct of the Agent.
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10.6. Employment of Agents and Counsel. Each Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Each Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. Each Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected in good faith by such Agent,
which counsel may be employees of such Agent or may be counsel for an Obligor.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify each Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by the Company for which such
Agent is entitled to reimbursement by the Company under the Loan Documents, (ii)
for any other expenses not reimbursed by the Company incurred by such Agent on
behalf of the Lenders, in connection with the preparation, execution, delivery,
administration and enforcement of the Loan Documents and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever and not
reimbursed by the Company which may be imposed on, incurred by or asserted
against such Agent in any way relating to or arising out of the Loan Documents
or any other document delivered in connection therewith or the transactions
contemplated thereby, or the enforcement of any of the terms thereof or of any
such other documents, provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of such Agent.
10.9. Rights as a Lender. With respect to its
Commitment, Loans made by it, the Notes issued to it and
any Letter of Credit issued by it, each Agent shall have the same rights and
powers hereunder and under any other Loan Document as any Lender and may
exercise the same as though it were not an Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include each Agent in
its individual capacity. Each Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Company or any of its Subsidiaries.
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10.10. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon either Agent or any other Lender and
based on the financial statements submitted by the Company and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon either Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
10.11. Successor Agent. Each Agent may resign at any time by giving at
least 30 days' prior written notice thereof to the Lenders and the Company and
such resignation shall be effective upon the appointment of a successor agent.
Upon any such resignation, the Company, with the approval of the Required
Lenders, shall have the right to appoint a successor Agent. If no successor
Agent shall have been so appointed and approved and shall have accepted such
appointment within thirty days after the retiring Agent's giving notice of
resignation, then the retiring Agent may appoint a successor Agent. Such
successor Agent shall be a commercial bank with an office located in the United
States of America having capital and retained earnings of at least
$1,000,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent.
The retiring Agent shall be discharged from its duties and obligations hereunder
and under the other Loan Documents upon the effectiveness of its resignation
hereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article X shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as Agent
hereunder and under the other Loan Documents.
10.12. Agents' Fees. The Company hereby agrees to pay to each Agent
for its sole account such fees as heretofore agreed upon by the Company and such
Agent in writing.
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ARTICLE XI
SETOFF RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if any Obligor becomes insolvent, however
evidenced, or any Default occurs, any indebtedness from any Lender to any
Obligor (including all account balances, whether provisional or final and
whether or not collected or available) may be offset and applied toward the
payment of the Obligations owing by such Obligor to such Lender, whether or not
such Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its share of any Advance (other than payments received
pursuant to Article III) or any Letter of Credit Liabilities in a greater
proportion than that received by any other Lender, such Lender agrees, promptly
upon demand, to purchase a portion of the Loans comprising that Advance, or
Letter of Credit Liabilities, as the case may be, held by the other Lenders so
that after such purchase each Lender will hold its ratable proportion of the
unpaid Loans comprising that Advance, or unpaid Letter of Credit Liabilities, as
the case may be. If any Lender, whether in connection with setoff or amounts
which might be subject to setoff or otherwise, receives collateral or other
protection for its Obligations or such amounts which may be subject to setoff,
such Lender agrees, promptly upon demand, to take such action necessary such
that all Lenders share in the benefits of such collateral ratably in the
proportions specified above. In case any such payment is disturbed by legal
process, or otherwise, appropriate further adjustments shall be made.
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ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Obligors, the
Agents and the Lenders and their respective successors and assigns, except that
(i) no Obligor shall have the right to assign its rights or obligations under
the Loan Documents (except in a transaction expressly permitted by Section 6.5
or 6.14(a)) and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may
at any time, without the consent of any Obligor or either Agent, assign all or
any portion of its rights under this Agreement and its Notes to a Federal
Reserve Bank; provided, however, that no such assignment shall release the
transferor Lender from its obligations hereunder. Each Agent may treat the payee
of any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 12.3 in the case of an assignment thereof or, in the
case of any other transfer, a written notice of the transfer is filed with each
Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
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12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Note held by such Lender, the
Commitment of such Lender, any Letter of Credit Liabilities of such Lender) or
any other interest of such Lender under the Loan Documents; provided, however,
that, except in the case of (i) a sale of a participation in a Competitive Bid
Loan or (ii) a sale of a participation to any other Lender), such participations
shall require the consent of the Company and shall each be in a minimum amount
of $5,000,000. In the event of any such sale by a Lender of participating
interests to a Participant, such Lender's obligations under the Loan Documents
shall remain unchanged, such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, such Lender shall remain
the holder of any such Note for all purposes under the Loan Documents, all
amounts payable by the Obligors under this Agreement shall be determined as if
such Lender had not sold such participating interests, and the Obligors, the
Issuing Banks and the Agents shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under the
Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment, modification or
waiver of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan, Letter of Credit Liabilities or
Commitment in which such Participant has an interest which forgives principal,
interest or fees or reduces the interest rate or fees payable with respect to
any such Loan, Letter of Credit Liabilities or Commitment, postpones any date
fixed for any regularly-scheduled payment of principal of, or interest or fees
on, any such Loan, Letter of Credit Liabilities or Commitment, releases any
guarantor of any such Loan or Letter of Credit Liabilities, if any, or releases
any substantial portion of collateral, if any, securing any such Loan or Letter
of Credit Liabilities.
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12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary course
of its business and in accordance with applicable law, at any time assign to one
or more banks or other entities ("Purchasers") all or a portion (if such
Purchaser is not a Lender immediately prior to such assignment, in a minimum
amount of $10,000,000) of its rights and obligations under the Loan Documents.
Such assignment shall be substantially in the form of Exhibit "E" hereto. The
consent of the Company, the Issuing Banks and the Agents shall be required prior
to an assignment becoming effective with respect to a Purchaser which is not
both a financial institution and an affiliate of the transferor. Such consents
shall be given in substantially the form attached as Exhibit "II" to Exhibit "E"
hereto.
12.3.2. Effect; Effective Date. Upon (i) delivery to the Company, the
Issuing Banks and the Agents of a notice of assignment, substantially in the
form attached as Exhibit "I" to Exhibit "E" hereto (a "Notice of Assignment"),
together with any consent required by Section 12.3.1, and (ii) payment of a
$3,500 fee to the Administrative Agent by the assignee or assignor Lender for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. On and after the
effective date of such assignment, such Purchaser shall for all purposes be a
Lender party to this Agreement and any other Loan Document executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and no
further consent or action by the Obligors, the Issuing Banks, the other Lenders
or the Agents shall be required to release the transferor Lender with respect to
the percentage of the Aggregate Commitment and Loans assigned to such Purchaser.
Upon the consummation of any assignment to a Purchaser pursuant to this Section
12.3.2, the transferor Lender, the Agents and the Obligors shall make
appropriate arrangements so that replacement Notes are issued to such transferor
Lender and new Notes or, as appropriate, replacement Notes, are issued to such
Purchaser, in each case in principal amounts reflecting their respective
Commitments, as adjusted pursuant to such assignment.
12.4. Dissemination of Information. The Obligors authorize each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a "Transferee") and any
prospective Transferee any and all information in such Lender's possession
concerning the creditworthiness of the Company and its Subsidiaries; provided
that each Transferee and prospective Transferee agrees to be bound by Section
9.12 of this Agreement.
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12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Purchaser which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Purchaser, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.5.14.
12.6. Increased Costs. Subject to the applicable limitations set forth
therein and to the further provisions of this Section 12.6, each Transferee
shall be entitled to the benefits of Section 2.5.14 and 2.5.15 and Article III
with respect to the rights transferred to it to the same extent as a Lender. No
Transferee (including, for purposes of this Section 12.6, any successor Lending
Installation) of any Lender's rights shall be entitled to receive any greater
payment under Section 2.5.14 or Article III than such Lender would have been
entitled to receive with respect to the rights transferred, unless such transfer
is made with the Company's prior written consent or by reason of the provisions
of Section 3.4 requiring such Lender to designate a different Lending
Installation under certain circumstances or at a time when the circumstances
giving rise to such greater payment did not exist.
ARTICLE XIII
NOTICES
13.1. Giving Notice. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing (including telex or facsimile) and addressed or delivered to such party:
(a) in the case of the Company or either Agent, at its address, facsimile number
or telex number set forth on the signature pages hereof, (b) in the case of any
Lender, at its address, facsimile number or telex number set forth in its
Administrative Questionnaire, (c) in the case of any Eligible Subsidiary, to it
care of the Company and (d) in the case of any party, such other address,
facsimile number or telex number as such party may hereafter specify for the
purpose by notice to the Agents and the Company. All such notices shall be
effective when received at the address specified above.
Page 81
<PAGE>
ARTICLE XIV
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
Each Eligible Subsidiary shall be deemed by the execution and
delivery of its Election to Participate to have represented and warranted that:
14.1. Existence and Power. It is duly organized, validly existing and
in good standing under the laws of its jurisdiction of organization and is a
Subsidiary of the Company.
14.2. Corporate or Partnership and Governmental Authorization;
Contravention. The execution and delivery by it of its Election to Participate
and its Notes, and the performance by it of this Agreement and its Notes, are
within its legal powers, have been duly authorized by all necessary corporate,
partnership or other legal action, require no action by or in respect of, or
filing with, any governmental body, agency or official and do not contravene, or
constitute a default under, in any material respect any provision of applicable
law or regulation or of its organizational documents or of any indenture or
other agreement or instrument governing Debt or any other material agreement or
instrument binding upon the Company or such Eligible Subsidiary or result in the
creation or imposition of any liens or encumbrances on any asset of the Company
or any of its Subsidiaries.
14.3. Binding Effect. This Agreement constitutes a legal, valid and binding
agreement of such Eligible Subsidiary and each of its Notes, when executed and
delivered in accordance with this Agreement, will constitute a legal, valid and
binding obligation of such Eligible Subsidiary, in each case enforceable in
accordance with its terms except as enforceability may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally.
14.4. Taxes. Except as disclosed in such Election to Participate, there is
no income, stamp or other tax of any country, or any taxing authority thereof or
therein, imposed by or in the nature of withholding or otherwise, which is
imposed on any payment to be made by such Eligible Subsidiary pursuant hereto or
on its Notes, or is imposed on or by virtue of the execution, delivery or
enforcement of its Election to Participate or of its Notes.
Page 82
<PAGE>
ARTICLE XV
GUARANTY
15.1. The Guaranty. The Company hereby unconditionally guarantees the full
and punctual payment (whether at stated maturity, upon acceleration or
otherwise) of the principal of and interest on each Note issued by any Eligible
Subsidiary pursuant to this Agreement, and the full and punctual payment of all
other amounts payable (including, without limitation, the Letter of Credit
Liabilities) by any Eligible Subsidiary under this Agreement. Upon failure by
any Eligible Subsidiary to pay punctually any such amount, the Company shall
forthwith on demand pay the amount not so paid at the place and in the manner
specified in this Agreement.
15.2. Guaranty Unconditional. The obligations of the Company hereunder
shall be unconditional and absolute and, without limiting the generality of the
foregoing, shall not be released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any Eligible Subsidiary under
this Agreement or any Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this
Agreement or any Note;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any Eligible
Subsidiary under this Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership
of any Eligible Subsidiary, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any Eligible
Subsidiary or its assets or any resulting release or discharge of any
obligation of any Eligible Subsidiary contained in this Agreement or
any Note;
Page 83
<PAGE>
(v) the existence of any claim, set-off or other rights which
the Company may have at any time against any Eligible Subsidiary,
either Agent, any Issuing Bank, any other Lender or any other Person,
whether in connection herewith or any unrelated transactions, provided
that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against any
Eligible Subsidiary for any reason of this Agreement or any Note, or
any provision of applicable law or regulation purporting to prohibit
the payment by any Eligible Subsidiary of the principal of or interest
on any Note or any other amount payable by it under this Agreement; or
(vii) any other act or omission to act or delay of any kind by any
Eligible Subsidiary, either Agent, any Issuing Bank or any other Person
or any other circumstance whatsoever which might, but for the
provisions of this paragraph, constitute a legal or equitable discharge
of or defense to the Company's obligations hereunder.
15.3. Discharge Only Upon Payment In Full; Reinstatement In
Certain Cercumstances. The Company's obligations hereunder shall remain in full
force and effect until the Commitments shall have terminated, any outstanding
Letters of Credit shall have expired or terminated and the principal of and
interest on the Notes and the Letter of Credit Liabilities and all other amounts
payable by the Company and each Eligible Subsidiary under this Agreement shall
have been paid in full. If at any time any payment of principal of or interest
on any Note or Letter of Credit Liabilities or any other amount payable by any
Eligible Subsidiary under this Agreement is rescinded or must be otherwise
restored or returned upon the insolvency, bankruptcy or reorganization of any
Eligible Subsidiary or otherwise, the Company's obligations hereunder with
respect to such payment shall be reinstated at such time as though such payment
had been due but not made at such time.
15.4. Waiver by the Company. The Company irrevocably waives acceptance
hereof, presentment, demand, protest and any notice not provided for herein, as
well as any requirement that at any time any action be taken by any Person
against any Eligible Subsidiary or any other Person.
Page 84
<PAGE>
15.5. Subrogation. Upon making any payment with respect to any Eligible
Subsidiary hereunder, the Company shall be subrogated to the rights of the payee
against such Eligible Subsidiary with respect to such payment; provided that the
Company shall not enforce any payment by way of subrogation until all amounts of
principal of and interest on the Notes and Letter of Credit Liabilities and all
other amounts payable by such Eligible Subsidiary under this Agreement have been
paid in full.
15.6. Stay of Acceleration. In the event that acceleration of the time for
payment of any amount payable by any Eligible Subsidiary under this Agreement or
its Notes is stayed upon insolvency, bankruptcy or reorganization of such
Eligible Subsidiary, all such amounts otherwise subject to acceleration under
the terms of this Agreement shall nonetheless be payable by the Company
hereunder forthwith on demand by the Required Lenders.
ARTICLE XVI
COUNTERPARTS; EFFECTIVENESS
This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when the Documentation Agent shall have received
evidence reasonably satisfactory to it that (i) this Agreement has been executed
by the Company, the Agents and the Lenders and (ii) the commitments of the
lenders parties to the Credit Agreement dated as of August 31, 1995 and amended
and restated as of October 15, 1996 among the Company, such lenders and First
Chicago, as administrative agent, and Morgan, as documentation agent (the "Prior
Agreement") shall have terminated and all loans outstanding thereunder and all
accrued interest and fees thereunder shall have been paid in full; provided that
(x) any "Competitive Bid Loan" made by a Lender pursuant to the Prior Agreement
which is outstanding at the time the other conditions to the effectiveness
hereof are satisfied shall remain outstanding on the terms applicable thereto
under the Prior Agreement, and shall be deemed a Competitive Bid Loan made
hereunder on such terms and (y) the Company and the Lenders comprising the
Required Lenders (as defined in the Prior Agreement) hereby agree that the
Commitments (as defined in the Prior Agreement) shall terminate automatically
upon the satisfaction of all other conditions to effectiveness of this
Agreement, without requirement of notice under the Prior Agreement or any other
action by any party hereto or thereto.
Page 85
<PAGE>
IN WITNESS WHEREOF, the Company, the Lenders and the Agents
have executed this Agreement as of the date first above written.
THE SERVICEMASTER COMPANY LIMITED
PARTNERSHIP
By: ServiceMaster Management Corporation,
its General Partner
By:/s/ Eric P. Zarnikow
Title: Vice President & Treasurer
Address: One ServiceMaster Way
Downers Grove, IL 60515-1700
Attention: Mr. Eric Zarnikow
Telephone: (630) 271-2361
Facsimile: (630) 271-5604
Page 86
<PAGE>
Commitment
$112,500,000 THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Administrative
Agent
By:/s/ Patricia H. Besser
Title: Vice President/Senior Corporate Banker
Address: One First National Plaza
Suite 0324
Chicago, IL 60670
Attention: Patricia H. Besser
Telephone: (312) 732-7703
Facsimile: (312) 732-5296
Page 87
<PAGE>
$112,500,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, individually and as
Documentation Agent
By:/s/ Charles H. King
Title: Vice President
Address: 60 Wall Street
New York, NY 10260-0060
Attention: Charles King
Telephone: (212) 648-7138
Facsimile: (212) 648-5336
Page 88
<PAGE>
$75,000,000 BANK OF AMERICA ILLINOIS
By:/s/ William F. Sweeney
Title: Vice President
Address: 231 S. LaSalle Street
Chicago, IL 60697
Attention: William F. Sweeney
Telephone: (312) 828-1843
Facsimile: (312) 987-1276
Page 89
<PAGE>
$54,375,000 BANK OF MONTREAL
By:/s/ Peter W. Steelman
Title:Director
Address: 115 S. LaSalle, 13 West
Chicago, IL 60603
Attention: Peter W. Steelman
Telephone: (312) 750-3812
Facsimile: (312) 750-3783
Page 90
<PAGE>
$54,375,000 THE BANK OF NEW YORK
By:/s/ John M. Lokay, Jr.
Title: Vice President
Address: One Wall Street
New York, NY 10286
Attention: John M. Lokay, Jr.
Telephone: (212) 635-1172
Facsimile: (212) 635-1208-9
Page 91
<PAGE>
$43,125,000 CREDIT LYONNAIS CHICAGO BRANCH
By:/s/ Mary Ann Klemm
Title: Vice President
Address: 227 West Monroe Street
Suite 3800
Chicago, IL 60606
Attention: Michael Lord
Assistant Vice President
Telephone: (312) 220-7318
Facsimile: (312) 641-0527
Page 92
<PAGE>
$54,375,000 CAISSE NATIONALE DE CREDIT AGRICOLE
By:/s/ Dean Balice
Title: Senior Vice President Branch Manager
Address: 55 East Monroe Street
Chicago, IL 60603-5702
Attention: Dean Balice
Telephone: (312) 917-7449
Facsimile: (312) 372-2830
Page 93
<PAGE>
$11,250,000 FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By:/s/ James H. Moore, Jr.
Title: Vice President
Address: 165 Madison Avenue
Memphis, TN 38109-0084
Telephone: (901) 523-4108
Facsimile: (901) 523-4267
Page 94
<PAGE>
$54,375,000 MELLON BANK, N.A.
By:/s/ Laurel Larson
Title: Assistant Vice President
Address: 55 West Monroe
Suite 2600
Chicago, IL 60603
Telephone: (312) 357-3408
Facsimile: (3120 357-3414
Page 95
<PAGE>
$75,000,000 NATIONSBANK, N.A.
By:/s/ Mary Carol Daly
Title: Vice President
Address: 233 S. Wacker Drive
Suite 2800
Chicago, IL 60606
Telephone: (312) 234-5618
Facsimile: (312) 234-5619
Page 96
<PAGE>
$43,125,000 SUNTRUST BANK, ATLANTA
By:/s/ Shelley M. Browne
Title: Vice President
By:/s/ Jennifer P. Harrelson
Title: Senior Vice President
Address: 25 Park Place
Atlanta, GA 30303
Attention: Shelley Browne
Telephone: (404) 658-4918
Facsimile: (404) 588-8505
Page 97
<PAGE>
$22,500,000 THE NORTHERN TRUST COMPANY
By:/s/ Diane M. Baer
Title: Second Vice President
Address: 50 S. LaSalle Street
Chicago, IL 60675
Attention: Diane M. Baer
Telephone: (312) 444-5802
Facsimile: (312) 444-5055
Page 98
<PAGE>
$37,500,000 THE SANWA BANK, LIMITED, CHICAGO BRANCH
By:/s/ Richard H. Ault
Title: Vice President
Address: 10 S. Wacker Drive
31st Floor
Chicago, IL 60606
Telephone:(312) 368-3011
Facsimile: (312) 346-6677
$750,000,000
============
Page 99
<PAGE>
<TABLE>
<CAPTION>
PRICING SCHEDULE
The Applicable Margin or Facility Fee Rate at any date is the
applicable percentage amount set forth in the table below based on the Pricing
Level at such date:
<S> <C> <C> <C> <C> <C> <C>
- ------------- ------------------ ------------------ ------------------ ---------------- ---------------- ------------------
Level I Level II Level III Level IV Level V Level VI
- ------------- ------------------ ------------------ ------------------ ---------------- ---------------- ------------------
Applicable 0.150% 0.170% 0.205% 0.225% 0.300% 0.500%
Eurocurrency
Margin
- ------------- ------------------ ------------------ ------------------ ---------------- ---------------- ------------------
Applicable 0.275% 0.295% 0.330% 0.350% 0.425% 0.625%
CD Rate
Margin
- ------------- ------------------ ------------------ ------------------ ---------------- ---------------- ------------------
Facility 0.075% 0.080% 0.095% 0.125% 0.150% 0.250%
Fee Rate
- ------------- ------------------ ------------------ ------------------ ---------------- ---------------- ------------------
LC Fee Rate 0.150% 0.170% 0.205% 0.225% 0.300% 0.500%
- ------------- ------------------ ------------------ ------------------ ---------------- ---------------- ------------------
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings:
"Applicable Interest Coverage Ratio" for purposes of
determining what Pricing Level exists at any date means (a) if the Company has
delivered all financial statements and certificates required to be delivered on
or before such date pursuant to subsections (a), (b) and (c) of Section 6.1, the
Interest Coverage Ratio as at the last day of the period covered by the most
recent such financial statements and (b) in all other cases, a ratio of less
than 2.50 to 1.00.
"Debt Rating" means at any date the higher of the credit
ratings, if any, publicly announced by S&P and Moody's for the Company's senior
unsecured debt without third-party credit enhancement (or if only one of S&P or
Moody's shall have assigned a credit rating, then such rating). If the ratings
assigned by S&P and Moody's differ by more than one increment, the Debt Rating
will be the median rating (or the higher of two intermediate ratings if there is
no median rating). If neither S&P nor Moody's assigns such a rating, then the
Pricing Level shall be determined solely on the basis of the Applicable Interest
Coverage Ratio, assuming for purposes of any Pricing Level having alternative
ratings criteria that the lower but not the higher rating criterion is met and
for purposes of any Pricing Level having a single rating criterion that such
criterion is met.
"Level I Pricing" applies at any date if, at such date, (x) if
such date is prior to April 1, 1999, the Debt Rating is A(A2) or better or (y)
<PAGE>
if such date is on or after April 1, 1999, either (i) the Debt Rating is A(A2)
or better and the Applicable Interest Coverage Ratio is not less than 6.50 to
1.00 or (ii) the Debt Rating is A-(A3) or better or the Applicable Interest
Coverage Ratio is not less than 8.00 to 1.00.
"Level II Pricing" applies at any date if, at such date, (a)
(x) if such date is prior to April 1, 1999, the Debt Rating is A-(A3) or better
or (y) if such date is on or after April 1, 1999, either (i) the Debt Rating is
A-(A3) or better and the Applicable Interest Coverage Ratio is not less than
5.00 to 1.00 or (ii) the Debt Rating is BBB+(Baa1) or better and the Applicable
Interest Coverage Ratio is not less than 6.50 to 1.00 and (b) no better Pricing
Level applies.
"Level III Pricing" applies at any date if, at such date, (a)
(x) if such date is prior to April 1, 1999, the Debt Rating is BBB+(Baa1) or
better or (y) if such date is on or after April 1, 1999, either (i) the Debt
Rating is BBB+(Baa1) or better and the Applicable Interest Coverage Ratio is not
less than 4.00 to 1.00 or (ii) the Debt Rating is BBB(Baa2) or better and the
Applicable Interest Coverage Ratio is not less than 5.00 to 1.00 and (b) no
better Pricing Level applies.
"Level IV Pricing" applies at any date if, at such date, (a)
(x) if such date is prior to April 1, 1999, the Debt Rating is BBB(Baa2) or
better or (y) if such date is on or after April 1, 1999, either (i) the Debt
Rating is BBB(Baa2) or better and the Applicable Interest Coverage Ratio is not
less than 3.25 to 1.00 or (ii) the Debt Rating is BBB-(Baa3) or better and the
Applicable Interest Coverage Ratio is not less than 4.00 to 1.00 and (b) no
better Pricing Level applies.
"Level V Pricing" applies at any date if, at such date, (a)
(x) if such date is prior to April 1, 1999, the Debt Rating is BBB-(Baa3) or
better or (y) if such date is on or after April 1, 1999 the Debt Rating is
BBB-(Baa3) or better and the Applicable Interest Coverage Ratio is not less than
2.75 to 1.00 and (b) no better Pricing Level applies.
"Level VI Pricing" applies at any date if, at such date, no other
Pricing Level applies.
"Pricing Level" refers to the determination of which of Level
I, Level II, Level III, Level IV, Level V or Level VI applies at any date.
<PAGE>
Notwithstanding the foregoing, for so long after the
effectiveness of this Agreement as the credit ratings of the Company remain, as
a result of the WMX Repurchase, on credit watch (with negative implications) or
similar status as publicly announced by either Moody's or S&P, if the Pricing
Level for any date would otherwise be Level I or Level II, the Pricing Level for
such date shall be Level III.
<PAGE>
SCHEDULE 6.11
SUBSIDIARY RESTRICTIONS
1. American Home Shield Corporation and its subsidiaries are subject to
regulatory restrictions imposed by various states which limit dividends and
similar payments.
<PAGE>
EXHIBIT "A"
NOTE
_________ ___,19__
THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Company"), promises to pay to the order of ___________ (the
"Lender") the aggregate unpaid principal amount of all Loans made by the Lender
to the Company pursuant to the Five-Year Credit Agreement dated as of April 1,
1997 among the Company, the Lenders named therein, including the Lender, The
First National Bank of Chicago, as Administrative Agent, and Morgan Guaranty
Trust Company of New York, as Documentation Agent (as the same may be amended or
modified, hereinafter referred to as the "Agreement"), in the currencies and on
the dates specified in the Agreement, in immediately available funds at the main
office of The First National Bank of Chicago in Chicago, Illinois, as
Administrative Agent, or as otherwise directed by the Administrative Agent
pursuant to the terms of the Agreement, together with interest, in like currency
and funds, on the unpaid principal amount hereof at the rates and on the dates
specified in the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder; provided, however, that any failure to so record shall not
affect the Company's obligations under any Loan Document.
This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Agreement, to which Agreement, as it may be amended from
time to time, reference is hereby made for a statement of the terms and
conditions under which this Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Agreement.
THE SERVICEMASTER COMPANY
LIMITED PARTNERSHIP
By: ServiceMaster Management Corporation,
its General Partner
By: __________________________________
Title: _______________________________
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF THE SERVICEMASTER COMPANY
LIMITED PARTNERSHIP
Date Currency Maturity Principal Unpaid
and Amount Balance
Principal Paid
Amount of
Loan
- ------ ----------- ------------ ---------- ----------
<PAGE>
EXHIBIT "B-1"
FORM OF OPINION OF KIRKLAND & ELLIS
April 1, 1997
To the Lenders who are parties to the
Credit Agreement described herein
Re: The ServiceMaster Company Limited
Partnership Five-Year Credit Agreement
dated as of April 1, 1997
Ladies and Gentlemen:
We have acted as special counsel to The ServiceMaster Company Limited
Partnership, a Delaware limited partnership (the "Company"), in connection with
the negotiation, execution and delivery of the Five-Year Credit Agreement dated
as of April 1, 1997 among the Company, The First National Bank of Chicago,
individually and as Administrative Agent, Morgan Guaranty Trust Company of New
York, individually and as Documentation Agent, and the Lenders named therein,
providing for credits in an aggregate amount not exceeding $750,000,000 at any
one time outstanding (the "Credit Agreement"). Terms used but not otherwise
defined herein are used herein as defined in the Credit Agreement.
For purposes of this opinion, we have examined the following:
(a) the Credit Agreement; and
(b) the proposed notes to be issued by the Company to the Lenders
pursuant to the Credit Agreement (the "Notes").
In addition, in connection with rendering the opinions expressed below
("our opinions"), we have examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such records,
certificates and other documents, as in our judgment are necessary or
appropriate to enable us to render our opinions. As to various factual matters
material to our opinions, we have relied upon certificates of public officials,
certificates of officers of ServiceMaster Management Corporation, a Delaware
corporation (the "Corporate General Partner") on behalf of the Company and the
representations and warranties contained in Article V of the Credit Agreement.
In addition, in rendering our opinions, we have assumed, with your permission
and without independent verification, that:
<PAGE>
(a) the signatures of persons signing all documents in connection with
which our opinions are rendered are genuine and authorized (other than those of
the Company and the Corporate General Partner on the Credit Agreement, the
Notes, and other agreements, certificates and documents entered into in
connection with the closing of the transactions contemplated by the Credit
Agreement);
(b) all documents submitted to us as originals or duplicate originals
are authentic;
(c) all documents submitted to us as copies, whether certified or not,
conform to authentic original documents;
(d) all parties to the documents reviewed by us (other than the Company
and the Corporate General Partner in connection with the Credit Agreement and
other agreements, certificates and documents entered into in connection with the
closing of the transactions contemplated by the Credit Agreement) have full
power and authority to execute, to deliver and to perform their obligations
under such documents and under the documents required or permitted to be
delivered and performed thereunder, and all such documents have been duly
authorized by all necessary action, have been duly executed by such parties,
have been duly delivered by such parties, and are legal, valid and binding
obligations of such parties enforceable in accordance with their terms;
(e) any approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any governmental body which may
be required in connection with the execution and delivery of the Credit
Agreement on account of your regulatory status has been obtained or made by you;
and
(f) the opinions set forth in the letter to you of even date herewith
from Vernon T. Squires, Esq. are correct.
Based upon and subject to the foregoing, we are of the opinion that:
(1) The Company is a limited partnership, validly existing under the
laws of the State of Delaware, has full partnership power and authority and is
duly authorized to enter into and perform the Credit Agreement and to incur the
obligations to be evidenced by the Notes;
(2) The Corporate General Partner is a corporation validly existing and
in good standing under the laws of the State of Delaware, has full corporate
power and authority and is duly authorized to execute and deliver the Credit
Agreement on behalf of the Company;
<PAGE>
(3) The execution and delivery of the Credit Agreement and the Notes by
the Corporate General Partner on behalf of the Company do not conflict with or
result in a breach of any provision of the Amended and Restated Agreement of
Limited Partnership of the Company; and
(4) The Credit Agreement and the Notes have been duly authorized,
executed and delivered by the Corporate General Partner on behalf of the Company
and constitute legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms.
Our opinions are subject to the following further qualifications:
(a) our opinions are subject to the effect of any applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
conveyance or other similar laws;
(b) the binding effect and the enforceability of the Credit Agreement
and the Notes and the availability of injunctive relief or other equitable
remedies thereunder are subject to the effect of general principles of equity
(regardless of whether enforcement is considered in proceedings at law or in
equity);
(c) the binding effect and the enforceability of the Credit Agreement
and the Notes are subject to the effect of laws and judicial decisions which
have imposed duties and standards of conduct (including, without limitation,
obligations of good faith, fair dealing and reasonableness and any obligation to
demonstrate that enforcement of provisions that are burdensome on a debtor is
reasonably necessary for the protection of the creditor) upon creditors;
(d) we express no opinion as to the enforceability of cumulative
remedies to the extent such cumulative remedies purport to or would have the
effect of compensating the party entitled to the benefits thereof in amounts in
excess of the actual loss suffered by such party or would violate applicable
laws concerning election of remedies;
(e) notwithstanding certain language of the Credit Agreement, you will
be limited to recovering only reasonable expenses, only reasonable attorneys'
fees and legal expenses and only reasonable compensation for funding losses,
increased costs or yield protection;
(f) we express no opinion as to, or the effect or applicability of, any
laws other than the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law and the Revised Uniform
Limited Partnership Act of the State of Delaware;
<PAGE>
(g) requirements in the Credit Agreement specifying that provisions
thereof may only be waived in writing may not be valid, binding or enforceable
to the extent that an oral agreement or an implied agreement by trade practice
or course of conduct has been created modifying any provision of such documents;
(h) we express no opinion as to the enforceability of the
indemnification provisions of the Credit Agreement insofar as said provisions
contravene public policy or might require indemnification or payments to you
with respect to any loss, cost or expense arising out of your gross negligence
or willful misconduct or any violation by you of statutory duties, general
principles of equity or public policy;
(i) waivers of equitable rights and defenses may not be valid, binding
or enforceable under state or federal law and certain rights of debtors and
duties of lenders may not be waived, released, varied or disclaimed by agreement
prior to a default; and
(j) we express no opinion as to the validity, binding effect or
enforceability of Section 9.10 of the Credit Agreement (Consent to
Jurisdiction).
This letter is furnished to you pursuant to Section 4.1(v) of the
Credit Agreement and is not to be used, circulated, quoted or otherwise relied
upon by any other person or entity or for any other purpose.
This opinion is for the benefit of the Lenders and their respective
counsel, and may not be relied upon by any other person. This opinion is limited
to the specific issues addressed and is limited in all respects to laws and
facts existing on the date hereof. By rendering this opinion, we do not
undertake to advise you of any changes in such laws or facts which may occur
after the date hereof.
Very truly yours,
KIRKLAND & ELLIS
<PAGE>
EXHIBIT "B-2"
FORM OF OPINION OF GENERAL COUNSEL
April 1, 1997
To the Lenders who are parties to the
Five-Year Credit Agreement described herein
Re: The ServiceMaster Company Limited
Partnership Five-Year Credit Agreement
dated as of April 1, 1997
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of The ServiceMaster
Company Limited Partnership, a Delaware limited partnership (the "Company") and,
in that capacity, I am familiar with the details of the negotiation, execution
and delivery of the Five-Year Credit Agreement dated as of April 1, 1997 among
the Company, The First National Bank of Chicago, as Administrative Agent, Morgan
Guaranty Trust Company of New York, as Documentation Agent and the Lenders named
therein, providing for credits in an aggregate amount not exceeding $750,000,000
at any one time outstanding (the "Credit Agreement"). I am furnishing this
opinion to you pursuant to Section 4.1(vi) of the Credit Agreement. Unless
otherwise defined herein, capitalized terms used herein have the meanings
assigned to such terms in the Credit Agreement.
For purposes of this opinion, I have examined the following:
(a) the Credit Agreement; and
(b) the proposed notes issued by the Company to the Lenders
pursuant to the Credit Agreement (the "Notes").
In addition, I have also examined such certificates of public
officials, certificates of officers of the Company, and copies of corporate and
partnership documents and records of the Company and other papers, and I have
made such other investigations as I have deemed relevant and necessary as a
basis for my opinions hereinafter set forth. In all such examinations I have
assumed the genuineness of all signatures (other than the signatures of officers
of the Company), the authenticity and completeness of all documents submitted to
me as originals, the due authority of the parties executing such documents
(other than on behalf of the Company) and the conformity to the originals of
documents submitted to me as copies.
<PAGE>
Based on the foregoing and subject to the qualifications set forth
below, I am of the opinion that:
(1) No approval, consent or withholding of objection on the part of any
regulatory body, federal, state or local, is necessary in connection with the
execution and delivery of the Credit Agreement or the Notes.
(2) The Company has full power and authority and is duly authorized to
conduct the activities in which it is now engaged and is duly licensed or
qualified and is in good standing as a foreign limited partnership in each
jurisdiction (to the extent qualification of a foreign limited partnership is
permitted by statute) where a failure so to qualify would reasonably be expected
to have a Material Adverse Effect and, in my opinion, the inability of the
Company to qualify as a foreign limited partnership in any state in which such
qualification is not permitted by law will not have a Material Adverse Effect.
(3) Each Material Subsidiary is a corporation or a limited partnership
duly incorporated or organized, as the case may be, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization, as
the case may be, has full power and authority and is duly authorized to conduct
the activities in which it is now engaged, and is duly licensed or qualified and
is in good standing in each jurisdiction (to the extent qualification of a
foreign limited partnership is permitted by statute) where a failure so to
qualify would reasonably be expected to have a Material Adverse Effect and, in
my opinion, the inability of any Material Subsidiary that is a limited
partnership to qualify as a foreign limited partnership in any state in which
such qualification is not permitted by law will not have a Material Adverse
Effect.
(4) The issuance of the Notes and the execution, delivery and
performance by the Company of the Credit Agreement (i) do not violate in any
material respect any provisions of any law or any order of any court,
governmental authority or agency, (ii) do not conflict with or result in any
breach of any of the terms, conditions or provisions of, or constitute a default
under, the limited partnership agreement of the Company or any agreement or any
debt instrument or other material agreement known to me to which the Company or
any Eligible Subsidiary is a party or by which the Company or any Eligible
Subsidiary may be bound and (iii) will not result in the creation or imposition
of any lien or encumbrance upon any of the property of the Company or any
Eligible Subsidiary.
<PAGE>
(5) There are no proceedings pending or, to my knowledge, threatened,
against or affecting the Company, any of its General Partners, its Parent or any
Subsidiary in any court or before any governmental authority or arbitration
board or tribunal which, if adversely determined, would reasonably be expected
to have a Material Adverse Effect. To my knowledge, neither the Company nor any
Subsidiary is in default with respect to any order of any court or governmental
authority, or arbitration board or tribunal which would reasonably be expected
to have a Material Adverse Effect.
(6) No documentary or stamp taxes are payable in connection with the
issuance of the Notes.
(7) Neither the issuance of the Notes nor the use by the Company of all
or any portion of the proceeds of the Advances will violate Regulations U or X
of the Board of Governors of the Federal Reserve System (12 C.F.R. Chapter II).
The opinions expressed in this letter as to enforceability are subject
to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally, to general principles of equity regardless of whether such
enforceability is considered in a proceeding in equity or at law or in a
bankruptcy proceeding, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and applicable laws and court
decisions which may limit the enforceability of certain remedial and other
provisions of the Notes.
The opinions expressed above are limited to the laws of the State of
Illinois, the federal laws of the United States of America, the Delaware General
Corporation Law and the Delaware Revised Uniform Limited Partnership Act, and I
do not express any opinion herein concerning any other law.
<PAGE>
The opinions expressed herein are solely for your benefit in connection
with the consummation of the transactions contemplated by the Credit Agreement
and may not be used or relied upon by any Person other than each of you.
Very truly yours,
Vernon T. Squires
Senior Vice President
and General Counsel
<PAGE>
EXHIBIT "C"
COMPETITIVE BID QUOTE REQUEST
(Section 2.3.2)
_________, 19__
To: The Lenders parties to the Credit Agreement described
below
From: [Name of Borrower]
Re: Five-Year Credit Agreement (the "Credit Agreement") dated as of April 1,
1997 among The ServiceMaster Company Limited Partnership, the Lenders named
therein, The First National Bank of Chicago, as Administrative Agent, and
Morgan Guaranty Trust Company of New York, as Documentation Agent
We hereby give notice pursuant to Section 2.3.2 of the Credit
Agreement that we request Competitive Bid Quotes for the following proposed
Competitive Bid Advance(s):
Borrowing Date: , 19__
Principal Amount (1) Interest Period (2)
- -------------------- -----------------------
Such Competitive Bid Quotes should offer [a Competitive Bid Margin]
[and] [an Absolute Rate]. [The currency in which the Loans are to be denominated
is __________.] Your Competitive Bid Quote must comply with Section 2.3.3 of the
Credit Agreement and the foregoing. Capitalized terms used herein have the
meanings assigned to them in the Credit Agreement.
Please respond to this request by no later than [1:00 p.m.] [9:00 a.m.]
Chicago time on , 19__.
[NAME OF BORROWER]
By:
Financial Officer
- -----------------------
(1) Amount must be at least (i) $1,000,000 or any larger integral multiple of
$1,000,000 in the case of a Floating Rate Advance, (ii) $5,000,000 or any larger
integral multiple of $1,000,000 in the case of any other Advance denominated in
Dollars or (iii) such amount and multiples as the Administrative Agent deems
appropriate and reasonably comparable to a $3,000,000 minimum Dollar Amount in
the case of any Advance denominated in an Alternative Currency.
(2) One, two, three or six months (Eurocurrency Auction) or not less than 7 days
(Absolute Rate Auction), subject to the provisions of the definitions of
Eurocurrency Interest Period and Absolute Rate Interest Period.
<PAGE>
EXHIBIT "D"
COMPETITIVE BID QUOTE
(Section 2.3.3)
____________, 19__
To: [Name of Borrower] (the "Borrower")
Re: Competitive Bid Quote
In response to your request dated _________, 199_, we hereby make the following
Competitive Bid Quote pursuant to Section 2.3.3 of the Credit Agreement
hereinafter referred to and on the following terms:
1. Quoting Lender: _____________________________________________
2. Person to contact at Quoting Lender: ________________________
3. Borrowing Date: ____________, 19__ (3)
4. We hereby offer to make Competitive Bid Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
- ----------------------
(3) As specified in the related Invitation For Competitive Bid Quotes.
<PAGE>
Principal Interest [Competitive [Absolute
Amount (4) Period (5) Bid Margin (6)] Rate (7)]
- ----------- ---------- --------------- ---------
[Provided, that the aggregate principal amount of Competitive Bid Loans for
which the above offers may be accepted shall not exceed $_________________.] (8)
- --------------------
(4) Principal amount bid for each Interest Period may not exceed the principal
amount requested. Bids must be made for at least (i) $1,000,000 or any larger
integral multiple of $1,000,000 in the case of a Floating Rate Advance, (ii)
$5,000,000 or any larger integral multiple of $1,000,000 in the case of any
other Advance denominated in Dollars or (iii) such amount and multiples as the
Administrative Agent deems appropriate and reasonably comparable to a $3,000,000
minimum Dollar Amount in the case of any Advance denominated in an Alternative
Currency.
(5) One, two, three or six months (Eurocurrency Auction) or not less than 7 days
(Absolute Rate Auction), as specified in the related Invitation For Competitive
Bid Quotes.
(6) Specify positive or negative percentage (rounded to the nearest 1/100 of 1%)
to be added or subtracted from the Eurocurrency Base Rate.
(7) Specify rate of interest per annum (rounded to the nearest 1/100 of 1%)
(8) Specify the limit, if any, as to the aggregate principal amount of the
Competitive Bid Loans of the quoting Lender which the Borrower may accept (see
Section 2.3.3. (ii)(d)).
<PAGE>
We understand and agree that the offers set forth above,
subject to the satisfaction of the applicable conditions set forth in the
Five-Year Credit Agreement dated as of April 1, 1997, among The ServiceMaster
Company Limited Partnership, the Lenders named therein, The First National Bank
of Chicago, as Administrative Agent and Morgan Guaranty Trust Company of New
York, as Documentation Agent (the "Credit Agreement"), irrevocably obligates us
to make the Competitive Bid Loan(s) for which any offer(s) are accepted, in
whole or in part.
Capitalized terms used herein and not otherwise defined herein shall have their
meanings as defined in the Credit Agreement.
Very truly yours,
[NAME OF BANK]
Dated: , 19__ By:
Authorized Officer
<PAGE>
EXHIBIT "E"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement")
between (the "Assignor") and (the "Assignee") is dated as of _________ __, 19__.
The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a
Five-Year Credit Agreement, dated as of April 1, 1997 (which, as it may be
amended, modified, renewed or extended from time to time, is herein called the
"Credit Agreement"), among The ServiceMaster Company Limited Partnership (the
"Company"), the Lenders named therein, The First National Bank of Chicago, as
Administrative Agent, and Morgan Guaranty Trust Company of New York, as
Documentation Agent. Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement. The
Assignor desires to assign to the Assignee, and the Assignee desires to assume
from the Assignor, an undivided interest (the "Purchased Percentage") in the
Commitment of the Assignor such that after giving effect to the assignment and
assumption hereinafter provided, the Commitment of the Assignee shall equal
$______________ and its percentage of the Aggregate Commitment shall equal __%.
2. ASSIGNMENT. For and in consideration of the assumption of
obligations by the Assignee set forth in Section 3 hereof and the other
consideration set forth herein, and effective as of the Effective Date (as
hereinafter defined), the Assignor does hereby sell, assign, transfer and convey
to the Assignee all of its right, title and interest in and to the Purchased
Percentage of (i) the Commitment of the Assignor (as in effect on the Effective
Date), (ii) each Committed Loan made by the Assignor outstanding on the
Effective Date, (iii) all Letter of Credit Liabilities of the Assignor on the
Effective Date and (iv) the Credit Agreement and the other Loan Documents.
Pursuant to Section 12.3.2 of the Credit Agreement, on and after the Effective
Date the Assignee shall have the same rights, benefits and obligations as the
Assignor had under the Loan Documents with respect to the Purchased Percentage
of the Loan Documents, all determined as if the Assignee were a "Lender" under
the Credit Agreement with ____% of the Aggregate Commitment. The Effective Date
shall be the later of ______ or two Business Days (or such shorter period agreed
to by the Agents) after a Notice of Assignment substantially in the form of
Exhibit "I" attached hereto and any consents substantially in the form of
Exhibit "II" attached hereto required to be delivered to the Agents by Section
12.3 of the Credit Agreement have been delivered to the Agents. In no event will
the Effective Date occur if the payments required to be made by the Assignee to
the Assignor on the Effective Date under Sections 4 and 5 hereof are not made on
the proposed Effective Date. The Assignor will notify the Assignee of the
proposed Effective Date on the Business Day prior to the proposed Effective
Date.
<PAGE>
3. ASSUMPTION. For and in consideration of the assignment of
rights by the Assignor set forth in Section 2 hereof and the other consideration
set forth herein, and effective as of the Effective Date, the Assignee does
hereby accept that assignment, and assume and covenant and agree fully,
completely and timely to perform, comply with and discharge, each and all of the
obligations, duties and liabilities of the Assignor under the Credit Agreement
which are assigned to the Assignee hereunder, which assumption includes, without
limitation, the obligation to fund the unfunded portion of the Aggregate
Commitment and to participate in Letters of Credit outstanding on the Effective
Date or issued thereafter, all in accordance with the provisions set forth in
the Credit Agreement as if the Assignee were a "Lender" under the Credit
Agreement with ___% of the Aggregate Commitment. The Assignee agrees to be bound
by all provisions relating to "Lenders" under and as defined in the Credit
Agreement, including, without limitation, provisions relating to the
dissemination of information and the payment of indemnification.
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the
Assignee shall be entitled to receive from the Administrative Agent all payments
of principal, interest and fees with respect to the Purchased Percentage of the
Assignor's Commitment, Committed Loans and Letter of Credit Liabilities. The
Assignee shall advance funds directly to the Administrative Agent with respect
to each Committed Loan and reimbursement payments made on or after the Effective
Date. In consideration for the transfer of the assigned obligations hereunder,
with respect to each Committed Loan made by the Assignor outstanding on the
Effective Date, the Assignee shall pay the Assignor on the Effective Date (or,
if Assignee so elects with respect to each Committed Loan bearing interest at a
Fixed Rate, on the Payment Date, as hereinafter defined) an amount equal to the
Purchased Percentage of any such Committed Loan. If the Assignee elects to make
such payment on the Effective Date, with respect to any Loan made by Assignor
outstanding on the Effective Date which bears interest at a fixed rate (each an
"Outstanding Fixed Rate Loan"), Assignee shall be entitled to receive interest
at a rate agreed upon by the Assignee and the Assignor (the "Outstanding Fixed
Rate Loan Interest Rate") for the remainder of the existing Interest Period.
<PAGE>
When Assignee receives interest on the Purchased Percentage of any Outstanding
Fixed Rate Loan, Assignee shall remit to Assignor the excess of (a) the interest
received by Assignee on the Outstanding Fixed Rate Loan over (b) the Outstanding
Fixed Rate Loan Interest Rate. In the event Assignee elects not to pay the
Assignor the Purchased Percentage of any such Outstanding Fixed Rate Loan on the
Effective Date, the Assignee shall pay the Assignor an amount equal to the
Purchased Percentage of such Outstanding Fixed Rate Loan (a) on the last day of
the Interest Period therefor or (b) on such earlier date agreed to by the
Assignor and the Assignee or (c) on the date on which any such Outstanding Fixed
Rate Loan either becomes due (by acceleration or otherwise) or is prepaid (the
date as described in the foregoing clauses (a), (b) or (c) being hereinafter
referred to as the "Payment Date"). In the event interest for the period from
the Effective Date to but not including the Payment Date is not paid by the
Borrower with respect to any Outstanding Fixed Rate Loan sold by the Assignor to
the Assignee pursuant to the preceding sentence, the Assignee shall pay to the
Assignor interest for such period on such Outstanding Fixed Rate Loan at the
applicable rate provided by the Credit Agreement. In the event of a prepayment
of any Outstanding Fixed Rate Loan, Assignee shall remit to Assignor the excess
of (a) the amount received by the Assignee as breakage costs over (b) the amount
which would have been received by the Assignee as a prepayment penalty if the
amount of prepayment penalty was based on the Outstanding Fixed Rate Loan
Interest Rate. On and after the Effective Date, the Assignee will also remit to
the Assignor any amounts of interest on Loans and fees received from the
Administrative Agent which relate to the Purchased Percentage of Loans made by
the Assignor accrued for periods prior to the Effective Date or the Payment Date
as applicable. In the event that either party hereto receives any payment to
which the other party hereto is entitled under this Assignment Agreement, then
the party receiving such amount shall promptly remit it to the other party
hereto. ***[This Section subject to modification by the Assignor and the
Assignee]***
5. FEES PAYABLE BY ASSIGNEE. On each day on which the Assignee
receives a payment of interest or fees under the Credit Agreement (other than a
payment of interest or fees which the Assignee is obligated to deliver to the
Assignor pursuant to Section 4 hereof, which shall be excluded in determining
fees payable to the Assignor pursuant to this Section), the Assignee shall pay
<PAGE>
to the Assignor a fee. The amount of such fee shall be the difference between
(i) the amount of such interest or fee, as applicable, received by the Assignee
and (ii) the amount of the interest or fee, as applicable, which would have been
received by the Assignee if each interest rate was ___ of 1% less than the
interest rate paid by the Company or if the facility fee was ___ of 1% less than
the facility fee paid by the Company pursuant to Section 2.4, as applicable. In
addition, the Assignee agrees to pay __% of the fee required to be paid to the
Administrative Agent pursuant to Section 12.3.2 of the Credit Agreement.
***[This Section subject to modification by the Assignor and the Assignee]***
6. CREDIT DETERMINATION: LIMITATIONS ON ASSIGNORS LIABILITY.
The Assignee represents and warrants to the Assignor that it is capable of
making and has made and shall continue to make its own credit determinations and
analysis based upon such information as the Assignee deemed sufficient to enter
into the transaction contemplated hereby and not based on any statements or
representations by the Assignor, the Agents or any Lender. It is understood and
agreed that the assignment and assumption hereunder are made without recourse to
the Assignor and that the Assignor makes no representation or warranty of any
kind to the Assignee and shall not be responsible for (i) the due execution,
legality, validity, enforceability, genuineness, sufficiency or collectibility
of the Credit Agreement or any other Loan Document, including without
limitation, documents granting the Assignor and the other Lenders a security
interest in assets of the Company or any of its Subsidiaries, or any guarantor,
(ii) any representation, warranty or statement made in or in connection with any
of the Loan Documents, (iii) the financial condition or creditworthiness of any
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) the inspection of any of
the property, books or records of the Company or any of its Subsidiaries, (vi)
the validity, enforceability, perfection, priority, condition, value or
sufficiency of any collateral securing or purporting to secure the Loans.
Neither the Assignor nor any of its officers, directors, employees, agents or
attorneys shall be liable for any mistake, error of judgment, or action taken or
omitted to be taken in connection with the Loans or the Loan Documents, except
for its or their own bad faith or willful misconduct.
7. INDEMNITY. The Assignee agrees to indemnify and hold the
Assignor harmless against any and all losses, costs and expenses (including,
without limitation, reasonable attorneys' fees, which attorneys may be employees
of the Assignee) and liabilities incurred by the Assignor in connection with or
arising in any manner from the Assignee's performance or non-performance of
obligations assumed under this Assignment Agreement.
<PAGE>
8. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the
Assignee shall have the right pursuant to Section 12.3 of the Credit Agreement
to assign the rights which are assigned to the Assignee hereunder to any entity
or person, provided that (i) any such subsequent assignment does not violate any
of the terms and conditions of the Loan Documents or any law, rule, regulations
order, writ, judgment, injunction or decree and that any consent required under
the terms of the Loan Documents has been obtained, (ii) the assignee under such
assignment from the Assignee shall agree to assume all of the Assignee's
obligations hereunder in a manner satisfactory to the Assignor and (iii) the
Assignee is not thereby released from any of its obligations to the Assignor
hereunder.
9. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage of the Aggregate Commitment assigned to the
Assignee shall remain the percentage specified in Section 1 hereof and the
dollar amount of the Commitment of the Assignee shall be recalculated based on
the reduced Aggregate Commitment.
10. ENTIRE AGREEMENT. This Assignment Agreement ****[and the
attached consent]**** embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings between the
parties hereto relating to the subject matter hereof.
11. GOVERNING LAW. This Assignment Agreement shall be governed
by the internal law, and not the law of conflicts, of the State of New York.
12. NOTICES. Notices shall be given under this Assignment
Agreement in the manner set forth in the Credit Agreement. For the purpose
hereof, the addresses of the parties hereto (until notice of a change is
delivered) shall be the address set forth under each party's name on the
signature pages hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
Title:
[NAME OF ASSIGNEE]
By:
Title:
<PAGE>
EXHIBIT "I"
NOTICE
OF ASSIGNMENT
To: THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP
One ServiceMaster Way
Downers Grove, IL 60515
Attention: Eric R. Zarnikow
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Documentation Agent
60 Wall Street
New York, NY 10260
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
One First National Plaza
Chicago, IL 60670
[ISSUING BANKS]
From: [NAME OF ASSIGNOR]
[NAME OF ASSIGNEE]
, 19__
1. We refer to that Five-Year Credit Agreement, dated as of
April 1, 1997 (which, as it may be amended, modified, renewed or extended from
time to time, is herein called the "Credit Agreement"), among The ServiceMaster
Company Limited Partnership (the "Company"), the Lenders named therein including
____________ (the "Assignor"), The First National Bank of Chicago, as
Administrative Agent, and Morgan Guaranty Trust Company of New York, as
Documentation Agent. Capitalized terms used herein and in any consent delivered
in connection herewith and not otherwise defined herein or in such consent shall
have the meanings attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and
delivered to the Company and the Agents pursuant to Section 12.3.2 of the Credit
Agreement.
3. The Assignor and (the "Assignee") have entered into an
Assignment Agreement, dated as of , 19__, pursuant to which, among other things,
the Assignor has sold, assigned, delegated and transferred to the Assignee, and
the Assignee has purchased, accepted and assumed from the Assignor, an undivided
interest in and to all of the Assignor's rights and obligations under the Credit
<PAGE>
Agreement such that Assignee's percentage of the Aggregate Commitment shall
equal __%, effective as of the Effective Date (as hereinafter defined). The
"Effective Date" shall be the later of ____ or two Business Days (or such
shorter period as agreed to by the Agents) after this Notice of Assignment and
any consents and fees required by Sections 12.3.1 and 12.3.2 of the Credit
Agreement have been delivered to the Agents, provided that the Effective Date
shall not occur if any condition precedent agreed to by the Assignor and the
Assignee has not been satisfied.
4. As of this date, the percentage of the Assignor in the
Aggregate Commitment, the Committed Advances and the Letters of Credit is __%.
As of the Effective Date, the percentage of the Assignor in the Aggregate
Commitment, the Committed Advances and the Letters of Credit will be __% (as
such percentage may be reduced or increased by assignments which become
effective prior to the assignment to the Assignee becoming effective) and the
percentage of the Assignee in the Aggregate Commitment, the Committed Advances
and the Letters of Credit and the Letters of Credit will be __%.
5. The Assignor and the Assignee hereby give to the Company
and the Agents notice of the assignment and delegation referred to herein. The
Assignor will confer with the Agents before _______, 19__ to determine if the
assignment to the Assignee will become effective on such date pursuant to
Section 3 hereof, and will confer with the Agents to determine the Effective
Date pursuant to Section 3 hereof if it occurs thereafter. The Assignor shall
notify the Agents if the assignment to the Assignee does not become effective on
any proposed Effective Date as a result of the failure to satisfy the conditions
precedent agreed to by the Assignor and the Assignee. At the request of the
Agent, the Assignor will give the Agents written confirmation of the occurrence
of the Effective Date.
6. The Assignee hereby accepts and assumes the assignment and
delegation referred to herein and agrees as of the Effective Date (i) to perform
fully all of the obligations under the Credit Agreement which it has hereby
assumed and (ii) to be bound by the terms and conditions of the Credit Agreement
as if it were a "Lender".
7. The Assignor and the Assignee request and agree that any
payments to be made by the Administrative Agent to the Assignor on and after the
Effective Date shall, to the extent of the assignment referred to herein, be
made entirely to the Assignee, it being understood that the Assignor and the
Assignee shall make between themselves any desired allocations.
<PAGE>
8. The Assignor or the Assignee shall pay to the
Administrative Agent on or before the Effective Date the processing fee of
$3,500 required by Section 12.3.2 of the Credit Agreement.
9. The Assignor and the Assignee request and direct that the
Administrative Agent prepare and cause the Borrower(s) to execute and deliver
[new Notes or, as appropriate,] replacement Notes, to the Assignor and the
Assignee in accordance with Section 12.3.2 of the Credit Agreement. The Assignor
[and the Assignee] agree[s] to deliver to the Administrative Agent the original
Notes received from it by the Borrower(s) upon the Assignor's [and Assignee's]
receipt of new Notes in the amounts set forth above.
10. The Assignee advises the Agents that the address listed
below is its address for notices under the Credit Agreement:
- ------------------
- ------------------
- ------------------
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
Title: Title:
<PAGE>
EXHIBIT "II"
CONSENT AND RELEASE
TO: [NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
---------------- ----------------
---------------- ----------------
_________, 19__
1. We acknowledge receipt from (the "Assignor") and
______________________ (the "Assignee") of the Notice of Assignment, dated as of
__________, 19__ (the "Notice"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings attributed to them in the Notice.
****[2. In consideration of the assumption by the Assignee of
the obligations of the Assignor as referred to in the Notice, the Company and
each Issuing Bank hereby (i) irrevocably consents, as required by Section 12.3.1
of the Credit Agreement, to the assignment and delegation referred to in the
Notice and (ii) as of the Effective Date, irrevocably reduces the percentage of
the Assignor in the Aggregate Commitment by the percentage of the Aggregate
Commitment assigned to the Assignee and releases the Assignor from all of its
obligations to the Company or any of its Subsidiaries or to such Issuing Bank
under the Loan Documents to the extent that such obligations have been assumed
by the Assignee]****
3. The Administrative Agent is hereby requested to prepare for
issuance by the relevant Borrower new Notes as requested by the Assignor and the
Assignee in the Notice.
****[4. In consideration of the assumption by the Assignee of
the obligations of the Assignor as referred to in the Notice, the Agents hereby
(i) irrevocably consent, as required by Section 12.3.1 of the Credit Agreement,
to the assignment and delegation referred to in the Notice, (ii) as of the
Effective Date, irrevocably release the Assignor from its obligations to the
Agents under the Loan Documents to the extent that such obligations have been
assumed by the Assignee, and (iii) agree that, as of the Effective Date, the
Agents shall consider the Assignee as a "Lender" for all purposes under the Loan
Documents to the extent of the assignment and delegation referred to in the
Notice.]****
<PAGE>
THE SERVICEMASTER COMPANY THE FIRST NATIONAL BANK
LIMITED PARTNERSHIP OF CHICAGO, as Administrative Agent
By: ServiceMaster Management By:
Corporation, its General Title:
Partner
MORGAN GUARANTY TRUST
By: COMPANY OF NEW YORK, as
Title: Documentation Agent
By:
Title:
[ISSUING BANK]
By: ____________________
Title: __________________
* Paragraphs 2 and 4 are to be included only if the consent of the Company, the
Issuing Banks and the Agents is required pursuant to Section 12.3.1 of the
Credit Agreement.
<PAGE>
EXHIBIT "F"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To: The First National Bank of Chicago, as Administrative Agent under the
Credit Agreement described below.
From: [Name of Borrower] (the "Borrower")
Re: Five-Year Credit Agreement, dated as of April 1, 1997 (as the same may
be amended or modified, the "Credit Agreement"), among The
ServiceMaster Company Limited Partnership, the Lenders named therein,
The First National Bank of Chicago, as Administrative Agent, and Morgan
Guaranty Trust Company of New York, as Documentation Agent.
Terms used herein and not otherwise defined shall have the
meanings assigned thereto in the Credit Agreement.
The Administrative Agent is specifically authorized and
directed to act upon the following standing money transfer instructions with
respect to the proceeds of Advances or other extensions of credit from time to
time until receipt by the Administrative Agent of a specific written revocation
of such instructions by the Borrower, provided, however, that the Administrative
Agent may otherwise transfer funds as hereafter directed in writing by the
Borrower in accordance with Section 13.1 of the Credit Agreement.
Facility Identification Number(s)
Customer/Account Name
Transfer Funds To
For Account No.
Reference/Attention To
Authorized Officer (Customer
Representative) Date
(Please Print) Signature
Bank Officer Name Date
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
<PAGE>
EXHIBIT "G"
FORM OF ELECTION TO PARTICIPATE
__________, 19__
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
for the Lenders under the Five-Year Credit Agreement dated as of April 1,
1997 among The ServiceMaster Company Limited Partnership
(the "Company"), the Lenders named therein,
The First National Bank of Chicago, as
Administrative Agent, and the Documentation
Agent
Dear Sirs:
Reference is made to the Credit Agreement described above.
Terms not defined herein which are defined in the Credit Agreement have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a
[corporation] [partnership] organized under the laws of [jurisdiction of
organization], elects to be an Eligible Subsidiary for purposes of the Credit
Agreement, effective upon your receipt hereof until an Election to Terminate
shall have been delivered to you with respect to the undersigned in accordance
with the Credit Agreement.
The undersigned confirms that the representations and
warranties set forth in Article XIV of the Credit Agreement are true and correct
as to the undersigned as of the date hereof. In particular, [except as disclosed
below,] there is no income, stamp or other tax of any country, or any taxing
authority thereof or therein, imposed by or in the nature of withholding or
otherwise, which is imposed on any payment to be made by the undersigned
pursuant to the Credit Agreement or the Notes of the undersigned, or is imposed
on or by virtue of the execution, delivery or enforcement of this Election to
Participate or of the Notes of the undersigned.
The undersigned agrees to perform all the obligations of an
Eligible Subsidiary under, and to be bound in all respects by the terms of, the
Credit Agreement, including without limitation Sections 9.11 and 9.12 thereof,
as if the undersigned were a signatory party thereto. The undersigned hereby
confirms the authority of the Financial Officers to act on its behalf as to all
matters relating to the Credit Agreement.
<PAGE>
The address to which all notices to the undersigned under the
Credit Agreement should be directed is:
This instrument shall be construed in accordance with and
governed by the laws of the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By __________________________________
Title:
The undersigned confirms that [name of Eligible Subsidiary] is
an additional Borrower for purposes of the Credit Agreement described above.
THE SERVICEMASTER COMPANY LIMITED
PARTNERSHIP
By: ServiceMaster Management
Corporation, its General Partner
By __________________________________
Title:
Receipt of the above Election to Participate is acknowledged
on and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
By __________________________________
Title:
<PAGE>
EXHIBIT "H"
FORM OF ELECTION TO TERMINATE
__________, 19__
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
for the Lenders under the Five-Year Credit Agreement dated as of April 1,
1997 among The ServiceMaster Company Limited Partnership
(the "Company"), the Lenders named therein,
The First National Bank of Chicago, as
Administrative Agent, and the Documentation
Agent
Dear Sirs:
Reference is made to the Credit Agreement described above.
Terms not defined herein which are defined in the Credit Agreement have for the
purposes hereof the meaning provided therein.
The undersigned hereby elect to terminate the status of [name
of Eligible Subsidiary], a [corporation] [partnership] organized under the laws
of [jurisdiction of organization] (the "Designated Subsidiary"), as an Eligible
Subsidiary for purposes of the Credit Agreement, effective upon your receipt
hereof. The undersigned represent and warrant that all principal and interest on
all Notes of the Designated Subsidiary and all other amounts payable by the
Designated Subsidiary pursuant to the Credit Agreement have been paid in full on
or prior to the date hereof. Notwithstanding the foregoing, this Election to
Terminate shall not affect any obligation of the Designated Subsidiary under the
Credit Agreement or under any of its Notes heretofore incurred.
<PAGE>
This instrument shall be construed in accordance with and
governed by the laws of the State of New York.
Very truly yours,
[NAME OF DESIGNATED SUBSIDIARY]
By __________________________________
Title:
THE SERVICEMASTER COMPANY LIMITED
PARTNERSHIP
By: ServiceMaster Management
Corporation, its General Partner
By __________________________________
Title:
Receipt of the above Election to Terminate is hereby
acknowledged on and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
By __________________________________
Title:
<PAGE>
EXHIBIT "I"
FORM OF OPINION OF COUNSEL FOR ELIGIBLE SUBSIDIARY
__________, 19__
To the Lenders and Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am counsel to [name of Eligible Subsidiary], a [corporation]
[partnership] organized under the laws of [jurisdiction of organization] (the
"Eligible Subsidiary"), and give this opinion pursuant to Section 4.2(b) of the
Five-Year Credit Agreement, dated as of April 1,1997 (as the same may be amended
or modified, the "Credit Agreement"), among The ServiceMaster Company Limited
Partnership (the "Company"), the Lenders named therein, The First National Bank
of Chicago, as Administrative Agent, and Morgan Guaranty Trust Company of New
York, as Documentation Agent. Terms defined in the Credit Agreement are used
herein as therein defined.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Eligible Subsidiary is a [corporation] [partnership]
duly organized, validly existing and in good standing under the laws of
[jurisdiction of organization], and is a Subsidiary of the Company.
2. The execution and delivery by the Eligible Subsidiary of
its Election to Participate and its Notes and the performance by the Eligible
Subsidiary of its obligations under the Credit Agreement and its Notes are
within the Eligible Subsidiary's legal powers, have been duly authorized by all
necessary [corporate] [partnership] or other legal action, require no action by
or in respect of, or filing with, any governmental body, agency or official and
do not contravene, or constitute a default under, in any material respect any
provision of applicable law or regulation or of the organizational documents of
the Eligible Subsidiary or of any indenture or other agreement or instrument
governing Debt or any other material agreement or instrument binding upon the
Company or the Eligible Subsidiary or result in the creation or imposition of
any Lien on any asset of the Eligible Subsidiary or any of its Subsidiaries.
<PAGE>
3. The Election to Participate of the Eligible Subsidiary and
the Credit Agreement constitute valid and binding agreements of the Eligible
Subsidiary and its Notes constitute valid and binding obligations of the
Eligible Subsidiary, in each case enforceable in accordance with its terms,
except as may be limited by (i) bankruptcy, insolvency or other similar laws
affecting the rights and remedies of creditors generally and (ii) general
principles of equity.
4. Except as disclosed in the Election to Participate, there
is no income, stamp or other tax of any country, or any taxing authority thereof
or therein, imposed by or in the nature of withholding or otherwise, which is
imposed on any payment to be made by the Eligible Subsidiary pursuant to the
Credit Agreement or on its Notes, or is imposed on or by virtue of the
execution, delivery or enforcement of its Election to Participate or of its
Notes.
Very truly yours,
<PAGE>
EXHIBIT "J"
FORM OF OPINION OF COUNSEL FOR THE AGENTS
April 1, 1997
To the Lenders and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the Five-Year
Credit Agreement, dated as of April 1, 1997 (as the same may be amended or
modified, the "Credit Agreement"), among The ServiceMaster Company Limited
Partnership (the "Company"), the Lenders named therein, The First National Bank
of Chicago, as Administrative Agent, and Morgan Guaranty Trust Company of New
York, as Documentation Agent, and have acted as special counsel for the Agents
for the purpose of rendering this opinion pursuant to Section 4.1(x) of the
Credit Agreement. Terms defined in the Credit Agreement are used herein as
therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that
the Credit Agreement constitutes a valid and binding agreement of the Company
and the Notes of the Company constitute valid and binding obligations of the
Company, in each case enforceable in accordance with their respective terms,
except as the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity.
<PAGE>
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and the
federal laws of the United States of America. To the extent that our opinion
expressed herein involves conclusions as to matters governed by the laws of
other jurisdictions, we have relied, with your permission, on the opinion of
[counsel for the Company], addressed to you and dated the date hereof, copies of
which have been delivered to you, and we have assumed, without independent
investigation, the correctness of the matters set forth in such opinions, our
opinion being subject to the assumptions, qualifications and limitations set
forth in such opinion with respect thereto. In addition, in giving the foregoing
opinion, we express no opinion as to the effect (if any) of any law of any
jurisdiction (except the State of New York) in which any Lender is located which
limits the rate of interest that such Lender may charge or collect.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other purpose
or relied upon by any other person without our prior written consent.
Very truly yours,
Exhibit 10.3 to 1997 Form 10-K
$250,000,000
364-DAY
CREDIT AGREEMENT
dated as of April 1, 1997
among
THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP,
THE LENDERS
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
and
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
-------------------------------------------------------------------------------
J.P. MORGAN SECURITIES INC.,
Arranger
BANK OF AMERICA NT & SA
and
NATIONSBANK, N.A.
as Co-Agents
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<C> <S> <C>
ARTICLE I
DEFINITIONS
1.1. Defined Terms............................................................................ 1
1.2. Accounting Terms and Determinations...................................................... 20
1.3. Rules of Construction.................................................................... 20
1.4. Rounding................................................................................. 21
ARTICLE II
THE FACILITY
2.1. The Facility............................................................................. 21
2.1.1. Description of Facility.................................................... 21
2.1.2. Availability of Facility; Required Payments................................ 21
2.2. Committed Advances....................................................................... 21
2.2.1. Committed Advances......................................................... 21
2.2.2. Types of Committed Advances................................................ 22
2.2.3. Method of Selecting Types and Interest Periods for New Committed
Advances................................................................... 22
2.2.4. Conversion and Continuation of Outstanding Committed Advances.............. 23
2.3. Competitive Bid Advances................................................................. 24
2.3.1. Competitive Bid Option; Repayment of Competitive Bid Advances.............. 24
2.3.2. Competitive Bid Quote Request.............................................. 25
2.3.3. Submission and Contents of Competitive Bid Quotes.......................... 25
2.3.4. Acceptance and Notice by the Borrower...................................... 27
2.3.5. Allocation by the Borrower................................................. 27
2.3.6. Notice by the Borrower to the Administrative Agent......................... 28
2.4. Facility Fees............................................................................ 28
2.5. General Facility Terms................................................................... 28
2.5.1. Method of Borrowing........................................................ 28
2.5.2. Minimum Amount of Each Committed Advance................................... 29
2.5.3. Optional Principal Payments................................................ 29
2.5.4. Interest Periods........................................................... 30
2.5.5. Rate after Maturity........................................................ 30
2.5.6. Interest Payment Dates; Interest Basis..................................... 30
2.5.7. Method of Payment.......................................................... 31
2.5.8. Notes...................................................................... 32
2.5.9. Notification of Advances, Interest Rates and Prepayments................... 32
Page i
<PAGE>
2.5.10. Non-Receipt of Funds by the Administrative Agent........................... 32
2.5.11. Cancellation............................................................... 33
2.5.12. Lending Installations...................................................... 33
2.5.13. Currency Equivalents....................................................... 33
2.5.14. Taxes...................................................................... 34
2.5.15. Regulation D Compensation.................................................. 36
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection......................................................................... 37
3.2. Changes in Capital Adequacy Regulations.................................................. 38
3.3. Availability of Types of Advances........................................................ 39
3.4. Funding Indemnification.................................................................. 40
3.5. Lender Statements; Limit on Retroactivity; Survival of Indemnity......................... 40
3.6. Foreign Subsidiary Costs................................................................. 41
3.7. Replacement of Lenders................................................................... 41
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance.......................................................................... 42
4.2. Initial Advance to each Eligible Subsidiary.............................................. 44
4.3. Each Advance............................................................................. 44
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.1. Organization and Authority............................................................... 45
5.2. Organization and Authority of Subsidiaries............................................... 46
5.3. Organization and Authority of Corporate General Partner.................................. 46
5.4. Business and Property.................................................................... 46
5.5. Financial Statements..................................................................... 47
5.6. Full Disclosure.......................................................................... 47
5.7. Pending Litigation....................................................................... 47
5.8. Loan Documents are Legal, Valid, Binding and Authorized.................................. 48
5.9. Governmental Consent..................................................................... 48
Page ii
<PAGE>
5.10. Taxes.................................................................................... 48
5.11. Employee Retirement Income Security Act of 1974.......................................... 49
5.12. Investment Company Act................................................................... 49
5.13. Compliance with Environmental Laws....................................................... 49
5.14. Regulations U and X...................................................................... 50
ARTICLE VI
COVENANTS
6.1.1. Information................................................................ 50
6.1.2. Use of Parent Information.................................................. 51
6.2. Use of Proceeds.......................................................................... 52
6.3. Notice of Default........................................................................ 52
6.4. Inspection............................................................................... 52
6.5. Legal Existence, Etc..................................................................... 52
6.6. Insurance................................................................................ 53
6.7. Taxes, Claims for Labor and Materials, Compliance with Laws.............................. 53
6.8. Maintenance, Etc......................................................................... 53
6.9. Nature of Business....................................................................... 54
6.10. Restricted Payments...................................................................... 54
6.11. Payment of Dividends by Subsidiaries..................................................... 54
6.12. Transactions with Affiliates............................................................. 55
6.13. Negative Pledge.......................................................................... 55
6.14. Consolidations, Mergers and Sales of Assets.............................................. 57
6.15. Leverage Test............................................................................ 58
6.16. Subsidiary Debt Limitation............................................................... 58
ARTICLE VII
DEFAULTS
7.1. .........................................................................................58
7.2. .........................................................................................58
7.3. .........................................................................................58
7.4. .........................................................................................58
7.5. .........................................................................................59
7.6. .........................................................................................59
7.7. .........................................................................................59
7.8. .........................................................................................59
7.9. .........................................................................................59
7.10. .........................................................................................59
7.11. .........................................................................................60
7.12. .........................................................................................60
7.13. .........................................................................................60
Page iii
<PAGE>
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration............................................................................. 60
8.2. Amendments............................................................................... 60
8.3. Preservation of Rights................................................................... 61
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations.............................................................. 62
9.2. Headings................................................................................. 62
9.3. Entire Agreement......................................................................... 62
9.4. Several Obligations...................................................................... 62
9.5. Expenses; Indemnification................................................................ 62
9.6. Numbers of Documents..................................................................... 63
9.7. Severability of Provisions............................................................... 64
9.8. Nonliability of Lenders.................................................................. 64
9.9. CHOICE OF LAW............................................................................ 64
9.10. CONSENT TO JURISDICTION.................................................................. 64
9.11. WAIVER OF JURY TRIAL..................................................................... 64
9.12. Confidentiality.......................................................................... 65
ARTICLE X
THE AGENTS
10.1. Appointment.............................................................................. 65
10.2. Powers................................................................................... 65
10.3. General Immunity......................................................................... 65
10.4. No Responsibility for Loans, Recitals, etc............................................... 66
10.5. Action on Instructions of Lenders........................................................ 66
10.6. Employment of Agents and Counsel......................................................... 66
10.7. Reliance on Documents; Counsel........................................................... 66
10.8. Agent's Reimbursement and Indemnification................................................ 67
10.9. Rights as a Lender....................................................................... 67
10.10. Lender Credit Decision................................................................... 67
10.11. Successor Agent.......................................................................... 68
10.12. Agents' Fees............................................................................. 68
Page iv
<PAGE>
ARTICLE XI
SETOFF RATABLE PAYMENTS
11.1. Setoff................................................................................... 68
11.2. Ratable Payments......................................................................... 69
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns................................................................... 69
12.2. Participations........................................................................... 70
12.2.1. Permitted Participants; Effect............................................. 70
12.2.2. Voting Rights.............................................................. 70
12.3. Assignments.............................................................................. 70
12.3.1. Permitted Assignments...................................................... 70
12.3.2. Effect; Effective Date..................................................... 71
12.4. Dissemination of Information............................................................. 71
12.5. Tax Treatment............................................................................ 72
12.6. Increased Costs................................................................................. 72
ARTICLE XIII
NOTICES
13.1. Giving Notice............................................................................ 72
ARTICLE XIV
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
14.1. Existence and Power...................................................................... 73
14.2. Corporate or Partnership and Governmental Authorization; Contravention................... 73
14.3. Binding Effect........................................................................... 73
14.4. Taxes.................................................................................... 73
Page v
<PAGE>
ARTICLE XV
GUARANTY
15.1. The Guaranty............................................................................. 74
15.2. Guaranty Unconditional................................................................... 74
15.3. Discharge Only Upon Payment In Full; Reinstatement In Certain Circumstances.............. 75
15.4. Waiver by the Company.................................................................... 75
15.5. Subrogation.............................................................................. 75
15.6. Stay of Acceleration..................................................................... 75
ARTICLE XVI
COUNTERPARTS; EFFECTIVENESS
</TABLE>
Page vi
<PAGE>
PRICING SCHEDULE
Schedule 6.11 Subsidiary Restrictions
Exhibit "A" Note
Exhibit "B-1" Form of Opinion of Kirkland & Ellis
Exhibit "B-2" Form of Opinion of General Counsel
Exhibit "C" Form of Competitive Bid Quote Request
Exhibit "D" Form of Competitive Bid Quote
Exhibit "E" Form of Assignment Agreement
Exhibit "F" Form of Loan/Credit Related Money Transfer
Instruction
Exhibit "G" Form of Election to Participate
Exhibit "H" Form of Election to Terminate
Exhibit "I" Form of Opinion of Counsel for Eligible
Subsidiary
Exhibit "J" Form of Opinion of Counsel for the Agents
Page vii
<PAGE>
364-DAY
CREDIT AGREEMENT
This 364-Day Credit Agreement, dated as of April 1, 1997, is
among The ServiceMaster Company Limited Partnership, the Lenders, The First
National Bank of Chicago, as Administrative Agent, and Morgan Guaranty Trust
Company of New York, as Documentation Agent. The parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1. Defined Terms. As used in this Agreement:
"Absolute Rate" means, with respect to a Loan made by a given
Lender for the relevant Absolute Rate Interest Period, the rate of interest per
annum (rounded to the nearest 1/100 of 1%) offered by such Lender and accepted
by the Borrower pursuant to Section 2.3.4.
"Absolute Rate Advance" means a borrowing hereunder consisting
of the aggregate amount of the several Absolute Rate Loans made by some or all
of the Lenders to the Borrower at the same time and for the same Absolute Rate
Interest Period.
"Absolute Rate Auction" means a solicitation of Competitive
Bid Quotes setting forth Absolute Rates pursuant to Section 2.3.
"Absolute Rate Interest Period" means, with respect to an
Absolute Rate Advance or an Absolute Rate Loan, a period of not less than 7 days
commencing on a Business Day selected by the Borrower pursuant to this
Agreement. If such Absolute Rate Interest Period would end on a day which is not
a Business Day, such Absolute Rate Interest Period shall end on the next
succeeding Business Day.
"Absolute Rate Loan" means a Loan which bears interest at an
Absolute Rate.
"Acquiring Person" means any Person (other than the Parent,
the Surviving Parent and the Surviving Company) or group of two or more Persons
acting as a partnership, limited partnership, syndicate, or other group for the
purpose of acquiring, holding or disposing of Equity Interests of the Company,
the Surviving Company, the Parent or the Surviving Parent, together with all
affiliates and associates (as defined in Rule 12b-2 under the Securities and
Exchange Act of 1934, as amended) of such Person or Persons.
Page 1
<PAGE>
"Administrative Agent" means The First National Bank of
Chicago in its capacity as contractual representative for the Lenders pursuant
to Article X, and not in its individual capacity as a Lender, and any successor
Administrative Agent appointed pursuant to Article X.
"Administrative Questionnaire" means, with respect to each
Lender, an administrative questionnaire in a form satisfactory to the
Administrative Agent and submitted to the Administrative Agent (with a copy to
the Company) duly completed by each Lender.
"Advance" means a borrowing hereunder consisting of the
aggregate amount of the several Loans made by some or all of the Lenders to the
Borrower of the same Type (or on the same interest basis in the case of
Competitive Bid Advances) and, in the case of Fixed Rate Advances, for the same
Interest Period and includes a Competitive Bid Advance.
"Affected Lender" is defined in Section 3.7.
"Affiliate" means any Person (other than a Subsidiary) which
directly or indirectly controls, or is controlled by, or is under common control
with, the Company. The term "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of Voting Equity Interest,
by contract or otherwise.
"Agent" means the Administrative Agent or the Documentation
Agent and "Agents" means both of the foregoing.
"Aggregate Commitment" means the aggregate of the Commitments
of all the Lenders hereunder, as reduced from time to time pursuant to the terms
hereof.
"Agreement" means this Credit Agreement, as it may be amended
or modified and in effect from time to time.
"Alternate Base Rate" means, on any date and with respect to
all Floating Rate Advances, a fluctuating rate of interest per annum equal to
the higher of (i) the Federal Funds Effective Rate most recently determined by
the Administrative Agent plus 1/2% per annum and (ii) the Corporate Base Rate.
Changes in the rate of interest on each Floating Rate Advance will take effect
simultaneously with each change in the Alternate Base Rate. The Administrative
Page 2
<PAGE>
Agent will give notice promptly to the Borrowers and the Lenders of changes in
the Alternate Base Rate, provided, however, that the Administrative Agent's
failure to give any such notice will not affect any Borrower's obligation to pay
interest to the Lenders on Floating Rate Advances at the then effective
Alternate Base Rate.
"Alternative Currency" means British Sterling, German Marks,
French Francs, Japanese Yen, Dutch Guilders, Swedish Kronor and any other
currency (other than Dollars) which is freely transferable and convertible into
Dollars in the London interbank market which has been expressly approved in
writing as an Alternative Currency for purposes hereof by all Lenders.
"Annual Report" is defined in Section 5.4.
"Applicable Margin" means the respective margin percentages
for each Committed Fixed Rate Advance determined in accordance with the Pricing
Schedule.
"Approved Multiple" means (a) in respect of any borrowing or
prepayment of a Floating Rate Advance, $1,000,000 or any larger integral
multiple of $1,000,000, (b) in the case of any other Advance denominated in
Dollars, $5,000,000 or any larger integral multiple of $1,000,000 and (c) in the
case of any Advance denominated in an Alternative Currency, such multiples of
such currency as the Administrative Agent deems appropriate and reasonably
comparable to a $3,000,000 minimum Dollar Amount.
"Article" means an article of this Agreement unless another
document is specifically referenced.
"Assessment Rate" means, for any CD Interest Period, the net
assessment rate per annum payable to the Federal Deposit Insurance Corporation
(or any successor) for the insurance of domestic deposits of the Administrative
Agent during the calendar year in which the first day of such CD Interest Period
falls, as estimated by the Administrative Agent on the first day of such CD
Interest Period.
"Board of Directors" prior to the Effective Date of the
Reorganization means the Board of Directors of the Corporate General Partner and
on or after the Effective Date of the Reorganization means the Board of
Directors of the Company.
Page 3
<PAGE>
"Borrower" means any Obligor in its capacity as borrower of a
Loan or Advance hereunder, and "Borrowers" means all such borrowers. References
to "the Borrower" in relation to any Loan or Advance are to the Borrower which
has borrowed or which proposes to borrow such Loan or Advance.
"Borrowing Date" means a date on which an Advance is made or to be
made hereunder.
"British Sterling" means the lawful currency of the United Kingdom.
"Business Day" means (i) with respect to any borrowing,
payment or rate selection of Eurocurrency Committed Advances or Eurocurrency Bid
Rate Advances, a day other than Saturday or Sunday on which banks are open for
business in Chicago and New York City and on which dealings in the relevant
currency are carried on in the London interbank market and, where funds are to
be paid or made available in an Alternative Currency, on which commercial banks
are open for domestic and international business in the place where such funds
are paid or made available and (ii) for all other purposes, a day other than
Saturday or Sunday on which banks are open for business in Chicago and New York
City.
"CD Interest Period" means, with respect to a Fixed CD Rate
Advance or a Fixed CD Rate Loan, a period of 30, 60, 90 or 180 days commencing
on a Business Day selected by the Borrower pursuant to this Agreement. If such
CD Interest Period would end on a day which is not a Business Day, such CD
Interest Period shall end on the next succeeding Business Day.
"Change of Control" shall be deemed to have occurred:
(a) prior to the Effective Date of the Reorganization, on the date on which:
(i) the Corporate General Partner ceases to have a Controlling General
Partnership Interest in both the Company and the Parent; or
(ii) Voting Stock of the Corporate General Partner sufficient to
elect at least a majority of its board of directors ceases to be
subject to the voting trust arrangement described in the Form 10-K; or
(iii) Continuing Directors cease to constitute a majority of the
board of directors of the Corporate General Partner; or
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(iv) an Acquiring Person shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of more than 30% (or if such Acquiring Person is WMX
Technologies, Inc. or one of its subsidiaries, 40%) of the Limited
Partnership Interests in the Company or the Parent; and
(b) on and after the Effective Date of the Reorganization,
on the date on which:
(i) Continuing Directors cease to constitute a majority of the
board of directors of the Surviving Parent or, if the Surviving Parent
and the Surviving Company shall have merged or consolidated, of the
Surviving Company; or
(ii) the Surviving Company shall cease to be a subsidiary of the
Surviving Parent (except by reason of a merger or consolidation between
them or the liquidation of the Surviving Company into the Surviving
Parent); or
(iii) an Acquiring Person shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 under the Securities Exchange Act of
1934, as amended) of more than 30% (or if such Acquiring Person is WMX
Technologies, Inc. or one of its subsidiaries, 40%) of the Voting Stock
in the Surviving Company or the Surviving Parent.
For avoidance of doubt, the Reorganization and related transactions described in
the Proxy Statement do not in and of themselves give rise to a Change of
Control.
"Commitment" means, for each Lender, the obligation of the
Lender to make Loans to the Borrowers not exceeding the amount set forth
opposite its signature below or as set forth in an applicable Assignment
Agreement substantially in the form of Exhibit "E" hereto received by the
Administrative Agent under the terms of Section 12.3, as such amount may be
modified from time to time pursuant to the terms of this Agreement.
"Committed Advance" means a borrowing hereunder consisting of
the aggregate amount of the several Committed Loans made by the Lenders to the
Borrower at the same time, of the same Type and, in the case of Fixed Rate
Advances, for the same Interest Period.
"Committed Borrowing Notice" is defined in Section 2.2.3.
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"Committed Fixed Rate Advance" means a Fixed CD Rate Advance or a
Eurocurrency Committed Advance.
"Committed Loan" means a Loan made by a Lender pursuant to
Section 2.2.
"Company" means The ServiceMaster Company Limited Partnership,
a Delaware limited partnership and its permitted successors and assigns
including the Surviving Company following the assumption of the obligations of
the Company hereunder pursuant to Section 6.14.
"Competitive Bid Advance" means a borrowing hereunder
consisting of the aggregate amount of the several Competitive Bid Loans made by
some or all of the Lenders to the Borrower at the same time, at the same
interest basis, and for the same Interest Period.
"Competitive Bid Borrowing Notice" is defined in Section 2.3.4.
"Competitive Bid Loan" means a Eurocurrency Bid Rate Loan or
an Absolute Rate Loan, as the case may be.
"Competitive Bid Margin" means the margin above or below the
applicable Eurocurrency Base Rate offered for a Eurocurrency Bid Rate Loan,
expressed as a percentage (rounded to the nearest 1/100 of 1%) to be added or
subtracted from such Eurocurrency Base Rate.
"Competitive Bid Quote" means a Competitive Bid Quote
substantially in the form of Exhibit "D" hereto completed and delivered by a
Lender to the Borrower in accordance with Section 2.3.3.
"Competitive Bid Quote Request" means a Competitive Bid Quote
Request substantially in the form of Exhibit "C" hereto completed and delivered
by the Borrower in accordance with Section 2.3.3.
"Consolidated Debt" means at any date, without duplication,
the Debt of the Company and its Consolidated Subsidiaries, determined on a
consolidated basis as of such date.
"Consolidated EBIT" means, for any fiscal period, without
duplication, Consolidated Net Income for such period plus, to the extent
deducted in determining Consolidated Net Income for such period, the aggregate
amount of (i) Consolidated Interest Expense and (ii) income tax expense.
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"Consolidated EBITDA" means, for any fiscal period, without
duplication, Consolidated EBIT for such period plus to the extent deducted in
determining Consolidated Net Income for such period, the aggregate amount of
depreciation and amortization. In the event of a purchase by the Company or a
Consolidated Subsidiary of all or any portion of the minority interest in SMCS,
Consolidated EBITDA for any period of four consecutive fiscal quarters ending on
or after the date of such purchase and prior to the first anniversary thereof
shall be determined as if such purchase had been made on the first day of such
four-quarter period.
"Consolidated Interest Expense" means, for any fiscal period,
without duplication, the interest expense of the Company and its Consolidated
Subsidiaries plus dividends accrued on preferred stock of the Company or a
Consolidated Subsidiary which constitutes Debt, all determined on a consolidated
basis for such period.
"Consolidated Net Income" means, for any fiscal period,
without duplication, the net income of the Company and its Consolidated
Subsidiaries (before dividends on preferred stock of the Company) determined on
a consolidated basis for such period, exclusive of the effect of (i) any
extraordinary or other unusual gain and (ii) any extraordinary or other unusual
losses, write-offs or write-downs to the extent that such losses, write-offs or
write-downs do not represent a cash expenditure in such period and will not
represent a cash expenditure in any future period.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity which would be consolidated with the Company in its consolidated
financial statements if such statements were prepared as of such date in
accordance with GAAP.
"Continuing Director" means (i) a director of the Corporate
General Partner at the date of this Agreement and (ii) an individual who after
the date of this Agreement becomes a director of the Corporate General Partner
(including any successor Corporate General Partner) or, after the Effective Date
of the Reorganization, of the Company and/or the Parent (x) in connection with
the death, disability or retirement of an incumbent director, or otherwise in
the ordinary course of the affairs of the corporation and (y) whose election was
effected or recommended by a majority of the Continuing Directors then in office
(or by a nominating committee appointed by such a majority of Continuing
Directors). For avoidance of doubt, the foregoing definition contemplates that
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the same individuals would successively constitute the Continuing Directors of
the Corporate General Partner, any successor Corporate General Partner and, upon
consummation of the Reorganization, the Parent and/or the Company, subject to
normal turnover.
"Controlling General Partner Interest" means a General
Partnership Interest which permits the owner of such General Partnership
Interest to direct the management of a general partnership or a limited
partnership.
"Conversion/Continuation Notice" is defined in Section 2.2.4.
"Corporate Base Rate" means a rate per annum equal to the
corporate base rate of interest announced by the Administrative Agent from time
to time, changing when and as said corporate base rate changes.
"Corporate General Partner" means ServiceMaster Management
Corporation, a Delaware corporation, and its successors.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable or accrued expenses arising
in the ordinary course of business, (iv) all obligations of such Person as
lessee which are capitalized in accordance with GAAP, (v) all obligations
(absolute or contingent) of such Person to reimburse any bank or other Person
issuing a letter of credit or similar instrument, (vi) any preferred stock
issued by such Person which is redeemable otherwise than at the sole option of
such Person for consideration other than Equity Interests in such Person, in the
Company or in the Parent, (vii) all Debt secured by a Lien on any asset of such
Person, whether or not such Debt is otherwise an obligation of such Person, and
(viii) all Guaranties by such Person of Debt of others.
"Debt Limit" means, at any date, the product of (a)
Consolidated EBITDA for the period of four consecutive fiscal quarters ending at
the date of the balance sheet most recently delivered (or required to be
delivered) on or prior to such date pursuant to Section 5.5 or 6.1 and (b) the
applicable Leverage Factor.
"Default" means an event described in Article VII.
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"Derivatives Obligations" of any Person means all obligations
of such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
Any determination of the amount of Derivatives Obligations owing at any time
shall be calculated net of offsets available at such time under any applicable
netting agreement.
"Disclosure Documents" is defined in Section 5.4.
"Documentation Agent" means Morgan, in its capacity as the
contractual representative for all of the Banks for purposes of this Agreement,
as designated and appointed in accordance with Article X, any successor thereto
as provided herein.
"Dollar Amount" means (i) in relation to any Advance
denominated in Dollars, the aggregate principal amount thereof and (ii) in
relation to any Advance denominated in an Alternative Currency, the equivalent
amount thereof in Dollars determined by the Administrative Agent pursuant to
Section 2.5.13. The Dollar Amount of any Advance denominated in an Alternative
Currency at any date is the Dollar Amount thereof determined as of such date or,
if no Dollar Amount is determined as of such date in accordance with Section
2.5.13, then determined as of the then most recent date for which such a
determination has been made. Each Advance denominated in an Alternative Currency
shall be deemed a utilization of the Commitments in an amount equal to the
Dollar Amount thereof.
"Dollars" and the sign "$" mean the lawful currency of the
United States of America.
"D&P" means Duff & Phelps, Inc.
"Dutch Gilders" means the lawful currency of The Netherlands.
"Effective Date of the Reorganization" means the date upon
which the Reorganization shall be effective.
"Election to Participate" means an Election to Participate
substantially in the form of Exhibit "G" hereto.
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"Election to Terminate" means an Election to Terminate
substantially in the form of Exhibit "H" hereto.
"Eligible Subsidiary" means any Subsidiary of the Company as
to which an Election to Participate shall have been delivered to the Agents and
as to which an Election to Terminate shall not have been delivered to the
Agents. Each such Election to Participate and Election to Terminate shall be
duly executed on behalf of such Subsidiary and the Company. The delivery of an
Election to Terminate with respect to an Eligible Subsidiary shall not affect
any obligation of such Eligible Subsidiary theretofore incurred. The
Administrative Agent shall promptly give notice to the Lenders of the receipt of
any Election to Participate or Election to Terminate.
"Equity Interest" means, in the case of a corporation, stock
of any class, and in the case of a partnership or a limited partnership, a
General Partnership Interest or Limited Partnership Interest, but excluding
preferred stock which constitutes Debt.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Eurocurrency Auction" means a solicitation of Competitive Bid
Quotes setting forth Competitive Bid Margins pursuant to Section 2.3.
"Eurocurrency Base Rate" means, with respect to a Eurocurrency
Committed Advance, a Eurocurrency Committed Loan, a Eurocurrency Bid Rate
Advance or a Eurocurrency Bid Rate Loan for the relevant Eurocurrency Interest
Period, the average of the respective rates per annum at which deposits in
Dollars or, in the case of any Eurocurrency Loan denominated in an Alternative
Currency, the relevant Alternative Currency are offered to each of the Reference
Banks in the London interbank market at approximately 11:00 a.m. (London time)
two Business Days before the first day of such Interest Period in an amount
approximately equal to the principal amount of the Loan of such Reference Bank
to which such Interest Period is to apply and for a period of time comparable to
such Interest Period (or, in the case of a Competitive Bid Advance, the amount
which would have been the amount of the Loan of such Reference Bank if such
Advance were a Committed Advance).
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"Eurocurrency Bid Rate" means, with respect to a Loan made by
a given Lender for the relevant Eurocurrency Interest Period, the sum of (i) the
Eurocurrency Base Rate and (ii) the Competitive Bid Margin offered by such
Lender and accepted by the Borrower pursuant to Section 2.3.4(i).
"Eurocurrency Bid Rate Advance" means a Competitive Bid Advance which
bears interest at a Eurocurrency Bid Rate.
"Eurocurrency Bid Rate Loan" means a Competitive Bid Loan which bears
interest at a Eurocurrency Bid Rate.
"Eurocurrency Committed Advance" means an Advance which bears
interest at a Eurocurrency Rate requested by the Borrower pursuant to Section
2.2.
"Eurocurrency Committed Loan" means a Loan which bears
interest at a Eurocurrency Rate requested by the Borrower pursuant to Section
2.2.
"Eurocurrency Interest Period" means, with respect to a
Eurocurrency Committed Advance, a Eurocurrency Committed Loan, a Eurocurrency
Bid Rate Advance or a Eurocurrency Bid Rate Loan, a period of one, two, three or
six months commencing on a Business Day selected by the Borrower pursuant to
this Agreement. Such Eurocurrency Interest Period shall end on the day which
corresponds numerically to such date of commencement one, two, three or six
months thereafter, provided, however, that any such period which begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such period)
shall end on the last Business Day of a calendar month. If a Eurocurrency
Interest Period would otherwise end on a day which is not a Business Day, such
Eurocurrency Interest Period shall end on the next succeeding Business Day,
provided, however, that if such next succeeding Business Day falls in a new
month, such Eurocurrency Interest Period shall end on the immediately preceding
Business Day.
"Eurocurrency Loan" means a Eurocurrency Committed Loan or a
Eurocurrency Bid Rate Loan, as applicable.
"Eurocurrency Rate" means, with respect to a Eurocurrency
Committed Advance or a Eurocurrency Committed Loan for the relevant Eurocurrency
Interest Period, the sum of (a) the Eurocurrency Base Rate applicable to such
Eurocurrency Interest Period plus (b) the Applicable Margin.
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"Federal Funds Effective Rate" means, for any period, a
fluctuating interest rate per annum equal for each day during such period to (i)
the weighted average of the rates on overnight federal funds transactions with
members of the Federal Reserve System arranged by federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the preceding
Business Day) by the Federal Reserve Bank of New York; or (ii) if such rate is
not so published for any day which is a Business Day, the average of the
quotations at approximately 10:00 a.m. (Chicago time) for such day on such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by the Administrative Agent.
"Financial Officers" means with respect to the Company and any
Eligible Subsidiary, prior to the Effective Date of the Reorganization, the
Chief Financial Officer or Treasurer of the Corporate General Partner and
subsequent to the Effective Date of the Reorganization, the Chief Financial
Officer or Treasurer of the Company.
"First Chicago" means The First National Bank of Chicago in
its individual capacity, and its successors and assigns (by merger or
otherwise).
"5-Year Agreement" means the 5-Year Credit Agreement dated as
of April 1, 1997 among the Company, the Lenders listed therein, First Chicago,
as Administrative Agent and Morgan, as Documentation Agent.
"Fixed CD Base Rate" means, with respect to a Fixed CD Rate
Advance or a Fixed CD Rate Loan for the relevant CD Interest Period, the rate
determined by the Administrative Agent to be the arithmetic average of the rates
reported to the Administrative Agent as the prevailing bid rate for the purchase
at face value at or before 10:00 a.m. (Chicago time) on the first day of such CD
Interest Period by three certificate of deposit dealers in New York or Chicago
of recognized standing selected by the Administrative Agent of certificates of
deposit of each Reference Bank in the approximate amount of such Reference
Bank's relevant Fixed CD Rate Loan and having a maturity approximately equal to
such CD Interest Period.
"Fixed CD Rate" means, with respect to a Fixed CD Rate Advance
or Fixed CD Rate Loan for the relevant CD Interest Period, a rate per annum
equal to the sum of (i) the quotient of (a) the Fixed CD Base Rate applicable to
that CD Interest Period, divided by (b) one minus the Reserve Requirement
(expressed as a decimal) applicable to that CD Interest Period, plus (ii) the
Assessment Rate applicable to that CD Interest Period, plus (iii) the Applicable
Margin.
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"Fixed CD Rate Advance" means an Advance which bears interest
at a Fixed CD Rate.
"Fixed CD Rate Loan" means a Loan which bears interest at a
Fixed CD Rate.
"Fixed Rate" means the Fixed CD Rate, the Eurocurrency Rate, the
Eurocurrency Bid Rate or the Absolute Rate.
"Fixed Rate Advance" means an Advance which bears interest at
a Fixed Rate.
"Fixed Rate Loan" means a Loan which bears interest at a Fixed
Rate.
"Floating Rate" means, for any day, a rate per annum equal to the
Alternate Base Rate.
"Floating Rate Advance" means an Advance which bears interest
at the Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the
Floating Rate.
"Form 10-K" is defined in Section 5.4.
"French Francs" means the lawful currency of France.
"GAAP" means generally accepted accounting principles in
effect from time to time in the United States of America.
"General Partnership Interest" means the interest of a general
partner in a general partnership and the interest of a general partner in a
limited partnership.
"German Marks" means the lawful currency of Germany.
"Guaranties" by any Person means all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Debt of any other Person (the "primary obligor") in any manner, whether directly
or indirectly, including, without limitation, all obligations incurred through
an agreement, contingent or otherwise, by such Person: (i) to purchase such Debt
or any property or assets constituting security therefor, (ii) to advance or
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supply funds (x) for the purchase or payment of such Debt, (y) to maintain
income, working capital or other balance sheet condition or otherwise to advance
or make available funds for the purchase or payment of such Debt, or (iii) to
lease property or to purchase Securities or other property or services primarily
for the purpose of assuring the owner of such Debt of the ability of the primary
obligor to make payment of the Debt, or (iv) otherwise to assure the owner of
the Debt of the primary obligor against loss in respect thereof. For the
purposes of all computations made under this Agreement, a Guaranty in respect of
any Debt shall be deemed to be Debt equal to the principal amount of such Debt
which has been guaranteed.
"Interest Period" means a CD Interest Period, a Eurocurrency
Interest Period or an Absolute Rate Interest Period.
"Japanese Yen" means the lawful currency of Japan.
"Lenders" means the financial institutions listed on the
signature pages of this Agreement and their respective successors and assigns.
"Lending Installation" means any office, branch, subsidiary or
affiliate of any Lender or the Administrative Agent.
"Leverage Factor" means, with respect to any period of four
consecutive fiscal quarters, if such period ends (a) prior to the fiscal quarter
in which the Effective Date of the Reorganization occurs, 4.25, (b) with the
fiscal quarter in which the Effective Date of the Reorganization occurs, 4.25,
(c) with the fiscal quarter immediately following the fiscal quarter in which
the Effective Date of the Reorganization occurs, 4.05, (d) with the second
fiscal quarter following the fiscal quarter in which the Effective Date of
Reorganization occurs, 3.825 and (e) with any fiscal quarter thereafter, 3.6.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purpose of this Agreement, the Company or any Subsidiary shall be
deemed to own subject to a Lien (i) any asset that it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement or other title retention agreement relating to such asset or any
capital lease or (ii) any account receivable transferred by it with recourse for
collectibility (including any such transfer subject to a holdback or similar
arrangement which effectively imposes the risk of collectibility upon the
transferor).
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"Limited Partnership Interest" means the interest of a limited
partner in a limited partnership.
"Loan" means, with respect to a Lender, such Lender's portion,
if any, of any Advance.
"Loan Documents" means this Agreement, the Notes and each
Election to Participate and Election to Terminate.
"Material Adverse Effect" means (i) a material adverse effect
on the properties, business, operations or financial condition of the Company
and its Subsidiaries taken as a whole, (ii) a material adverse effect on the
ability of the Company to perform its obligations under the Loan Documents or
(iii) any material impairment of the rights and remedies of the Agents and the
Lenders against the Obligors under the Loan Documents.
"Material Commitment" means a legally binding commitment by
one or more banks or other financial institutions to extend credit to the
Company and/or its Subsidiaries in an aggregate amount of $25,000,000 or more
pursuant to a written agreement signed by the Company or a Subsidiary.
"Material Subsidiary" means (i) any Eligible Subsidiary and
(ii) any other Subsidiary which has consolidated assets or consolidated annual
revenues of more than $10,000,000.
"Maturity Date" means the Termination Date; provided that if
the Company shall have given notice to the Administrative Agent not less than 30
days prior to the Termination Date electing that this proviso be applicable,
then the Maturity Date in respect of all Committed Advances denominated in
Dollars (but not in respect of any Committed Advances denominated in an
Alternative Currency or any Competitive Bid Advances) shall be the first
anniversary of the Termination Date (or if such day is not a Business Day, the
next preceding Business Day). The Administrative Agent shall promptly notify
each Lender of any such notice received by it.
"Moody's" means Moody's Investors Service, Inc.
"Morgan" means Morgan Guaranty Trust Company of New York in
its individual capacity, and its successors and assigns.
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"Note" means a promissory note in substantially the form of
Exhibit "A" hereto, duly executed and delivered to the Documentation Agent by
the Borrower for the account of a Lender and payable to the order of such
Lender, including any amendment, modification, renewal or replacement of such
promissory note.
"Obligations" means all unpaid principal of and accrued and
unpaid interest on the Notes, all accrued and unpaid fees and all other
reimbursements, indemnities or other obligations of the Obligors to any Lender
or Agent arising under the Loan Documents.
"Obligor" means the Company or any Eligible Subsidiary, and
"Obligors" means all of them.
"Parent" means The ServiceMaster Limited Partnership, a
Delaware limited partnership, and its successors, including any corporate
successor resulting from the Reorganization.
"Partnership Interest" means Limited Partnership Interests and
General Partnership Interests.
"Payment Date" means the fifteenth day of each March, June,
September, and December.
"Person" means any corporation, limited liability company,
natural person, firm, joint venture, partnership, trust, unincorporated
organization, enterprise, government or any department or agency of any
government.
"Plans" is defined in Section 5.11.
"Pricing Level" is defined in the Pricing Schedule.
"Pricing Schedule" means the Schedule hereto entitled "Pricing
Schedule".
"Proxy Statement" means the Proxy Statement/Prospectus dated
December 11, 1991 of the Parent.
"Reference Banks" means Bank of America NT & SA, NationsBank,
N.A., First Chicago and Morgan. If any such Reference Bank ceases to be a
Lender, the Company and the Agents shall designate another Lender as a
replacement Reference Bank.
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"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System from time to time in effect and shall include any
successor or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"Regulations U and X" means Regulations U and X of the Board
of Governors of the Federal Reserve System from time to time in effect and shall
include any successor or other regulations or official interpretations of said
Board of Governors relating to the extension of credit by banks for the purpose
of purchasing or carrying margin stock applicable to member banks of the Federal
Reserve System.
"Reorganization" means the change in the organizational
structure of the ServiceMaster enterprise substantially as described in the
Proxy Statement.
"Replacement Lender" is defined in Section 3.7.
"Required Lenders" means Lenders in the aggregate having at
least 66-2/3% of the Aggregate Commitment or, if the Aggregate Commitment has
been terminated, Lenders in the aggregate holding at least 66-2/3% of the
aggregate unpaid principal amount of the outstanding Advances.
"Reserve Requirement" means, with respect to a Eurocurrency
Interest Period or a CD Interest Period, the maximum aggregate reserve
requirement (including all basic, supplemental, marginal and other reserves)
which is imposed under Regulation D on new non-personal time deposits of
$100,000 or more with a maturity equal to that of the CD Interest Period (in the
case of Fixed CD Rate Advances or Fixed CD Rate Loans) or on Eurocurrency
liabilities (in the case of Eurocurrency Committed Advances or Eurocurrency
Committed Loans). The Reserve Requirement shall be adjusted automatically on and
as of the effective date of any change in the applicable reserve requirement.
"Restricted Payments" means, without duplication:
(a) the declaration or payment by the Company of any
dividends or distributions, either in cash or property, on any
Equity Interest of the Company (except dividends or other
distributions to the extent payable solely in Partnership
Interests of the Company or capital stock of the Company);
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(b) the purchase, acquisition, redemption or
retirement by the Company directly or indirectly, or through
any Subsidiary, of any Equity Interest of the Company or the
Parent or any warrants, rights or options to purchase or
acquire any Equity Interest of the Company or the Parent; and
(c) to the extent not included in clause (a) or (b)
above, any other payment or distribution by the Company,
either directly or indirectly or through any Subsidiary, in
respect of any Equity Interest of the Company or the Parent.
"SMCS" means ServiceMaster Consumer Services Limited
Partnership, a Delaware limited partnership.
"SMMS" means ServiceMaster Management Services Limited
Partnership, a Delaware limited partnership.
"Section" means a numbered section of this Agreement, unless
another document is specifically referenced.
"Security" shall have the same meaning as in Section (2)(1) of
the Securities Act of 1933, as amended.
"S&P" means Standard & Poor's Ratings Group.
The term "subsidiary" means, as to any particular parent
business entity, any business entity of which such parent business entity and/or
one or more business entities which are themselves subsidiaries of such parent
business entity, (i) in the case of any corporation, own more than 50% of the
Voting Stock, or (ii) in the case of any partnership other than SMCS and SMMS,
own a Controlling General Partnership Interest and, if any such partnership is a
limited partnership, own more than 50% of the Limited Partnership Interest;
provided, however, SMCS and SMMS shall be deemed subsidiaries of the Company so
long as (i) prior to the Effective Date of the Reorganization the Controlling
General Partnership Interest shall be owned by the Corporate General Partner and
(ii) the Company owns more than 50% of the Partnership Interests therein.
The term "Subsidiary" means a subsidiary of the Company.
"Surviving Company" means ServiceMaster Corporation, a
Delaware corporation, which as part of the Reorganization, shall be a
wholly-owned Subsidiary of the Surviving Parent, and its successors. As part of
the Reorganization the Parent and the Company will be liquidated into the
Surviving Company and the Surviving Company will assume the obligations of the
Company under the Loan Documents pursuant to Section 6.14.
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"Surviving Parent" means ServiceMaster Incorporated, a
Delaware corporation, which shall own 100% of the outstanding Voting Stock of
the Company following the consummation of the Reorganization, and its
successors. The Surviving Company and the Surviving Parent may merge or
consolidate as part of or following the Reorganization, in which case the
resulting or surviving entity shall be the Surviving Company for purposes of
this Agreement, or the Surviving Company may liquidate into the Surviving
Parent, in which case the Surviving Parent shall become and be the Surviving
Company, all in accordance with Section 6.14.
"Swedish Kronor" means the lawful currency of the Kingdom of
Sweden.
"Termination Date" means March 31, 1998, unless the
Commitments are earlier terminated pursuant to the terms hereof.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Loan or Advance, its nature
as a Floating Rate Advance or Loan, Fixed CD Rate Advance or Loan, Eurocurrency
Committed Advance or Loan in a particular currency, Eurocurrency Bid Rate
Advance or Loan in a particular currency or Absolute Rate Advance or Loan.
"Unmatured Default" means an event which, but for the lapse of
time or the giving of notice, or both, would constitute a Default.
"Voting Equity Interest" means Voting Stock and General
Partnership Interests.
"Voting Stock" means Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
"WMX Repurchase" is defined in Section 6.2.
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The foregoing definitions shall be equally applicable to both
the singular and plural forms of the defined terms.
1.2. Accounting Terms and Determinations. Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder shall be made, and all financial statements
required to be delivered hereunder shall be prepared in accordance with GAAP,
applied on a basis consistent (except for changes concurred in by the Parent's
independent public accountants) with the most recent audited consolidated
financial statements of the Parent and its Consolidated Subsidiaries delivered
to the Banks; provided that, if the Company notifies the Documentation Agent
that the Company wishes to amend any covenant in Article VI to eliminate the
fact of any change in GAAP on the operation of such covenant (or if the
Documentation Agent notifies the Company that the Required Lenders wish to amend
Article VI for such purpose), then the Company's compliance with such covenant
shall be determined on the basis of GAAP in effect immediately before the
relevant change in GAAP became effective, until either such notice is withdrawn
or such covenant is amended in a manner satisfactory to the Company and the
Required Lenders.
1.3. Rules of Construction. Any reference contained in any of
the Loan Documents to "knowledge" or "awareness" of the Company or any Eligible
Subsidiary shall be deemed limited to the "knowledge" or "awareness" of one or
more Financial Officers.
1.4. Rounding. All determinations of rates per annum under
this Agreement shall be rounded to the nearest 1/100th of 1% (with 0.0050% being
rounded upward to 0.01%).
ARTICLE II
THE FACILITY
2.1. The Facility.
2.1.1. Description of Facility. The Lenders grant to the
Borrowers a revolving credit facility pursuant to which, and upon the terms and
subject to the conditions herein set out:
(i) each Lender severally agrees to make Committed Loans in
Dollars or (in the case of Eurocurrency Committed Loans) in Alternative
Currencies to the Borrowers in accordance with Section 2.2;
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(ii) each Lender may, in its sole discretion, make bids to make
Competitive Bid Loans in Dollars or (in the case of Eurocurrency Bid
Rate Loans) in Alternative Currencies to the Borrowers in accordance
with Section 2.3; and
(iii) in no event may the sum of the aggregate Dollar Amount of all
outstanding Advances to all Borrowers (including both the Committed
Advances and the Competitive Bid Advances) exceed the Aggregate
Commitment.
2.1.2. Availability of Facility; Required Payments. Subject to
the terms and conditions set forth in this Agreement, the facility is available
from the date of this Agreement to the Termination Date, and the Borrowers may
borrow, repay and reborrow at any time prior to the Termination Date. The
Commitments to lend hereunder shall expire at the close of business on the
Termination Date. All outstanding Advances and all other unpaid Obligations
shall be paid in full on the Maturity Date.
2.2. Committed Advances.
2.2.1. Committed Advances. From and including the date of this
Agreement and to and including the Termination Date, each Lender severally
agrees, on the terms and conditions set forth in this Agreement, to make
Committed Loans to the Borrowers from time to time in Dollar Amounts not to
exceed in the aggregate at any one time outstanding to all Borrowers the amount
of such Lender's Commitment. Each Committed Advance hereunder shall consist of
borrowings made from the several Lenders ratably in proportion to the ratio that
their respective Commitments bear to the Aggregate Commitment. The Committed
Advances shall be evidenced by the Notes and shall be repaid as provided by the
terms of Section 2.1.2.
2.2.2. Types of Committed Advances. The Committed Advances may
be Floating Rate Advances, Fixed CD Rate Advances or Eurocurrency Committed
Advances, or a combination thereof, selected by the Borrower in accordance with
Sections 2.2.3 and 2.2.4.
2.2.3. Method of Selecting Types and Interest Periods for New
Committed Advances. The Borrower shall select the Type of Advance and, in the
case of each Fixed Rate Advance, the Interest Period applicable to each
Committed Advance from time to time. The Borrower shall give the Administrative
Agent notice (a "Committed Borrowing Notice") not later than 10:00 a.m. (Chicago
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time) on the Borrowing Date of each Floating Rate Advance, two Business Days
before the Borrowing Date of each Fixed CD Rate Advance, three Business Days
before the Borrowing Date for each Eurocurrency Committed Advance denominated in
Dollars and five Business Days before the Borrowing Date for each Eurocurrency
Committed Advance denominated in an Alternative Currency. A Committed Borrowing
Notice shall specify:
(i) the Borrowing Date, which shall be a Business Day, of such
Committed Advance;
(ii) the aggregate principal amount of such Committed Advance;
(iii) the Type of Committed Advance selected (including, in the case
of a Eurocurrency Committed Advance, the currency in which such Advance
is to be denominated; and
(iv) in the case of each Committed Fixed Rate Advance, the Interest
Period applicable thereto (which may not end after the Maturity Date).
Subject to Section 3.3, each Committed Borrowing Notice shall be irrevocable.
2.2.4. Conversion and Continuation of Outstanding Committed
Advances. Floating Rate Advances shall continue as Floating Rate Advances unless
and until such Floating Rate Advances are either prepaid in accordance with
Section 2.5.3 or converted into Committed Fixed Rate Advances denominated in
Dollars. Unless sooner prepaid in accordance with Section 2.5.3 or converted in
accordance with this Section, each Committed Fixed Rate Advance of any Type
shall continue as a Fixed Rate Advance of such Type until the end of the then
applicable Interest Period therefor, at which time (x) if such Fixed Rate
Advance is a Committed Fixed Rate Advance denominated in Dollars such Committed
Fixed Rate Advance shall be automatically converted into a Floating Rate Advance
unless the Borrower shall have given the Administrative Agent a timely notice of
prepayment thereof pursuant to Section 2.5.3 or a timely Conversion/Continuation
Notice requesting that, at the end of such Interest Period, such Committed Fixed
Rate Advance either continue as a Committed Fixed Rate Advance of such Type for
the same or another Interest Period or be converted into an Advance of another
Type denominated in Dollars and (y) subject to Section 2.5.13(b), if such Fixed
Rate Advance is a Committed Fixed Rate Advance denominated in an Alternative
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Currency, such Committed Fixed Rate Advance shall be automatically continued as
a Committed Fixed Rate Advance in the same Alternative Currency for an
additional Interest Period of one month, unless the Borrower shall have given
the Administrative Agent a timely notice of prepayment thereof pursuant to
Section 2.5.3 or a timely Continuation Notice requesting that at the end of such
Interest Period such Committed Fixed Rate Advance continue as a Committed Fixed
Rate Advance for another Interest Period. If the Administrative Agent does not
receive such timely notice of prepayment or Continuation Notice, it shall notify
the Lenders to such effect on the date such notice is due. Subject to the terms
of Section 2.5.2, the Borrower may elect from time to time to convert all or any
part of a Committed Advance of any Type denominated in Dollars into any other
Type or Types of Committed Advances denominated in Dollars; provided that any
conversion of any Committed Fixed Rate Advance on any day other than the last
day of the Interest Period applicable thereto shall be subject to Section 3.4.
The Borrower shall give the Administrative Agent notice (a
"Conversion/Continuation Notice") of each conversion of a Committed Advance or
continuation of a Committed Fixed Rate Advance not later than 10:00 a.m.
(Chicago time) on the date of, in the case of a conversion into a Floating Rate
Advance, or two Business Days, in the case of a conversion into or continuation
of a Fixed CD Rate Advance, three Business Days, in the case of a conversion
into or continuation of a Eurocurrency Committed Advance denominated in Dollars
or five Business Days, in the case of a continuation of a Eurocurrency Committed
Advance denominated in an Alternative Currency, prior to the date of, the
requested conversion or continuation, specifying:
(i) the requested date, which shall be a Business Day, of such
conversion or continuation;
(ii) the aggregate amount and Type of the Committed Advance which is
to be converted or continued; and
(iii) the amount and Type(s) of Committed Advance(s) into which such
Committed Advance is to be converted or continued and, in the case of a
conversion into or continuation of a Committed Fixed Rate Advance, the
duration of the Interest Period applicable thereto (which may not end
after the Maturity Date).
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Subject to Section 3.3, each Conversion/Continuation Notice shall be
irrevocable. Changes in the currency in which an Advance is denominated may not
be effected by a conversion pursuant to this Section 2.2.4.
2.3. Competitive Bid Advances.
2.3.1. Competitive Bid Option; Repayment of Competitive Bid
Advances. In addition to Committed Advances pursuant to Section 2.2, but subject
to the terms and conditions set forth in this Agreement (including, without
limitation, the limitation set forth in Section 2.1.1(iii) as to the maximum
aggregate principal amount of all outstanding Advances hereunder and the
limitation set forth in Section 4.3(iii) as to the minimum credit standing for
Competitive Bid Advances), any Borrower may, as set forth in this Section 2.3,
request the Lenders, prior to the Termination Date, to make offers to make
Competitive Bid Advances to such Borrower. Each Lender may, but shall have no
obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section
2.3. Competitive Bid Advances shall be evidenced by the Notes. Each Competitive
Bid Advance shall be repaid in full by the Borrower on the last day of the
Interest Period applicable thereto.
2.3.2. Competitive Bid Quote Request. When the Borrower wishes
to request offers to make Competitive Bid Loans under Section 2.3, it shall
transmit to each Lender by telex or telecopy a Competitive Bid Quote Request so
as to be received no later than (i) 10:00 a.m. (Chicago time) at least five
Business Days prior to the Borrowing Date proposed therein, in the case of a
Eurocurrency Auction denominated in Dollars, (ii) 10:00 a.m. (Chicago time) at
least seven Business Days prior to the Borrowing Date, in the case of a
Eurocurrency Auction denominated in an Alternative Currency or (iii) 10:00 a.m.
(Chicago time) at least one Business Day prior to the Borrowing Date proposed
therein, in the case of an Absolute Rate Auction specifying:
(a) the proposed Borrowing Date, which shall be a Business Day,
for the proposed Competitive Bid Advance;
(b) the aggregate principal amount of such Competitive Bid Advance;
(c) whether the Competitive Bid Quotes requested are to set forth
a Competitive Bid Margin or an Absolute Rate, or both;
(d) in the case of a Eurocurrency Auction, the currency in which
the Loans are to be denominated; and
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(e) the Interest Period applicable thereto (which may not end
after the Termination Date).
The Borrower may request offers to make Competitive Bid Loans for more than one
Interest Period and for a Eurocurrency Auction and an Absolute Rate Auction in a
single Competitive Bid Quote Request. No Competitive Bid Quote Request shall be
given within 3 Business Days of any other Competitive Bid Quote Request. Each
Competitive Bid Quote Request shall be in an Approved Multiple.
2.3.3. Submission and Contents of Competitive Bid Quotes. (i)
Each Lender may, in its sole discretion, submit to the Borrower a Competitive
Bid Quote containing an offer or offers to make Competitive Bid Loans in
response to any Invitation for Competitive Bid Quotes. Each Competitive Bid
Quote must comply with the requirements of this Section 2.3.3 and must be
submitted to the Borrower by telecopy at its address specified in or pursuant to
Article XIII not later than (a) 1:00 p.m. (Chicago time) at least three Business
Days prior to the proposed Borrowing Date, in the case of a Eurocurrency Auction
denominated in Dollars, (b) 1:00 p.m. (Chicago time) at least five Business Days
prior to the proposed Borrowing Date, in the case of a Eurocurrency Auction
denominated in an Alternative Currency or (c) 9:00 a.m. (Chicago time) on the
proposed Borrowing Date, in the case of an Absolute Rate Auction. Subject to
Articles IV and VIII, any Competitive Bid Quote so made shall be irrevocable.
(ii) Each Competitive Bid Quote shall in any case specify:
(a) the proposed Borrowing Date, which shall be the same as
that set forth in the applicable Invitation for Competitive Bid Quotes;
(b) the principal amount of the Competitive Bid Loan for which
each such offer is being made, which principal amount (1) may be
greater than, less than or equal to the Commitment of the quoting
Lender, (2) must be an Approved Multiple and (3) may not exceed the
principal amount of Competitive Bid Loans for which offers were
requested;
(c) in the case of a Eurocurrency Auction, the Competitive Bid
Margin offered for each such Competitive Bid Loan;
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(d) the limit, if any, as to the aggregate principal amount of
the Competitive Bid Loans from such Lender which may be accepted by the
Borrower;
(e) in the case of an Absolute Rate Auction, the Absolute Rate
offered for each such Competitive Bid Loan;
(f) the applicable Interest Period; and
(g) the identity of the quoting Lender.
(iii) The Borrower shall reject any Competitive Bid Quote that:
(a) is not substantially in the form of Exhibit "D" hereto or
does not specify all of the information required by Section 2.3.3(ii);
(b) contains qualifying, conditional or similar language,
other than any such language contained in Exhibit "D" hereto;
(c) proposes terms other than or in addition to those set
forth in the applicable Invitation for Competitive Bid Quotes; or
(d) arrives after the time set forth in Section 2.3.3(i).
If any Competitive Bid Quote shall be rejected pursuant to this Section
2.3.3(iii), then the Borrower shall notify the relevant Lender of such rejection
as soon as practical.
2.3.4. Acceptance and Notice by the Borrower. Not later than
(a) 2:00 p.m. (Chicago time) at least three Business Days prior to the proposed
Borrowing Date, in the case of a Eurocurrency Auction denominated in Dollars,
(b) 2:00 p.m. (Chicago time) at least five Business Days prior to the proposed
Borrowing Date, in the case of a Eurocurrency Auction denominated in an
Alternative Currency or (c) 10:00 a.m. (Chicago time) on the proposed Borrowing
Date, in the case of an Absolute Rate Auction, the Borrower shall notify each
Lender of its acceptance or rejection of the offers so notified to it pursuant
to Section 2.3.3; provided, however, that the failure by the Borrower to give
such notice to any Lender shall be deemed to be a rejection by the Borrower of
all such offers made by such Lender. In the case of acceptance, such notice (a
"Competitive Bid Borrowing Notice") shall specify the aggregate principal amount
of offers for each Interest Period that are accepted. The Borrower may accept or
reject any Competitive Bid Quote in whole or in part (subject to the terms of
Section 2.3.3(ii)(d)); provided that:
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(a) the aggregate principal amount of each Competitive Bid
Advance may not exceed the applicable amount set forth in the related
Competitive Bid Quote Request;
(b) acceptance of offers may only be made on the basis of
ascending Competitive Bid Margins or Absolute Rates, as the case may
be; and
(c) the Borrower may not accept any offer of the type
described in Section 2.3.3(iii) or that otherwise fails to comply with
the requirements of this Agreement for the purpose of obtaining a
Competitive Bid Loan under this Agreement.
2.3.5. Allocation by the Borrower. If offers are made by two
or more Lenders with the same Competitive Bid Margins or Absolute Rates, as the
case may be, for a greater aggregate principal amount than the amount in respect
of which offers are permitted to be accepted for the related Interest Period,
the principal amount of Competitive Bid Loans in respect of which such offers
are accepted shall be allocated by the Borrower among such Lenders as nearly as
possible (in such multiples, not greater than $1,000,000 (or the equivalent in
an Alternative Currency), as the Borrower may deem appropriate) in proportion to
the aggregate principal amount of such offers. Allocations by the Borrower of
the amounts of Competitive Bid Loans shall be conclusive in the absence of
manifest error. The Borrower shall promptly, but in any event on the same
Business Day in the case of Eurocurrency Bid Rate Advances, and by 11:00 a.m.
(Chicago time) in the case of Absolute Rate Advances, notify each Lender that
submitted a Competitive Bid Quote of its receipt of a Competitive Bid Borrowing
Notice and the aggregate principal amount of such Competitive Bid Advance
allocated to each participating Lender.
2.3.6. Notice by the Borrower to the Administrative Agent.
Promptly, but in any event on the same Business Day that the Borrower issues any
Competitive Bid Borrowing Notice, the Borrower shall give the Administrative
Agent notice of the amount, maturity, applicable interest rate and Lender for
each Competitive Bid Loan accepted by the Borrower pursuant to such Competitive
Bid Borrowing Notice.
2.4. Facility Fees. The Company hereby agrees to pay to the
Administrative Agent for the account of each Lender, ratably in the proportion
that such Lender's Commitment bears to the Aggregate Commitment, a per annum
facility fee at the Facility Fee Rate (determined daily in accordance with the
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Pricing Schedule) on the daily amount of the Aggregate Commitment (and, if any
Advances remain outstanding following termination of the Commitments, on the
daily aggregate Dollar Amount of all outstanding Advances), payable quarterly in
arrears on each Payment Date, on the Termination Date and, if later, on the date
on which all outstanding Advances shall have been repaid in full. All accrued
facility fees hereunder shall be payable on the effective date of any
termination of the obligations of the Lenders to make Loans hereunder.
2.5. General Facility Terms
2.5.1. Method of Borrowing. Not later than (i) 12:00 noon
(Chicago time) on each Borrowing Date for each Advance denominated in Dollars
and (ii) the funding deadline designated by the Administrative Agent in the case
of any Advance denominated in an Alternative Currency (which shall be no earlier
than 10:00 a.m. local time in the place of payment and no later than 12:00 noon
(Chicago time)), each Lender shall make available its Loan or Loans, if any, in
immediately available funds, to the Administrative Agent at its address
specified pursuant to Article XIII or at such other location as the
Administrative Agent shall direct. The Administrative Agent shall promptly
deposit the funds so received from the Lenders in the Borrower's account at the
Administrative Agent's main office in Chicago or as otherwise directed by the
Borrower. Notwithstanding the foregoing provisions of this Section 2.5.1, to the
extent that a Loan made to a Borrower by a Lender matures on the Borrowing Date
of a requested Loan to such Borrower in the same currency, such Lender shall
apply the proceeds of the Loan it is then making to the repayment of principal
of the maturing Loan.
2.5.2. Minimum Amount of Each Committed Advance. Each
Committed Advance shall be in an Approved Multiple; provided, however, that any
Floating Rate Advance may be in the aggregate amount of the unused Aggregate
Commitment.
2.5.3. Optional Principal Payments. The Borrower may from time
to time pay all of its outstanding Committed Advances, or, in an Approved
Multiple, any portion of the outstanding Committed Advances upon (i) in the case
of any Floating Rate Advance, notice to the Administrative Agent not later than
10:00 a.m. (Chicago time) on the date of prepayment, (ii) in the case of any
Fixed CD Rate Advance, two Business Days' prior notice to the Administrative
Agent, (iii) in the case of any Eurocurrency Committed Advance denominated in
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Dollars, three Business Days' prior notice to the Administrative Agent and (iv)
in the case of any Eurocurrency Committed Advance denominated in an Alternative
Currency, five Business Days' prior notice to the Administrative Agent. Any such
notice of prepayment shall be irrevocable. All such payments shall be made in
immediately available funds to the Administrative Agent at the Administrative
Agent's address specified in Article XIII or at any other location specified by
the Administrative Agent in accordance with Section 2.5.7 not later than (i)
noon (Chicago time) on the date of payment for each Advance denominated in
Dollars and (ii) the funding deadline designated by the Administrative Agent in
the case of any Advance denominated in an Alternative Currency (which should be
no earlier than 10:00 a.m. local time in the place of payment and no later than
12:00 noon (Chicago time)). Subject to Section 2.5.13(a), a Competitive Bid
Advance may not be prepaid prior to the last day of its applicable Interest
Period without the prior consent of the Lender which originally made such Loan,
which consent may be given or withheld at the Lender's sole and absolute
discretion, provided that no Competitive Bid Advance may be prepaid if there
exists a Default. Any prepayment of a Fixed Rate Advance prior to the end of its
applicable Interest Period shall be subject to the indemnity provisions of
Section 3.4.
2.5.4. Interest Periods. Subject to the provisions of Section
2.5.5, each Advance shall bear interest from and including the first day of the
Interest Period applicable thereto to (but not including) the earlier of (i) the
last day of such Interest Period or (ii) the date of any earlier prepayment as
permitted by Section 2.5.3, at the interest rate determined as applicable to
such Advance, payable in the currency of such Advance.
2.5.5. Rate after Maturity. Except as provided in the next
sentence, any Advance not paid at maturity, whether by acceleration or
otherwise, shall bear interest until paid in full at a rate per annum equal to
(i) in the case of an Advance denominated in Dollars, the Alternate Base Rate
plus 2% per annum, payable upon demand and (ii) in the case of an Advance
denominated in an Alternative Currency, the sum of 2% plus the Applicable Margin
for Eurocurrency Committed Advances for such day plus the quotient obtained by
dividing (x) the average of the respective rates per annum at which one day (or,
if such amount due remains unpaid more than five Business Days, then for such
other period of time not longer than three months as the Administrative Agent
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may select) deposits in such Alternative Currency in an amount approximately
equal to such overdue payment due to each of the Reference Banks (or, in the
case of a Competitive Bid Advance, the amount which would have been due to each
Reference Bank if such Advance were a Committed Advance) are offered to such
Reference Bank in the London interbank market for the applicable period
determined as provided above by (y) 1.00 minus the Reserve Requirement. In the
case of a Fixed Rate Advance the maturity of which is accelerated, such Fixed
Rate Advance shall bear interest for the remainder of the applicable Interest
Period (or until paid if paid prior to the end of such Interest Period), at the
higher of the rate otherwise applicable to such Fixed Rate Advance for such
Interest Period plus 2% per annum or the applicable rate specified in the
preceding sentence.
2.5.6. Interest Payment Dates; Interest Basis. Interest
accrued on each Fixed Rate Advance shall be payable on the last day of its
applicable Interest Period, on any date on which such Fixed Rate Advance is
prepaid or converted, and at the maturity of such Advance. Interest accrued on
each Floating Rate Advance shall be payable on each Payment Date, on any date on
which such Floating Rate Advance is prepaid, and at the maturity of such
Advance. Interest accrued on each Fixed Rate Advance having an Interest Period
longer than three months shall also be payable on the last day of each 90 day
interval (in the case of Fixed CD Rate Advances or Absolute Rate Advances) or
three-month interval (in the case of Eurocurrency Committed Advances or
Eurocurrency Bid Rate Advances) during such Interest Period. Interest on Fixed
Rate Loans and facility fees hereunder shall be calculated for actual days
elapsed on the basis of a 360-day year. Interest on Floating Rate Loans shall be
calculated for actual days elapsed on the basis of a 365-day year, or, when
applicable, 366-day year. Interest shall be payable for the day an Advance is
made but not for the day of any payment on the amount paid if payment is
received prior to the deadline specified pursuant to Section 2.5.7. If any
payment of principal of or interest on an Advance shall become due on a day
which is not a Business Day, such payment shall be made on the next succeeding
Business Day and, in the case of a principal payment, such extension of time
shall be included in computing interest in connection with such payment.
2.5.7. Method of Payment. Subject to the last sentence of
Section 2.5.1, all payments of principal, interest, and fees hereunder shall be
made by (i) noon (local time) for each payment in Dollars and (ii) the funding
deadline designated by the Administrative Agent for each payment in an
Alternative Currency (which shall be no earlier than 10:00 a.m. local time in
the place of payment and no later than 12:00 noon (Chicago time)), on the date
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when due in immediately available funds to the Administrative Agent at the
Administrative Agent's address specified pursuant to Article XIII, or at any
other location specified in writing by the Administrative Agent to the Borrower
and shall be distributed by the Administrative Agent ratably among all Lenders
in the case of fees and payments in respect of Committed Advances and ratably
among the applicable Lenders in respect of Competitive Bid Advances. Each
payment delivered to the Administrative Agent for the account of any Lender
shall be delivered promptly by the Administrative Agent to such Lender in the
same type of funds which the Administrative Agent received at its address
specified pursuant to Article XIII or at any location specified in a notice
received by the Administrative Agent from such Lender. All payments of the
principal of and interest on any Loan shall be made in the currency in which
such Loan is denominated.
2.5.8. Notes. Each Lender is hereby authorized to record on
the schedule attached to each of its Notes, or otherwise record in accordance
with its usual practice, the date and amount of each of its Loans evidenced by
such Note; provided, however, that any failure to so record shall not affect the
Obligors' obligations under any Loan Document.
2.5.9. Notification of Advances, Interest Rates and
Prepayments. The Administrative Agent will notify each Lender of the contents of
each Aggregate Commitment reduction notice, Committed Borrowing Notice,
Conversion/Continuation Notice and repayment notice received by it hereunder
promptly and in any event before the close of business on the same Business Day
of receipt thereof (or, in the case of borrowing notices with respect to
Floating Rate Advances and Absolute Rate Advances, within one hour of receipt
thereof). The Administrative Agent will notify each Lender of the interest rate
applicable to each Fixed Rate Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate.
2.5.10. Non-Receipt of Funds by the Administrative Agent.
Unless the Borrower or a Lender, as the case may be, notifies the Administrative
Agent prior to the date on which it is scheduled to make payment to the
Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or
(ii) in the case of the Borrower, a payment of principal, interest or fees to
the Administrative Agent for the account of the Lenders, that it does not intend
to make such scheduled payment, the Administrative Agent may assume that such
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scheduled payment has been made. The Administrative Agent may, but shall not be
obligated to, make the amount of such scheduled payment available to the
intended recipient in reliance upon such assumption. If such Lender or the
Borrower, as the case may be, has not in fact made such scheduled payment to the
Administrative Agent, the recipient of such scheduled payment shall, on demand
by the Administrative Agent, repay to the Administrative Agent the amount so
made available together with interest thereon in respect of each day during the
period commencing on the date such amount was so made available by the
Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to (x) in the case of scheduled payment by a
Lender, the Federal Funds Effective Rate for such day or (y) in the case of
scheduled payment by the Borrower, the interest rate applicable to the relevant
Loan.
2.5.11. Cancellation. The Company may at any time after the
date hereof cancel the Aggregate Commitment, in whole, or in a minimum aggregate
amount of $10,000,000 (and in integral multiples of $1,000,000 if in excess
thereof) ratably among the Lenders upon written notice to the Administrative
Agent not later than 10:00 a.m. (Chicago time) on the effective date of
cancellation specified therein, which notice shall specify the amount of such
reduction; provided, however, no such notice of cancellation shall be effective
to the extent that it would reduce the Aggregate Commitment to an amount which
would be less than the aggregate Dollar Amount of Loans outstanding at the time
such cancellation is to take effect. Any notice of cancellation given pursuant
to this Section 2.5.11 shall be irrevocable and shall specify the date upon
which such cancellation is to take effect.
2.5.12. Lending Installations. Subject to Section 12.6, each
Lender may, by written (including telex or telecopy) notice to the
Administrative Agent and the Company, book its Loans at any Lending Installation
selected by such Lender and may from time to time change its Lending
Installation and for whose account Loan payments are to be made. Each Lender
will notify the Administrative Agent and the Company on or prior to the date of
this Agreement of the Lending Installation which it intends to utilize for each
type of Loan hereunder.
2.5.13. Currency Equivalents. (a) The Administrative Agent shall
determine the Dollar Amount of each Advance denominated in an Alternative
Currency as of the first day of each Interest Period applicable thereto, and in
the case of any such Interest Period of more than three months, at three month
intervals after the first day thereof, and shall promptly notify the Borrower
and the Lenders of each Dollar Amount so determined by it. Each such
determination shall be based
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on the spot rate at which in accordance with normal banking procedures the
Administrative Agent could purchase the Alternative Currency with Dollars in the
interbank market in London at 11:00 a.m. (London time) two Business Days prior
to the date as of which such Dollar Amount is to be determined. If after giving
effect to any such determination of a Dollar Amount, the aggregate Dollar Amount
of all outstanding Advances exceeds the Aggregate Commitment, the Borrowers
shall within five Business Days prepay outstanding Advances (as selected by the
Company) to the extent necessary to eliminate such excess; provided that such
prepayment shall be applied to outstanding Committed Advances to the extent
necessary to prepay such Advances in full before prepayment of any Competitive
Bid Advances pursuant to this Section 2.5.13(a).
(b) If for the purpose of obtaining judgment in any court it
is necessary to convert a sum due from any Obligor hereunder or under any of the
Notes in the currency expressed to be payable herein or under the Notes (the
"specified currency") into another currency, the parties hereto agree, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures the
Administrative Agent could purchase the specified currency with such other
currency at the Administrative Agent's London office at 11:00 a.m. (London time)
on the Business Day preceding that on which final judgment is given. The
obligations of each Obligor in respect of any sum due to any Lender or the
Administrative Agent hereunder or under any Note shall, notwithstanding any
judgment in a currency other than the specified currency, be discharged only to
the extent that on the Business Day following receipt by such Lender or the
Administrative Agent (as the case may be) of any sum adjudged to be so due in
such other currency such Lender or the Administrative Agent (as the case may be)
may in accordance with normal banking procedures purchase the specified currency
with such other currency; if the amount of the specified currency so purchased
is less than the sum originally due to such Lender or the Administrative Agent,
as the case may be, in the specified currency, each Obligor agrees, to the
fullest extent that it may effectively do so, as a separate obligation and
notwithstanding any such judgment, to indemnify such Lender or the
Administrative Agent, as the case may be, against such loss, and if the amount
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of the specified currency so purchased exceeds (a) the sum originally due to any
Lender or the Administrative Agent, as the case may be, in the specified
currency and (b) any amounts shared with other Lenders as a result of
allocations of such excess as a disproportionate payment to such Lender under
Article XI, such Lender or the Administrative Agent, as the case may be, agrees
to remit such excess to the Company for the account of the Obligors.
2.5.14. Taxes.5.14. (a) Any and all payments by a Borrower
hereunder or under the Notes shall be made free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto excluding, (i)
in the case of each Lender and Agent, taxes imposed on its income, and franchise
or similar taxes imposed on it, by the jurisdiction under the laws of which such
Lender or Agent is organized or any political subdivision thereof and taxes
imposed on its income, and franchise taxes imposed on it, by the jurisdiction of
such Lender's applicable Lending Installation or any political subdivision
thereof and (ii) in the case of each Lender, any United States withholding tax
imposed on such payments but only to the extent not attributable to a change in
law, regulation, treaty or interpretation after the time such Lender first
becomes a party to this Agreement (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities arising out of or related to
this Agreement being hereinafter referred to as "Taxes"). If any Borrower shall
be required by law to deduct any Taxes from or in respect of any sum payable
hereunder or under any Note to any Lender or Agent, (i) the sum payable shall be
increased as may be necessary so that after making all required deductions
(including deductions applicable to additional sums payable under this Section
2.5.14) such Lender or Agent (as the case may be) receives an amount equal to
the sum it would have received had no deductions been made, (ii) such Borrower
shall make such deductions and (iii) such Borrower shall pay the full amount
deducted to the relevant taxation authority or other authority in accordance
with applicable law and provide such Lender or Agent (as the case may be) with a
receipt or other evidence of such payment.
(b) In addition, each Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies which arise from any payment made hereunder or under the Notes
or from the execution, delivery, enforcement or registration of, or otherwise
with respect to, the Loan Documents (hereinafter referred to as "Other Taxes").
(c) Each Borrower will indemnify each Lender and Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed by any jurisdiction on amounts payable under this Section
2.5.14) paid by such Lender or Agent and any liability including penalties,
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interest and expenses arising therefrom or with respect thereto, whether or not
such Taxes or Other Taxes were correctly or legally asserted by the relevant
taxing authority or other governmental entity. This indemnification shall be
made to the Administrative Agent for the account of such Lender or Agent (as the
case may be) within 30 days from the date such Lender or Agent makes written
demand therefor (with a copy, in the case of a demand by a Lender or the
Documentation Agent, of such demand to the Administrative Agent). If a Lender or
Agent shall become aware that it is entitled to receive a refund in respect of
Taxes or Other Taxes as to which it has been indemnified by a Borrower pursuant
to this Section 2.5.14, it shall promptly notify such Borrower of the
availability of such refund and, unless such Lender or Agent determines in good
faith that it is not in its best interests to do so, shall apply for such
refund. If any Lender or Agent receives a refund in respect of any Taxes or
Other Taxes as to which it has been indemnified by a Borrower pursuant to this
Section 2.5.14, it shall promptly notify such Borrower of such refund and shall
promptly repay such refund to such Borrower (to the extent of amounts that have
been paid by such Borrower under this Section 2.5.14 with respect to such
refund), net of all out-of-pocket expenses of such Lender or Agent in obtaining
such refund; provided that the Borrower, upon the request of such Lender or
Agent agrees to return such refund (plus penalties, interest or other charges)
to such Lender or Agent in the event such Lender or Agent is required to repay
such refund.
(d) Notwithstanding the foregoing, unless, prior to the
initial Borrowing Date (in the case of a Lender listed on the signature pages
hereto), and prior to the effective date of the Assignment and Acceptance by
which it became a Lender (in the case of Lender that became a Lender pursuant to
such Assignment and Acceptance), and in each case from time to time thereafter,
if requested by the Company or the Administrative Agent, each Lender organized
under the laws of a jurisdiction outside the United States shall have provided
the Company and the Administrative Agent with the forms prescribed by the
Internal Revenue Service of the United States certifying as to such Lender's
status for purposes of determining exemption from United States withholding
taxes with respect to all payments of interest to be made to such Lender
hereunder or other documents satisfactory to the Company which, in each case,
shall indicate that all payments to be made to such Lender hereunder are not
subject to United States withholding tax or are subject to such taxes at a rate
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reduced to zero by an applicable tax treaty, neither the Company nor any other
Borrower shall have any obligation under the last sentence of Section 2.5.14(a)
to make any payments to or for the benefit of such Lender in respect of Taxes
imposed by the United States of America unless such Lender is unable to provide
such form as a result of a change in law or treaty after the time such Lender
becomes a party to this Agreement.
2.5.15. Regulation D Compensation. For so long as any Lender
maintains reserves against "Eurocurrency liabilities" (or any other category of
liabilities which includes deposits by reference to which interest rate on
Eurocurrency Committed Loans is determined or any category of extensions of
credit or other assets which includes loans by a non-United States office of
such Lender to United States residents), and as a result the cost to such Lender
(or its Lending Installation) of making or maintaining any of its Eurocurrency
Committed Loans is increased, then such Lender may require the Borrower to pay,
contemporaneously with each payment of interest on such Loans, additional
interest on the related Eurocurrency Committed Loan of such Lender at a rate per
annum up to but not exceeding the excess of (i)(A) the applicable Eurocurrency
Base Rate divided by (B) one minus the Reserve Requirement over (ii) the
applicable Eurocurrency Base Rate. Any Lender wishing to require payment of such
additional interest (x) shall so notify the Borrower and the Administrative
Agent, in which case such additional interest on the Eurocurrency Committed
Loans of such Lender shall be payable to such Lender at the place indicated in
such notice with respect to each Interest Period which commences at least three
Business Days after the giving of such notice and (y) shall furnish to the
Borrower at least five Business Days prior to each date on which interest is
payable on the Eurocurrency Committed Loans a certificate setting forth the
amount to which such Lender is then entitled under this Section.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If, after the date of this Agreement,
the adoption of any law or the application of any governmental or
quasi-governmental rule, regulation, policy, guideline or directive (whether or
not having the force of law), or any change therein, or any change in the
interpretation or administration thereof, or the compliance of any Lender
therewith,
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(i) with respect to Committed Loans bearing interest at a
Fixed Rate, imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement
against assets of, deposits with or for the account of, or credit
extended by, any Lender or any applicable Lending Installation (other
than reserves and assessments taken into account in determining the
interest rate applicable to Committed Advances bearing interest at a
Fixed Rate or for which such Lender is compensated pursuant to Section
2.5.15), or
(ii) with respect to Committed Loans bearing interest at a Fixed
Rate, imposes any other condition,
the result of which is to increase the cost to any Lender or any applicable
Lending Installation of making, funding or maintaining such Loans or reduces any
amount receivable by any Lender or any applicable Lending Installation in
connection with such Loans, or requires any Lender or any applicable Lending
Installation to make any payment calculated by reference to the amount of such
Loans held or interest received by it, by an amount deemed material by such
Lender, then, within 30 days of demand by such Lender, the Borrower shall pay
such Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender reasonably and in good faith determines is
attributable to the making, funding and maintaining of such Loans by it.
3.2. Changes in Capital Adequacy Regulations. If a Lender
reasonably and in good faith determines that the amount of capital required or
expected to be maintained by such Lender, any Lending Installation of such
Lender or any corporation controlling such Lender attributable to this
Agreement, the Loans or its obligation to make Loans hereunder is increased as a
result of a Change (as hereafter defined), then, within 15 days of demand by
such Lender, the Company shall pay such Lender the amount which such Lender
reasonably and in good faith determines is necessary to compensate it for any
reduction in the rate of return on capital to an amount below that which such
Lender could have achieved but for such Change and is attributable to this
Agreement, the Loans or its obligation to make Loans hereunder, provided,
however, that the effect of any Change shall be determined based on the effect
on such Lender that would be applicable to such Lender if such Lender was
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maintaining the highest credit quality as determined by the applicable
regulatory authorities at the time of such Change. "Change" means (i) any change
after the date of this Agreement in the Risk-Based Capital Guidelines or (ii)
any adoption of or change in any other law, governmental or quasi-governmental
rule, regulation, policy, guideline, interpretation, or directive (whether or
not having the force of law) of general applicability after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or any Lending Installation or any corporation
controlling any Lender (including any determination by any authority, central
bank or comparable agency that, for purposes of capital adequacy requirements,
the Commitments hereunder do not constitute commitments with an original
maturity of one year or less, which shall be deemed a Change). "Risk-Based
Capital Guidelines" means (i) the risk-based capital guidelines in effect in the
United States on the date of this Agreement, including transition rules, and
(ii) the corresponding capital regulations promulgated by regulatory authorities
outside the United States implementing the July 1988 report of the Basle
Committee on Banking Regulation and Supervisory Practices Entitled
"International Convergence of Capital Measurements and Capital Standards,"
including transition rules, and any amendments to such regulations adopted prior
to the date of this Agreement.
3.3. Availability of Types of Advances. If the Required
Lenders reasonably and in good faith determine that (i) deposits of a type and
maturity appropriate to match fund Committed Advances bearing interest at a
Fixed Rate are not available or (ii) solely in the case of a Eurocurrency
Committed Advance denominated in an Alternative Currency, the interest
applicable to such Committed Advance does not accurately reflect the funding
cost of such Committed Advance, then the Administrative Agent shall forthwith
give notice thereof to the Company and the Lenders, whereupon until the
Administrative Agent notifies the Company that the circumstances giving rise to
such suspension no longer exist, the obligations of the Lenders to make Fixed CD
Rate Loans or Eurocurrency Loans (in the affected currency), or to convert
outstanding Loans into such Loans or continue outstanding Loans as such Loans
for an additional Interest Period, shall be suspended and (i) any affected
outstanding Committed Advance denominated in Dollars shall be converted into a
Floating Rate Advance on the last day of the then current Interest Period
applicable thereto, (ii) any affected Committed Advance denominated in Dollars
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for which a Committed Borrowing Notice has previously been given shall instead
be made as a Floating Rate Advance, unless the Borrower elects not to borrow
such Advance by giving one Business Day's notice to the Administrative Agent to
such effect, (iii) any affected outstanding Committed Advance denominated in an
Alternative Currency shall mature and be due and payable on the last day of the
then current Interest Period applicable thereto and (iv) any affected
Eurocurrency Advance denominated in an Alternative Currency for which a
Committed Borrowing Notice or a Competitive Bid Borrowing Notice has previously
been given shall be canceled. Nothing in this Section 3.3 shall affect any right
of the Borrower to borrow or convert outstanding Loans into Loans of a Type not
affected by the circumstances described above under and in accordance with the
other applicable provisions of this Agreement. If any Lender determines that
maintenance of any of its Eurocurrency Loans would violate any applicable law,
rule, regulation or directive, whether or not having the force of law, then such
Lender may by notice to the Company, through the Administrative Agent, require
that such Eurocurrency Loans be converted to an unaffected Type of Loan on the
last day of the then current Interest Period applicable thereto, if such Lender
may lawfully maintain such Loan to such date, or on such earlier date as such
Lender may require if it is not able lawfully to maintain such Loan to such
date.
3.4. Funding Indemnification. If any payment of a Fixed Rate
Loan occurs on a date which is not the last day of the applicable Interest
Period, whether because of acceleration, prepayment or otherwise, or any Fixed
Rate Loan is converted to a Loan of a different Type on a date which is not the
last day of the applicable Interest Period (except pursuant to the last sentence
of Section 3.3), or the Borrower fails to prepay any Fixed Rate Loan after
notice of prepayment has been given in accordance with Section 2.5.3, or a Fixed
Rate Advance is not made, converted or continued on the date specified by the
Borrower for any reason other than default by the Lenders, the Borrower will
indemnify each Lender for any loss or cost incurred by it resulting therefrom,
including, without limitation, any loss or cost in liquidating or employing
deposits acquired to fund or maintain the Fixed Rate Advance.
3.5. Lender Statements; Limit on Retroactivity; Survival of
Indemnity. To the extent reasonably possible, each Lender shall designate an
alternate Lending Installation with respect to its Fixed Rate Loans to reduce
any liability of the Borrower or the Company to such Lender under Section 3.1,
3.2 or 3.6 or to avoid the unavailability of a Type of Committed Advance under
Section 3.3, so long as such designation is not disadvantageous to such Lender.
Each Lender shall deliver a written statement of such Lender as to the amount
due, if any, under Section 3.1, 3.2, 3.3, 3.4 or 3.6. Such written statement
shall set forth in reasonable detail the calculations upon which such Lender
determined such amount and shall be final, conclusive and binding in the absence
of manifest error. Determination of amounts payable under such Sections in
connection with a Fixed Rate Loan shall be calculated as though each Lender
funded its Fixed Rate Loan through the purchase of a deposit of the type and
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maturity corresponding to the deposit used as a reference in determining the
Fixed Rate applicable to such Loan, whether in fact that is the case or not. The
Borrower or the Company, as the case may be, shall only be obligated to
compensate any Lender under Section 3.1, 3.2, 3.4 or 3.6 for any amount arising
or accruing during (i) any time or period commencing not more than 90 days prior
to the date on which such Lender notifies the Administrative Agent and the
Company that it proposes to demand such compensation and identifies to the
Administrative Agent and the Company the statute, regulation or other basis upon
which the claimed compensation is or will be based and (ii) any time or period
during which, because of the retroactive application of such statute, regulation
or other such basis, such Lender did not know that such amount would arise or
accrue. Unless otherwise provided herein, the amount specified in the written
statement shall be payable on demand after receipt by the Borrower or the
Company, as the case may be, of the written statement. The obligations of the
Obligors under Sections 3.1, 3.2, 3.4 and 3.6 shall survive payment of any other
of the Obligations and the termination of this Agreement.
3.6. Foreign Subsidiary Costs. If any Lender determines
reasonably and in good faith that the cost to such Lender of making or
maintaining any Loan to an Eligible Subsidiary is increased, or the amount of
any sum received or receivable by any Lender (or its Lending Installation) is
reduced by an amount deemed by such Lender to be material, by reason of the fact
that such Eligible Subsidiary is incorporated in, or conducts business in, a
jurisdiction outside the United States of America, the Company shall indemnify
such Lender for such increased cost or reduction within 30 days after demand by
such Lender (with a copy to the Administrative Agent). A certificate of such
Lender claiming compensation under this Section 3.6 and setting forth the
additional amount or amounts to be paid to it hereunder shall be conclusive in
the absence of manifest error.
3.7. Replacement of Lenders. In the event a Lender (an
"Affected Lender") shall have: (i) failed to either fund its ratable share of
any Committed Advance which such Lender is obligated to fund under the terms of
Section 2.2 or its share of any Competitive Bid Advance which such Lender is
obligated to fund under the terms of Section 2.3, and in either case such
failure has not been cured within five Business Days, (ii) either repudiated its
obligations under this Agreement or failed to reaffirm such obligations in
writing within ten Business Days of a written request therefor from the Company
(with a copy to each Agent), or (iii) made demand for additional amounts
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pursuant to Sections 2.5.14, 3.1, 3.2 or 3.6, as a result of any condition
described in any such Section, then, unless such Affected Lender has theretofore
taken steps to remove or cure, and has removed or cured within ten Business
Days, such failure or the conditions creating the cause for such demand for such
additional amounts, as the case may be, the Company may require the Affected
Lender to transfer and assign without recourse (in accordance with and subject
to the restrictions contained in Sections 12.1, 12.2 and 12.3) all its
interests, rights and obligations under this Agreement to a bank designated by
the Company and which is reasonably acceptable to the Agents (such bank being
herein called a "Replacement Lender"); provided, that (i) no such assignment
shall conflict with any law, rule or regulation or order of any state, federal
or local governmental authority and (ii) the Replacement Lender shall pay to the
Affected Lender in immediately available funds on the date of such assignment
the principal of and interest accrued to the date of payment on the Loans made
by it hereunder and all other amounts accrued for its account or owed to it
hereunder (including, without limitation, any amount which would be payable
pursuant to Section 3.4 in connection with a prepayment in full of the Loans of
the Affected Lender on the date of such assignment). Each Lender agrees to use
its best efforts to notify the Company as promptly as practicable upon such
Lender's becoming aware that circumstances exist which would cause any Obligor
to become obligated to pay additional amounts to such Lender pursuant to
Sections 2.5.14, 3.1, 3.2 or 3.6.
ARTICLE IV
CONDITIONS PRECEDENT
4.1. Initial Advance. No Lender shall be required to make the initial
Advance hereunder unless the Company has furnished or caused to be
furnished to the Documentation Agent:
(i) Copies of (x) the limited partnership agreement of the
Company, together with all amendments thereto, and (y) the Company's
Certificate of Limited Partnership as filed with the Secretary of State
of Delaware, all certified by a Financial Officer or the President of
the Company.
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(ii) Copies, certified by a Financial Officer, of the Corporate
General Partner's Certificate of Incorporation, By-Laws and Board of
Directors' resolutions authorizing the execution, delivery and
performance of the Loan Documents on behalf of the Company.
(iii) An incumbency certificate, executed by a Financial Officer,
which shall identify by name and title and bear the signature of the
Financial Officers authorized to sign the Loan Documents and to make
borrowings hereunder, upon which certificate the Lenders shall be
entitled to rely until informed of any change in writing by the
Company.
(iv) Copies of a long-form certificate of the Secretary of State of
the State of Delaware, dated reasonably near the date hereof, listing
the Certificate of Limited Partnership of the Company and each
amendment, if any, thereto, on file in the office of the Secretary of
State of the State of Delaware and stating that such documents are the
only charter documents of the Company on file in the office of the
Secretary of State of the State of Delaware and that the Company is a
limited partnership in good standing in the State of Delaware.
(v) A written opinion of the Company's special counsel, Kirkland &
Ellis, in substantially the form of Exhibit "B-l" hereto.
(vi) A written opinion of the General Counsel to the Company, Vernon
T. Squires, Esq., in substantially the form of Exhibit "B-2" hereto.
(vii) The Notes of the Company payable to the order of each of the
Lenders.
(viii) A certificate, signed by a Financial Officer, (i) stating that
no Default or Unmatured Default has occurred and is continuing and (ii)
setting forth the Pricing Level as at the date of delivery of such
certificate.
(ix) A duly completed Loan/Credit Related Money Transfer
Instruction for the Company in substantially the form of Exhibit "F"
hereto.
(x) A written opinion of Davis Polk & Wardwell, special counsel for
the Agents, in substantially the form of Exhibit "J" hereto.
(xi) Such other documents as the Documentation Agent or its counsel
may have reasonably requested.
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The Documentation Agent shall promptly notify the other
parties hereto of its receipt of the foregoing documents.
4.2. Initial Advance to each Eligible Subsidiary. No Lender
shall be required to make the initial Advance hereunder to any Eligible
Subsidiary unless such Eligible Subsidiary has furnished or caused to be
furnished to the Documentation Agent:
(i) The Notes of such Eligible Subsidiary payable to the order
of each Lender.
(ii) An opinion of counsel for such Eligible Subsidiary reasonably
acceptable to the Documentation Agent, substantially in the form of
Exhibit "I" hereto and covering such additional matters relating to the
transactions contemplated hereby as the Documentation Agent or the
Required Lenders may reasonably request.
(iii) All documents which the Documentation Agent may reasonably
request relating to the existence of such Eligible Subsidiary, the
corporate or partnership authority for and the validity of the Election
to Participate of such Eligible Subsidiary, this Agreement and the
Notes of such Eligible Subsidiary, and any other matters relevant
thereto, all in form and substance reasonably satisfactory to the
Documentation Agent.
(iv) A duly completed Loan/Credit Related Money Transfer
Instruction for such Eligible Subsidiary in substantially the form of
Exhibit "F" hereto.
The Documentation Agent shall promptly notify the other
parties hereto of its receipt of the foregoing documents.
4.3. Each Advance. No Lender shall be required to make any
Advance (including, without limitation, the initial Advance hereunder), unless
on the applicable Borrowing Date:
(i) Prior to and after giving effect to such Advance there
exists no Default or Unmatured Default.
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(ii) The representations and warranties of the Company and (if
other than the Company) the Borrower contained in Articles V and XIV of
this Agreement are true and correct in all material respects as of such
Borrowing Date, other than (x) Sections 5.4, 5.5(a) and 5.6, which
representations and warranties are made only as of the date of this
Agreement and (y) in the case of any Committed Advance which does not
result in an increase in the aggregate Dollar Amount of Committed
Advances at the time outstanding, Sections 5.5(b) and 5.7.
(iii) In the case of any Competitive Bid Advance, the
Company's senior unsecured debt without third-party credit enhancement
is rated at least BBB-(Baa3) by at least one of S&P, Moody's or D&P.
Each borrowing of an Advance shall constitute a representation
and warranty by the Company and (if other than the Company) the Borrower that
the conditions contained in Section 4.3(i) and (ii) have been satisfied.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Lenders that:
5.1. Organization and Authority. The Company
(a) prior to the Effective Date of the Reorganization, is a
limited partnership duly organized and validly existing under the laws
of the State of Delaware and on and after the Effective Date of the
Reorganization, will be duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted;
(c) is duly licensed or qualified and is in good standing as a
foreign limited partnership (to the extent qualification as a foreign
limited partnership is permitted by statute), or, on and after the
Reorganization, as a foreign corporation, in each jurisdiction wherein
the failure to be so qualified would reasonably be expected to have a
Material Adverse Effect; and
(d) does not believe that the inability of the Company to
qualify as a foreign limited partnership in any state in which such
qualification is not permitted by law will have a Material Adverse
Effect.
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5.2. Organization and Authority of Subsidiaries. Each Material
Subsidiary:
(a) is a limited partnership, general partnership or
corporation, duly organized, validly existing and, where applicable, in
good standing under the laws of its jurisdiction of incorporation or
the jurisdiction where organized, as the case may be;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation or partnership (to the extent qualification as a
foreign partnership is permitted by statute), as the case may be, in
each jurisdiction wherein the failure to be so qualified would
reasonably be expected to have a Material Adverse Effect.
The Company does not believe that the inability of any Material Subsidiary which
is a partnership to qualify as a foreign partnership in any state in which such
qualification is not permitted by law will have a Material Adverse Effect.
5.3. Organization and Authority of Corporate General
Partner. The Corporate General Partner:
(a) is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware;
(b) has all requisite power and authority and all necessary
licenses and permits to own and operate its properties and to carry on
its business as now conducted; and
(c) is duly licensed or qualified and is in good standing as a
foreign corporation in each jurisdiction wherein the failure to be so
qualified would reasonably be expected to have a Material Adverse
Effect.
5.4. Business and Property. The Lenders have each heretofore
been furnished with a copy of the Annual Report of the Parent on Form 10-K for
the fiscal year ended December 31, 1996 (the "Form 10-K"), the Annual Report to
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Shareholders of the Parent for the fiscal year ended December 31, 1996 (the
"Annual Report") and the Information Memorandum dated March, 1997 (the
"Information Memorandum") of the Company, which Information Memorandum generally
sets forth the business conducted by the Company and its Subsidiaries and the
principal properties of the Company and its Subsidiaries. The Form 10-K, the
Annual Report, and the Information Memorandum are hereinafter referred to as the
"Disclosure Documents."
5.5. Financial Statements. (a) The consolidated balance sheets
of the Parent and its subsidiaries as of December 31, 1996, and the statements
of income and cash flows for the fiscal year ended on said date accompanied by a
report thereon containing an opinion unqualified as to scope limitations imposed
by the Parent and otherwise without qualification except as therein noted, by
Arthur Andersen LLP, have been prepared in accordance with GAAP consistently
applied except as therein noted, fairly present in all material respects the
financial position of the Company and its Subsidiaries as of such date and the
results of their operations and cash flows for such period.
(b) Since December 31, 1996, no event or condition has occurred which
has had or which would reasonably be expected to have a material adverse effect
on the properties, business, operations or financial condition of the Company
and its Subsidiaries taken as a whole.
5.6. Full Disclosure. The financial statements referred to in
Section 5.5 do not, nor do the Disclosure Documents or any other written
statement furnished by the Parent or any Obligor to the Agents or the Lenders in
connection with the negotiation of the Loan Documents, contain any untrue
statement of a material fact or omit a material fact necessary to make the
statements contained therein or herein not misleading as of the dates thereof.
There is no fact peculiar to the Company or its Subsidiaries which the Company
has not disclosed to the Lenders in writing which materially affects adversely
nor, so far as the Company can foresee, will materially affect adversely the
properties, business, operations or financial condition of the Company and its
Subsidiaries taken as a whole.
5.7. Pending. There are no proceedings pending or, to the
knowledge of the Company threatened, against or affecting the Company, any of
its General Partners, its Parent or any Subsidiary in any court or before any
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governmental authority or arbitration board or tribunal which would reasonably
be expected to have a Material Adverse Effect. Neither the Company nor any
Subsidiary is in default with respect to any order of any court or governmental
authority or arbitration board or tribunal which would reasonably be expected to
have a Material Adverse Effect.
5.8. Loan Documents are Legal, Valid, Binding and Authorized.
The execution and delivery of the Loan Documents by the Company and compliance
by the Company with all of the provisions of the Loan Documents
(a) are within the power of the Company and have been duly
authorized by proper action on the part of the Company; and
(b) will not violate in any material respect any provisions of
any law or any order of any court or governmental authority or agency
and will not conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute a default under the limited
partnership agreement of the Company or any indenture or other
agreement or instrument governing Debt or any other material agreement
or instrument to which the Company is a party or by which it may be
bound or result in the imposition of any liens or encumbrances on any
property of the Company.
The execution and delivery by the Company of the Loan Documents and the
performance of its obligations thereunder have been duly authorized by proper
corporate and partnership proceedings, and the Loan Documents constitute legal,
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors'
rights generally.
5.9. Governmental Consent. No approval, consent or withholding
of objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution, delivery and performance by the
Company of the Loan Documents or compliance by the Company with any of the
provisions of the Loan Documents.
5.10. Taxes. All United States Federal income tax returns and
all other material tax returns required to be filed by the Parent, the Company
or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes,
and all material assessments, fees and other governmental charges upon the
Parent, the Company or any Subsidiary or upon any of their respective
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properties, income or franchises, which are shown to be due and payable in such
returns have been paid. The Company does not know of any proposed additional tax
assessment against the Parent, the Company or any Subsidiary for which adequate
provision has not been made on its accounts. To the best of the Company's
knowledge, the provisions for taxes on the books of the Parent, the Company and
each Subsidiary are adequate for all open years, and for its current fiscal
period.
5.11. Employee Retirement Income Security Act of 1974. The
consummation of the transactions provided for in this Agreement and compliance
by the Company with the provisions of the Loan Documents will not involve any
prohibited transaction within the meaning of the ERISA or Section 4975 of the
Code. No "employee pension benefit plans", as defined in ERISA ("Plans"),
maintained by the Company or any Person which is under common control with the
Company within the meaning of Section 4001(b) of ERISA, nor any trusts created
thereunder, have incurred any "accumulated funding deficiency" as defined in
Section 302 of ERISA. Neither the Company nor, to the best of the Company's
knowledge, any Person which is under common control with the Company, within the
meaning of Section 4001(b) of ERISA, maintains any "qualified defined benefit
plan" as defined in ERISA.
5.12. Investment Company Act.12. Investment Company Act.
Neither the Company nor any Subsidiary is an "investment company" or an
"affiliated person" thereof or an "affiliated person" of such affiliated person
as such terms are defined in the Investment Company Act of 1940, as amended.
5.13. Compliance with Environmental Laws. Neither the Company
nor any Subsidiary is in violation of any applicable Federal, state, or local
laws, statutes, rules, regulations or ordinances relating to public health,
safety or the environment, including, without limitation, relating to releases,
discharges, emissions or disposals to air, water, land or ground water, to the
withdrawal or use of ground water, to the use, handling or disposal of
polychlorinated biphenyls (PCB's), asbestos or urea formaldehyde, to the
treatment, storage, disposal or management of hazardous substances (including,
without limitation, petroleum, crude oil or any fraction thereof, or other
hydrocarbons), pollutants or contaminants, to exposure to toxic, hazardous or
other controlled, prohibited or regulated substances which violation would
reasonably be expected to have a Material Adverse Effect.
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5.14. Regulations U and X. Margin stock (as defined in
Regulations U and X) constitutes less than 25% of those assets of the Company
and its Subsidiaries which are subject to any limitation on sale, pledge, or
other restriction hereunder.
ARTICLE VI
COVENANTS
During the term of this Agreement, unless the Required Lenders
shall otherwise consent in writing:
6.1.1. Information. The Company will deliver to each of the
Lenders:
(a) as soon as available and in any event within 120 days
after the end of each fiscal year of the Company, consolidated and
consolidating balance sheets of the Company and its Consolidated
Subsidiaries (subject to Section 6.1.2) as of the end of such fiscal
year and the related consolidated and consolidating statements of
income and cash flows for such fiscal year, setting forth in each case
in comparative form the figures for the previous fiscal year, such
consolidated statements to be reported on in a manner which satisfies
the financial reporting requirements of the Securities and Exchange
Commission by a firm of independent public accountants of nationally
recognized standing;
(b) as soon as available and in any event within 60 days after
the end of each of the first three quarters of each fiscal year of the
Company, the internally prepared consolidated and consolidating balance
sheets of the Company and its Consolidated Subsidiaries (subject to
Section 6.1.2) as of the end of such quarter and the related
consolidated and consolidating statements of income and cash flows for
such quarter and for the portion of the Company's fiscal year ended at
the end of such quarter, setting forth in the case of such statements
of income and cash flows in comparative form the figures for the
corresponding quarter and the corresponding portion of the Company's
previous fiscal year, all certified (subject to normal year-end
adjustments and the absence of footnotes) as to fairness of
presentation, GAAP and consistency by a Financial Officer of the
Company;
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(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of a
Financial Officer of the Company (i) setting forth in reasonable detail
the calculations required to establish whether the Company was in
compliance with the requirements of Sections 6.10, 6.15 and 6.16 on the
date of such financial statements and (ii) stating whether any Default
or Unmatured Default exists on the date of such certificate and, if any
Default or Unmatured Default then exists, setting forth the details
thereof and the action which the Company is taking or proposes to take
with respect thereto;
(d) promptly upon the mailing thereof to the securityholders
of the Parent generally, copies of all financial statements, reports
and proxy statements so mailed;
(e) promptly upon the filing thereof, copies of all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and reports on
Forms 10-K, 10-Q and 8-K (or their equivalents) which the Company or
the Parent shall have filed with the Securities and Exchange
Commission; and
(f) from time to time such additional information regarding
the financial position or business of the Company and its Subsidiaries
as the Administrative Agent, at the request of any Lender, may
reasonably request.
6.1.2. Use of Parent Information. If the certificate furnished
pursuant to Section 6.1(c) shall state that (i) the financial statements of the
Parent and its subsidiaries fairly present in all material respects the
financial condition of the Company and its Consolidated Subsidiaries for the
period in respect of which such certificate shall be given and (ii) the
consolidated revenue of the Company and its Consolidated Subsidiaries
constitutes at least 98% of the consolidated revenues of the Parent and its
subsidiaries and that the combined assets of the Company and its Consolidated
Subsidiaries constitute at least 98% of the consolidated assets of the Parent
and its subsidiaries, then the Company may furnish consolidated financial
statements of the Parent otherwise complying with the requirements of subsection
(a) or (b) above, as applicable, in lieu of the consolidated financial
statements of the Company specified therein. The consolidating financial
statements required by such subsections shall be prepared in substantially the
same format as those set forth in the Information Memorandum.
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6.2. Use of Proceeds. The Company will, and will cause each of
its Subsidiaries to, use the proceeds of the Advances for general corporate
purposes, including a distribution by the Company to the Parent in the
approximate amount of $626,000,000 to provide funds to enable the Parent to
repurchase from WMX Technologies, Inc. and its subsidiaries ("WMX") limited
partnership interests in the Parent and options to acquire limited partnership
interests in the Parent held by WMX (the "WMX Repurchase"). The Company will
not, nor will it permit any Subsidiary to, use the proceeds of any Advance in
violation of Regulations U and X.
6.3. Notice of Default. Upon the obtaining of actual knowledge
thereof by a Financial Officer, the Company will, and will cause each of its
Subsidiaries to, give prompt notice in writing to the Administrative Agent of
(i) the occurrence of any Default or Unmatured Default and what actions the
Company proposes to take with respect thereto, if any, and (ii) any other
development, financial or otherwise, which would reasonably be expected to have
a material adverse effect on the properties, business, operations or financial
condition of the Company and its Subsidiaries taken as a whole.
6.4. Inspection. The Company will, and will cause each
Subsidiary to, permit the Lenders, by their respective representatives and
agents, to inspect any of the properties, corporate books and financial records
of the Company and each Subsidiary, to examine and make copies of the books of
accounts and other financial records of the Company and each Subsidiary, and to
discuss the affairs, finances and accounts of the Company and each Subsidiary
with, and to be advised as to the same by, their respective officers at such
reasonable times and intervals as the Lenders may reasonably designate.
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6.5. Legal Existence, Etc. The Company will preserve and keep
in force and effect, and will cause each Material Subsidiary to preserve and
keep in force and effect, its legal existence as a limited partnership, general
partnership or as a corporation, as the case may be, and all licenses and
permits necessary to the proper conduct of its business, provided that the
foregoing shall not prevent (x) any transaction permitted by Section 6.14
(including without limitation the Reorganization), (y) the merger or
consolidation of any Eligible Subsidiary with, or the liquidation of any
Eligible Subsidiary into, any other Eligible Subsidiary or, subject to Section
6.14, the Company or (z) the merger or consolidation of any other Material
Subsidiary with or the liquidation of any other Material Subsidiary into any
other Subsidiary or, subject to Section 6.14, the Company.
6.6. Insurance. The Company will maintain, and will cause each
Subsidiary to maintain, insurance coverage by financially sound and reputable
insurers in such forms and amounts and against such risks as are customary for
companies of similar size and financial strength engaged in the same or similar
business activities and owning and operating similar properties.
6.7. Taxes, Claims for Labor and Materials, Compliance with
Laws. The Company will promptly pay and discharge, and will cause each
Subsidiary promptly to pay and discharge all material lawful taxes, assessments
and governmental charges or levies imposed upon the Company or such Subsidiary,
respectively, or upon or in respect of all or any material part of the property
or business of the Company or such Subsidiary, all trade accounts payable in
accordance with usual and customary business terms, and all claims for work,
labor or materials, which if unpaid might become a lien or charge upon any
material property of the Company or such Subsidiary, provided the Company or
such Subsidiary shall not be required to pay any such tax, assessment, charge,
levy, account payable or claim if (i) the validity, applicability or amount
thereof is being contested in good faith by appropriate actions or proceedings
which will prevent the forfeiture or sale of any material property of the
Company or such Subsidiary or any material interference with the use thereof by
the Company or such Subsidiary, and (ii) the Company or such Subsidiary shall
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set aside on its books, reserves deemed by it to be adequate with respect
thereto. The Company will promptly comply, and will cause each Subsidiary to
comply, in all material respects with all laws, ordinances or governmental rules
and regulations to which it is subject, including without limitation, ERISA, the
Occupational Safety and Health Act of 1970, Federal Insecticide, Fungicide and
Rodenticide Act and Federal Environmental Pesticide Control Act of 1972 and all
laws, ordinances, governmental rules and regulations relating to environmental
protection in all applicable jurisdictions, the violation of which would
reasonably be expected to have a Material Adverse Effect.
6.8. Maintenance, Etc. The Company will maintain, preserve and
keep, and will cause each Subsidiary to maintain, preserve and keep, its
properties which are used in the conduct of its business (whether owned in fee
or a leasehold interest) in good repair and working order and from time to time
will make all necessary repairs, replacements, renewals and additions so that at
all times (in the Company's reasonable judgment) the efficiency thereof shall be
maintained, except where the failure to do so would not reasonably be expected
to have a Material Adverse Effect.
6.9. Nature of Business. Neither the Company nor any
Subsidiary will engage in any business if, as a result, the general nature of
the business, taken on a consolidated basis, which would then be engaged in by
the Company and its Subsidiaries would be substantially changed from the general
nature of the business engaged in by the Company and its Subsidiaries and
described in the Annual Report.
6.10. Restricted Payments. The Company will not make any
Restricted Payment if at the time of such Restricted Payment and after the
giving effect thereto a Default shall have occurred and be continuing. In
addition, the Company will not make any Restricted Payment if after giving
effect thereto the aggregate amount of Restricted Payments made during the
period from and after April 1, 1995 to and including the date of the making of
the Restricted Payment in question would exceed the sum of (i) Consolidated Net
Income for such period, computed on a cumulative basis for such entire period,
(ii) the net proceeds (whether cash or other property, and in the case of other
property, at a value determined by the Company reasonably and in good faith) to
the Company from the issue or sale of Equity Interests in the Company or the
Parent on or after April 1, 1995 and (iii) $100,000,000.
For the purposes of this Section 6.10 the amount of any
Restricted Payment declared, paid or distributed in property of the Company
shall be deemed to be the greater of the book value or fair market value (as
determined in good faith by the Board of Directors) of such property at the time
of the making of the Restricted Payment in question.
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6.11. Payment of Dividends by Subsidiaries. The Company will
not and will not permit any Subsidiary to enter into any agreement which
restricts the ability of any Subsidiary to declare any dividend or to make any
distribution on any Equity Interest of such Subsidiary, other than the
restrictions set forth in Schedule 6.11.
6.12. Transactions with Affiliates..12. Transactions with
Affiliates. The Company will not, and will not permit any Subsidiary to, enter
into or be a party to, any material transaction or arrangement with any
Affiliate (including without limitation, the purchase from, sale to or exchange
of property with, or the rendering of any service by or for, any Affiliate),
except in the ordinary course of and pursuant to the reasonable requirements of
the Company's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to the Company or such Subsidiary than would reasonably be
expected to be obtained in a comparable arm's-length transaction with a Person
other than an Affiliate; provided that the foregoing shall not prevent the
transactions described in the Proxy Statement relating to the Reorganization.
For the purposes of this Section 6.12, the incurrence of Debt which is payable
to the Parent or the Surviving Parent shall not be prohibited so long as such
Debt is permitted pursuant to Section 6.15 and shall have terms which are
comparable to the terms which would reasonably be expected to be obtained in an
arm's-length transaction with a Person other than an Affiliate. It is understood
that the relationship between the Company and the Corporate General Partner
established by the Company's agreement of limited partnership, and the
performance of such agreement by the parties thereto, do not contravene this
Section 6.12.
6.13. Negative Pledge. Neither the Company nor any Subsidiary will
create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) Liens existing on the date of this Agreement securing Debt
outstanding on the date of this Agreement;
(b) any Lien existing on any asset of any corporation or other
entity at the time such corporation or other entity becomes a
Subsidiary and not created in contemplation of such event;
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(c) any Lien on any asset securing Debt incurred or assumed
for the purpose of financing all or any part of the cost of acquiring
such asset, provided that such Lien attaches to such asset concurrently
with or within 90 days after the acquisition thereof;
(d) any Lien on any asset of any corporation or other entity
existing at the time such corporation or other entity is merged or
consolidated with or into the Company or a Subsidiary and not created
in contemplation of such event, provided that such Lien does not extend
to any additional assets;
(e) any Lien existing on any asset prior to the acquisition
thereof by the Company or a Subsidiary and not created in contemplation
of such acquisition;
(f) any Lien arising out of the refinancing, extension,
renewal or refunding of any Debt secured by any Lien permitted by any
of the foregoing clauses of this Section, provided that such Debt is
not increased and is not secured by any additional assets;
(g) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Company in accordance with
GAAP;
(h) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 30 days or that
are being contested in good faith and by appropriate proceedings and
Liens securing judgments but only to the extent for an amount and for a
period not resulting in a Default under Section 7.6 hereof;
(i) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(j) deposits to secure the performance of bids, trade
contracts (other than for Debt or Derivatives Obligations), leases,
statutory obligations, surety bonds, appeal bonds with respect to
judgments not exceeding $25,000,000, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business;
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(k) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that do
not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the business
of the Company and its Subsidiaries;
(l) other Liens arising in the ordinary course of its business
which (i) do not secure Debt or Derivatives Obligations, (ii) do not
secure any obligation in an amount exceeding $25,000,000 and (iii) do
not in the aggregate materially detract from the value of its assets or
materially impair the use thereof in the operation of its business;
(m) Liens arising from receivables financings accounted for as
sales under generally accepted accounting principles; provided that the
aggregate unrecovered investment of the purchasers shall at no time
exceed $100,000,000 (plus accrued interest);
(n) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $10,000,000;
and
(o) Liens not otherwise permitted by the foregoing clauses of
this Section securing Debt in an aggregate principal or face amount at
any date not to exceed $25,000,000.
6.14. Consolidations, Mergers and Sales of Assets. (a) The
Company will not (i) consolidate or merge with or into any other Person or (ii)
sell, lease or otherwise transfer all or substantially all of its assets to any
other Person, provided that the foregoing provisions of this Section 6.14 shall
not preclude (w) consummation of the Reorganization, (x) the liquidation of the
Surviving Company into the Surviving Parent, (y) any merger or consolidation to
which the Company is a party or (z) with the prior written consent of the
Required Lenders, the sale or other transfer of all or substantially all of the
assets of the Company so long as, in the case of each of (w), (x), (y) and (z),
(i) at the time the Surviving Company, in the case of the Reorganization, the
Surviving Parent, in the case of a liquidation of the Surviving Company into it,
the surviving entity, in the case of a merger or consolidation, or the
transferee, in the case of a sale of all or substantially all of the assets of
the Company, is organized under the laws of the United States of America or a
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state thereof and (except in the case of a merger in which the Company is the
surviving entity) expressly assumes all obligations of the Company under the
Loan Documents pursuant to an instrument in form and substance reasonably
satisfactory to the Required Lenders and (ii) after giving effect thereto, no
Default or Unmatured Default shall have occurred and be continuing.
(b) The Company will not sell, lease or otherwise transfer,
directly or indirectly, in any period of four consecutive fiscal quarters assets
having an aggregate net book value greater than 20% of the consolidated total
assets of the Company and its Subsidiaries at the commencement of such period;
provided that this subsection (b) shall not apply to sale or other disposition
in the ordinary course of business of inventory or obsolete equipment.
6.15. Leverage Test. Consolidated Debt shall at no time
exceed the Debt Limit.
6.16. Subsidiary Debt Limitation. The aggregate Debt of
Subsidiaries, exclusive of (i) Debt under this Agreement and the 5-Year
Agreement and (ii) Debt owing to the Company or a Subsidiary, shall at no time
exceed 20% of the Debt Limit.
ARTICLE VII
DEFAULTS
The occurrence of any one or more of the following events
shall constitute a Default:
7.1. Any representation or warranty made or deemed made under
Article IV by any Obligor to the Lenders or the Administrative Agent under or in
connection with this Agreement or any certificate or other document delivered in
connection with this Agreement or any other Loan Document shall be materially
false on the date as of which made or deemed made.
7.2. Nonpayment of principal of any Note when due, or
nonpayment of interest upon any Note or of any facility fee or other obligations
under any of the Loan Documents within five days after the same becomes due.
7.3. The breach by the Company of any of the terms or
provisions of Sections 6.10 through 6.16.
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7.4. The breach by the Company (other than a breach which
constitutes a Default under Section 7.1, 7.2 or 7.3) of any of the terms or
provisions of this Agreement which is not remedied within thirty days after the
earlier of (a) any Financial Officer of the Company having knowledge of such
breach or (b) written notice from the Administrative Agent or any Lender.
7.5. Default by the Company or any Subsidiary in the payment
of the principal of or interest on any Debt and/or Derivatives Obligations in an
aggregate amount of $25,000,000 or more, as and when the same shall become due
and payable by the lapse of time, by declaration, by call for redemption or
otherwise, and such default shall continue beyond the period of grace, if any,
allowed with respect thereto.
7.6. Default or the happening of any event shall occur under
any indenture, agreement, or other instrument under which any Material
Commitment is made or any Debt of the Company or any Subsidiary in an aggregate
amount of $25,000,000 or more is outstanding and such default or event shall
continue for a period of time sufficient to permit the acceleration of the
maturity of any Debt of the Company or any Subsidiary outstanding thereunder or
to permit termination of any Material Commitment, provided any such default
which exists solely on account of the Reorganization shall not constitute a
Default or Unmatured Default under this Section 7.6 once such default shall have
been waived by the holders of such Debt or the makers of such Material
Commitment.
7.7. The Corporate General Partner shall withdraw from the
Company (except in connection with the Reorganization) and no successor
Corporate General Partner shall have been elected prior thereto or substantially
simultaneously therewith in accordance with Section 12.1 of the limited
partnership agreement of the Company.
7.8. A custodian, trustee or receiver is appointed for the
Company, the Corporate General Partner or any Material Subsidiary or for the
major part of the property of any of the foregoing and is not discharged within
30 days after such appointment.
7.9. Final judgment or judgments for the payment of money
aggregating in excess of $25,000,000 is or are outstanding against the Company
or any Subsidiary and such judgments have remained unpaid, unvacated, unbonded
or unstayed by appeal or otherwise for a period of 30 days.
7.10. The Company, the Corporate General Partner or any
Material Subsidiary becomes insolvent or bankrupt, is generally not paying its
debts as they become due or makes an assignment for the benefit of creditors, or
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the Company, the Corporate General Partner or any Material Subsidiary causes or
suffers an order for relief to be entered with respect to it under applicable
Federal bankruptcy law or applies for or consents to the appointment of a
custodian, trustee or receiver for the Company, the Corporate General Partner or
such Material Subsidiary or for the major part of the property of any of the
foregoing.
7.11. Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or similar law
or laws for the relief of debtors, are instituted by or against the Company, the
Corporate General Partner or any Material Subsidiary, and, if instituted against
the Company, the Corporate General Partner or any Material Subsidiary, are
consented to or are not dismissed within 60 days after such institution.
7.12. Any Change of Control shall occur.
7.13. The Guaranty of the Company under Article XV shall cease
to be in full force and effect or the Company shall contest in any manner the
validity, binding nature or enforceability of Article XV, in either case at a
time when any Loans are outstanding hereunder to an Eligible Subsidiary.
ARTICLE VIII
ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.8,
7.10 or 7.11 occurs with respect to the Company, the obligations of the Lenders
to make Loans hereunder shall automatically terminate and the Obligations shall
immediately become due and payable without presentment, demand, protest or
notice of any kind (all of which the Company hereby expressly waives) or any
other election or action on the part of the Administrative Agent or any Lender.
If any other Default occurs, the Required Lenders may terminate or suspend the
obligations of the Lenders to make Loans hereunder, or declare the Obligations
to be due and payable, or both, in either case upon written notice to the
Company, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or further notice of any kind, all of which
each Obligor hereby expressly waives.
8.2. Amendments. Subject to the provisions of this Article
VIII, the Loan Documents may be amended to add or modify any provisions thereof
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or change in any manner the rights of the Lenders or the Obligors thereunder or
waive any Default thereunder, but only in a writing signed by the Required
Lenders (or the Documentation Agent with the consent in writing of the Required
Lenders) and the Company; provided, however, that no such supplemental agreement
shall, without the consent of each Lender affected thereby:
(i) Extend the maturity of any Loan or Note or reduce the
principal amount thereof, or reduce the rate or extend the
time of payment of interest thereon or fees under Section 2.4.
(ii) Change the percentage of the Commitments or the aggregate
unpaid principal amount, or the number of Lenders, which shall
be required for the Lenders or any of them to take any action
under this Section 8.2 or any other provision (including any
definition) of this Agreement.
(iii) Extend the Termination Date or increase the amount of the
Commitment of any Lender hereunder, or permit any Borrower to
assign its rights or obligations under this Agreement except
in connection with the Reorganization and in compliance with
the terms of Section 6.5 and 6.14.
(iv) Amend Section 2.5.13(a), Section 8.1 or this Section 8.2.
(v) Release the Company from its obligations under Article XV.
No amendment of any provision of this Agreement relating to either Agent shall
be effective without the written consent of such Agent. The Administrative Agent
may waive payment of the fee required under Section 12.3.2 without obtaining the
consent of any of the Lenders. No amendment shall, unless signed by an Eligible
Subsidiary, (w) subject such Eligible Subsidiary to any additional obligation,
(x) increase the principal of or rate of interest on any outstanding Loan of
such Eligible Subsidiary, (y) accelerate the stated maturity of any outstanding
Loan of such Eligible Subsidiary or (z) change this proviso.
8.3. Preservation of Rights. No delay or omission of any
Lender or Agent to exercise any right under the Loan Documents shall impair such
right or be construed to be a waiver of any Default or an acquiescence therein,
and the making of a Loan notwithstanding the existence of a Default or the
inability of the Borrower to satisfy the conditions precedent to such Loan shall
not constitute any waiver or acquiescence. Any single or partial exercise of any
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such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lenders required pursuant to Section 8.2, and then only
to the extent in such writing specifically set forth. All remedies contained in
the Loan Documents or by law afforded shall be cumulative and all shall be
available to the Agents and the Lenders until the Obligations have been paid in
full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and
warranties of the Obligors contained in this Agreement shall survive delivery of
the Notes and the making of the Loans herein contemplated.
9.2. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of
any of the provisions of the Loan Documents.
9.3. Entire Agreement. The Loan Documents embody the entire
agreement and understanding among the Obligors, the Agents and the Lenders and
supersede all prior agreements and understandings among the Obligors, the Agents
and the Lenders relating to the subject matter thereof except as contemplated in
Section 10.12.
9.4. Several Obligations. The respective obligations of the
Lenders hereunder are several and not joint and no Lender shall be the partner
or agent of any other (except to the extent to which either Agent is authorized
to act as such). The failure of any Lender to perform any of its obligations
hereunder shall not relieve any other Lender from any of its obligations
hereunder. No Lender shall have any liability for the failure of any other
Lender to perform its obligations hereunder. This Agreement shall not be
construed so as to confer any right or benefit upon any Person other than the
parties to this Agreement and their respective successors and assigns.
9.5. Expenses; Indemnification. (a) The Company shall
reimburse (i) the Agents for any reasonable costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees of Davis Polk &
Wardwell, special counsel for the Agents) paid or incurred by either Agent in
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connection with the preparation, review, execution, delivery, amendment,
modification and administration of the Loan Document and (ii) the Agents and the
Lenders for any reasonable costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and allocated costs of inside counsel for
the Agents and the Lenders) paid or incurred by either Agent or any Lender in
connection with the collection and enforcement of the Loan Documents, any
refinancing or restructuring of the credit arrangements provided under this
Agreement in the nature of a "work-out" or any insolvency or bankruptcy
proceedings in respect of any Obligor.
(b) The Company further agrees to indemnify each Agent and
each Lender, their respective affiliates, and the respective directors,
officers, employees and agents of the foregoing, against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including, without
limitation, all expenses of litigation or preparation therefor whether or not
the Agent or any Lender is a party thereto) (collectively, the "Indemnified
Amounts") which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the transactions contemplated hereby or the
direct or indirect application or proposed application of the proceeds of any
Loan hereunder; provided that it is understood that the Company shall not, in
respect of the legal expenses of the Lenders in connection with any proceeding
or related proceedings in the same jurisdiction, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Lenders designated by the Agents (except if and to the extent that, owing to
existing or potential conflicts of interest among them, such counsel shall
advise that representation of all Lenders by a single firm would not be
appropriate); and provided, further, that the Company shall not be liable to any
Lender for any Indemnified Amounts (x) resulting from the gross negligence or
willful misconduct of such Lender, its affiliates or any of their respective
officers, directors, employees and agents or (y) constituting the costs and
expenses of prosecuting a suit or proceeding commenced by such Lender which is
finally determined adversely to such Lender (any counterclaim asserted against
such Lender being treated as a separate proceeding for this purpose). The
obligations of the Company under this Section 9.5 shall survive the termination
of this Agreement.
9.6. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agents may furnish one to each of the
Lenders.
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9.7. Severability of Provisions. Any provision in any Loan
Document that is held to be inoperative, unenforceable, or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable, or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.8. Nonliability of Lenders. The relationship between the
Obligors and the Lenders and the Agents shall be solely that of debtor and
creditor. Neither Agent nor any Lender shall have any fiduciary responsibilities
to any Obligor. Neither Agent nor any Lender undertakes any responsibility to
any Obligor to review or inform any Obligor of any matter in connection with any
phase of its business or operations.
9.9. Choice of Law. The loan documents shall be governed by
and construed in accordance with the internal laws (and not the law of
conflicts) of the State of New York.
9.10. Consent to Jurisdiction. Each obligor hereby irrevocably
submits to the non-exclusive jurisdiction of any United States Federal or New
York State Court sitting in New York City in any action or proceeding arising
out of or relating to any loan documents and each obligor hereby irrevocably
agrees that all claims in respect of such action or proceeding may be heard and
determined in any such court and irrevocably waives to the extent allowed by law
any objection it may now or hereafter have as to the venue of any such suit,
action or proceeding brought in such a court or that such court is an
inconvenient forum. Nothing herein shall limit the right of either agent or any
lender to bring proceedings against any obligor in the courts of any other
jurisdiction. Any judicial proceeding by any obligor against either agent or any
lender or any affiliate of either agent or any lender involving, directly or
indirectly, any matter in any way arising out of, related to, or connected with
any loan document shall be brought only in a court in New York City, unless such
obligor is unable to obtain such jurisdiction.
9.11. Waiver of Jury Trial. Each obligor, agent and lender
hereby waives to the extent allowed by law trial by jury in any judicial
proceeding involving, directly or indirectly, any matter (whether sounding in
tort, contract or otherwise) in any way arising out of, related to, or connected
with any loan document or the relationship established thereunder.
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9.12. Confidentiality. Each Lender agrees to hold any
confidential information which it may receive from the Parent, the Company or
any of its Subsidiaries pursuant to this Agreement in confidence, except for
disclosure (i) to other Lenders and their respective Affiliates, (ii) to legal
counsel, accountants, and other professional advisors to that Lender, (iii) to
regulatory officials upon their request or otherwise pursuant to law or
regulation, (iv) as requested pursuant to or as required by law, regulation, or
legal process, (v) in connection with any legal proceeding to which that Lender
is a party, and (vi) permitted by Section 12.4. The restrictions in this Section
9.12 shall not apply to any information which is or becomes generally available
to the public other than as a result of disclosure by a Lender or a Lender's
representatives.
ARTICLE X
THE AGENTS
10.1. Appointment. First Chicago and Morgan are hereby
appointed Administrative Agent and Documentation Agent, respectively, hereunder
and under each other Loan Document, and each of the Lenders irrevocably
authorizes each such Agent to act as the contractual representative of such
Lender. Each such Agent agrees to act as such upon the express conditions
contained in this Article X. Neither Agent shall have a fiduciary relationship
in respect of any Lender by reason of this Agreement.
10.2. Powers. Each Agent shall have and may exercise such
powers under the Loan Documents as are specifically delegated to such Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto. Neither Agent shall have any implied duties to the Lenders, or any
obligation to the Lenders to take any action thereunder except any action
specifically provided by the Loan Documents to be taken by such Agent.
10.3. General Immunity. Neither Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable to any Obligor or any Lender for any action taken or omitted to
be taken by it or them in their respective agency capacities under or in
connection with this Agreement except for its own gross negligence or willful
misconduct.
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10.4. No Responsibility for Loans, Recitals, etc. Neither
Agent nor any of its affiliates nor any of their respective directors, officers,
agents or employees shall be responsible for or have any duty to ascertain,
inquire into, or verify (i) any statement, warranty or representation made in
connection with any Loan Document or any borrowing hereunder; (ii) the
performance or observance of any of the covenants or agreements of any Obligor
under any Loan Document; (iii) the satisfaction of any condition specified in
Article IV, except receipt of items required to be delivered to such Agent; or
(iv) the validity, effectiveness or genuineness of any Loan Document or any
other instrument or writing furnished in connection therewith, except for the
authority of such Agent's signatory to this Agreement.
10.5. Action on Instructions of Lenders. Each Agent shall in
all cases be fully protected in acting, or in refraining from acting, hereunder
and under any other Loan Document in accordance with written instructions signed
by the Required Lenders (or, where so specified herein, all the Lenders), and
such instructions and any action taken or failure to act pursuant thereto shall
be binding on all of the Lenders and on all holders of Notes. Each Agent shall
be fully justified in failing or refusing to take any action hereunder and under
any other Loan Document unless it shall first be indemnified to its satisfaction
by the Lenders pro rata against any and all liability, cost and expense that it
may incur by reason of taking or continuing to take any such action, provided
that, such indemnity need not include liability, costs and expenses arising
solely from the gross negligence or willful misconduct of the Agent.
10.6. Employment of Agents and Counsel. Each Agent may execute
any of its duties as Agent hereunder and under any other Loan Document by or
through employees, agents, and attorneys-in-fact and shall not be answerable to
the Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. Each Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. Each Agent shall be
entitled to rely upon any Note, notice, consent, certificate, affidavit, letter,
telegram, statement, paper or document believed by it to be genuine and correct
and to have been signed or sent by the proper person or persons, and, in respect
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to legal matters, upon the opinion of counsel selected in good faith by such
Agent, which counsel may be employees of such Agent or may be counsel for an
Obligor.
10.8. Agent's Reimbursement and Indemnification. The Lenders
agree to reimburse and indemnify each Agent ratably in proportion to their
respective Commitments (i) for any amounts not reimbursed by the Company for
which such Agent is entitled to reimbursement by the Company under the Loan
Documents, (ii) for any other expenses not reimbursed by the Company incurred by
such Agent on behalf of the Lenders, in connection with the preparation,
execution, delivery, administration and enforcement of the Loan Documents and
(iii) for any liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind and nature
whatsoever and not reimbursed by the Company which may be imposed on, incurred
by or asserted against such Agent in any way relating to or arising out of the
Loan Documents or any other document delivered in connection therewith or the
transactions contemplated thereby, or the enforcement of any of the terms
thereof or of any such other documents, provided that no Lender shall be liable
for any of the foregoing to the extent they arise from the gross negligence or
willful misconduct of such Agent.
10.9. Rights as a Lender. With respect to its Commitment,
Loans made by it and the Notes issued to it, each Agent shall have the same
rights and powers hereunder and under any other Loan Document as any Lender and
may exercise the same as though it were not an Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include each Agent in
its individual capacity. Each Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Company or any of its Subsidiaries.
10.10. Lender Credit Decision. Each Lender acknowledges that
it has, independently and without reliance upon either Agent or any other Lender
and based on the financial statements submitted by the Company and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan Documents.
Each Lender also acknowledges that it will, independently and without reliance
upon either Agent or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement and the
other Loan Documents.
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10.11. Successor Agent. Each Agent may resign at any time by
giving at least 30 days' prior written notice thereof to the Lenders and the
Company and such resignation shall be effective upon the appointment of a
successor agent. Upon any such resignation, the Company, with the approval of
the Required Lenders, shall have the right to appoint a successor Agent. If no
successor Agent shall have been so appointed and approved and shall have
accepted such appointment within thirty days after the retiring Agent's giving
notice of resignation, then the retiring Agent may appoint a successor Agent.
Such successor Agent shall be a commercial bank with an office located in the
United States of America having capital and retained earnings of at least
$1,000,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent.
The retiring Agent shall be discharged from its duties and obligations hereunder
and under the other Loan Documents upon the effectiveness of its resignation
hereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article X shall continue in effect for its benefit in respect
of any actions taken or omitted to be taken by it while it was acting as Agent
hereunder and under the other Loan Documents.
10.12. Agents' Fees. The Company hereby agrees to pay to each Agent
for its sole account such fees as heretofore agreed upon by the Company and
such Agent in writing.
ARTICLE XI
SETOFF RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any
rights of the Lenders under applicable law, if any Obligor becomes insolvent,
however evidenced, or any Default occurs, any indebtedness from any Lender to
any Obligor (including all account balances, whether provisional or final and
whether or not collected or available) may be offset and applied toward the
payment of the Obligations owing by such Obligor to such Lender, whether or not
such Obligations, or any part hereof, shall then be due.
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11.2. Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon its share of any Advance (other than
payments received pursuant to Article III) in a greater proportion than that
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Loans comprising that Advance held by the other
Lenders so that after such purchase each Lender will hold its ratable proportion
of the unpaid Loans comprising that Advance. If any Lender, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives collateral or other protection for its Obligations or such amounts
which may be subject to setoff, such Lender agrees, promptly upon demand, to
take such action necessary such that all Lenders share in the benefits of such
collateral ratably in proportion to their Loans. In case any such payment is
disturbed by legal process, or otherwise, appropriate further adjustments shall
be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the
Loan Documents shall be binding upon and inure to the benefit of the Obligors,
the Agents and the Lenders and their respective successors and assigns, except
that (i) no Obligor shall have the right to assign its rights or obligations
under the Loan Documents (except in a transaction expressly permitted by Section
6.5 or 6.14(a)) and (ii) any assignment by any Lender must be made in compliance
with Section 12.3. Notwithstanding clause (ii) of this Section, any Lender may
at any time, without the consent of any Obligor or either Agent, assign all or
any portion of its rights under this Agreement and its Notes to a Federal
Reserve Bank; provided, however, that no such assignment shall release the
transferor Lender from its obligations hereunder. Each Agent may treat the payee
of any Note as the owner thereof for all purposes hereof unless and until such
payee complies with Section 12.3 in the case of an assignment thereof or, in the
case of any other transfer, a written notice of the transfer is filed with each
Agent. Any assignee or transferee of a Note agrees by acceptance thereof to be
bound by all the terms and provisions of the Loan Documents. Any request,
authority or consent of any Person, who at the time of making such request or
giving such authority or consent is the holder of any Note, shall be conclusive
and binding on any subsequent holder, transferee or assignee of such Note or of
any Note or Notes issued in exchange therefor.
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12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law, at any
time sell to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Note held by such Lender, the
Commitment of such Lender, or any other interest of such Lender under the Loan
Documents; provided, however, that, except in the case (i) of a sale of a
participation in a Competitive Bid Loan or (ii) a sale of a Participation to any
other Lender, such participations shall require the consent of the Company and
shall each be in a minimum amount of $5,000,000. In the event of any such sale
by a Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender shall
remain solely responsible to the other parties hereto for the performance of
such obligations, such Lender shall remain the holder of any such Note for all
purposes under the Loan Documents, all amounts payable by the Obligors under
this Agreement shall be determined as if such Lender had not sold such
participating interests, and the Obligors and the Agents shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under the Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment, modification
or waiver of any provision of the Loan Documents other than any amendment,
modification or waiver with respect to any Loan or Commitment in which such
Participant has an interest which forgives principal, interest or fees or
reduces the interest rate or fees payable with respect to any such Loan or
Commitment, postpones any date fixed for any regularly-scheduled payment of
principal of, or interest or fees on, any such Loan or Commitment, releases any
guarantor of any such Loan, if any, or releases any substantial portion of
collateral, if any, securing any such Loan.
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12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any time assign
to one or more banks or other entities ("Purchasers") all or a portion (if such
Purchaser is not a Lender immediately before such assignment, in a minimum
amount of $10,000,000) of its rights and obligations under the Loan Documents.
Such assignment shall be substantially in the form of Exhibit "E" hereto. The
consent of the Company and the Agents shall be required prior to an assignment
becoming effective with respect to a Purchaser which is not both a financial
institution and an affiliate of the transferor. Such consents shall be given in
substantially the form attached as Exhibit "II" to Exhibit "E" hereto.
12.3.2. Effect; Effective Date. Upon (i) delivery to the
Company and the Agents of a notice of assignment, substantially in the form
attached as Exhibit "I" to Exhibit "E" hereto (a "Notice of Assignment"),
together with any consent required by Section 12.3.1, and (ii) payment of a
$3,500 fee to the Administrative Agent by the assignee or assignor Lender for
processing such assignment, such assignment shall become effective on the
effective date specified in such Notice of Assignment. On and after the
effective date of such assignment, such Purchaser shall for all purposes be a
Lender party to this Agreement and any other Loan Document executed by the
Lenders and shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto, and no
further consent or action by the Obligors, the Lenders or the Agents shall be
required to release the transferor Lender with respect to the percentage of the
Aggregate Commitment and Loans assigned to such Purchaser. Upon the consummation
of any assignment to a Purchaser pursuant to this Section 12.3.2, the transferor
Lender, the Agents and the Obligors shall make appropriate arrangements so that
replacement Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each case in
principal amounts reflecting their respective Commitments, as adjusted pursuant
to such assignment.
12.4. Dissemination of Information. The Obligors authorize
each Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
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Lender's possession concerning the creditworthiness of the Company and its
Subsidiaries; provided that each Transferee and prospective Transferee agrees to
be bound by Section 9.12 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Purchaser which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Purchaser, concurrently with the effectiveness of such
transfer, to comply with the provisions of Section 2.5.14.
12.6. Increased Costs. Subject to the applicable limitations
set forth therein and to the further provisions of this Section 12.6, each
Transferee shall be entitled to the benefits of Section 2.5.14 and 2.5.15 and
Article III with respect to the rights transferred to it to the same extent as a
Lender. No Transferee (including, for purposes of this Section 12.6, any
successor Lending Installation) of any Lender's rights shall be entitled to
receive any greater payment under Section 2.5.14 or Article III than such Lender
would have been entitled to receive with respect to the rights transferred,
unless such transfer is made with the Company's prior written consent or by
reason of the provisions of Section 3.4 requiring such Lender to designate a
different Lending Installation under certain circumstances or at a time when the
circumstances giving rise to such greater payment did not exist.
ARTICLE XIII
NOTICES
13.1. Giving Notice. All notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing (including telex or facsimile) and addressed or delivered to
such party: (a) in the case of the Company or either Agent, at its address,
facsimile number or telex number set forth on the signature pages hereof, (b) in
the case of any Lender, at its address, facsimile number or telex number set
forth in its Administrative Questionnaire, (c) in the case of any Eligible
Subsidiary, to it care of the Company and (d) in the case of any party, such
other address, facsimile number or telex number as such party may hereafter
specify for the purpose by notice to the Agents and the Company. All such
notices shall be effective when received at the address specified above.
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ARTICLE XIV
REPRESENTATIONS AND WARRANTIES
OF ELIGIBLE SUBSIDIARIES
Each Eligible Subsidiary shall be deemed by the execution and
delivery of its Election to Participate to have represented and warranted that:
14.1. Existence and Power. It is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and is a Subsidiary of the Company.
14.2. Corporate or Partnership and Governmental Authorization;
Contravention. The execution and delivery by it of its Election to Participate
and its Notes, and the performance by it of this Agreement and its Notes, are
within its legal powers, have been duly authorized by all necessary corporate,
partnership or other legal action, require no action by or in respect of, or
filing with, any governmental body, agency or official and do not contravene, or
constitute a default under, in any material respect any provision of applicable
law or regulation or of its organizational documents or of any indenture or
other agreement or instrument governing Debt or any other material agreement or
instrument binding upon the Company or such Eligible Subsidiary or result in the
creation or imposition of any liens or encumbrances on any asset of the Company
or any of its Subsidiaries.
14.3. Binding Effect. This Agreement constitutes a legal,
valid and binding agreement of such Eligible Subsidiary and each of its Notes,
when executed and delivered in accordance with this Agreement, will constitute a
legal, valid and binding obligation of such Eligible Subsidiary, in each case
enforceable in accordance with its terms except as enforceability may be limited
by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.
14.4. Taxes. Except as disclosed in such Election to
Participate, there is no income, stamp or other tax of any country, or any
taxing authority thereof or therein, imposed by or in the nature of withholding
or otherwise, which is imposed on any payment to be made by such Eligible
Subsidiary pursuant hereto or on its Notes, or is imposed on or by virtue of the
execution, delivery or enforcement of its Election to Participate or of its
Notes.
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ARTICLE XV
GUARANTY
15.1. The Guaranty. The Company hereby unconditionally
guarantees the full and punctual payment (whether at stated maturity, upon
acceleration or otherwise) of the principal of and interest on each Note issued
by any Eligible Subsidiary pursuant to this Agreement, and the full and punctual
payment of all other amounts payable by any Eligible Subsidiary under this
Agreement. Upon failure by any Eligible Subsidiary to pay punctually any such
amount, the Company shall forthwith on demand pay the amount not so paid at the
place and in the manner specified in this Agreement.
15.2. Guaranty Unconditional. The obligations of the Company
hereunder shall be unconditional and absolute and, without limiting the
generality of the foregoing, shall not be released, discharged or otherwise
affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any Eligible Subsidiary under
this Agreement or any Note, by operation of law or otherwise;
(ii) any modification or amendment of or supplement to this
Agreement or any Note;
(iii) any release, impairment, non-perfection or invalidity of any
direct or indirect security for any obligation of any Eligible
Subsidiary under this Agreement or any Note;
(iv) any change in the corporate existence, structure or ownership
of any Eligible Subsidiary, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting any Eligible
Subsidiary or its assets or any resulting release or discharge of any
obligation of any Eligible Subsidiary contained in this Agreement or
any Note;
(v) the existence of any claim, set-off or other rights which
the Company may have at any time against any Eligible Subsidiary,
either Agent, any Lender or any other Person, whether in connection
herewith or any unrelated transactions, provided that nothing herein
shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim;
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(vi) any invalidity or unenforceability relating to or against any
Eligible Subsidiary for any reason of this Agreement or any Note, or
any provision of applicable law or regulation purporting to prohibit
the payment by any Eligible Subsidiary of the principal of or interest
on any Note or any other amount payable by it under this Agreement; or
(vii) any other act or omission to act or delay of any kind by any
Eligible Subsidiary, either Agent, any Lender or any other Person or
any other circumstance whatsoever which might, but for the provisions
of this paragraph, constitute a legal or equitable discharge of or
defense to the Company's obligations hereunder.
15.3. Discharge Only Upon Payment In Full; Reinstatement In
Certain Circumstances. The Company's obligations hereunder shall remain in full
force and effect until the Commitments shall have terminated and the principal
of and interest on the Notes and all other amounts payable by the Company and
each Eligible Subsidiary under this Agreement shall have been paid in full. If
at any time any payment of principal of or interest on any Note or any other
amount payable by any Eligible Subsidiary under this Agreement is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Eligible Subsidiary or otherwise, the Company's
obligations hereunder with respect to such payment shall be reinstated at such
time as though such payment had been due but not made at such time.
15.4. Waiver by the Company. The Company irrevocably waives
acceptance hereof, presentment, demand, protest and any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
Person against any Eligible Subsidiary or any other Person.
15.5. Subrogation. Upon making any payment with respect to any
Eligible Subsidiary hereunder, the Company shall be subrogated to the rights of
the payee against such Eligible Subsidiary with respect to such payment;
provided that the Company shall not enforce any payment by way of subrogation
until all amounts of principal of and interest on the Notes and all other
amounts payable by such Eligible Subsidiary under this Agreement have been paid
in full.
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15.6. Stay of Acceleration. In the event that acceleration of
the time for payment of any amount payable by any Eligible Subsidiary under this
Agreement or its Notes is stayed upon insolvency, bankruptcy or reorganization
of such Eligible Subsidiary, all such amounts otherwise subject to acceleration
under the terms of this Agreement shall nonetheless be payable by the Company
hereunder forthwith on demand by the Required Lenders.
ARTICLE XVI
COUNTERPARTS; EFFECTIVENESS
This Agreement may be executed in any number of counterparts,
all of which taken together shall constitute one agreement, and any of the
parties hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when the Documentation Agent shall have received
evidence reasonably satisfactory to it that (i) this Agreement has been executed
by the Company, the Agents and the Lenders and (ii) the commitments of the
lenders parties to the Credit Agreement dated as of August 31, 1995 and amended
and restated as of October 15, 1996 among the Company, such lenders and First
Chicago, as administrative agent, and Morgan, as documentation agent (the "Prior
Agreement") shall have terminated and all loans outstanding thereunder and all
accrued interest and fees thereunder shall have been paid in full; provided that
(x) any "Competitive Bid Loan" made by a Lender pursuant to the Prior Agreement
which is outstanding at the time the other conditions to the effectiveness
hereof are satisfied shall remain outstanding on the terms applicable thereto
under the Prior Agreement, and shall be deemed a Competitive Bid Loan made
hereunder on such terms and (y) the Company and the Lenders comprising the
Required Lenders (as defined in the Prior Agreement) hereby agree that the
Commitments (as defined in the Prior Agreement) shall terminate automatically
upon the satisfaction of all other conditions to effectiveness of this
Agreement, without requirement of notice under the Prior Agreement or any other
action by any party hereto or thereto.
Page 75
<PAGE>
IN WITNESS WHEREOF, the Company, the Lenders and the Agents
have executed this Agreement as of the date first above written.
THE SERVICEMASTER COMPANY LIMITED
PARTNERSHIP
By: ServiceMaster Management Corporation,
its General Partner
By:/s/ Eric P. Zarnikow
Title:Vice President and Treasurer
Address: One ServiceMaster Way
Downers Grove, IL 60515-1700
Attention: Mr. Eric Zarnikow
Telephone: (630) 271-2361
Facsimile: (630) 271-5604
Page 76
<PAGE>
Commitment
- ----------
$37,500,000 THE FIRST NATIONAL BANK OF CHICAGO,
individually and as Administrative
Agent
By:/s/ Patricia H. Besser
Title:Vice President/Senior Corporate Banker
Address: One First National Plaza
Suite 0324
Chicago, IL 60670
Attention: Patricia H. Besser
Telephone: (312) 732-7703
Facsimile: (312) 732-5296
Page 77
<PAGE>
$37,500,000 MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, individually and as
Documentation Agent
By:/s/ Charles H. King
Title:Vice President
Address: 60 Wall Street
New York, NY 10260-0060
Attention: Charles King
Telephone: (212) 648-7138
Facsimile: (212) 648-5336
Page 78
<PAGE>
$25,000,000 BANK OF AMERICA ILLINOIS
By:/s/ William F. Sweeney
Title:Vice President
Address: 231 S. LaSalle Street
Chicago, IL 60697
Attention: William F. Sweeney
Telephone: (312) 828-1843
Facsimile: (312) 987-1276
Page 79
<PAGE>
$18,125,000 BANK OF MONTREAL
By:/s/ Peter W. Steelman
Title:Director
Address: 115 S. LaSalle. 13 West
Chicago, IL 60603
Attention: Peter W. Steelman
Telephone: (312) 750-3812
Facsimile: (312) 750-3783
Page 80
<PAGE>
$18,125,000 THE BANK OF NEW YORK
By:/s/ John M. Lokay, Jr.
Title:Vice President
Address: One Wall Street
New York, NY 10286
Attention: John M. Lokay, Jr.
Telephone: (212) 635-1172
Facsimile: (212) 635-1208/9
Page 81
<PAGE>
$18,125,000 CAISSE NATIONALE DE CREDIT AGRICOLE
By:/s/ Dean Balice
Title:Senior Vice President Branch Manager
Address:55 East Monroe Street
Chicago, IL 60603-5702
Attention: Dean Balice
Telephone: (312) 917-7449
Facsimile: (312) 372-2830
Page 82
<PAGE>
$14,375,000 CREDIT LYONNAIS CHICAGO BRANCH
By:/s/ Mary Ann Klemm
Title:Vice President
Address: 227 West Monroe Street
Chicago, IL 60606
Attention: Michael Lord
Assistant Vice President
Telephone: (312) 220-7318
Facsimile: (312) 641-0527
Page 83
<PAGE>
$14,375,000 SUNTRUST BANK, ATLANTA
By:/s/ Shelley M. Browne
Title:Vice President
By:/s/ Jennifer P. Harrelson
Title:Senior Vice President
Address: 25 Park Place
Atlanta, GA 30303
Attention: Shelley Browne
Telephone: (404) 658-4918
Facsimile: (404) 588-8505
Page 84
<PAGE>
$3,750,000 FIRST TENNESSEE BANK NATIONAL
ASSOCIATION
By:/s/ James H. Moore, Jr.
Title:Vice President
Address: 165 Madison Avenue
Memphis, TN 38109-0084
Telephone: (901) 523-4108
Facsimile: (901) 523-4267
Page 85
<PAGE>
$18,125,000 MELLON BANK, N.A.
By:/s/ Laurel Larson
Title:Assistant Vice President
Address: 55 East Monroe
Suite 2600
Chicago, IL 60603
Telephone: (312) 357-3408
Facsimile: (312) 357-3414
Page 86
<PAGE>
$25,000,000 NATIONSBANK, N.A.
By:/s/ Mary Carol Daly
Title:Vice President
Address: 233 S. Wacker Drive
Suite 2800
Chicago, IL 60606
Telephone: (312) 234-5618
Facsimile: (312) 234-5619
Page 87
<PAGE>
$12,500,000 THE SANWA BANK, LIMITED, CHICAGO BRANCH
By:/s/ Richard H. Ault
Title:Vice President
Address: 10 S. wacker Drive
31st Floor
Chicago, IL 60606
Telephone: (312) 368-3011
Facsimile: (312) 346-6677
Page 88
<PAGE>
$7,500,000 THE NORTHERN TRUST COMPANY
By:/s/ Diane M. Baer
Title:Second Vice President
Address: 50 S. LaSalle Street
Chicago, IL 60675
Telephone: (312) 444-5802
Facsimile: (312) 444-5055
- ------------
$250,000,000
============
Page 89
<PAGE>
PRICING SCHEDULE
The Applicable Margin or Facility Fee Rate at any date is the
applicable percentage amount set forth in the table below based on the Pricing
Level at such date:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ---------- ------------------ -------------------- ------------------- ---------------- ---------------- ==================
Level I Level II Level III Level IV Level V Level VI
- ---------- ------------------ -------------------- ------------------- ---------------- ---------------- ==================
Applicable 0.1750% 0.1950% 0.2350% 0.2700% 0.3500% 0.5625%
Eurocurrency
Margin
- ---------- ------------------ -------------------- ------------------- ---------------- ---------------- ==================
Applicable 0.3000% 0.3250% 0.3600% 0.3950% 0.4750% 0.6875%
CD Rate
Margin
- ---------- ------------------ -------------------- ------------------- ---------------- ---------------- ==================
Facility 0.0500% 0.0550% 0.0650% 0.0800% 0.1000% 0.1875%
Fee Rate
- ---------- ------------------ -------------------- ------------------- ---------------- ---------------- ==================
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings:
"Debt Rating" means at any date the higher of the credit
ratings, if any, publicly announced by S&P and Moody's for the Company's senior
unsecured debt without third-party credit enhancement (or if only one of S&P or
Moody's shall have assigned a credit rating, then such rating). If the ratings
assigned by S&P and Moody's differ by more than one increment, the Debt Rating
will be the median rating (or the higher of two intermediate ratings if there is
no median rating).
"Level I Pricing" applies at any date if, at such date, the
Debt Rating is A(A2) or better.
"Level II Pricing" applies at any date if, at such date, (a)
the Debt Rating is A-(A3) or better and (b) no better Pricing Level applies.
"Level III Pricing" applies at any date if, at such date, (a)
the Debt Rating is BBB+(Baa1) or better and (b) no better Pricing Level applies.
"Level IV Pricing" applies at any date if, at such date, (a)
the Debt Rating is BBB(Baa2) or better and (b) no better Pricing Level applies.
"Level V Pricing" applies at any date if, at such date, (a)
the Debt Rating is BBB-(Baa3) or better and (b) no better Pricing Level applies.
<PAGE>
"Level VI Pricing" applies at any date if, at such date, no
other Pricing Level applies.
"Pricing Level" refers to the determination of which of Level
I, Level II, Level III, Level IV, Level V or Level VI applies at any date.
Notwithstanding the foregoing, for so long after the
effectiveness of this Agreement as the credit ratings of the Company remain, as
a result of the WMX Repurchase, on credit watch (with negative implications) or
similar status as publicly announced by either Moody's or S&P, if the Pricing
Level for any date would otherwise be Level I or Level II, the Pricing Level for
such date shall be Level III.
<PAGE>
SCHEDULE 6.11
SUBSIDIARY RESTRICTIONS
1. American Home Shield Corporation and its subsidiaries are subject to
regulatory restrictions imposed by various states which limit dividends and
similar payments.
<PAGE>
EXHIBIT "A"
NOTE
_________ ___,19__
THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP, a Delaware limited
partnership (the "Company"), promises to pay to the order of ___________ (the
"Lender") the aggregate unpaid principal amount of all Loans made by the Lender
to the Company pursuant to the 364-Day Credit Agreement dated as of April 1,
1997 among the Company, the Lenders named therein, including the Lender, The
First National Bank of Chicago, as Administrative Agent, and Morgan Guaranty
Trust Company of New York, as Documentation Agent (as the same may be amended or
modified, hereinafter referred to as the "Agreement"), in the currencies and on
the dates specified in the Agreement, in immediately available funds at the main
office of The First National Bank of Chicago in Chicago, Illinois, as
Administrative Agent, or as otherwise directed by the Administrative Agent
pursuant to the terms of the Agreement, together with interest, in like currency
and funds, on the unpaid principal amount hereof at the rates and on the dates
specified in the Agreement.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder; provided, however, that any failure to so record shall not
affect the Company's obligations under any Loan Document.
This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Agreement, to which Agreement, as it may be amended from
time to time, reference is hereby made for a statement of the terms and
conditions under which this Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Agreement.
THE SERVICEMASTER COMPANY
LIMITED PARTNERSHIP
By: ServiceMaster Management
Corporation,
its General Partner
By: __________________________________
Title: _______________________________
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF THE SERVICEMASTER COMPANY
LIMITED PARTNERSHIP
Date Currency Maturity Principal Unpaid
and Amount Balance
Principal Paid
Amount of
Loan
- ---------- ----------- --------- ----------- ---------
<PAGE>
EXHIBIT "B-1"
FORM OF OPINION OF KIRKLAND & ELLIS
April 1, 1997
To the Lenders who are parties to the
Credit Agreement described herein
Re: The ServiceMaster Company Limited
Partnership 364-Day Credit Agreement
dated as of April 1, 1997
Ladies and Gentlemen:
We have acted as special counsel to The ServiceMaster Company Limited
Partnership, a Delaware limited partnership (the "Company"), in connection with
the negotiation, execution and delivery of the 364-Day Credit Agreement dated as
of April 1, 1997 among the Company, The First National Bank of Chicago,
individually and as Administrative Agent, Morgan Guaranty Trust Company of New
York, individually and as Documentation Agent, and the Lenders named therein,
providing for Advances in an aggregate principal amount not exceeding
$250,000,000 at any one time outstanding (the "Credit Agreement"). Terms used
but not otherwise defined herein are used herein as defined in the Credit
Agreement.
For purposes of this opinion, we have examined the following:
(a) the Credit Agreement; and
(b) the proposed notes to be issued by the Company to the Lenders
pursuant to the Credit Agreement (the "Notes").
In addition, in connection with rendering the opinions expressed below
("our opinions"), we have examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such records,
certificates and other documents, as in our judgment are necessary or
appropriate to enable us to render our opinions. As to various factual matters
material to our opinions, we have relied upon certificates of public officials,
certificates of officers of ServiceMaster Management Corporation, a Delaware
corporation (the "Corporate General Partner") on behalf of the Company and the
representations and warranties contained in Article V of the Credit Agreement.
In addition, in rendering our opinions, we have assumed, with your permission
and without independent verification, that:
<PAGE>
(a) the signatures of persons signing all documents in connection with
which our opinions are rendered are genuine and authorized (other than those of
the Company and the Corporate General Partner on the Credit Agreement, the
Notes, and other agreements, certificates and documents entered into in
connection with the closing of the transactions contemplated by the Credit
Agreement);
(b) all documents submitted to us as originals or duplicate originals
are authentic;
(c) all documents submitted to us as copies, whether certified or not,
conform to authentic original documents;
(d) all parties to the documents reviewed by us (other than the Company
and the Corporate General Partner in connection with the Credit Agreement and
other agreements, certificates and documents entered into in connection with the
closing of the transactions contemplated by the Credit Agreement) have full
power and authority to execute, to deliver and to perform their obligations
under such documents and under the documents required or permitted to be
delivered and performed thereunder, and all such documents have been duly
authorized by all necessary action, have been duly executed by such parties,
have been duly delivered by such parties, and are legal, valid and binding
obligations of such parties enforceable in accordance with their terms;
(e) any approval, consent or withholding of objection on the part of,
or filing, registration or qualification with, any governmental body which may
be required in connection with the execution and delivery of the Credit
Agreement on account of your regulatory status has been obtained or made by you;
and
(f) the opinions set forth in the letter to you of even date herewith
from Vernon T. Squires, Esq. are correct.
Based upon and subject to the foregoing, we are of the opinion that:
(1) The Company is a limited partnership, validly existing under the
laws of the State of Delaware, has full partnership power and authority and is
duly authorized to enter into and perform the Credit Agreement and to incur the
obligations to be evidenced by the Notes;
(2) The Corporate General Partner is a corporation validly existing and
in good standing under the laws of the State of Delaware, has full corporate
power and authority and is duly authorized to execute and deliver the Credit
Agreement on behalf of the Company;
(3) The execution and delivery of the Credit Agreement and the Notes by
the Corporate General Partner on behalf of the Company do not conflict with or
result in a breach of any provision of the Amended and Restated Agreement of
Limited Partnership of the Company; and
<PAGE>
(4) The Credit Agreement and the Notes have been duly authorized,
executed and delivered by the Corporate General Partner on behalf of the Company
and constitute legal, valid and binding obligations of the Company enforceable
in accordance with their respective terms.
Our opinions are subject to the following further qualifications:
(a) our opinions are subject to the effect of any applicable
bankruptcy, insolvency, reorganization, arrangement, moratorium, fraudulent
conveyance or other similar laws;
(b) the binding effect and the enforceability of the Credit Agreement
and the Notes and the availability of injunctive relief or other equitable
remedies thereunder are subject to the effect of general principles of equity
(regardless of whether enforcement is considered in proceedings at law or in
equity);
(c) the binding effect and the enforceability of the Credit Agreement
and the Notes are subject to the effect of laws and judicial decisions which
have imposed duties and standards of conduct (including, without limitation,
obligations of good faith, fair dealing and reasonableness and any obligation to
demonstrate that enforcement of provisions that are burdensome on a debtor is
reasonably necessary for the protection of the creditor) upon creditors;
(d) we express no opinion as to the enforceability of cumulative
remedies to the extent such cumulative remedies purport to or would have the
effect of compensating the party entitled to the benefits thereof in amounts in
excess of the actual loss suffered by such party or would violate applicable
laws concerning election of remedies;
(e) notwithstanding certain language of the Credit Agreement, you will
be limited to recovering only reasonable expenses, only reasonable attorneys'
fees and legal expenses and only reasonable compensation for funding losses,
increased costs or yield protection;
(f) we express no opinion as to, or the effect or applicability of, any
laws other than the laws of the State of New York, the federal laws of the
United States of America and the General Corporation Law and the Revised Uniform
Limited Partnership Act of the State of Delaware;
(g) requirements in the Credit Agreement specifying that provisions
thereof may only be waived in writing may not be valid, binding or enforceable
to the extent that an oral agreement or an implied agreement by trade practice
or course of conduct has been created modifying any provision of such documents;
<PAGE>
(h) we express no opinion as to the enforceability of the
indemnification provisions of the Credit Agreement insofar as said provisions
contravene public policy or might require indemnification or payments to you
with respect to any loss, cost or expense arising out of your gross negligence
or willful misconduct or any violation by you of statutory duties, general
principles of equity or public policy;
(i) waivers of equitable rights and defenses may not be valid, binding
or enforceable under state or federal law and certain rights of debtors and
duties of lenders may not be waived, released, varied or disclaimed by agreement
prior to a default; and
(j) we express no opinion as to the validity, binding effect or
enforceability of Section 9.10 of the Credit Agreement (Consent to
Jurisdiction).
This letter is furnished to you pursuant to Section 4.1(v) of the
Credit Agreement and is not to be used, circulated, quoted or otherwise relied
upon by any other person or entity or for any other purpose.
This opinion is for the benefit of the Lenders and their respective
counsel, and may not be relied upon by any other person. This opinion is limited
to the specific issues addressed and is limited in all respects to laws and
facts existing on the date hereof. By rendering this opinion, we do not
undertake to advise you of any changes in such laws or facts which may occur
after the date hereof.
Very truly yours,
KIRKLAND & ELLIS
<PAGE>
EXHIBIT "B-2"
FORM OF OPINION OF GENERAL COUNSEL
April 1, 1997
To the Lenders who are parties to the
Credit Agreement described herein
Re: The ServiceMaster Company Limited
Partnership 364-Day Credit Agreement
dated as of April 1, 1997
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of The ServiceMaster
Company Limited Partnership, a Delaware limited partnership (the "Company") and,
in that capacity, I am familiar with the details of the negotiation, execution
and delivery of the 364-Day Credit Agreement dated as of April 1, 1997 among the
Company, The First National Bank of Chicago, as Administrative Agent, Morgan
Guaranty Trust Company of New York, as Documentation Agent and the Lenders named
therein, providing for Advances in an aggregate principal amount not exceeding
$250,000,000 at any one time outstanding (the "Credit Agreement"). I am
furnishing this opinion to you pursuant to Section 4.1(vi) of the Credit
Agreement. Unless otherwise defined herein, capitalized terms used herein have
the meanings assigned to such terms in the Credit Agreement.
For purposes of this opinion, I have examined the following:
(a) the Credit Agreement; and
(b) the proposed notes issued by the Company to the Lenders
pursuant to the Credit Agreement (the "Notes").
In addition, I have also examined such certificates of public
officials, certificates of officers of the Company, and copies of corporate and
partnership documents and records of the Company and other papers, and I have
made such other investigations as I have deemed relevant and necessary as a
basis for my opinions hereinafter set forth. In all such examinations I have
assumed the genuineness of all signatures (other than the signatures of officers
of the Company), the authenticity and completeness of all documents submitted to
me as originals, the due authority of the parties executing such documents
(other than on behalf of the Company) and the conformity to the originals of
documents submitted to me as copies.
<PAGE>
Based on the foregoing and subject to the qualifications set forth
below, I am of the opinion that:
(1) No approval, consent or withholding of objection on the part of any
regulatory body, federal, state or local, is necessary in connection with the
execution and delivery of the Credit Agreement or the Notes.
(2) The Company has full power and authority and is duly authorized to
conduct the activities in which it is now engaged and is duly licensed or
qualified and is in good standing as a foreign limited partnership in each
jurisdiction (to the extent qualification of a foreign limited partnership is
permitted by statute) where a failure so to qualify would reasonably be expected
to have a Material Adverse Effect and, in my opinion, the inability of the
Company to qualify as a foreign limited partnership in any state in which such
qualification is not permitted by law will not have a Material Adverse Effect.
(3) Each Material Subsidiary is a corporation or a limited partnership
duly incorporated or organized, as the case may be, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization, as
the case may be, has full power and authority and is duly authorized to conduct
the activities in which it is now engaged, and is duly licensed or qualified and
is in good standing in each jurisdiction (to the extent qualification of a
foreign limited partnership is permitted by statute) where a failure so to
qualify would reasonably be expected to have a Material Adverse Effect and, in
my opinion, the inability of any Material Subsidiary that is a limited
partnership to qualify as a foreign limited partnership in any state in which
such qualification is not permitted by law will not have a Material Adverse
Effect.
(4) The issuance of the Notes and the execution, delivery and
performance by the Company of the Credit Agreement (i) do not violate in any
material respect any provisions of any law or any order of any court,
governmental authority or agency, (ii) do not conflict with or result in any
breach of any of the terms, conditions or provisions of, or constitute a default
under, the limited partnership agreement of the Company or any agreement or any
debt instrument or other material agreement known to me to which the Company or
any Eligible Subsidiary is a party or by which the Company or any Eligible
Subsidiary may be bound and (iii) will not result in the creation or imposition
of any lien or encumbrance upon any of the property of the Company or any
Eligible Subsidiary.
<PAGE>
(5) There are no proceedings pending or, to my knowledge, threatened,
against or affecting the Company, any of its General Partners, its Parent or any
Subsidiary in any court or before any governmental authority or arbitration
board or tribunal which, if adversely determined, would reasonably be expected
to have a Material Adverse Effect. To my knowledge, neither the Company nor any
Subsidiary is in default with respect to any order of any court or governmental
authority, or arbitration board or tribunal which would reasonably be expected
to have a Material Adverse Effect.
(6) No documentary or stamp taxes are payable in connection with the
issuance of the Notes.
(7) Neither the issuance of the Notes nor the use by the Company of all
or any portion of the proceeds of the Advances will violate Regulations U or X
of the Board of Governors of the Federal Reserve System (12 C.F.R. Chapter II).
The opinions expressed in this letter as to enforceability are subject
to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally, to general principles of equity regardless of whether such
enforceability is considered in a proceeding in equity or at law or in a
bankruptcy proceeding, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and applicable laws and court
decisions which may limit the enforceability of certain remedial and other
provisions of the Notes.
The opinions expressed above are limited to the laws of the State of
Illinois, the federal laws of the United States of America, the Delaware General
Corporation Law and the Delaware Revised Uniform Limited Partnership Act, and I
do not express any opinion herein concerning any other law.
<PAGE>
The opinions expressed herein are solely for your benefit in connection
with the consummation of the transactions contemplated by the Credit Agreement
and may not be used or relied upon by any Person other than each of you.
Very truly yours,
Vernon T. Squires
Senior Vice President
and General Counsel
<PAGE>
EXHIBIT "C"
COMPETITIVE BID QUOTE REQUEST
(Section 2.3.2)
_________, 19__
To: The Lenders parties to the Credit Agreement described
below
From: [Name of Borrower]
Re: 364-Day Credit Agreement (the "Credit Agreement") dated as of April 1,
1997 among The ServiceMaster Company Limited Partnership, the Lenders
named therein, The First National Bank of Chicago, as Administrative
Agent, and Morgan Guaranty Trust Company of New York, as Documentation
Agent
We hereby give notice pursuant to Section 2.3.2 of the 364-Day Credit
Agreement that we request Competitive Bid Quotes for the following proposed
Competitive Bid Advance(s):
Borrowing Date: , 19__
Principal Amount (1) Interest Period (2)
- ------------------------------ ------------------------
Such Competitive Bid Quotes should offer [a Competitive Bid Margin]
[and] [an Absolute Rate]. [The currency in which the Loans are to be denominated
is __________.] Your Competitive Bid Quote must comply with Section 2.3.3 of the
Credit Agreement and the foregoing. Capitalized terms used herein have the
meanings assigned to them in the Credit Agreement.
Please respond to this request by no later than [1:00 p.m.]
[9:00 a.m.] Chicago time on , 19__.
[NAME OF BORROWER]
By:
Financial Officer
- ------------------------
1 Amount must be at least (i) $1,000,000 or any larger integral multiple of
$1,000,000 in the case of a Floating Rate Advance, (ii) $5,000,000 or any larger
integral multiple of $1,000,000 in the case of any other Advance denominated in
Dollars or (iii) such amount and multiples as the Administrative Agent deems
appropriate and reasonably comparable to a $3,000,000 minimum Dollar Amount in
the case of any Advance denominated in an Alternative Currency.
2 One, two, three or six months (Eurocurrency Auction) or not less than 7
days (Absolute Rate Auction), subject to the provisions of the definitions of
Eurocurrency Interest Period and Absolute Rate Interest Period.
<PAGE>
EXHIBIT "D"
COMPETITIVE BID QUOTE
(Section 2.3.3)
____________, 19__
To: [Name of Borrower] (the "Borrower")
Re: Competitive Bid Quote
In response to your request dated _________, 199_, we hereby make the following
Competitive Bid Quote pursuant to Section 2.3.3 of the Credit Agreement
hereinafter referred to and on the following terms:
1. Quoting Lender: _____________________________________________
2. Person to contact at Quoting Lender: ________________________
3. Borrowing Date: ____________, 19__ (3)
4. We hereby offer to make Competitive Bid Loan(s) in the following principal
amounts, for the following Interest Periods and at the following rates:
Principal Interest [Competitive [Absolute
Amount (4) Period (5) Bid Margin (6)] Rate (7)]
- ---------- ----------- --------------- ----------
[Provided, that the aggregate principal amount of Competitive Bid Loans for
which the above offers may be accepted shall not exceed $_________________.]8
- ----------------
3 As specified in the related Invitation For Competitive Bid Quotes.
4 Principal amount bid for each Interest Period may not exceed the principal
amount requested. Bids must be made for at least (i) $1,000,000 or any larger
integral multiple of $1,000,000 in the case of a Floating Rate Advance, (ii)
$5,000,000 or any larger integral multiple of $1,000,000 in the case of any
other Advance denominated in Dollars or (iii) such amount and multiples as the
Administrative Agent deems appropriate and reasonably comparable to a $3,000,000
minimum Dollar Amount in the case of any Advance denominated in an Alternative
Currency.
5 One, two, three or six months (Eurocurrency Auction) or not less than 7
days (Absolute Rate Auction), as specified in the related Invitation For
Competitive Bid Quotes.
6 Specify positive or negative percentage (rounded to the nearest 1/100 of
1%) to be added or subtracted from the Eurocurrency Base Rate.
7 Specify rate of interest per annum (rounded to the nearest 1/100 of 1%).
8 Specify the limit, if any, as to the aggregate principal amount of the
Competitive Bid Loans of the quoting Lender which the Borrower may accept (see
Section 2.3.3 (ii) (d)).
<PAGE>
We understand and agree that the offers set forth above,
subject to the satisfaction of the applicable conditions set forth in the
364-Day Credit Agreement dated as of April 1, 1997, among The ServiceMaster
Company Limited Partnership, the Lenders named therein, The First National Bank
of Chicago, as Administrative Agent and Morgan Guaranty Trust Company of New
York, as Documentation Agent (the "Credit Agreement"), irrevocably obligates us
to make the Competitive Bid Loan(s) for which any offer(s) are accepted, in
whole or in part.
Capitalized terms used herein and not otherwise defined herein shall have their
meanings as defined in the Credit Agreement.
Very truly yours,
[NAME OF BANK]
Dated: , 19__ By:
Authorized Officer
<PAGE>
EXHIBIT "E"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement")
between (the "Assignor") and (the "Assignee") is dated as of _________ __, 19__.
The parties hereto agree as follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a 364-Day
Credit Agreement, dated as of April 1, 1997 (which, as it may be amended,
modified, renewed or extended from time to time, is herein called the "Credit
Agreement"), among The ServiceMaster Company Limited Partnership (the
"Company"), the Lenders named therein, The First National Bank of Chicago, as
Administrative Agent, and Morgan Guaranty Trust Company of New York, as
Documentation Agent. Capitalized terms used herein and not otherwise defined
herein shall have the meanings attributed to them in the Credit Agreement. The
Assignor desires to assign to the Assignee, and the Assignee desires to assume
from the Assignor, an undivided interest (the "Purchased Percentage") in the
Commitment of the Assignor such that after giving effect to the assignment and
assumption hereinafter provided, the Commitment of the Assignee shall equal
$______________ and its percentage of the Aggregate Commitment shall equal __%.
2. ASSIGNMENT. For and in consideration of the assumption of
obligations by the Assignee set forth in Section 3 hereof and the other
consideration set forth herein, and effective as of the Effective Date (as
hereinafter defined), the Assignor does hereby sell, assign, transfer and convey
to the Assignee all of its right, title and interest in and to the Purchased
Percentage of (i) the Commitment of the Assignor (as in effect on the Effective
Date), (ii) each Committed Loan made by the Assignor outstanding on the
Effective Date and (iii) the Credit Agreement and the other Loan Documents.
Pursuant to Section 12.3.2 of the Credit Agreement, on and after the Effective
Date the Assignee shall have the same rights, benefits and obligations as the
Assignor had under the Loan Documents with respect to the Purchased Percentage
of the Loan Documents, all determined as if the Assignee were a "Lender" under
the Credit Agreement with ____% of the Aggregate Commitment. The Effective Date
shall be the later of ______ or two Business Days (or such shorter period agreed
to by the Agents) after a Notice of Assignment substantially in the form of
Exhibit "I" attached hereto and any consents substantially in the form of
<PAGE>
Exhibit "II" attached hereto required to be delivered to the Agents by Section
12.3 of the Credit Agreement have been delivered to the Agents. In no event will
the Effective Date occur if the payments required to be made by the Assignee to
the Assignor on the Effective Date under Sections 4 and 5 hereof are not made on
the proposed Effective Date. The Assignor will notify the Assignee of the
proposed Effective Date on the Business Day prior to the proposed Effective
Date.
3. ASSUMPTION. For and in consideration of the assignment of
rights by the Assignor set forth in Section 2 hereof and the other consideration
set forth herein, and effective as of the Effective Date, the Assignee does
hereby accept that assignment, and assume and covenant and agree fully,
completely and timely to perform, comply with and discharge, each and all of the
obligations, duties and liabilities of the Assignor under the Credit Agreement
which are assigned to the Assignee hereunder, which assumption includes, without
limitation, the obligation to fund the unfunded portion of the Aggregate
Commitment in accordance with the provisions set forth in the Credit Agreement
as if the Assignee were a "Lender" under the Credit Agreement with ___% of the
Aggregate Commitment. The Assignee agrees to be bound by all provisions relating
to "Lenders" under and as defined in the Credit Agreement, including, without
limitation, provisions relating to the dissemination of information and the
payment of indemnification.
4. PAYMENT OBLIGATIONS. On and after the Effective Date, the
Assignee shall be entitled to receive from the Administrative Agent all payments
of principal, interest and fees with respect to the Purchased Percentage of the
Assignor's Commitment and Committed Loans. The Assignee shall advance funds
directly to the Administrative Agent with respect to each Committed Loan and
reimbursement payments made on or after the Effective Date. In consideration for
the transfer of the assigned obligations hereunder, with respect to each
Committed Loan made by the Assignor outstanding on the Effective Date, the
Assignee shall pay the Assignor on the Effective Date (or, if Assignee so elects
with respect to each Committed Loan bearing interest at a Fixed Rate, on the
Payment Date, as hereinafter defined) an amount equal to the Purchased
Percentage of any such Committed Loan. If the Assignee elects to make such
payment on the Effective Date, with respect to any Committed Loan made by
Assignor outstanding on the Effective Date which bears interest at a fixed rate
(each an "Outstanding Fixed Rate Loan"), Assignee shall be entitled to receive
interest at a rate agreed upon by the Assignee and the Assignor (the
"Outstanding Fixed Rate Loan Interest Rate") for the remainder of the existing
Interest Period. When Assignee receives interest on the Purchased Percentage of
any Outstanding Fixed Rate Loan, Assignee shall remit to Assignor the excess of
(a) the interest received by Assignee on the Outstanding Fixed Rate Loan over
(b) the Outstanding Fixed Rate Loan Interest Rate. In the event Assignee elects
<PAGE>
not to pay the Assignor the Purchased Percentage of any such Outstanding Fixed
Rate Loan on the Effective Date, the Assignee shall pay the Assignor an amount
equal to the Purchased Percentage of such Outstanding Fixed Rate Loan (a) on the
last day of the Interest Period therefor or (b) on such earlier date agreed to
by the Assignor and the Assignee or (c) on the date on which any such
Outstanding Fixed Rate Loan either becomes due (by acceleration or otherwise) or
is prepaid (the date as described in the foregoing clauses (a), (b) or (c) being
hereinafter referred to as the "Payment Date"). In the event interest for the
period from the Effective Date to but not including the Payment Date is not paid
by the Borrower with respect to any Outstanding Fixed Rate Loan sold by the
Assignor to the Assignee pursuant to the preceding sentence, the Assignee shall
pay to the Assignor interest for such period on such Outstanding Fixed Rate Loan
at the applicable rate provided by the Credit Agreement. In the event of a
prepayment of any Outstanding Fixed Rate Loan, Assignee shall remit to Assignor
the excess of (a) the amount received by the Assignee as breakage costs over (b)
the amount which would have been received by the Assignee as a prepayment
penalty if the amount of prepayment penalty was based on the Outstanding Fixed
Rate Loan Interest Rate. On and after the Effective Date, the Assignee will also
remit to the Assignor any amounts of interest on Loans and fees received from
the Administrative Agent which relate to the Purchased Percentage of Loans made
by the Assignor accrued for periods prior to the Effective Date or the Payment
Date as applicable. In the event that either party hereto receives any payment
to which the other party hereto is entitled under this Assignment Agreement,
then the party receiving such amount shall promptly remit it to the other party
hereto. ***[This Section subject to modification by the Assignor and the
Assignee]***
5. FEES PAYABLE BY ASSIGNEE. On each day on which the Assignee
receives a payment of interest or fees under the Credit Agreement (other than a
payment of interest or fees which the Assignee is obligated to deliver to the
Assignor pursuant to Section 4 hereof, which shall be excluded in determining
fees payable to the Assignor pursuant to this Section), the Assignee shall pay
to the Assignor a fee. The amount of such fee shall be the difference between
(i) the amount of such interest or fee, as applicable, received by the Assignee
and (ii) the amount of the interest or fee, as applicable, which would have been
received by the Assignee if each interest rate was ___ of 1% less than the
interest rate paid by the Company or if the facility fee was ___ of 1% less than
<PAGE>
the facility fee paid by the Company pursuant to Section 2.4, as applicable. In
addition, the Assignee agrees to pay __% of the fee required to be paid to the
Administrative Agent pursuant to Section 12.3.2 of the Credit Agreement.
***[This Section subject to modification by the Assignor and the Assignee]***
6. CREDIT DETERMINATION: LIMITATIONS ON ASSIGNORS LIABILITY.
The Assignee represents and warrants to the Assignor that it is capable of
making and has made and shall continue to make its own credit determinations and
analysis based upon such information as the Assignee deemed sufficient to enter
into the transaction contemplated hereby and not based on any statements or
representations by the Assignor, the Agents or any Lender. It is understood and
agreed that the assignment and assumption hereunder are made without recourse to
the Assignor and that the Assignor makes no representation or warranty of any
kind to the Assignee and shall not be responsible for (i) the due execution,
legality, validity, enforceability, genuineness, sufficiency or collectibility
of the Credit Agreement or any other Loan Document, including without
limitation, documents granting the Assignor and the other Lenders a security
interest in assets of the Company or any of its Subsidiaries, or any guarantor,
(ii) any representation, warranty or statement made in or in connection with any
of the Loan Documents, (iii) the financial condition or creditworthiness of any
Borrower or any guarantor, (iv) the performance of or compliance with any of the
terms or provisions of any of the Loan Documents, (v) the inspection of any of
the property, books or records of the Company or any of its Subsidiaries, (vi)
the validity, enforceability, perfection, priority, condition, value or
sufficiency of any collateral securing or purporting to secure the Loans.
Neither the Assignor nor any of its officers, directors, employees, agents or
attorneys shall be liable for any mistake, error of judgment, or action taken or
omitted to be taken in connection with the Loans or the Loan Documents, except
for its or their own bad faith or willful misconduct.
7. INDEMNITY. The Assignee agrees to indemnify and hold the
Assignor harmless against any and all losses, costs and expenses (including,
without limitation, reasonable attorneys' fees, which attorneys may be employees
of the Assignee) and liabilities incurred by the Assignor in connection with or
arising in any manner from the Assignee's performance or non-performance of
obligations assumed under this Assignment Agreement.
<PAGE>
8. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the
Assignee shall have the right pursuant to Section 12.3 of the Credit Agreement
to assign the rights which are assigned to the Assignee hereunder to any entity
or person, provided that (i) any such subsequent assignment does not violate any
of the terms and conditions of the Loan Documents or any law, rule, regulations
order, writ, judgment, injunction or decree and that any consent required under
the terms of the Loan Documents has been obtained, (ii) the assignee under such
assignment from the Assignee shall agree to assume all of the Assignee's
obligations hereunder in a manner satisfactory to the Assignor and (iii) the
Assignee is not thereby released from any of its obligations to the Assignor
hereunder.
9. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage of the Aggregate Commitment assigned to the
Assignee shall remain the percentage specified in Section 1 hereof and the
dollar amount of the Commitment of the Assignee shall be recalculated based on
the reduced Aggregate Commitment.
10. ENTIRE AGREEMENT. This Assignment Agreement ****[and the
attached consent]**** embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings between the
parties hereto relating to the subject matter hereof.
11. GOVERNING LAW. This Assignment Agreement shall be governed
by the internal law, and not the law of conflicts, of the State of New York.
12. NOTICES. Notices shall be given under this Assignment
Agreement in the manner set forth in the Credit Agreement. For the purpose
hereof, the addresses of the parties hereto (until notice of a change is
delivered) shall be the address set forth under each party's name on the
signature pages hereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above written.
[NAME OF ASSIGNOR]
By:
Title:
[NAME OF ASSIGNEE]
By:
Title:
<PAGE>
EXHIBIT "I"
NOTICE
OF ASSIGNMENT
To: THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP
One ServiceMaster Way
Downers Grove, IL 60515
Attention: Eric R. Zarnikow
MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Documentation Agent
60 Wall Street
New York, NY 10260
THE FIRST NATIONAL BANK OF CHICAGO,
as Administrative Agent
One First National Plaza
Chicago, IL 60670
From: [NAME OF ASSIGNOR]
[NAME OF ASSIGNEE]
, 19__
1. We refer to that 364-Day Credit Agreement, dated as of
April 1,1997 (which, as it may be amended, modified, renewed or extended from
time to time, is herein called the "Credit Agreement"), among The ServiceMaster
Company Limited Partnership (the "Company"), the Lenders named therein including
____________ (the "Assignor"), The First National Bank of Chicago, as
Administrative Agent, and Morgan Guaranty Trust Company of New York, as
Documentation Agent. Capitalized terms used herein and in any consent delivered
in connection herewith and not otherwise defined herein or in such consent shall
have the meanings attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and
delivered to the Company and the Agents pursuant to Section 12.3.2 of the Credit
Agreement.
3. The Assignor and (the "Assignee") have entered into an
Assignment Agreement, dated as of , 19__, pursuant to which, among other things,
the Assignor has sold, assigned, delegated and transferred to the Assignee, and
the Assignee has purchased, accepted and assumed from the Assignor, an undivided
interest in and to all of the Assignor's rights and obligations under the Credit
Agreement such that Assignee's percentage of the Aggregate Commitment shall
<PAGE>
equal __%, effective as of the Effective Date (as hereinafter defined). The
"Effective Date" shall be the later of ____ or two Business Days (or such
shorter period as agreed to by the Agents) after this Notice of Assignment and
any consents and fees required by Sections 12.3.1 and 12.3.2 of the Credit
Agreement have been delivered to the Agents, provided that the Effective Date
shall not occur if any condition precedent agreed to by the Assignor and the
Assignee has not been satisfied.
4. As of this date, the percentage of the Assignor in the
Aggregate Commitment and Committed Advances is __%. As of the Effective Date,
the percentage of the Assignor in the Aggregate Commitment and Committed
Advances will be __% (as such percentage may be reduced or increased by
assignments which become effective prior to the assignment to the Assignee
becoming effective) and the percentage of the Assignee in the Aggregate
Commitment and Committed Advances will be __%.
5. The Assignor and the Assignee hereby give to the Company
and the Agents notice of the assignment and delegation referred to herein. The
Assignor will confer with the Agents before _______, 19__ to determine if the
assignment to the Assignee will become effective on such date pursuant to
Section 3 hereof, and will confer with the Agents to determine the Effective
Date pursuant to Section 3 hereof if it occurs thereafter. The Assignor shall
notify the Agents if the assignment to the Assignee does not become effective on
any proposed Effective Date as a result of the failure to satisfy the conditions
precedent agreed to by the Assignor and the Assignee. At the request of the
Agent, the Assignor will give the Agents written confirmation of the occurrence
of the Effective Date.
6. The Assignee hereby accepts and assumes the assignment and
delegation referred to herein and agrees as of the Effective Date (i) to perform
fully all of the obligations under the Credit Agreement which it has hereby
assumed and (ii) to be bound by the terms and conditions of the Credit Agreement
as if it were a "Lender".
7. The Assignor and the Assignee request and agree that any
payments to be made by the Administrative Agent to the Assignor on and after the
Effective Date shall, to the extent of the assignment referred to herein, be
made entirely to the Assignee, it being understood that the Assignor and the
Assignee shall make between themselves any desired allocations.
8. The Assignor or the Assignee shall pay to the
Administrative Agent on or before the Effective Date the processing fee of
$3,500 required by Section 12.3.2 of the Credit Agreement.
<PAGE>
9. The Assignor and the Assignee request and direct that the
Administrative Agent prepare and cause the Borrower(s) to execute and deliver
[new Notes or, as appropriate,] replacement Notes, to the Assignor and the
Assignee in accordance with Section 12.3.2 of the Credit Agreement. The Assignor
[and the Assignee] agree[s] to deliver to the Administrative Agent the original
Notes received from it by the Borrower(s) upon the Assignor's [and Assignee's]
receipt of new Notes in the amounts set forth above.
10. The Assignee advises the Agents that the address listed
below is its address for notices under the Credit Agreement:
- ----------------------
- ----------------------
- ----------------------
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: By:
Title: Title:
<PAGE>
EXHIBIT "II"
CONSENT AND RELEASE
TO: [NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
------------------------ ------------------------
------------------------ ------------------------
, 19__
1. We acknowledge receipt from (the "Assignor") and
______________________ (the "Assignee") of the Notice of Assignment, dated as of
__________, 19__ (the "Notice"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings attributed to them in the Notice.
****[2. In consideration of the assumption by the Assignee of
the obligations of the Assignor as referred to in the Notice, the Company hereby
(i) irrevocably consents, as required by Section 12.3.1 of the Credit Agreement,
to the assignment and delegation referred to in the Notice and (ii) as of the
Effective Date, irrevocably reduces the percentage of the Assignor in the
Aggregate Commitment by the percentage of the Aggregate Commitment assigned to
the Assignee and releases the Assignor from all of its obligations to the
Company or any of its Subsidiaries under the Loan Documents to the extent that
such obligations have been assumed by the Assignee]****
3. The Administrative Agent is hereby requested to prepare for
issuance by the relevant Borrower new Notes as requested by the Assignor and the
Assignee in the Notice.
****[4. In consideration of the assumption by the Assignee of
the obligations of the Assignor as referred to in the Notice, the Agents hereby
(i) irrevocably consent, as required by Section 12.3.1 of the Credit Agreement,
to the assignment and delegation referred to in the Notice, (ii) as of the
Effective Date, irrevocably release the Assignor from its obligations to the
Agents under the Loan Documents to the extent that such obligations have been
assumed by the Assignee, and (iii) agree that, as of the Effective Date, the
Agents shall consider the Assignee as a "Lender" for all purposes under the Loan
Documents to the extent of the assignment and delegation referred to in the
Notice.]****
<PAGE>
THE SERVICEMASTER COMPANY THE FIRST NATIONAL BANK
LIMITED PARTNERSHIP OF CHICAGO, as Administrative Agent
By: ServiceMaster Management By:
Corporation, its General Title:
Partner
MORGAN GUARANTY TRUST
By: COMPANY OF NEW YORK, as
Title: Documentation Agent
By:
Title:
* Paragraphs 2 and 4 are to be included only if the consent of the Company and
the Agents is required pursuant to Section 12.3.1 of the Credit Agreement.
<PAGE>
EXHIBIT "F"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To: The First National Bank of Chicago, as Administrative Agent under the
Credit Agreement described below.
From: [Name of Borrower] (the "Borrower")
Re: 364-Day Credit Agreement, dated as of April 1, 1997 (as the same may be
amended or modified, the "Credit Agreement"), among The ServiceMaster
Company Limited Partnership, the Lenders named therein, The First
National Bank of Chicago, as Administrative Agent, and Morgan Guaranty
Trust Company of New York, as Documentation Agent.
Terms used herein and not otherwise defined shall have the
meanings assigned thereto in the Credit Agreement.
The Administrative Agent is specifically authorized and
directed to act upon the following standing money transfer instructions with
respect to the proceeds of Advances or other extensions of credit from time to
time until receipt by the Administrative Agent of a specific written revocation
of such instructions by the Borrower, provided, however, that the Administrative
Agent may otherwise transfer funds as hereafter directed in writing by the
Borrower in accordance with Section 13.1 of the Credit Agreement.
Facility Identification Number(s)
Customer/Account Name
Transfer Funds To
For Account No.
Reference/Attention To
Authorized Officer (Customer
Representative) Date
(Please Print) Signature
Bank Officer Name Date
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
<PAGE>
EXHIBIT "G"
FORM OF ELECTION TO PARTICIPATE
__________, 19__
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
for the Lenders under the 364-Day Credit Agreement dated as of April 1,
1997 among The ServiceMaster Company Limited Partnership
(the "Company"), the Lenders named therein,
The First National Bank of Chicago, as
Administrative Agent, and the Documentation
Agent
Dear Sirs:
Reference is made to the Credit Agreement described above.
Terms not defined herein which are defined in the Credit Agreement have for the
purposes hereof the meaning provided therein.
The undersigned, [name of Eligible Subsidiary], a
[corporation] [partnership] organized under the laws of [jurisdiction of
organization], elects to be an Eligible Subsidiary for purposes of the Credit
Agreement, effective upon your receipt hereof until an Election to Terminate
shall have been delivered to you with respect to the undersigned in accordance
with the Credit Agreement.
The undersigned confirms that the representations and
warranties set forth in Article XIV of the Credit Agreement are true and correct
as to the undersigned as of the date hereof. In particular, [except as disclosed
below,] there is no income, stamp or other tax of any country, or any taxing
authority thereof or therein, imposed by or in the nature of withholding or
otherwise, which is imposed on any payment to be made by the undersigned
pursuant to the Credit Agreement or the Notes of the undersigned, or is imposed
on or by virtue of the execution, delivery or enforcement of this Election to
Participate or of the Notes of the undersigned.
The undersigned agrees to perform all the obligations of an
Eligible Subsidiary under, and to be bound in all respects by the terms of, the
Credit Agreement, including without limitation Sections 9.11 and 9.12 thereof,
as if the undersigned were a signatory party thereto. The undersigned hereby
confirms the authority of the Financial Officers to act on its behalf as to all
matters relating to the Credit Agreement.
<PAGE>
The address to which all notices to the undersigned under the
Credit Agreement should be directed is:
This instrument shall be construed in accordance with and
governed by the laws of the State of New York.
Very truly yours,
[NAME OF ELIGIBLE SUBSIDIARY]
By __________________________________
Title:
The undersigned confirms that [name of Eligible Subsidiary] is
an additional Borrower for purposes of the Credit Agreement described above.
THE SERVICEMASTER COMPANY LIMITED
PARTNERSHIP
By: ServiceMaster Management
Corporation, its General Partner
By __________________________________
Title:
Receipt of the above Election to Participate is acknowledged
on and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
By __________________________________
Title:
<PAGE>
EXHIBIT "H"
FORM OF ELECTION TO TERMINATE
__________, 19__
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
for the Lenders under the 364-Day Credit Agreement dated as of April 1,
1997 among The ServiceMaster Company Limited Partnership
(the "Company"), the Lenders named therein,
The First National Bank of Chicago, as
Administrative Agent, and the Documentation
Agent
Dear Sirs:
Reference is made to the Credit Agreement described above.
Terms not defined herein which are defined in the Credit Agreement have for the
purposes hereof the meaning provided therein.
The undersigned hereby elect to terminate the status of [name
of Eligible Subsidiary], a [corporation] [partnership] organized under the laws
of [jurisdiction of organization] (the "Designated Subsidiary"), as an Eligible
Subsidiary for purposes of the Credit Agreement, effective upon your receipt
hereof. The undersigned represent and warrant that all principal and interest on
all Notes of the Designated Subsidiary and all other amounts payable by the
Designated Subsidiary pursuant to the Credit Agreement have been paid in full on
or prior to the date hereof. Notwithstanding the foregoing, this Election to
Terminate shall not affect any obligation of the Designated Subsidiary under the
Credit Agreement or under any of its Notes heretofore incurred.
<PAGE>
This instrument shall be construed in accordance with and
governed by the laws of the State of New York.
Very truly yours,
[NAME OF DESIGNATED SUBSIDIARY]
By __________________________________
Title:
THE SERVICEMASTER COMPANY LIMITED
PARTNERSHIP
By: ServiceMaster Management
Corporation, its General Partner
By __________________________________
Title:
Receipt of the above Election to Terminate is hereby
acknowledged on and as of the date set forth above.
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Documentation Agent
By __________________________________
Title:
<PAGE>
EXHIBIT "I"
FORM OF OPINION OF COUNSEL FOR ELIGIBLE SUBSIDIARY
__________, 19__
To the Lenders and Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
I am counsel to [name of Eligible Subsidiary], a [corporation]
[partnership] organized under the laws of [jurisdiction of organization] (the
"Eligible Subsidiary"), and give this opinion pursuant to Section 4.2(b) of the
364-Day Credit Agreement, dated as of April 1, 1997 (as the same may be amended
or modified, the "Credit Agreement"), among The ServiceMaster Company Limited
Partnership (the "Company"), the Lenders named therein, The First National Bank
of Chicago, as Administrative Agent, and Morgan Guaranty Trust Company of New
York, as Documentation Agent. Terms defined in the Credit Agreement are used
herein as therein defined.
I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as I have deemed necessary or advisable for
purposes of this opinion.
Upon the basis of the foregoing, I am of the opinion that:
1. The Eligible Subsidiary is a [corporation] [partnership]
duly organized, validly existing and in good standing under the laws of
[jurisdiction of organization], and is a Subsidiary of the Company.
2. The execution and delivery by the Eligible Subsidiary of
its Election to Participate and its Notes and the performance by the Eligible
Subsidiary of its obligations under the Credit Agreement and its Notes are
within the Eligible Subsidiary's legal powers, have been duly authorized by all
necessary [corporate] [partnership] or other legal action, require no action by
or in respect of, or filing with, any governmental body, agency or official and
<PAGE>
do not contravene, or constitute a default under, in any material respect any
provision of applicable law or regulation or of the organizational documents of
the Eligible Subsidiary or of any indenture or other agreement or instrument
governing Debt or any other material agreement or instrument binding upon the
Company or the Eligible Subsidiary or result in the creation or imposition of
any Lien on any asset of the Eligible Subsidiary or any of its Subsidiaries.
3. The Election to Participate of the Eligible Subsidiary and
the Credit Agreement constitute valid and binding agreements of the Eligible
Subsidiary and its Notes constitute valid and binding obligations of the
Eligible Subsidiary, in each case enforceable in accordance with its terms,
except as may be limited by (i) bankruptcy, insolvency or other similar laws
affecting the rights and remedies of creditors generally and (ii) general
principles of equity.
4. Except as disclosed in the Election to Participate, there
is no income, stamp or other tax of any country, or any taxing authority thereof
or therein, imposed by or in the nature of withholding or otherwise, which is
imposed on any payment to be made by the Eligible Subsidiary pursuant to the
Credit Agreement or on its Notes, or is imposed on or by virtue of the
execution, delivery or enforcement of its Election to Participate or of its
Notes.
Very truly yours,
<PAGE>
EXHIBIT "J"
FORM OF OPINION OF COUNSEL FOR THE AGENTS
April 1, 1997
To the Lenders and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260
Dear Sirs:
We have participated in the preparation of the 364-Day Credit
Agreement, dated as of April 1, 1997 (as the same may be amended or modified,
the "Credit Agreement"), among The ServiceMaster Company Limited Partnership
(the "Company"), the Lenders named therein, The First National Bank of Chicago,
as Administrative Agent, and Morgan Guaranty Trust Company of New York, as
Documentation Agent, and have acted as special counsel for the Agents for the
purpose of rendering this opinion pursuant to Section 4.1(x) of the Credit
Agreement. Terms defined in the Credit Agreement are used herein as therein
defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that
the Credit Agreement constitutes a valid and binding agreement of the Company
and the Notes of the Company constitute valid and binding obligations of the
Company, in each case enforceable in accordance with their respective terms,
except as the same may be limited by bankruptcy, insolvency or similar laws
affecting creditors' rights generally and by general principles of equity.
<PAGE>
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and the
federal laws of the United States of America. To the extent that our opinion
expressed herein involves conclusions as to matters governed by the laws of
other jurisdictions, we have relied, with your permission, on the opinion of
[counsel for the Company], addressed to you and dated the date hereof, copies of
which have been delivered to you, and we have assumed, without independent
investigation, the correctness of the matters set forth in such opinions, our
opinion being subject to the assumptions, qualifications and limitations set
forth in such opinion with respect thereto. In addition, in giving the foregoing
opinion, we express no opinion as to the effect (if any) of any law of any
jurisdiction (except the State of New York) in which any Lender is located which
limits the rate of interest that such Lender may charge or collect.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other purpose
or relied upon by any other person without our prior written consent.
Very truly yours,
Exhibit 10.20 to 1997 Form 10-K
This instrument constitutes part of a prospectus covering securities that will
be registered under the Securities Act of 1933.
OPTION AGREEMENT
For Non-Qualified Option Granted Under the
ServiceMaster 1998 Equity Incentive Plan
(subject to shareholder approval)
The ServiceMaster Company, a Delaware corporation, (the "Company") and
[INSERT NAME] the "Optionee") hereby agree as follows:
Part 1. Option Terms
1.1 Definitions. As used in this Agreement, the following terms have
the indicated meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board of
Directors of the Company.
"Company" means The ServiceMaster Company, a Delaware
corporation.
"Grant Date" means the date set forth in the Term Sheet as the
date on which the Option which is the subject of this agreement was
granted.
"Plan" means the ServiceMaster 1998 Equity Incentive Plan as
constituted on the Grant Date and, subject to the limitations set forth
in Section 12.2 of the Plan, as amended from time to time thereafter.
"Shares" means the shares of common stock of the Company or
any successor organization to the Company (as more fully set forth in
the Plan).
"Shareholders" means the holders of the shares of common stock
of the Company on the record date for the meeting of the shareholders
at which the Plan is submitted to the shareholders for their approval.
"Term Sheet" means the document which is referenced to and
delivered concurrently with this Agreement and which sets forth certain
terms and conditions of the Option granted hereunder.
Page 1
<PAGE>
1.2 Grant. (a) Pursuant to the Plan (but subject to the approval of the
Plan by the Shareholders as more fully specified in Section 5.11), the Company
hereby grants to the Optionee an option (the "Option") which entitles the
Optionee to purchase from the Company the Shares which are subject to the Option
on the terms and subject to the conditions specified in the Term Sheet, this
Agreement and the Plan.
(b) Various terms governing this Option, including the Grant Date, the
consideration payable for the Option, and the exercise price under the Option,
are set forth in the Term Sheet. The Term Sheet has been signed by the Company
and must also be signed by the Optionee before the Optionee has any rights under
this agreement.
1.3 Character of the Option. The Option is a "non-qualified stock
option", meaning that it is an option to purchase Shares which is not intended
to meet the requirements of Section 422 of the Code.
1.4 Number of Shares for which the Option May be Exercised. Unless and
until an adjustment is made pursuant to Section 4.3 of the Plan, the number of
Shares which are subject to the Option is the number specified in the Term
Sheet.
1.5 Option Exercise Price. Unless and until an adjustment is made
pursuant to Section 4.4 of the Plan, the price at which the Shares which may be
purchased from the Company upon any exercise of this Option shall be the
original exercise price specified in the Term Sheet.
Part 2: Exercise
2.1 Vesting Schedule. (a) During the period commencing on the Grant
Date and ending on the fifth anniversary of the Grant Date, this Option may be
exercised only with respect to installments of not more than 20% each which
mature, respectively, on the first, second, third, fourth and fifth
anniversaries of the Grant Date. Such installments shall cumulate over the
foregoing five-year period. The foregoing limitation shall operate as shown in
the following schedule, provided, that in no event may this Option be exercised
in a manner or to an extent contrary to the provisions of this Agreement or the
Plan:
Grant Date Cumulative
Anniversary Percent Per Cent
----------- ------- ----------
1st 20% 20%
2nd 20% 40%
3rd 20% 60%
4th 20% 80%
5th 20% 100%
Page 2
<PAGE>
(b) After the fifth anniversary of the Grant Date, this Option may be
exercised in whole or in part and at such time or times as the person entitled
to exercise the Option may desire with respect to all Shares then available
under this Option, provided, that in no event may the Option be exercised after
the expiration date set forth in the Term Sheet or in a manner or to an extent
contrary to the provisions of this Agreement or the Plan.
2.2 Manner of Exercise. (a) The person entitled to exercise this Option
may do so by giving the Company a written notice (the "Exercise Notice") which
shall --
(i) identify the Option;
(ii) specify the number of Shares with respect to which the Option is
then being exercised;
(iii) state the price at which the shares will be purchased;
(iv) state that the person signing the Exercise Notice agrees to
purchase the Shares so specified at the Exercise Price and on
the terms established in this Agreement and the Plan; and
(v) be accompanied by the payment in full for the Shares being
purchased.
A form of Exercise Notice which will be deemed satisfactory by the Company is
attached to this Agreement as Exhibit A. Delivery of the Exercise Notice may be
made by personal delivery or by United States mail.
2.3 Exercise Date. This Option shall be deemed to have been exercised
on the date (the "Exercise Date") on which the Exercise Notice, completed as
required by Section 2.2 (or completed in such other form or manner as the
Company's Secretary or the Committee shall approve), is delivered to the office
of the Secretary of the Company or at such other place as may have been
designated by the Secretary or the Committee at the time of such exercise as a
place to which notices of exercise of Options granted under the Plan may be
delivered.
2.4 Manner of Payment. Payment for the Shares purchased pursuant to
each exercise of the Option shall be made only in cash.
2.5 Termination of Option. The Option shall terminate on whichever of
the following dates occurs first: (i) the Expiration Date as specified in the
Term Sheet; (ii) six months after the date of the Optionee's employment with
ServiceMaster for any reason unless Section 2.6 is applicable; or (iii) any
other date established under any of the provisions of the Plan as the date after
which the Option may not be exercised. The applicable date under this Section
2.5 is hereinafter referred to as the "Termination Date".
Page 3
<PAGE>
2.6 Effect of Death or Disability or Retirement. The effect upon the
exercisability of the Option on account of the Optionee's death, disability or
retirement shall be determined by rules adopted or modified by the Committee
from time to time. Exhibit B to this Agreement states the rules which the
Committee has presently determined shall be applicable to the Option in such
cases. Such rules may be amended at any time and from time to time or eliminated
entirely, provided that in such event the Company shall notify the Optionee. If
no such rules are in effect at the time of the Optionee's death, disability or
retirement, clause (ii) of Section 2.5 without the reference to Section 2.6
shall govern.
2.7 No Exercise After the Termination Date. The Option may not be
exercised after its Termination Date. Thus, the Option does not convey any right
to purchase any Shares which Optionee (or other holder of the Option) has not
agreed to purchase in an Exercise Notice delivered to the Company on or prior to
the Termination Date in accordance with the requirements of the preceding
sections of this Part 2.
Part 3: The Plan Terms
3.1 Plan Terms Control. The Option has been granted under the Plan as
constituted at the Grant Date. The terms of the Plan as constituted at the Grant
Date are incorporated into this Agreement by reference and shall control the
rights and obligations of the Company and the Optionee under this Agreement.
3.2 Effect of Subsequent Changes in the Plan. No change in the Plan
which shall be made after the Grant Date shall adversely affect the rights of
the Optionee under this Agreement unless the Optionee shall have agreed in
writing to such change. No change in the Plan after the Grant Date shall inure
to the benefit of the Optionee except to the extent expressly permitted by the
Committee.
Part 4. Call Right.
4.1 The Company's Call Right. (a) If the Optionee terminates his or her
employment with the Company or any subsidiary of the Company and within five
years after the date of such termination of employment the Optionee becomes
employed by an organization and assumes responsibilities with that organization
which places the Optionee in competition with any one or more of the businesses
then being conducted by the Company or any subsidiary of the Company, the
Company shall have the right (the "Call Right") to purchase Shares from the
Optionee in a number equal to the number of the Shares which the Optionee had
purchased within five years prior to the initial competitive activity by the
Optionee. The amount payable by the Company for the Shares to be delivered by
the Optionee pursuant to this Section 4.1 shall be the Optionee's Investment (as
defined in paragraph (b) below) in the Shares purchased under the Option. If and
to the extent that the Optionee can not deliver the Shares which were purchased
Page 4
<PAGE>
under the Option because the Optionee has previously disposed of all or some of
such Shares, then the Optionee agrees to obtain substitute Shares in the number
needed to comply with the Optionee's delivery obligation under this Section 4.1
by purchasing Shares in the market or by any other lawful means, and the
Optionee shall deliver such substitute Shares to the Company.
(b) As used in this Section 4.1, the term "Optionee's Investment"
means, as to each Share purchased under the Option, the Exercise Price Per Share
as shown in the Term Sheet, provided that the figure representing the Optionee's
Investment shall be appropriately adjusted in the event of Capital Changes as
provided in Section 5.1.
(c) The judgement of the Committee as to whether, for purposes of
applying Section 4.1(a), the Optionee is in competition with the Company and/or
any of its business units shall be conclusive and binding, unless the Optionee
can show by clear and convincing evidence that no such competition has occurred.
4.2 Call Right Exercise Period. The Call Right may be exercised by the
Company at any time on or prior to the date (the "Call Deadline") which occurs
three months after the Committee has first actually become aware that the
Optionee has become employed by another organization and, as an employee of such
organization, become engaged in activities which place the Optionee in
competition with the Company as described in Section 4.1.
4.3 Exercise of Call Right. The Company's Call Right shall be exercised
by delivery by the Company of a written notice of such exercise to the Optionee
at the most recent address for the Optionee as shown on the records of the
Company.
4.4 Consummation of the Company's Purchase. Within five business days
after the Company has exercised its Call Right pursuant to Section 4.3, the
Optionee shall deliver to the Company: (i) certificate(s) representing Shares in
the number required to be delivered under Section 4.1; (ii) transfer instruments
reasonably satisfactory to the Company to vest immediately in the Company
absolute ownership of such Shares free of any adverse interest of any kind; and
(iii) such evidence and assurances as the Company shall reasonably request to
establish the power of the Optionee to convey ownership of such Shares and the
person(s) entitled to receive payment for such Shares. Upon receipt of all the
items deliverable under the preceding sentence, the Company shall pay the
purchase price for such Shares as established pursuant to Section 4.1. If the
Optionee does not deliver the Shares at the time required under the preceding
sentence, the Company shall have the right to obtain payment from the Optionee
for an amount equal to the difference between the greater of the market price at
the time the Call Right is exercised or the time the payment is made and the
Optionee's Investment plus interest from exercise of the Call Right at the prime
rate plus two percentage points and collection costs.
4.5 Call Right Lapse. If the Company fails to exercise its Call Right
on or prior to the Call Deadline, then immediately after the Call Deadline the
Optionee shall be relieved of any further obligation to deliver any Shares under
this Part 4.
Page 5
<PAGE>
Part 5. General Provisions
5.1 Capital Changes. The Committee shall have the right to determine
the effect of each Capital Change upon the parties' respective rights and
obligations under this Agreement, including but not limited to (i) the nature
and quantity of property purchasable by the Company under Part 4 after giving
effect to such Capital Change and (ii) the price payable by the Company for such
property upon exercise by the Company of rights granted in Part 4.
5.2 Securities Law Compliance. The Optionee shall not offer, sell or
otherwise dispose of any of the Shares acquired by reason of any exercise of the
Option in any manner which would violate the Securities Act of 1933 or any other
state or federal law or require the Company to make any filing or take any
action to avoid such a violation.
5.3 Terms Defined in the Plan. Every term which is defined or given a
special meaning in the Plan has the same meaning whenever it is used in this
Agreement.
5.4 Binding Agreement. (a) Each party acknowledges that it is intended
that the other party may rely on the rights granted by this Agreement and that
this Agreement is supported by adequate consideration and is binding on each
party in accordance with its terms.
(b) This Agreement shall also be binding upon and inure to the benefit
of any successor of the Company.
5.5 Complete Agreement. This Agreement, the Term Sheet and the Plan
together contain the complete agreement of the parties relating to the Option.
The rights and obligations of the parties evidenced by this Agreement, the Term
Sheet and the Plan supersede any prior understandings, agreements or
representations by or between the parties which may have related to such subject
matter in any way.
5.6 Amendments and Waivers. The provisions of this Agreement may be
amended, and a person may take any action which is prohibited herein or omit to
perform any action required to be performed by such person, only if such
amendment, act or omission has been approved in writing by the parties to the
Agreement. No course of dealing or any delay in exercising any rights hereunder
shall operate as a waive of any rights of any person under this Agreement. A
waiver upon any one occasion shall not be construed as a bar or waiver of any
right or remedy on any future occasion.
5.7 Counterparts. This Agreement and the Term Sheet may be executed in
one or more counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument.
Page 6
<PAGE>
5.8 Notices. Any notice to the Company required or permitted by the
terms of this Agreement shall not be deemed to have been given unless is it in
writing and shall be deemed to have been given at (but not before) the time it
has been delivered in writing to the office of the Secretary of the Company or
to such other place as the Company may designate in writing from time to time.
5.9 Captions. The captions used in this Agreement are for convenience
only, do not constitute a part of this Agreement, and shall not be deemed to
limit, characterize, or in any way affect any provision of this Agreement.
5.10 Execution. The parties have executed the Term Sheet to evidence
their intention to be bound by every provision of this Agreement.
5.11 Stockholder Approval. The Optionee understands that the Plan has
been approved by the Executive Committee of the Board of Directors, but the Plan
will not stand as fully approved as a stock option plan of the Company until it
has been submitted to and approved by the Shareholders. The Board of Directors
intends to seek such approval by the Shareholders at the annual meeting of the
Shareholders to be held on May 1, 1998. The grant of the Option made by this
agreement and the related Term Sheet is conditional upon such Stockholder
approval. If such approval is granted, the Option will become final; if such
approval is not granted, the Option will become void and of no further effect.
-oOo-
Page 7
<PAGE>
EXERCISE FORM
OPTION GRANTED UNDER THE
SERVICEMASTER 1998 EQUITY INCENTIVE PLAN
To: The Secretary
The ServiceMaster Company
One ServiceMaster Way
Downers Grove, IL 60515
Pursuant to the provisions of the Option Agreement which I entered into
with The ServiceMaster Company under the ServiceMaster 1998 Equity Incentive
Plan (the "Plan") covering an option to purchase shares of The ServiceMaster
Company which was granted to me on February ___, 1998, I hereby notify you that
I wish to exercise such option as follows:
Number of shares as to which the option
is being exercised (must be consistent with the vesting schedule) ____________
Exercise price (number of shares times the
price stated in the option agreement) $____________
Withholding Tax
Check One:
_______ I authorize ServiceMaster to reduce the number of shares issued
pursuant to this option exercise in a number sufficient to cover the
withholding tax obligation based on the average market price of
ServiceMaster shares over the preceding five business days. I certify
that I am currently employed by ServiceMaster or a ServiceMaster
affiliated company.
_______ I am hereby remitting with this Exercise Form a check in the amount of
$__________ which has been calculated to satisfy ServiceMaster's
minimum tax withholding obligation.
PLEASE SEE THE REVERSE SIDE WHICH MUST BE SIGNED BEFORE THE SHARES COVERED BY
THIS NOTICE CAN BE ISSUED.
EXHIBIT A
<PAGE>
The Exercise Date stated on the reverse side is the date on which I have
delivered this notice to you (either by personal delivery or by deposit in the
United States mail).
In connection with the exercise of my option:
1. I hereby agree to purchase the Shares in the number and at the price as
set forth on the reverse side and on the terms established under the
terms of the Plan, the Option Agreement and the regulations adopted by
the Compensation Committee;
2. I represent that I am the person entitled under the option agreement
and the Plan to purchase the Shares covered by this notice;
3. I understand that by the exercise of my option I will be considered to
have received income which is subject to federal, state and/or local
income taxes and that withholding will be made against this obligation
as indicated on the reverse side.
4. I understand that the terms of the Plan give ServiceMaster the right to
purchase from me, at my cost, the shares which I purchased pursuant to
this exercise of my option if I enter into competitive activity with
ServiceMaster within five years after termination of my employment. I
further understand that the exercise of this "Call Right" could have a
substantial negative financial impact to me.
5. I have received the most recent annual report of The ServiceMaster
Company and am familiar with the information contained in that report.
Date: ____________
---------------------------
Signature
---------------------------
Printed Name
<PAGE>
RULES FOR APPLICATION IN THE CASE OF
DEATH, DISABILITY OR RETIREMENT.
(See Section 2.5(b) of the Option Agreement)
Certain Definitions:
"Qualifying Retirement" means a termination of employment with ServiceMaster
which satisfies both of the following conditions:
A. The termination of employment occurs at a time when the
employee is either age 63 or older or the employee has
attained 15 years of service with ServiceMaster (which need
not be 15 consecutive years); and
B. The termination of employment is not an involuntary
termination of employment or a discharge for cause.
Event Rules
---------------------------- -------------------------------------
1. Death or disability The unvested
portion of the vesting schedule is
accelerated and the option shall be
open to exercise for two years form
the date of the event.
2. Qualifying Retirement
The option shall remain exercisable to the end of its term in accordance with
its provisions, but the option shall expire immediately if: (i) the employee
enters into a position which is competitive with ServiceMaster or (ii) the
employee asserts any claims against ServiceMaster which are related in any way
to the employee's termination of employment with ServiceMaster (other than
claims which are founded on an agreement between the employee and
ServiceMaster).
If death occurs after a
Qualifying Retirement and before the
term of the option has expired, Rule
1 shall become applicable commencing
on the date of death.
EXHIBIT B
Exhibit 10.21 to 1997 Form 10-K
This instrument constitutes part of a prospectus covering securities that will
be registered under the Securities Act of 1933.
OPTION AGREEMENT
For Incentive Stock Option Granted Under the
ServiceMaster 1998 Equity Incentive Plan
(subject to shareholder approval)
The ServiceMaster Company, a Delaware corporation, (the "Company") and
[INSERT NAME] (the "Optionee") hereby agree as follows:
Part 1. Option Terms
1.1 Definitions. As used in this Agreement, the following terms have
the indicated meanings:
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Compensation Committee of the Board of
Directors of the Company.
"Company" means The ServiceMaster Company, a Delaware
corporation.
"Grant Date" means the date set forth in the Term Sheet as the
date on which the Option which is the subject of this agreement was
granted.
"Plan" means the ServiceMaster 1998 Equity Incentive Plan as
constituted on the Grant Date and, subject to the limitations set forth
in Section 12.2 of the Plan, as amended from time to time thereafter.
"Shares" means the shares of common stock of the Company or
any successor organization to the Company (as more fully set forth in
the Plan).
"Shareholders" means the holders of the shares of common stock
of the Company on the record date for the meeting of the shareholders
at which the Plan is submitted to the shareholders for their approval.
"Term Sheet" means the document which is referenced to and
delivered concurrently with this Agreement and which sets forth certain
terms and conditions of the Option granted hereunder.
Page 1
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1.2 Grant. (a) Pursuant to the Plan (but subject to the approval of the
Plan by the Shareholders as more fully specified in Section 5.11), the Company
hereby grants to the Optionee an option (the "Option") which entitles the
Optionee to purchase from the Company the Shares which are subject to the Option
on the terms and subject to the conditions specified in the Term Sheet, this
Agreement and the Plan.
(b) Various terms governing this Option, including the Grant Date, the
consideration payable for the Option, and the exercise price under the Option,
are set forth in the Term Sheet. The Term Sheet has been signed by the Company
and must also be signed by the Optionee before the Optionee has any rights under
this agreement.
1.3 Character of the Option. The Option is an "incentive stock option",
meaning that it is an option to purchase Shares which is intended to meet the
requirements of Section 422 of the Code.
1.4 Number of Shares for which the Option May be Exercised. Unless and
until an adjustment is made pursuant to Section 4.3 of the Plan, the number of
Shares which are subject to the Option is the number specified in the Term
Sheet.
1.5 Option Exercise Price. Unless and until an adjustment is made
pursuant to Section 4.4 of the Plan, the price at which the Shares which may be
purchased from the Company upon any exercise of this Option shall be the
original exercise price specified in the Term Sheet.
Part 2: Exercise
2.1 Vesting Schedule. (a) During the period commencing on the Grant
Date and ending on the fifth anniversary of the Grant Date, this Option may be
exercised only with respect to installments of not more than 20% each which
mature, respectively, on the first, second, third, fourth and fifth
anniversaries of the Grant Date. Such installments shall cumulate over the
foregoing five-year period. The foregoing limitation shall operate as shown in
the following schedule, provided, that in no event may this Option be exercised
in a manner or to an extent contrary to the provisions of this Agreement or the
Plan:
Grant Date Cumulative
Anniversary Percent Per Cent
1st 20% 20%
2nd 20% 40%
3rd 20% 60%
4th 20% 80%
5th 20% 100%
Page 2
<PAGE>
(b) After the fifth anniversary of the Grant Date, this Option may be
exercised in whole or in part and at such time or times as the person entitled
to exercise the Option may desire with respect to all Shares then available
under this Option, provided, that in no event may the Option be exercised after
the expiration date set forth in the Term Sheet or in a manner or to an extent
contrary to the provisions of this Agreement or the Plan.
2.2 Manner of Exercise. (a) The person entitled to exercise this Option
may do so by giving the Company a written notice (the "Exercise Notice") which
shall --
(i) identify the Option;
(ii) specify the number of Shares with respect to which the Option is
then being exercised;
(iii) state the price at which the shares will be purchased;
(iv) state that the person signing the Exercise Notice agrees to
purchase the Shares so specified at the Exercise Price and on
the terms established in this Agreement and the Plan; and
(v) be accompanied by the payment in full for the Shares being
purchased.
A form of Exercise Notice which will be deemed satisfactory by the Company is
attached to this Agreement as Exhibit A. Delivery of the Exercise Notice may be
made by personal delivery or by United States mail.
2.3 Exercise Date. This Option shall be deemed to have been exercised
on the date (the "Exercise Date") on which the Exercise Notice, completed as
required by Section 2.2 (or completed in such other form or manner as the
Company's Secretary or the Committee shall approve), is delivered to the office
of the Secretary of the Company or at such other place as may have been
designated by the Secretary or the Committee at the time of such exercise as a
place to which notices of exercise of Options granted under the Plan may be
delivered.
2.4 Manner of Payment. Payment for the Shares purchased pursuant to
each exercise of the Option shall be made only in cash.
2.5 Termination of Option. The Option shall terminate on whichever of
the following dates occurs first: (i) the Expiration Date as specified in the
Term Sheet; (ii) six months after the date of the Optionee's employment with
ServiceMaster for any reason unless Section 2.6 is applicable; or (iii) any
other date established under any of the provisions of the Plan as the date after
which the Option may not be exercised. The applicable date under this Section
2.5 is hereinafter referred to as the "Termination Date".
Page 3
<PAGE>
2.6 Effect of Death or Disability or Retirement. The effect upon the
exercisability of the Option on account of the Optionee's death, disability or
retirement shall be determined by rules adopted or modified by the Committee
from time to time. Exhibit B to this Agreement states the rules which the
Committee has presently determined shall be applicable to the Option in such
cases. Such rules may be amended at any time and from time to time or eliminated
entirely, provided that in such event the Company shall notify the Optionee. If
no such rules are in effect at the time of the Optionee's death, disability or
retirement, clause (ii) of Section 2.5 without the reference to Section 2.6
shall govern.
2.7 No Exercise After the Termination Date. The Option may not be
exercised after its Termination Date. Thus, the Option does not convey any right
to purchase any Shares which Optionee (or other holder of the Option) has not
agreed to purchase in an Exercise Notice delivered to the Company on or prior to
the Termination Date in accordance with the requirements of the preceding
sections of this Part 2.
Part 3: The Plan Terms
3.1 Plan Terms Control. The Option has been granted under the Plan as
constituted at the Grant Date. The terms of the Plan as constituted at the Grant
Date are incorporated into this Agreement by reference and shall control the
rights and obligations of the Company and the Optionee under this Agreement.
3.2 Effect of Subsequent Changes in the Plan. No change in the Plan
which shall be made after the Grant Date shall adversely affect the rights of
the Optionee under this Agreement unless the Optionee shall have agreed in
writing to such change. No change in the Plan after the Grant Date shall inure
to the benefit of the Optionee except to the extent expressly permitted by the
Committee.
Part 4. Call Right.
4.1 The Company's Call Right. (a) If the Optionee terminates his or her
employment with the Company or any subsidiary of the Company and within five
years after the date of such termination of employment the Optionee becomes
employed by an organization and assumes responsibilities with that organization
which places the Optionee in competition with any one or more of the businesses
then being conducted by the Company or any subsidiary of the Company, the
Company shall have the right (the "Call Right") to purchase Shares from the
Optionee in a number equal to the number of the Shares which the Optionee had
purchased within five years prior to the initial competitive activity by the
Optionee. The amount payable by the Company for the Shares to be delivered by
the Optionee pursuant to this Section 4.1 shall be the Optionee's Investment (as
defined in paragraph (b) below) in the Shares purchased under the Option. If and
to the extent that the Optionee can not deliver the Shares which were purchased
under the Option because the Optionee has previously disposed of all or some of
such Shares, then the Optionee agrees to obtain substitute Shares in the number
needed to comply with the Optionee's delivery obligation under this Section 4.1
by purchasing Shares in the market or by any other lawful means, and the
Optionee shall deliver such substitute Shares to the Company.
Page 4
<PAGE>
(b) As used in this Section 4.1, the term "Optionee's Investment"
means, as to each Share purchased under the Option, the Exercise Price Per Share
as shown in the Term Sheet, provided that the figure representing the Optionee's
Investment shall be appropriately adjusted in the event of Capital Changes as
provided in Section 5.1.
(c) The judgement of the Committee as to whether, for purposes of
applying Section 4.1(a), the Optionee is in competition with the Company and/or
any of its business units shall be conclusive and binding, unless the Optionee
can show by clear and convincing evidence that no such competition has occurred.
4.2 Call Right Exercise Period. The Call Right may be exercised by the
Company at any time on or prior to the date (the "Call Deadline") which occurs
three months after the Committee has first actually become aware that the
Optionee has become employed by another organization and, as an employee of such
organization, become engaged in activities which place the Optionee in
competition with the Company as described in Section 4.1.
4.3 Exercise of Call Right. The Company's Call Right shall be exercised
by delivery by the Company of a written notice of such exercise to the Optionee
at the most recent address for the Optionee as shown on the records of the
Company.
4.4 Consummation of the Company's Purchase. Within five business days
after the Company has exercised its Call Right pursuant to Section 4.3, the
Optionee shall deliver to the Company: (i) certificate(s) representing Shares in
the number required to be delivered under Section 4.1; (ii) transfer instruments
reasonably satisfactory to the Company to vest immediately in the Company
absolute ownership of such Shares free of any adverse interest of any kind; and
(iii) such evidence and assurances as the Company shall reasonably request to
establish the power of the Optionee to convey ownership of such Shares and the
person(s) entitled to receive payment for such Shares. Upon receipt of all the
items deliverable under the preceding sentence, the Company shall pay the
purchase price for such Shares as established pursuant to Section 4.1. If the
Optionee does not deliver the Shares at the time required under the preceding
sentence, the Company shall have the right to obtain payment from the Optionee
for an amount equal to the difference between the greater of the market price at
the time the Call Right is exercised or the time the payment is made and the
Optionee's Investment plus interest from exercise of the Call Right at the prime
rate plus two percentage points and collection costs.
4.5 Call Right Lapse. If the Company fails to exercise its Call Right
on or prior to the Call Deadline, then immediately after the Call Deadline the
Optionee shall be relieved of any further obligation to deliver any Shares under
this Part 4.
Page 5
<PAGE>
Part 5. General Provisions
5.1 Capital Changes. The Committee shall have the right to determine
the effect of each Capital Change upon the parties' respective rights and
obligations under this Agreement, including but not limited to (i) the nature
and quantity of property purchasable by the Company under Part 4 after giving
effect to such Capital Change and (ii) the price payable by the Company for such
property upon exercise by the Company of rights granted in Part 4.
5.2 Securities Law Compliance. The Optionee shall not offer, sell or
otherwise dispose of any of the Shares acquired by reason of any exercise of the
Option in any manner which would violate the Securities Act of 1933 or any other
state or federal law or require the Company to make any filing or take any
action to avoid such a violation.
5.3 Terms Defined in the Plan. Every term which is defined or given a
special meaning in the Plan has the same meaning whenever it is used in this
Agreement.
5.4 Binding Agreement. (a) Each party acknowledges that it is intended
that the other party may rely on the rights granted by this Agreement and that
this Agreement is supported by adequate consideration and is binding on each
party in accordance with its terms.
(b) This Agreement shall also be binding upon and inure to the benefit
of any successor of the Company.
5.5 Complete Agreement. This Agreement, the Term Sheet and the Plan
together contain the complete agreement of the parties relating to the Option.
The rights and obligations of the parties evidenced by this Agreement, the Term
Sheet and the Plan supersede any prior understandings, agreements or
representations by or between the parties which may have related to such subject
matter in any way.
5.6 Amendments and Waivers. The provisions of this Agreement may be
amended, and a person may take any action which is prohibited herein or omit to
perform any action required to be performed by such person, only if such
amendment, act or omission has been approved in writing by the parties to the
Agreement. No course of dealing or any delay in exercising any rights hereunder
shall operate as a waive of any rights of any person under this Agreement. A
waiver upon any one occasion shall not be construed as a bar or waiver of any
right or remedy on any future occasion.
5.7 Counterparts. This Agreement and the Term Sheet may be executed in
one or more counterparts, each of which shall be an original but all of which
together shall constitute one and the same instrument.
Page 6
<PAGE>
5.8 Notices. Any notice to the Company required or permitted by the
terms of this Agreement shall not be deemed to have been given unless is it in
writing and shall be deemed to have been given at (but not before) the time it
has been delivered in writing to the office of the Secretary of the Company or
to such other place as the Company may designate in writing from time to time.
5.9 Captions. The captions used in this Agreement are for convenience
only, do not constitute a part of this Agreement, and shall not be deemed to
limit, characterize, or in any way affect any provision of this Agreement.
5.10 Execution. The parties have executed the Term Sheet to evidence
their intention to be bound by every provision of this Agreement.
5.11 Stockholder Approval. The Optionee understands that the Plan has
been approved by the Executive Committee of the Board of Directors, but the Plan
will not stand as fully approved as a stock option plan of the Company until it
has been submitted to and approved by the Shareholders. The Board of Directors
intends to seek such approval by the Shareholders at the annual meeting of the
Shareholders to be held on May 1, 1998. The grant of the Option made by this
agreement and the related Term Sheet is conditional upon such Stockholder
approval. If such approval is granted, the Option will become final; if such
approval is not granted, the Option will become void and of no further effect.
-oOo-
Page 7
<PAGE>
EXERCISE FORM
OPTION GRANTED UNDER THE
SERVICEMASTER 1998 EQUITY INCENTIVE PLAN
To: The Secretary
The ServiceMaster Company
One ServiceMaster Way
Downers Grove, IL 60515
Pursuant to the provisions of the Option Agreement which I entered into
with The ServiceMaster Company under the ServiceMaster 1998 Equity Incentive
Plan (the "Plan") covering an option to purchase shares of The ServiceMaster
Company which was granted to me on February ___, 1998, I hereby notify you that
I wish to exercise such option as follows:
Number of shares as to which the option
is being exercised (must be consistent with the vesting schedule) ____________
Exercise price (number of shares times the
price stated in the option agreement) $____________
Withholding Tax
Check One:
_______ I authorize ServiceMaster to reduce the number of shares issued
pursuant to this option exercise in a number sufficient to cover the
withholding tax obligation based on the average market price of
ServiceMaster shares over the preceding five business days. I certify
that I am currently employed by ServiceMaster or a ServiceMaster
affiliated company.
_______ I am hereby remitting with this Exercise Form a check in the amount of
$__________ which has been calculated to satisfy ServiceMaster's
minimum tax withholding obligation.
PLEASE SEE THE REVERSE SIDE WHICH MUST BE SIGNED BEFORE THE SHARES COVERED BY
THIS NOTICE CAN BE ISSUED.
EXHIBIT A
<PAGE>
The Exercise Date stated on the reverse side is the date on which I have
delivered this notice to you (either by personal delivery or by deposit in the
United States mail).
In connection with the exercise of my option:
1. I hereby agree to purchase the Shares in the number and at the price as
set forth on the reverse side and on the terms established under the
terms of the Plan, the Option Agreement and the regulations adopted by
the Compensation Committee;
2. I represent that I am the person entitled under the option agreement
and the Plan to purchase the Shares covered by this notice;
3. I understand that by the exercise of my option I will be considered to
have received income which is subject to federal, state and/or local
income taxes and that withholding will be made against this obligation
as indicated on the reverse side.
4. I understand that the terms of the Plan give ServiceMaster the right to
purchase from me, at my cost, the shares which I purchased pursuant to
this exercise of my option if I enter into competitive activity with
ServiceMaster within five years after termination of my employment. I
further understand that the exercise of this "Call Right" could have a
substantial negative financial impact to me.
5. I have received the most recent annual report of The ServiceMaster
Company and am familiar with the information contained in that report.
Date: ____________
---------------------------
Signature
---------------------------
Printed Name
<PAGE>
RULES FOR APPLICATION IN THE CASE OF
DEATH, DISABILITY OR RETIREMENT.
(See Section 2.5(b) of the Option Agreement)
Certain Definitions:
"Qualifying Retirement" means a termination of employment with ServiceMaster
which satisfies both of the following conditions:
A. The termination of employment occurs at a time when the
employee is either age 63 or older or the employee has
attained 15 years of service with ServiceMaster (which need
not be 15 consecutive years); and
B. The termination of employment is not an involuntary
termination of employment or a discharge for cause.
Event Rules
---------------------------- -------------------------------------
1. Death or disability The unvested
portion of the vesting schedule is
accelerated and the option shall be
open to exercise for two years form
the date of the event.
2. Qualifying Retirement
The option shall remain exercisable to the end of its term in accordance with
its provisions, but the option shall expire immediately if: (i) the employee
enters into a position which is competitive with ServiceMaster or (ii) the
employee asserts any claims against ServiceMaster which are related in any way
to the employee's termination of employment with ServiceMaster (other than
claims which are founded on an agreement between the employee and
ServiceMaster).
If death occurs after a
Qualifying Retirement and before the
term of the option has expired, Rule
1 shall become applicable commencing
on the date of death.
EXHIBIT B
Exhibit 13 to 1997 Form 10-K
<TABLE>
<CAPTION>
Financial Highlights
For years ended December 31,
(In thousands, except per share data) 1997 1996 Change
---------- ---------- ----------
Operating Results:
<S> <C> <C> <C>
Customer level revenue (1) ................................. $5,550,000 $4,933,000 + 13%
Operating revenue .......................................... 3,961,502 3,458,328 + 15%
Earnings before interest, taxes, depreciation
and amortization (EBITDA)............................... 443,788 369,701 + 20%
Operating income ........................................... 343,933 295,218 + 17%
Historical partnership net
income (before tax benefit of corporate conversion)(2).. 264,076 245,140 + 8%
Tax benefit recorded relating to change in tax status ...... 65,000 -- -
---------- ----------
Net Income (2) ............................................. 329,076 245,140 + 34%
Pro forma Corporate Information: (2 and 3)
Net income ................................................. $ 163,470 $ 150,429 + 9%
Per Share:
Basic ................................................ $ 0.86 $0.71 + 21%
Diluted .............................................. $ 0.82 $0.69 + 19%
Cash distributions ................................... $ 0.46 2/3 $0.44 + 6%
Financial Position:
Total assets ............................................... $2,475,224 $1,846,841
Long-term debt ............................................. 1,247,845 482,315
Shareholders' equity ....................................... 524,438 796,767
Share Price Range :
(Traded on the New York Stock Exchange under the symbol SVM)
High price ................................................. $29.50 $ 17.75
Low price .................................................. $16.38 $ 12.92
Closing price .............................................. $29.25 $ 17.42
</TABLE>
(1) Customer level revenue represents the combined revenues of the Company's
direct operations and the estimated revenues of its various independently
licensed franchisees.
(2) The Company converted from partnership to corporate form in a tax-free
exchange for shareholders on December 26, 1997. Prior to the conversion,
the Partnership was not subject to federal and state income taxes, as its
taxable income was allocated to the Company's shareholders. As a result of
the conversion, the Company is a taxable entity and is responsible for
such payments. Pro forma information is presented to compare the
continuing results of operations as if the Company were a taxable
corporation in 1997 and 1996. The pro forma provision for income taxes has
been calculated assuming that the Company's effective tax rate was
approximately 40 percent of pretax earnings. The Company's historical net
income per share as a Partnership was as follows:
Before One-Time Tax Benefit Actual
1997 1996 1997 1996
-------------------- ---------------------
Basic $1.39 $1.16 $1.73 $1.16
Diluted $1.33 $1.12 $1.66 $1.12
(3) The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" which requires the dual presentation of basic and
diluted earnings per share. Basic earnings per share replaces the
previously required presentation of primary earnings per share. Basic
earnings per share are calculated based on 190,629 shares in 1997 and
211,587 shares in 1996 while diluted earnings per share are calculated
based on 199,760 shares in 1997 and 220,286 shares in 1996. All share and
per share data reflect the three-for-two share splits in June 1997 and
June 1996.
<PAGE>
Management Discussion and Analysis of
Financial Condition and Results of Operations
(All share and per share data reflect the
three-for-two share splits in June 1997 and June 1996)
The terms "Company" and "ServiceMaster" refer to the operations of
ServiceMaster Limited Partnership and The ServiceMaster Company, its successor
corporation.
1997 Compared with 1996
- -----------------------
Revenues increased 15 percent to $4 billion reflecting the effect of
acquisitions and growth from base operations. Operating income increased 17
percent to $344 million, while margins increased to 8.7 percent of revenue from
8.5 percent in 1996, reflecting the continued strong growth of higher margin
businesses, productivity improvements, and the integration of the acquired
Barefoot operations. These improvements were offset in part by the impact of the
newly acquired professional employer organization which has significantly lower
margins than the rest of the Company's businesses. Operating income margins
would have improved 50 basis points excluding this acquisition.
Pro forma information is presented which compares the continuing results of
operations as if the Company were a taxable corporation in all years. On this
basis, net income grew 9 percent to $163 million. Basic earnings per share
increased 21 percent to $.86 and diluted earnings per share were up 19 percent
to $.82. Earnings per share grew at a higher rate than net income due to the
transaction with Waste Management Inc. (WMX) in which the Company repurchased
WMX's 19 percent ownership interest in ServiceMaster (40.7 million shares) for
$626 million on April 1, 1997. This transaction served to increase interest
expense significantly and reduce shares outstanding.
Historical net income was $329 million including a one-time tax gain of $65
million realized upon reincorporation. The resulting historical basic and
diluted earnings per share were $1.73 and $1.66, respectively. Partnership net
income excluding this gain increased 8 percent to $264 million. On this basis,
basic and diluted earnings per share were $1.39 and $1.33, increases of 20
percent and 19 percent, respectively.
The Consumer Services business unit achieved a 14 percent increase in revenue
and a 21 percent increase in pro forma net income reflecting the successful
integration of the Barefoot business (which was acquired in February 1997)
combined with good growth from base operations and other acquisitions. The
TruGreen-ChemLawn operations achieved strong double-digit growth in revenues and
profits reflecting the Barefoot acquisition, increases in the customer base,
improved branch efficiencies, strong sales of ancillary products and favorable
weather conditions throughout most of the year. Terminix achieved solid growth
in revenue and profits for the year. Strong growth in renewals and productivity
improvements offset the effects of adverse weather conditions on termite
operations and increased termite remediation costs. American Home Shield
achieved very strong double-digit increases in both revenues and profits, with
excellent increases in contract renewals and direct-to-consumer sales. This is
consistent with an overall strategy to expand channels of distribution in this
business which have historically been concentrated in the residential resale
market. ServiceMaster Residential/Commercial and Merry Maids reported modest
profit growth and solid revenue growth for the year, reflecting the conversion
of certain franchises and distributors to company-owned operations.
The Management Services business, which includes Diversified Health Services
(DHS), achieved 7 percent growth in revenue reflecting the Premier Manufacturing
Support Services (Premier) acquisition made last year and, to a lesser degree,
growth in the base business. The base business growth resulted from improvements
in Healthcare (which includes DHS) and Business & Industry, offset by reductions
in Education. Pro forma net income was flat compared to the prior year. Despite
continuing competitive pressures and industry consolidation in the acute care
market, the Company achieved solid revenue increases and improved customer
retention in the Healthcare market. Reported profits in this market were
comparable to the prior year. Within the acute care sector, good growth was
realized from sales of the Integrated Service product which provides
comprehensive service solutions to clients. The Company achieved significant
revenue and profit increases in the Business & Industry market, largely as a
result of the successful integration of the Premier acquisition and modest
growth in the base business. In the Education market, revenues and profits
declined due to the discontinuation of certain large accounts and margin
pressures in certain accounts.
Revenues in New Business Development and Parent increased significantly,
reflecting the August 1997 acquisition of Certified Systems, Inc. (CSI) which
added approximately $155 million in revenue and minimal profits after
acquisition related costs. CSI is a professional employer organization that
provides clients with administrative processing of payroll, workers'
compensation insurance, health insurance, unemployment insurance, and other
employee benefit plans. Pro forma net income reflects the additional interest
expense incurred relating to the WMX share repurchase.
On a consolidated basis, cost of services rendered and products sold increased
14 percent and decreased slightly as a percentage of revenue to 77.2 percent in
1997 from 77.5 percent in 1996. This reflects the changing mix of the enterprise
as Consumer Services increased in size relative to the overall business of the
Company. The Consumer Services unit operates at a higher gross profit margin
than the Management
21
<PAGE>
Services business unit, but incurs relatively higher levels of selling and
administrative costs. However, much of this reduction in cost of
goods sold was offset by the acquisition of CSI which operates at significantly
lower gross margins than the Company's other businesses. Without CSI, cost of
goods sold would have been 76.5 percent of revenue in 1997.
Consolidated selling and administrative expenses increased 16 percent over the
prior year, and as a percentage of revenue, increased from 13.9 percent in 1996
to 14.1 percent in 1997, reflecting the changing business mix of the Company
described above.
Interest expense increased over the prior year primarily due to increased debt
levels associated with the repurchase of shares previously held by WMX and
acquisitions.
Interest and investment income increased over the prior year levels due to
growth in, and strong returns from, the investment portfolio at American Home
Shield as well as a gain associated with the sale of an interest in an
international joint venture.
Minority interest expense decreased due to the repurchase of minority
ownership interests in subsidiary entities.
Most operations conducted by the Company and its subsidiary partnerships have
been exempt from federal corporate income tax since 1986. The Internal Revenue
Code would have imposed federal corporate tax on the Company's operations
beginning in 1998. In anticipation of this change, ServiceMaster shareholders
approved a reincorporating merger which was completed on December 26, 1997, and
the Company converted from partnership to corporate form. As a result of the
reincorporation, the Company recognized a step-up in the tax basis of its assets
which will be amortized against taxable income in future years. Simultaneously,
the Company recorded a book gain representing the difference between the tax and
book basis of the enterprise's assets and liabilities. The actual value to the
Company of the tax basis step-up significantly exceeds the amount of the
deferred tax asset. The Company believes that the step-up will result in a
reduction in its cash tax payments in excess of $25 million per annum over the
ensuing 15 years.
1996 Compared with 1995
- -----------------------
Revenues increased 8 percent to $3.5 billion primarily due to internal growth,
with the effects of acquisition activity at both the Consumer Services and
Management Services segments offsetting the disposition of the Education Food
Service line in early 1995. Operating income increased 17 percent to $295
million, while margins increased to 8.5 percent of revenue from 7.9 percent in
1995, reflecting the combined effects of the continued rapid growth of our
higher margin business units and the favorable effects of overhead leveraging
throughout the enterprise. Both net income and earnings per share reflect the
December 1995 acquisition of WMX's minority ownership interest in Consumer
Services, which reduced minority interest expense and increased the number of
shares outstanding by approximately 41 million (on a post-split basis). Pro
forma net income, restated as if the Company were a taxpaying corporation, was
$150 million, a 42 percent increase over the comparable 1995 level with pro
forma basic earnings per share at $.71, a 16 percent increase and pro forma
diluted earnings per share at $.69, a 17 percent increase. Historical
Partnership net income was $245 million, up 43 percent from the prior year while
historical basic earnings per share were $1.16, an increase of 17 percent and
historical diluted earnings per share were $1.12, an 18 percent increase.
The Consumer Services business segment achieved a 13 percent increase in
revenues and pro forma net income growth of 23 percent. TruGreen-ChemLawn
operations had strong growth in revenues and profits despite unfavorable weather
conditions throughout the year. Continued strong growth in residential services
and strong commercial sales, combined with the favorable effects of new service
initiatives, such as interior plantscaping and home fertilizer delivery, helped
offset the weather-related adversities. Terminix achieved solid growth in
revenues as a result of increases in pest control sales and termite completions.
Profits also increased but at a less rapid pace due to changes in the sales mix
and higher production costs. American Home Shield achieved very strong increases
in warranty contracts written, earned revenues and profits. These increases were
primarily the result of strong internal growth, small acquisitions and continued
increases in contract renewals. The ServiceMaster Residential/Commercial
operations continued to achieve growth in revenues and profits, reflecting the
continued repurchase of distributors, as well as steady internal growth which
offset a decline in large disaster recovery projects. The Merry Maids business
achieved solid increases in revenues and profits as a result of strong growth
from existing franchisees, as well as the expansion of company-owned branch
operations.
The Management Services business segment, including Diversified Health
Services, achieved 18 percent overall growth in pro forma net income for the
year, reflecting significant transaction-related fees and gains, strong cost
controls and improved customer retention, as well as the elimination of losses
incurred in 1995 from the discontinued Education Food Service business.
22
<PAGE>
Revenues for the traditional businesses grew three percent over the prior year
as improvements in Education and Business & Industry were offset by slight
reductions in Healthcare. Revenues generated from the fourth quarter acquisition
of Premier offset the effect of the disposition of Education Food Service in
February 1995. The traditional Healthcare business, which primarily serves the
acute care sector of the health care market, recorded profits that were
consistent with the prior year level. Strong cost controls and efficiency gains
offset a slight decline in revenues, reflecting continuing competitive pressures
and industry consolidations. Diversified Health Services continued to achieve
excellent growth in revenues and profits, reflecting strong growth in management
services, improvements in the rehabilitation operations which were started in
1995, and a significant increase in transaction-related fees and gains. The
Education market experienced solid revenue growth with an improved customer
retention rate. Profits decreased as a result of lower margins on a higher mix
of large school district contracts. The Business & Industry unit achieved
double-digit increases in both revenues and profits, with a substantial increase
in services to the aviation industry.
Revenues in New Business Development and Parent decreased, reflecting the 1995
sale of a small business investment. Profits were improved reflecting the
purchase of the WMX minority ownership interest in Consumer Services in exchange
for ServiceMaster shares.
On a consolidated basis, cost of services rendered and products sold increased
7 percent but continued to decline as a percentage of revenue to 77.5 percent in
1996 from 78.1 percent in 1995. This decrease as a percentage of revenue
reflects the changing mix of the business as Consumer Services increases in size
in relation to the overall business of the Company. The Consumer Services units
operate at a higher gross profit margin than the Management Services business
units, but incur relatively higher levels of selling and administrative costs.
Consolidated selling and administrative expenses increased 7 percent over the
prior year, but as a percentage of revenue, decreased from 14.1 percent in 1995
to 13.9 percent in 1996, reflecting good cost controls and improved
efficiencies.
Overall operating income margins continue to reflect effective leveraging
and rapid growth in higher margin businesses, improving to 8.5 percent of
revenues compared to 7.9 percent in 1995.
Interest income increased over prior year levels due to growth in the
investment portfolio at American Home Shield, as well as gains realized on
several sales of marketable securities during the year. Interest expense
increased over the prior year, reflecting increased borrowings relating to
acquisitions and treasury share purchases. The decrease in minority interest
expense primarily reflects the purchase from WMX of the minority interest in the
Consumer Services business segment in December 1995.
1997 Financial Position
- -----------------------
The Company continued to exhibit its excellent cash generating ability, with
cash flows from operations increasing 9 percent to $372 million and free
operating cash flows (defined as cash flows from operations less property
additions) increasing 9 percent to $326 million. The Company's free operating
cash flows represent the cash available for enhancing shareholder value (e.g.,
acquisitions, dividends and share repurchases) after financing the growth of
existing business units. Cash flows from the operating segments grew at strong
double digit rates and were partially offset by increased interest expense
relating to the WMX transaction. The Company's free operating cash flows have
consistently exceeded recurring net income as a result of relatively low working
capital and fixed asset requirements, combined with the effects of noncash
charges for depreciation and amortization.
Cash and marketable securities totaled approximately $124 million at December
31, 1997. Debt levels increased despite strong operating cash flows due to the
repurchase of WMX's 19 percent ownership interest in the Company for $626
million and acquisitions. The Company is a party to a number of long-term debt
agreements which require it to comply with certain financial covenants,
including limitations on indebtedness, restricted payments, fixed charge
coverage ratios and net worth. The Company is in compliance with the covenants
related to these debt agreements. Management believes that funds generated from
operations and other existing financial resources will continue to be adequate
to satisfy the ongoing operating needs of the Company. In addition, the Company
had $450 million of unused commitment on its revolving bank facility at December
31, 1997.
On February 24, 1997, the Company completed the acquisition of Barefoot Inc.
(Barefoot), the second largest professional residential lawn care service
company in the United States. The aggregate value of this transaction was
approximately $237 million with the payment consisting of $146 million of shares
and the remainder in cash.
On August 11, 1997, the Company acquired Certified Systems, Inc. (CSI), one of
the nation's largest professional employer organizations. CSI provides clients
with administrative processing of payroll, workers' compensation insurance,
23
<PAGE>
health insurance, unemployment insurance and other employee benefit plans.
Subsequent to year-end, ServiceMaster acquired Rescue Industries, Inc. which
operates under the trade name Rescue Rooter. Rescue Rooter is one of the largest
companies in America specializing in plumbing and drain cleaning services.
On April 1, 1997, ServiceMaster repurchased the entire 19 percent ownership
interest that WMX had held in the Company for approximately $626 million. WMX
had owned 40.7 million restricted shares of ServiceMaster and also had an option
to purchase an additional 2.8 million shares which was canceled as part of the
transaction. This transaction was immediately additive to earnings per share and
provided significant, incremental tax benefits to the Company.
In April, the Company also entered into a committed $1 billion multi-currency
revolving credit agreement, which includes a five-year revolving credit facility
of $750 million and a 364-day revolving credit facility of $250 million with a
one-year term loan option (two-year total term).
On July 28, 1997, ServiceMaster filed a Form S-3 shelf registration statement
with the Securities and Exchange Commission providing for the sale of up to $950
million in either unsecured senior debt securities or equity interests. On
August 14, 1997, the Company completed a $300 million dual-tranche debt offering
consisting of $100 million, 6.95 percent notes due August 15, 2007 and $200
million, 7.45 percent notes due August 15, 2027. On March 2, 1998, the Company
completed a $300 million dual-tranche offering of unsecured senior notes
consisting of $150 million, 7.10 percent notes due March 1, 2018 and $150
million, 7.25 percent notes due March 1, 2038. The net proceeds of these
offerings were used to refinance borrowings under bank credit facilities,
thereby reducing the Company's exposure to short-term interest rate
fluctuations.
Proceeds from future offerings will be used for general corporate purposes,
which may include repayment of debt, repurchase of shares, acquisitions, capital
expenditures and working capital requirements. No decision has been made
relating to the potential future sale of other securities from the shelf. Any
future decisions will depend on the Company's capital needs and market
conditions at the time.
Because certain computer programs use two digits rather than four to define
the applicable year, many systems may not function properly beyond the year
1999. In addition, certain systems are unable to recognize the year 2000 as a
leap year. The Company has conducted a review of its computer systems to
identify those that could be affected by the year 2000 problem, and has
determined that it will be required to replace or remediate many of its systems
to facilitate their continuing reliable operation. The Company currently
believes that expenses directly related to this effort are not expected to have
a material impact on the results of its operations.
Although the Company believes that critical remediation efforts will be
completed prior to the year 2000, the untimely completion of these efforts
could, in certain circumstances, have a material adverse effect on the
operations of the Company. In addition, the Company is in the process of
establishing whether the external parties and systems with which the Company
interacts and external systems for which the Company has certain maintenance
responsibilities are in compliance and whether non-compliance could have a
material adverse impact on the Company.
Accounts receivable and inventories increased reflecting general business
growth and the acquisition of Barefoot. The increases in prepaid expenses and
other assets resulted from the strong growth at American Home Shield, where
initial direct contract costs are capitalized and expensed over the life of the
service contract, and the recording of deferred tax assets related to the
conversion to corporate form. Intangible assets have grown primarily due to the
acquisition of Barefoot, CSI, and other smaller companies. Property and
equipment increased primarily due to acquisitions and general business growth.
The Company does not have any material capital commitments at this time. Notes
receivable and other long-term assets increased due to the deferred tax assets
discussed above.
Accounts payable and other accrued liabilities increased due to general
business growth and the effects of acquisitions. Deferred revenues increased
primarily as a result of strong growth in warranty contracts written at American
Home Shield and an increase in customer prepayments at TruGreen-ChemLawn.
At the end of 1997, there were no minority ownership interests in subsidiary
entities, and the General Partners' interests in the parent entities were
eliminated upon reincorporation.
Total shareholders' equity decreased to $524 million in 1997 from $797 million
at December 31, 1996, reflecting the repurchase of shares previously owned by
WMX and other treasury share repurchases and cash distributions. This reduction
was partially offset by strong growth in earnings, shares issued to acquire
Barefoot, and the gain recorded related to establishing
24
<PAGE>
the deferred tax assets created upon reincorporation. The Company continues to
repurchase shares in the open market or in privately negotiated transactions
pursuant to the authorization previously granted by the Board of Directors. As
of December 31, 1997, there was $39 million of authorization remaining.
At year end, the aggregate market value of the Company's outstanding shares
exceeded $5 billion. An investor who held their shares for the entire year
realized a total return on their investment of 71 percent in 1997, exceeding
market averages. ServiceMaster shareholders have also experienced compounded
total returns exceeding 20 percent annually over the last five-, 10- and 20-year
periods.
Cash distributions paid directly to shareholders totaled $89 million, or $.46
2/3 per share, a 6 percent per share increase over the prior year. The total
amount of cash distributions, including payments made to the shareholders' trust
described below, increased 6 percent to approximately $156 million.
Several years ago, the Company adopted a pattern of annual
increases in direct distributions to shareholders for the remaining term of the
Partnership. In corporate form, the Company expects to continue to increase its
dividend payment. The timing and amount of future dividends will be at the
discretion of the Board of Directors and will depend on, among other things, the
Company's corporate finance objectives and cash requirements. The Company has
announced its intended cash distribution for 1998 of $.49 per share.
In 1993, ServiceMaster established a trust for the benefit of Partnership
shareholders. Each year, the trust was allocated the portion of the
Partnership's taxable income which exceeded the level of direct cash dividends,
thereby reducing the taxable income of partnership shareholders. The trust
received cash payments from the Partnership in amounts sufficient to pay its
income tax obligations on this allocated taxable income. Cash distributions made
to the trust totaled $65 million in 1997 and $50 million in 1996. The trust was
terminated upon reincorporation and has no residual resources or obligations
except for its final income tax payment.
The return to corporate form is not expected to impact the enterprise's future
liquidity and capital resources materially. As a corporation, the Company is
responsible for the payment of corporate federal and state income taxes.
Nonetheless, the increased cash requirements related to corporate income taxes
will be significantly offset by the elimination of cash payments to the
Partnership's shareholder trust and the annual cash benefit resulting from the
step-up in tax basis in the enterprise's assets realized upon reincorporation.
In addition, management expects that the Company will not be required to pay
federal income taxes resulting from its 1998 earnings until March of 1999. At
that time, the Company will be responsible for its 1998 obligation and will
begin making estimated payments for its 1999 obligations.
The following table presents net income before interest, taxes, depreciation
and amortization (EBITDA). EBITDA is a commonly-used supplemental measurement of
a company's ability to generate cash flow used by many of ServiceMaster's
investors and lenders. Many of the Company's existing long-term debt
arrangements require it to maintain specified levels of EBITDA. Management
believes that EBITDA is another measure which demonstrates the exceptional
cash-generating abilities of the Company's businesses.
<TABLE>
<CAPTION>
(In thousands, except percentage data) 1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income ....................................... $ 329,076 $ 245,140 $ 172,019 $ 139,883 $ 145,947
Depreciation...................................... 45,392 41,658 38,332 32,885 29,674
Amortization...................................... 47,670 37,348 27,656 21,323 20,282
Tax benefit relating to change in tax status ..... (65,000) -- -- -- --
Gain on issuance of subsidiary shares ............ -- -- -- -- (30,200)
--------- --------- --------- --------- ---------
Cash income ...................................... 357,138 324,146 238,007 194,091 165,703
Interest expense.................................. 76,447 38,298 35,855 31,543 32,483
Tax provision (while organized as a partnership .. 10,203 7,257 5,588 2,755 2,146
--------- --------- --------- --------- ---------
EBITDA ........................................... $ 443,788 $ 369,701 $ 279,450 $ 228,389 $ 200,332
========= ========= ========= ========= =========
Growth over prior period ......................... 20% 32% 22% 14% 15%
</TABLE>
EBITDA should not be considered an alternative to net income in measuring the
Company's performance, or used as an exclusive measure of cash flow because it
does not consider the impact of working capital growth, capital expenditures,
debt principal reductions or other sources and uses of cash which are disclosed
in the Consolidated Statements of Cash Flows.
In accordance with the Private Securities Litigation Reform Act of 1995, the
Company notes that statements that look forward in time, which include
everything other than historical information, involve risks and uncertainties
that may affect the Company's actual results of operations. Factors which could
cause actual results to differ materially include the following (among others):
weather conditions adverse to certain of the Company's Consumer Services
businesses, the entry of additional competitors in any of the markets served by
the Company, labor shortages, consolidation of hospitals in the healthcare
market, the condition of the U.S. economy, and other factors listed from time to
time in the Company's filing with the Securities and Exchange Commission.
25
<PAGE>
Eleven Year Financial Summary
The Company converted from partnership to corporate form in a tax-free exchange
for shareholders on December 26, 1997. Prior to the conversion, the Partnership
was not subject to federal and state income taxes, as its taxable income was
allocated to the Company's shareholders. As a result of the conversion, the
Company is a taxable entity and is responsible for such payments. Pro forma
information is presented to compare the continuing results of operations as if
the Company were a taxable corporation in all years. The pro forma provision for
income taxes has been calculated assuming that the corporation's effective tax
rate was approximately 40 percent of pretax earnings.
<TABLE>
<CAPTION>
(In thousands, except per share and percentage data)
1997 1996 1995
---------- ---------- ----------
Operating Results
<S> <C> <C> <C>
Operating revenue ................................ $3,961,502 $3,458,328 $3,202,504
Cost of services rendered and products sold ...... 3,058,160 2,681,008 2,499,700
Selling and administrative expenses .............. 559,409 482,102 450,937
---------- ---------- ----------
Operating income (Note 2) ........................ 343,933 295,218 251,867
---------- ---------- ----------
Percentage of operating revenu ............... 8.7% 8.5% 7.9%
Non-operating expense ............................ 69,654 42,821 74,260
Provision for income taxes ....................... 10,203 7,257 5,588
---------- ---------- ----------
Partnership net income (before
corporate conversion-Note 2) $ 264,076 $ 245,140 $ 172,019
========== ========== ==========
Percentage of operating revenue .............. 6.7% 7.1% 5.4%
Tax benefit relating to change in tax status ..... 65,000 --- ---
---------- ---------- ----------
Net income ....................................... $ 329,076 $ 245,140 $ 172,019
========== ========== ==========
Pro forma corporate net income ................... $ 163,470 $ 150,429 $ 105,854
========== ========== ==========
Percentage of operating revenue .............. 4.1% 4.3% 3.3%
Pro forma Corporate earnings per share (Notes 1 and 2):
Basic ........................................ $ 0.86 $ 0.71 $ 0.61
Diluted ...................................... $ 0.82 $ 0.69 $ 0.59
Shares used to compute basic net income per share 190,629 211,587 173,588
Shares used to compute diluted net income per share 199,760 220,286 182,135
Cash distributions to shareholders ............... $ 0.47 $ 0.44 $ 0.42
Share price range:
High price ................................... $ 29.50 $ 17.75 $ 13.50
Low price .................................... $ 16.38 $ 12.92 $ 9.56
Financial Position (at year end)
Current assets ................................... $ 594,084 $ 499,334 $ 393,239
Current liabilities .............................. 558,177 425,552 372,930
Working capital .................................. 35,907 73,782 20,309
Current ratio .................................... 1.1-1 1.2-1 1.1-1
Total assets ..................................... $2,475,224 $1,846,841 $1,649,890
Non-current liabilities .......................... 1,392,609 607,614 517,603
Minority interest ................................ --- 16,908 12,697
Deferred gain .................................... --- --- ---
Shareholders' equity ............................. 524,438 796,767 746,660
Percentage return on weighted average shareholders' equity 43% 32% 46%
Shares outstanding, net of treasury shares and
share subscriptions .......................... 186,629 213,597 214,227
</TABLE>
<TABLE>
<CAPTION>
Note 1:
Pro forma net income per share is presented above, the Company's historical net income per share as a partnership
for the last five years was as follows:
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
EPS:Basic $ 1.73 $ 1.16 $ 0.99 $ 0.82 $ 0.68
Diluted $ 1.66 $ 1.12 $ 0.95 $ 0.80 $ 0.67
All share and per share data reflect the three-for-two share splits in 1997,
1996, 1993 and 1992.
</TABLE>
26
<PAGE>
Eleven Year Financial Summary
(In thousands, except per share and percentage data)
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990 1989 1988 1987
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S><C> <C> <C> <C> <C> <C> <C> <C>
$2,985,207 $2,758,859 $2,488,854 $2,109,941 $1,825,750 $1,609,267 $1,531,276 $1,425,316
2,356,435 2,192,684 2,021,010 1,762,700 1,545,527 1,387,448 1,327,128 1,228,885
414,746 393,131 326,477 225,814 177,941 129,035 118,275 116,938
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
214,026 173,044 141,367 121,427 102,282 92,784 85,873 79,493
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
7.2% 6.3% 5.7% 5.8% 5.6% 5.8% 5.6% 5.6%
71,388 55,151 45,740 39,860 30,397 24,016 21,247 19,492
2,755 2,146 1,233 1,426 2,332 721 -- --
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 139,883 $ 115,747 $ 94,394 $ 80,141 $ 69,553 $ 68,047 $ 64,626 $ 60,001
========== ========== ========== ========== ========== ========== ========== ==========
4.7% 4.2% 3.8% 3.8% 3.8% 4.2% 4.2% 4.2%
--- --- --- --- --- --- --- ---
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$ 139,883 $ 115,747 $ 94,394 $ 80,141 $ 69,553 $ 68,047 $ 64,626 $ 60,001
========== ========== ========== ========== ========== ========== ========== ==========
$ 85,012 $ 70,264 $ 56,994 $ 48,614 $ 42,843 $ 40,986 $ 38,517 $ 35,761
========== ========== ========== ========== ========== ========== ========== ==========
2.8% 2.5% 2.3% 2.3% 2.3% 2.5% 2.5% 2.5%
$ 0.50 $ 0.42 $ 0.34 $ 0.30 $ 0.27 $ 0.25 $ 0.24 $ 0.23
$ 0.48 $ 0.40 $ 0.33 $ 0.30 $ 0.27 $ 0.25 $ 0.24 $ 0.22
170,433 169,279 166,552 160,184 159,820 163,372 160,193 157,540
177,928 177,487 175,294 168,386 162,025 166,146 163,772 161,610
$ 0.41 $ 0.40 $ 0.39 $ 0.38 $ 0.37 $ 0.35 $ 0.33 $ 0.30
$ 12.61 $ 13.78 $ 8.85 $ 7.70 $ 4.69 $ 4.79 $ 5.56 $ 6.25
$ 9.56 $ 7.83 $ 6.52 $ 4.33 $ 3.90 $ 4.17 $ 4.40 $ 4.32
$ 331,045 $ 291,325 $ 257,542 $ 217,517 $ 237,262 $ 219,661 $ 203,925 $ 128,804
304,395 244,552 206,755 157,458 158,046 135,375 76,908 59,993
26,650 46,773 50,787 60,059 79,216 84,286 127,017 68,811
1.1-1 1.2-1 1.2-1 1.4-1 1.5-1 1.6-1 2.7-1 2.1-1
$1,230,839 $1,122,461 $1,005,531 $ 843,660 $ 796,935 $ 593,693 $ 485,492 $ 371,104
483,906 471,177 511,211 376,638 372,052 410,056 346,970 260,267
135,272 117,513 77,906 78,229 55,636 9,174 10,186 8,660
-- -- -- 109,354 115,195 -- -- --
307,266 289,219 209,659 121,981 96,006 39,088 51,428 42,184
47% 46% 54% 74% 130% 139% 135% 166%
170,946 171,934 170,258 162,351 161,960 153,597 157,977 157,314
</TABLE>
<TABLE>
<CAPTION>
Note 2:
In the above presentation, the operating results in the years from 1990
through 1993, have been stated to exclude gains on issuance of subsidiary
shares, restructuring and unusual charges and the change in accounting for post
retirement benefits. The results on a basis which includes these items are as
follows:
1993 1992 1991 1990
-------- ------- -------- -------
<S> <C> <C> <C> <C>
Operating income................................. $173,044 $62,432 $121,427 $95,782
Pro forma corporate net income................... $88,263 $73,486 $52,095 $50,889
EPS: Basic...................................... $0.52 $0.44 $0.33 $0.32
Diluted.................................... $0.51 $0.43 $0.32 $0.32
</TABLE>
27
<PAGE>
Notes to the Consolidated Financial Statements
Summary of Significant Accounting Policies
Basis of Consolidation: The consolidated financial statements include the
accounts of ServiceMaster and its majority-owned subsidiary partnerships and
corporations, collectively referred to as the Company. Intercompany transactions
and balances have been eliminated in consolidation. Investments in
unconsolidated subsidiaries representing ownership of at least 20 percent, but
less than 50 percent, are accounted for under the equity method. Certain
immaterial 1996 and 1995 amounts have been reclassified to conform with the 1997
presentation. The preparation of the consolidated financial statements requires
management to make certain estimates and assumptions required under generally
accepted accounting principles which may differ from the actual results.
Revenues: Revenues from lawn care, termite, and pest control services are
recognized as the services are provided. Revenues from franchised services
(which in aggregate represent less than 10 percent of consolidated totals)
consist of initial franchise fees received from the sales of licenses, sales of
products to franchisees, and continuing monthly fees based upon franchise
revenue.
Home warranty contract fees are recognized as revenues ratably over the life
of the contract. Customers' coverage under home warranty contracts is on a
"claims made" basis and contract costs are expensed as incurred.
Revenues from management services are recognized as services are rendered and
consist of contract fees which reflect the total price of such services. Where
the Company principally uses people who are employees of the facility, the
payroll costs for such employees are charged to the Company by the facility and
are included in "Cost of services rendered and products sold" in the
Consolidated Statements of Income. Receivables from the facilities are reflected
in the Consolidated Statements of Financial Position at the net amount due,
after deducting from the contract price all amounts chargeable to the Company.
Revenues from the professional employer organization (PEO) are recognized as
the services are rendered. Consistent with PEO industry practice, revenues
include the gross amount billed to clients which includes payroll and other
direct costs.
Inventory Valuation: Inventories are valued at the lower of cost (first-in,
first-out basis) or market. Inventory costs include material, labor, and factory
overhead and related handling costs. Raw materials represent less than three
percent of the inventory value at December 31, 1997. The remaining inventory is
finished goods to be used on the customers' premises or sold to franchisees.
Depreciation and Amortization: Buildings and equipment used in the business are
stated at cost and depreciated over their estimated useful lives using the
straight-line method for financial reporting purposes. The estimated useful
lives for building and improvements range from 10 to 40 years, while the
estimated useful lives for equipment range from 3 to 10 years. Intangible assets
consist primarily of trade names ($183 million), covenants not to compete ($34
million) and goodwill ($1.3 billion). These assets are amortized on a
straight-line basis over their estimated useful lives as follows: trade names -
40 years; covenants not to compete - 10 to 20 years; and goodwill - 40 years.
Long-lived assets, including fixed assets and intangible assets, are
periodically reviewed to determine recoverability by comparing their carrying
values to the undiscounted future cash flows expected to be realized from their
use. No recovery problems have been indicated by these comparisons. If the
undiscounted future cash flows had been less than the carrying amount of the
asset, an impairment loss would have been recognized based on the asset's fair
value, and the carrying amount of the asset would have been reduced accordingly.
Income Taxes: The Company accounts for income taxes under the Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes." This
statement utilizes an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the Company's financial statements or tax
returns. Deferred income taxes are provided to reflect the differences between
the tax bases of assets and liabilities and their reported amounts in the
financial statements.
Earnings Per Share: The Company adopted Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" which requires the dual presentation of
basic and diluted earnings per share. Basic earnings per share replaces the
previously required presentation of primary earnings per share and is based on
the weighted average number of common shares outstanding during the year. Shares
potentially issuable under option and convertible debentures which are dilutive
in nature have been considered outstanding for purposes of the diluted earnings
per share calculation.
28
<PAGE>
Report of Independent Public Accountants
To the Shareholders of
The ServiceMaster Company
We have audited the accompanying consolidated statements of financial position
of THE SERVICEMASTER COMPANY (organized under the laws of the State of Delaware,
formerly ServiceMaster Limited Partnership) AND SUBSIDIARIES, as of December 31,
1997 and 1996, and the related consolidated statements of income, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The
ServiceMaster Company and Subsidiaries as of December 31, 1997 and 1996, and the
consolidated results of operations and cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois,
January 26, 1998
29
<PAGE>
<TABLE>
<CAPTION>
Statements of Income
(In thousands, except per share data)
Years Ended December 31,
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenue ............................................ $ 3,961,502 $ 3,458,328 $ 3,202,504
Operating Costs and Expenses:
Cost of services rendered and products sold .................. 3,058,160 2,681,008 2,499,700
Selling and administrative expenses .......................... 559,409 482,102 450,937
----------- ----------- -----------
Total operating costs and expenses ........................... 3,617,569 3,163,110 2,950,637
----------- ----------- -----------
Operating Income ............................................. 343,933 295,218 251,867
Non-operating Expense (Income):
Interest expense ............................................. 76,447 38,298 35,855
Interest and investment income ............................... (14,304) (10,183) (7,310)
Minority interest, including General Partners' 2 percent
interest which totaled $5,362 in 1997,
$4,977 in 1996, and $3,505 in 1995 ......................... 7,511 14,706 45,715
---------- ---------- ----------
Income before Income Taxes ................................... 274,279 252,397 177,607
Provision for income taxes (1) ............................... 10,203 7,257 5,588
Tax benefit relating to change in tax status ................. 65,000 --- ---
---------- ---------- ----------
Net Income (1) ............................................... $ 329,076 $ 245,140 $ 172,019
=========== =========== ===========
Pro forma Information:
Income before Income Taxes ................................... $ 274,279 $ 252,397 $ 177,607
Corporate provision for income taxes (1) .................... 110,809 101,968 71,753
----------- ----------- -----------
Net Income ................................................... $ 163,470 $ 150,429 $ 105,854
=========== =========== ===========
Basic Net Income Per Share (1 and 2).......................... $0.86 $0.71 $0.61
Diluted Net Income Per Share (1 and 2)........................ $0.82 $0.69 $0.59
</TABLE>
(1) The Company converted from partnership to corporate form in a tax-free
exchange for shareholders on December 26, 1997. Prior to the conversion, the
Partnership was not subject to federal and state income taxes. Its taxable
income was allocated to the Company's shareholders. As a result of the
conversion, the Company is a taxable entity and is responsible for such
payments. Pro forma information is presented to compare the continuing results
of operations as if the Company was a taxable corporation in 1997, 1996 and
1995. The pro forma provision for income taxes has been calculated assuming that
the Company's effective tax rate was approximately 40 percent of pretax
earnings. The Company's historical net income per share as a Partnership was as
follows:
Before One-Time Tax Benefit Actual
1997 1996 1995 1997 1996 1995
---------------------- -----------------------
Basic $1.39 $1.16 $.99 $1.73 $1.16 $.99
Diluted $1.33 $1.12 $.95 $1.66 $1.12 $.95
(2) The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" which requires the dual presentation of basic and diluted
earnings per share. Basic earnings per share replaces the previously required
presentation of primary earnings per share. Basic earnings per share are
calculated based on 190,629 shares in 1997, 211,587 shares in 1996 and 173,588
in 1995 while diluted earnings per share are calculated based on 199,760 shares
in 1997, 220,286 shares in 1996 and 182,135 in 1995. All share and per share
data reflect the three-for-two share splits in June 1997 and June 1996.
See accompanying Summary of Significant Accounting Policies and Notes
to the Consolidated Financial Statements.
30
<PAGE>
<TABLE>
<CAPTION>
Statements of Financial Position
(In thousands)
As of December 31,
1997 1996
----------- -----------
Assets
Current Assets:
<S> <C> <C>
Cash and cash equivalents ..................................................... $ 64,876 $ 72,009
Marketable securities ......................................................... 59,248 42,404
Receivables, less allowances of $32,221 in 1997 and $26,287 in 1996 ........... 299,138 270,401
Inventories ................................................................... 48,157 43,529
Prepaid expenses and other assets ............................................. 122,665 70,991
----------- -----------
Total current assets ........................................................ 594,084 499,334
----------- -----------
Property, Plant, and Equipment, at Cost:
Land and buildings ............................................................ 46,632 47,536
Equipment ..................................................................... 316,021 273,177
----------- -----------
362,653 320,713
Less: accumulated depreciation ............................................... 204,383 174,313
----------- -----------
Net property, plant, and equipment ............................................ 158,270 146,400
----------- -----------
Other Assets:
Intangible assets, primarily trade names and goodwill,
less accumulated amortization of $218,293 in 1997 and $170,623 in 1996 ...... 1,563,309 1,098,466
Notes receivable, long-term securities, and other assets ...................... 159,561 102,641
----------- -----------
Total Assets ............................................................... $ 2,475,224 $ 1,846,841
=========== ===========
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable .............................................................. $ 84,673 $ 66,025
Accrued liabilities:
Payroll and related expenses ................................................ 85,315 69,136
Insurance and related expenses .............................................. 55,909 43,675
Other ....................................................................... 129,443 92,756
Deferred revenues ............................................................. 181,298 138,339
Current portion of long-term obligations ...................................... 21,539 15,621
----------- -----------
Total current liabilities ................................................... 558,177 425,552
----------- -----------
Long-Term Debt ................................................................ 1,247,845 482,315
Other Long-Term Obligations ................................................... 144,764 125,299
Commitments and Contingencies (see Notes)
Minority and General Partners' Interests
including General Partners' interest $1,604 in 1996 ......................... -- 16,908
Shareholders' Equity
Partnership equity ............................................................ -- 862,625
Common stock $0.01 par value, authorized 1 billion shares; issued and
outstanding 186,629 shares .................................................. 1,866 --
Additional paid - in capital .................................................. 519,424 --
Retained earnings ............................................................. 65,000 --
Restricted stock .............................................................. (4,270) (5,858)
Treasury stock ................................................................ (57,582) (60,000)
----------- -----------
Total shareholders' equity ................................................. 524,438 796,767
----------- -----------
Total Liabilities and Shareholders' Equity .................................... $ 2,475,224 $ 1,846,841
=========== ===========
</TABLE>
See accompanying Summary of Significant Accounting Policies and
Notes to the Consolidated Financial Statements.
31
<PAGE>
<TABLE>
<CAPTION>
Statements of Cash Flows
(In thousands)
Years Ended December 31,
1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash and Cash Equivalents at January 1........................... $ 72,009 $ 23,113 $ 14,333
Cash Flows from Operations:
Net Income ...................................................... 329,076 245,140 172,019
Adjustments to reconcile net income to
net cash provided from operations:
Depreciation............................................... 45,392 41,658 38,332
Amortization............................................... 47,670 37,348 27,656
Deferred tax asset recorded upon reincorporation .......... (65,000) --- ---
Change in working capital, net of acquisitions:
Receivables ............................................... (6,853) (19,084) (28,503)
Inventories and other current assets ...................... (14,210) (12,666) (16,209)
Accounts payable .......................................... 5,603 10,302 10,773
Deferred revenues ......................................... 30,012 17,602 19,691
Accrued liabilities ....................................... (82) 13,140 24,287
Minority interest and other, net ............................ 281 7,946 49,379
--------- --------- ---------
Net Cash Provided from Operations ............................... 371,889 341,386 297,425
--------- --------- ---------
Cash Flows from Investing Activities:
Property additions .......................................... (46,232) (42,952) (44,624)
Business acquisitions, net of cash acquired ................. (233,689) (58,473) (42,763)
Net purchases of investment securities ...................... (16,753) (20,075) (6,820)
Payments to sellers of acquired businesses .................. (4,723) (3,742) (2,908)
Sale of equipment and other assets .......................... 4,134 2,664 2,250
Notes receivable and financial investments .................. (3,593) 3,304 (12,250)
Proceeds from sale of businesses ............................ -- 4,526 23,255
--------- --------- ---------
Net Cash Used for Investing Activities .......................... (300,856) (114,748) (83,860)
--------- --------- ---------
Cash Flows from Financing Activities:
Long-term borrowings, net ................................... 888,528 123,732 96,067
Payment of borrowings and other obligations ................. (160,155) (82,857) (85,945)
Purchase of ServiceMaster shares ............................ (657,191) (76,556) (58,500)
Distributions to shareholders and shareholders' trust ....... (155,883) (146,520) (127,070)
Proceeds from employee share option plans ................... 6,526 6,835 3,183
Distributions to holders of minority interests .............. (542) (3,074) (32,794)
Other ....................................................... 551 698 274
--------- --------- ---------
Net Cash Used for Financing Activities .......................... (78,166) (177,742) (204,785)
--------- --------- ---------
Cash Increase (Decrease) During the Year ........................ (7,133) 48,896 8,780
--------- --------- ---------
Cash and Cash Equivalents at December 31 ........................ $ 64,876 $ 72,009 $ 23,113
========= ========= =========
</TABLE>
See accompanying Summary of Significant Accounting Policies and
Notes to the Consolidated Financial Statements.
32
<PAGE>
<TABLE>
<CAPTION>
Statements of Shareholders' Equity
(In thousands)
Corporate Equity
----------------------------------
Additional Limited
Common Paid - in Retained Partners' Treasury Restricted Total
Stock Capital Earnings Equity Shares Shares Equity
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1994 ....................$ --- $ --- $ --- $ 364,673 $ (48,497) $ (8,910) $ 307,266
Net income 1995 ............................... --- --- --- 172,019 --- --- 172,019
Shareholder distributions ..................... --- --- --- (127,070) --- --- (127,070)
Shares issued under option, subscription, and
grant plans and other (435 shares) ........... --- --- --- 13,965 2,431 1,361 17,757
Treasury shares purchased and related
costs (4,883 shares).......................... --- --- --- --- (58,500) --- (58,500)
Shares issued for the acquisition of Consumer
Services minority interest (40,741 shares) ... --- --- --- 265,227 91,161 --- 356,388
Shares issued for the acquisition of the
TruGreen-ChemLawn minority interest
(6,354 shares) and other acquisitions ........ --- --- --- 78,800 --- --- 78,800
------- --------- --------- --------- --------- -------- --------
Balance, December 31, 1995 ....................$ --- $ --- $ --- $ 767,614 $ (13,405) $ (7,549) $ 746,660
Net income 1996 ............................... --- --- --- 245,140 --- --- 245,140
Shareholder distributions ..................... --- --- --- (146,520) --- --- (146,520)
Shares issued under option, subscription, and
grant plans and other (2,453 shares) ......... --- --- --- (6,713) 2,506 1,691 (2,516)
Treasury shares purchased and related costs
(5,157 shares) ............................... --- --- --- --- (76,556) --- (76,556)
Shares issued for acquisitions ................ --- --- --- 3,104 27,455 --- 30,559
-------- --------- --------- --------- --------- ------- --------
Balance, December 31, 1996 ....................$ --- $ --- $ --- $ 862,625 $ (60,000) $ (5,858) $ 796,767
Net income 1997 ............................... --- --- 65,000 264,076 --- --- 329,076
Shareholder distributions ..................... --- --- --- (155,883) --- --- (155,883)
Shares issued under option, debentures, and
grant plans and other (4,319 shares) ......... --- --- --- 20,151 3,511 1,588 25,250
Treasury shares repurchased from
WMX (40,741 shares)........................... --- --- --- (625,978) --- --- (625,978)
Treasury shares purchased and related
costs (1,347 shares) ......................... --- --- --- --- (31,213) --- (31,213)
Shares issued for the acquisition of Barefoot,
Inc. (8,614 shares)and other acquisitions .... --- --- --- 156,299 30,120 --- 186,419
Conversion to corporate form .................. 1,866 519,424 --- (521,290) --- --- ---
-------- --------- --------- --------- --------- ------- --------
Balance, December 31, 1997 ....................$ 1,866 $ 519,424 $ 65,000 $ --- $ (57,582) $ (4,270) $ 524,438
======== ========= ========== ========== ========= ======== =========
All share data reflect the three-for-two share splits in June 1997 and June 1996.
</TABLE>
See accompanying Summary of Significant Accounting Policies and
Notes to the Consolidated Financial Statements
33
<PAGE>
Notes to the Consolidated Financial Statements
Business Unit Reporting
The business of the Company is conducted through the ServiceMaster Consumer
Services, ServiceMaster Management Services, and New Business Development and
Parent operating units. The Consumer Services unit provides a variety of
specialty services to residential and commercial customers. The Management
Services unit provides a variety of supportive management services to health
care, education and commercial accounts. Included in this segment for all
periods is ServiceMaster Diversified Health Services, which provides management
services and other products and services to the long-term care industry and had
previously been reported in the New Business Development and Parent unit. The
New Business Development and Parent unit includes the newly established
ServiceMaster Employer Services, which has been grouped with Parent due to the
developmental status of this business. The Employer Services unit provides
clients with administrative processing of payroll, workers' compensation
insurance, health insurance, unemployment insurance and other employee benefits
plans. The International operations of the enterprise, which had previously been
reported in the New Business Development and Parent operating unit, are now
reflected within the Consumer Services and Management Services operating units
for all periods.
Information regarding the accounting policies used by the Company is described
in the Summary of Significant Accounting Policies. Operating expenses of the
business units consist primarily of direct costs and a royalty payable to Parent
based on the revenues or profits of the business unit. Identifiable assets are
those used in carrying out the operations of the business unit and include
intangible assets directly related to its operations. The Company's headquarters
facility and other investments are included in the identifiable assets of New
Business Development and Parent.
The following information is presented on a pro forma basis as if the Company
was a taxable corporation in all years and corporate taxes have been allocated
to the segments. The 1996 and 1995 information reflects changes made during the
year to the royalty and interest expense allocation methodology between
Management Services and Parent. The consolidated results were unaffected by
these changes.
<TABLE>
<CAPTION>
New Business
Consumer Management Development
(In thousands) Services Services and Parent Consolidated
---------- ---------- ------------ -------------
1997
<S> <C> <C> <C> <C>
Operating revenue ........................ $1,662,519 $2,113,598 $ 185,385 $3,961,502
---------- ---------- ---------- ----------
Operating income ......................... 234,714 96,067 13,152 343,933
---------- ---------- ---------- ----------
Non-operating expenses ................... 27,539 5,028 37,087 69,654
Income before income taxes ............... 207,175 91,039 (23,935) 274,279
Corporate provision for income taxes ..... 83,699 36,780 (9,670) 110,809
---------- ---------- ---------- ----------
Pro forma corporate net income ........... $ 123,476 $ 54,259 $ (14,265) $ 163,470
========== ========== ========== ==========
Identifiable assets at December 31, 1997 . $1,785,932 $ 420,185 $ 269,107 $2,475,224
Depreciation and amortization expense .... $ 63,261 $ 26,120 $ 3,681 $ 93,062
Capital expenditures ..................... $ 19,488 $ 25,056 $ 1,688 $ 46,232
1996
Operating revenue ........................ $1,461,696 $1,982,687 $ 13,945 $3,458,328
---------- ---------- ---------- ----------
Operating income ......................... 185,895 97,264 12,059 295,218
---------- ---------- ---------- ----------
Non-operating expenses ................... 14,233 6,249 22,339 42,821
Income before income taxes ............... 171,662 91,015 (10,280) 252,397
Corporate provision for income taxes ..... 69,352 36,770 (4,154) 101,968
--------- ---------- ---------- ----------
Pro forma corporate net income ........... $ 102,310 $ 54,245 $ (6,126) $ 150,429
========== ========== ========== ==========
Identifiable assets at December 31, 1996 . $1,394,177 $ 357,882 $ 94,782 $1,846,841
Depreciation and amortization expense .... $ 52,446 $ 23,855 $ 2,705 $ 79,006
Capital expenditures ..................... $ 19,915 $ 21,676 $ 1,361 $ 42,952
1995
Operating revenue ........................ $1,289,835 $1,885,926 $ 26,743 $3,202,504
---------- ---------- ---------- ----------
Operating income ......................... 155,098 85,390 11,379 251,867
---------- ---------- ---------- ----------
Non-operating expenses ................... 15,751 7,964 50,545 74,260
Income before income taxes ............... 139,347 77,426 (39,166) 177,607
Corporate provision for income taxes ..... 56,296 31,280 (15,823) 71,753
---------- ---------- ---------- ----------
Pro forma corporate net income ........... $ 83,051 $ 46,146 $ (23,343) $ 105,854
========== ========== ========== ==========
Identifiable assets at December 31, 1995 $1,239,599 $ 340,194 $ 70,097 $1,649,890
Depreciation and amortization expense .... $ 42,205 $ 21,492 $ 2,291 $ 65,988
Capital expenditures ..................... $ 18,563 $ 20,611 $ 5,450 $ 44,624
</TABLE>
34
<PAGE>
Reincorporation
Most operations of ServiceMaster and its subsidiary partnerships have been
conducted since 1986 free of federal corporate income tax. The Internal Revenue
code would have imposed federal corporate tax on ServiceMaster's operations
beginning in 1998. In January 1992, in anticipation of this change, the
Partnership's shareholders approved a tax-free plan of reorganization to return
to corporate form.
The ServiceMaster Company was created as part of this plan. The reorganization
became effective December 26, 1997 and was structured as a merger in which The
ServiceMaster Company became the successor entity through which the public now
invests in ServiceMaster. (The term "the Company" or "ServiceMaster" is used to
collectively refer to the Partnership and its successor corporation, The
ServiceMaster Company.) At the time of reincorporation each outstanding limited
partnership share was converted into one share of $0.01 par value common stock.
No federal income taxes were imposed on the shareholders of the Partnership as a
result of the reincorporation.
Pro forma information has been presented in the accompanying financial
statements in order to compare the continuing results of operations as if the
Company had been a taxable entity in 1997, 1996 and 1995. The pro forma
provision has been calculated assuming that the Company's effective tax rate had
been approximately 40 percent of pretax earnings. Management currently estimates
that the effective tax rate in the years following reincorporation will also be
approximately 40 percent. This estimate may differ from the actual effective tax
rate following reincorporation due to changes in circumstances, statutory tax
rates, acquisitions, etc.
Prior to December 26, 1997, The ServiceMaster Limited Partnership held as its
only asset a 99 percent interest in the profits, losses, and distributions of
The ServiceMaster Company Limited Partnership, which through subsidiaries owned
and operated the ServiceMaster business. The Managing General Partner was
ServiceMaster Management Corporation, which held a one percent interest in the
income of both Partnerships. As a result of the reorganization, The
ServiceMaster Company owns all of the general and limited partnership interests
in the Partnership. No payment or equity issuance was made to the Managing
General Partner in connection with the reorganization except for the pay out of
any income allocated to its capital account prior to reincorporation.
Income Taxes
Prior to reincorporation, the Partnership (a publicly-traded partnership for
federal and state income tax purposes) was not directly subject to income taxes.
Since December 31, 1986 most of ServiceMaster's income or loss was allocated
directly to the partners. However, the Partnership had certain subsidiaries
which operated in corporate form, including American Home Shield, its home
health care businesses, and certain international operations. These corporate
form subsidiaries were subject to normal federal and state corporate income
taxes. Additionally, several of the Partnership's subsidiaries were subject to
state partnership business taxes and foreign business and income tax payments
which account for a significant portion of the provision for income taxes that
was previously reflected in the Partnership's consolidated income statement.
As a result of the reincorporating merger, the Company recognized a step-up in
the tax basis of certain assets, that will be amortized against the taxable
income of the surviving enterprise in future years. As the reincorporation was
structured as a merger of affiliated entities, it did not have an impact on the
"book basis" of ServiceMaster's assets which are reflected in the accompanying
audited financial statements. As a result of the reincorporation, the Company
recorded deferred tax assets that represent the difference between the book and
tax basis of the enterprise. This resulted in the recognition of deferred tax
assets on the balance sheet and a corresponding $65 million gain in the tax
benefit line of the income statement. The actual benefit to the Company of the
basis step-up significantly exceeds the amount of the gain and is expected to
result in a reduction of cash tax payments of exceeding $25 million per annum
for 15 years.
The pro forma provision for income taxes estimated at 40 percent differed from
the amounts computed by applying the U.S. federal tax rate of 35 percent to
pretax earnings primarily as a result of state income taxes, net of the federal
tax benefit.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes. Management believes that,
based upon its lengthy and consistent history of profitable operations, it is
probable that the net deferred tax assets will be realized on future tax
returns, primarily from the generation of future taxable income. The Company's
deferred taxes include the deferred taxes created upon the conversion to
35
<PAGE>
corporate form as well as the deferred taxes of the Company's subsidiaries which
already operated in corporate form prior to the Company's conversion.
Significant components of the Company's deferred tax assets at December 31, 1997
are as follows:
(in thousands)
Deferred tax assets:
Current:
Accounts receivable allowance $ 12,000
Accrued expenses 21,500
Long-Term:
Long-term assets 5,000
Insurance expenses 33,100
---------
Net deferred tax assets $ 71,600
=========
Acquisitions and Sales
Acquisitions have been accounted for using the purchase method, and
accordingly, the results of operations of the acquired businesses have been
included in the Company's consolidated financial statements since their dates of
acquisition. The assets and liabilities of these businesses were recorded in the
financial statements at their estimated fair market values as of the acquisition
dates.
On February 24, 1997, the Company acquired Barefoot Inc., the second largest
professional residential lawn care services company in the United States. The
Company paid approximately $237 million by issuing 8.6 million shares and paying
$91 million in cash in exchange for all of the Barefoot stock. The excess of the
consideration paid over the fair value of the Barefoot business of $254 million
was recorded as goodwill which is being amortized on a straight-line basis over
40 years.
On December 31, 1995, ServiceMaster completed a transaction with Waste
Management Inc. (WMX) in which WMX contributed its 27.76 percent interest in
Consumer Services to ServiceMaster and, in exchange the Partnership issued
approximately 40.7 million unregistered shares and an option to purchase
approximately 2.8 million additional shares. This transaction represented a
negotiated acceleration of a conversion right previously held by WMX that was
first exercisable beginning in 1996. The unregistered shares and the option
included a number of voting and trading restrictions, including significant
limitations on open market sales, with the Company retaining a right of first
refusal. The shares issued to WMX were valued based upon the average market
price of unrestricted Company shares at the time the transaction was agreed to
and announced, adjusted to reflect the significant voting and trading
restrictions on the shares and other considerations. The valuation of these
shares issued to WMX was determined in part based on a review performed by an
international investment banking firm. The transaction generated approximately
$239 million of intangible assets, primarily trade names and goodwill, which are
being amortized on a straight-line basis over 40 years.
On April 1, 1997, the Partnership completed the repurchase of all the
restricted shares and the option issued to WMX for $626 million.
The following schedule represents the unaudited pro forma consolidated results
of operations (after reincorporation tax adjustments) as if the Barefoot
acquisition and the WMX share repurchase had taken place at the beginning
of each period indicated:
(in thousands, except per share data)
1997 1996
----------- ----------
Operating revenue $3,962,729 $3,562,242
Operating income $342,282 $320,479
Net income $153,295 $132,680
Basic EPS $0.84 $0.74
Diluted EPS $0.81 $0.71
During 1997, the Company made several smaller acquisitions which included
Certified Systems, Inc. one of the nation's largest professional employer
organizations, Orkin's lawn care and plantscaping division and several other
lawn care and pest control businesses. The Company also purchased the minority
interests of Management and Diversified Health Services for a combination of
cash and Company shares, totaling approximately $25 million. The aggregate fair
market value of the assets acquired less liabilities assumed for these smaller
acquisitions was $196 million, including approximately $267 million of
intangible assets, primarily goodwill.
During 1996, the Company acquired Premier, a provider of management services
to the automotive industry, and several other smaller companies, predominately
pest control, lawn care and pharmacy management businesses. The aggregate fair
value of assets acquired less liabilities assumed was $91 million, including
approximately $96 million of intangible assets which are being amortized on a
straight-line basis over 40 years.
In January 1995, Consumer Services acquired the 15 percent minority interest
in TruGreen-ChemLawn in exchange for Partnership shares valued at $71 million.
This consideration represented 6.4 million shares valued at the quoted market
price of the shares at the time of the transaction. In February 1995, the
Company sold 80 percent of the Education Food Service business to DAKA
36
<PAGE>
International, Inc. for $20 million. The gain realized on the sale was not
material to the overall results for the year.
Supplemental cash flow information regarding the Company's acquisitions is as
follows:
<TABLE>
<CAPTION>
(In thousands) 1997 1996 1995
---------- ---------- -----------
<S> <C> <C> <C>
Fair value of assets acquired ....................... $ 590,600 $ 134,377 $ 502,430
Less liabilities assumed ............................ (157,741) (43,781) (24,246)
---------- ---------- -----------
Net assets acquired.................................. 432,859 90,596 478,184
Less shares issued................................... (186,419) (30,559) (435,188)
Less cash acquired................................... (12,751) (1,564) (233)
---------- ---------- -----------
Business acquisitions, net of cash acquired.......... $ 233,689 $ 58,473 $ 42,763
========== ========== ===========
</TABLE>
Long-Term Debt
Long-term debt includes the following:
<TABLE>
<CAPTION>
(In thousands, except per share data) 1997 1996
--------------- ----------------
Notes Payable:
<S> <C> <C>
6.65%, maturing in 2002 - 2004.....................$ 70,000 $ 70,000
8.38%, maturing in 1998 - 2001..................... 40,000 50,000
10.57%, maturing in 1998 - 2000.................... 27,000 36,000
10.81%, maturing in 2000 - 2002.................... 55,000 55,000
7.40%, maturing in 2006............................ 125,000 125,000
6.95%, maturing in 2007............................ 100,000 -
7.45%, maturing in 2027............................ 200,000 -
7.47%, refinanced, refinanced in 1997.............. - 50,000
9%, convertible at $5.74 per share................. - 18,300
6%, subordinated, convertible at $8.30 per share... 3,581 3,581
Revolving credit facilities ....................... 550,000 -
Other.............................................. 98,803 90,055
Less current portions.............................. (21,539) (15,621)
-------------- ----------------
Total long-term debt...............................$ 1,247,845 $ 482,315
================ =================
</TABLE>
The Company is party to a number of long-term debt agreements which require it
to comply with certain financial covenants, including limitations on
indebtedness, restricted payments, fixed charge coverage ratios and net worth.
The Company has been and currently is in compliance with the covenants related
to these debt agreements.
On July 28, 1997, ServiceMaster filed a Form S-3 shelf registration statement
with the Securities and Exchange Commission providing for the sale of up to $950
million in either unsecured senior debt securities or equity interests. On
August 14, 1997 the Company successfully completed the issuance of two tranches
of debt. The first tranche, $100 million of 6.95 percent notes, was priced to
yield 6.99 percent and is due August 15, 2007. The second tranche, $200 million
of 7.45 percent notes, was priced to yield 7.47 percent and is due August 15,
2027. Subsequent to year end, the Company completed a $300 million dual-tranche
offering of unsecured senior notes consisting of $150 million, 7.10 percent
notes due March 1, 2018 and $150 million, 7.25 percent notes due March 1, 2038.
The net proceeds were used to reduce borrowings under bank credit facilities
thereby reducing the Company's exposure to short-term interest rate
fluctuations. Proceeds from future offerings will be used for general corporate
purposes, which may include repayment of debt, repurchase of shares,
acquisitions, capital expenditures and working capital requirements. No decision
has been made relating to the potential future sale of other securities from the
shelf. Any future decisions will depend on the Company's capital needs and
market conditions at the time.
In September 1996, the Company completed a $125 million private placement
of debt at an overall interest rate of 7.40 percent. Proceeds were used to
pay down the bank revolving credit facility.
The Company has a $1 billion multi-currency revolving credit agreement, dated
April 1, 1997, which includes a 364 day revolving credit facility of $250
million with a five-year revolving credit facility of $750 million and a
one-year term loan option (two-year total term). The line
37
<PAGE>
of credit can be used for general Company purposes. The revolving credit
facility had $450 million of unused commitment as of December 31, 1997.
Interest paid was $63 million in 1997, $34 million in 1996, and $34 million in
1995. Average rates paid on the revolving credit facilities were 5.98 percent in
1997 and 5.62 percent in 1996. Future scheduled long-term debt payments are $19
million in 1999, $37 million in 2000, $28 million in 2001 and $32 million in
2002. The $19 million of notes payable due in 1998 are expected to be refinanced
by the long-term revolving credit facility in 1998 and therefore are not
considered current liabilities.
Based upon the borrowing rates currently available to the Company for
long-term borrowings with similar terms and maturities, the fair value of
long-term debt is approximately $1.3 billion.
Future long-term noncancelable operating lease payments are $30.1 million in
1998, $21.7 million in 1999, $15.1 million in 2000, $8.4 million in 2001, $4.7
million in 2002, and $6.9 million thereafter. Rental expense for 1997, 1996, and
1995 was $83.9 million, $74.8 million, and $65.4 million, respectively.
Employee Benefit Plans
Contributions to qualified profit sharing plans were made in the amount of
$8.2 million in 1997, $6.9 million in 1996, and $6.2 million in 1995. Under the
Employee Share Purchase Plan, the Company contributed $1.1 million in 1997, $1.0
million in 1996, and $0.8 million in 1995. These funds defrayed part of the cost
of the shares purchased by employees.
Cash and Marketable Securities
Marketable securities held at December 31, 1997 and 1996, with a maturity of
three months or less, are included in the Statements of Financial Position
caption "Cash and Cash Equivalents." Marketable securities are designated as
available for sale and recorded at current market value, with unrealized gains
and losses reported in a separate component of shareholders' equity. Marketable
securities available for current operations are classified as current assets
while securities held for noncurrent uses are classified as long-term. The
Company's investments consist primarily of publicly-traded debt and common
equity securities. As of December 31, 1997, the aggregate market value of the
Company's short- and long-term investments in equity securities was $87 million
and the aggregate cost basis was $73 million. There has been no material
participation in derivative trading securities in 1997 or 1996. Gains and losses
on sales of investments, as determined on a specific identification basis, are
included in investment income in the period they are realized. Gross gains and
losses on such sales were not material in 1997, 1996 or 1995.
Interest and dividend income received on cash and marketable securities
was $8.3 million, $8.0 million, and $6.8 million in 1997, 1996, and 1995,
respectively.
Shareholders' Equity
The Company has authorized one billion shares of common stock with a par value
of $.01 and 11 million shares of preferred stock. There were no shares of
preferred stock issued or outstanding. In December 1997, ServiceMaster converted
from a publicly traded limited partnership to a corporation. At the time of
reincorporation, each outstanding limited partnership share was converted into
one share of common stock on a tax-free basis to the shareholders. Upon
reincorporation, all Limited Partners' equity was transferred to common stock
and additional paid in capital. Earnings after the reincorporation reflect only
the tax benefit attributable to the conversion, all other earnings for the year
have been included in Limited Partners' equity. The shares underlying the
obligations and rights relating to the employee option plans were also converted
from partnership shares to corporate stock on a one-for-one basis.
In 1997, the Company filed a $950 million shelf registration statement with
the Securities and Exchange Commission for the sale of unsecured senior debt
securities and equity interests. No decision has been made relating to the
potential sale of equity securities from the shelf. Any future decision
regarding the sale of securities from the shelf will depend on the Company's
capital needs and market conditions at the time. On April 1, 1997, the Company
bought WMX's entire ownership interest in ServiceMaster for approximately $626
million. This transaction resulted in the Company acquiring the 40.7 million
Company shares held by WMX and cancelling WMX's option to purchase an additional
2.8 million Company shares.
As of December 31, 1997 there were 10,464,000 Company shares available for
issuance upon the exercise of employee options outstanding and future grants.
Share options are issued at a price not less than the fair market value on the
grant date and expire within ten years of the grant date. Certain options may
permit the holder to pay the option exercise price by tendering Company shares
that have been owned by the holder without restriction for an extended period.
Share grants
38
<PAGE>
carry a vesting period and are restricted as to the sale or transfer of
the shares.
The Company accounts for employee share options under Accounting Principles
Board Opinion 25, as permitted under generally accepted accounting principles.
Accordingly, no compensation cost has been recognized in the accompanying
financial statements related to these options. Had compensation cost for these
plans been determined consistent with Statement of Financial Accounting
Standards No. 123 (SFAS 123), which is an accounting alternative that is
permitted but not required, pro forma net income and net income per share would
reflect the following:
(in thousands, except per share data)
1997 1996
---- ----
Net Income:
As reported (1) $163,470 $150,429
SFAS 123 pro forma $160,966 $149,480
Net Income Per Share:
Basic As reported (1) $.86 $.71
SFAS 123 pro forma $.84 $.71
Diluted As reported (1) $.82 $.69
SFAS 123 pro forma $.81 $.68
(1) Corporate form
The SFAS 123 pro forma net income reflects options granted in 1997 and 1996.
Since SFAS 123 does not apply to options granted prior to 1995, the pro forma
disclosure is not likely to be indicative of pro forma results which may be
expected in future years. This primarily relates to the fact that options vest
over several years and pro forma compensation cost is recognized as the options
vest. In addition, awards may have been granted in earlier years which would
have resulted in pro forma compensation cost in 1997.
The fair value of each option is estimated on the date of grant based on the
Black-Scholes option pricing model with the following weighted-average
assumptions in 1997 and 1996: a risk-free interest rate of 6.3 percent and 5.6
percent, respectively; a volatility rate of 21 percent and 27 percent,
respectively; a 3.2 percent distribution yield, in both years; and an average
expected life of 7 years. The options granted to employees in 1997 and 1996 have
a weighted-average fair value of $4.22 and $3.60, respectively and vest ratably
over five years. The Company has estimated the value of these options assuming a
single weighted-average expected life for the entire award.
39
<PAGE>
A summary of option and grant transactions during the last three years is
summarized below:
<TABLE>
<CAPTION>
Share Price Weighted-Average Share Price
Options Range Exercise Price Grants Range
- ------------------------------------------------------------------------------------------------------------------------
Total exercisable and outstanding
<S> <C> <C> <C> <C> <C>
December 31, 1994 10,565,946 $ 1.09 - 11.45 $ 8.22 1,821,977 $ 4.30 - 11.33
Transactions during 1995:
Granted to employees ---- ---- ---- 14,625 $ 10.17 - 11.95
Issued to WMX 2,812,500 $ 14.67 $ 14.67 --- ---
Exercised, paid, or vested (936,002) $ 1.09 - 11.45 $ 6.03 (317,786) $ 4.30 - 11.95
Terminated or resigned (274,170) $ 1.97 - 11.45 $ 5.67 (48,323) $ 4.45 - 4.57
Total exercisable, December 31, 1995 9,355,774 $ 1.09 - 11.45 $ 8.19 --- ---
Total outstanding, December 31, 1995 12,168,274 $ 1.09 - 14.67 $ 9.69 1,470,492 $ 4.30 - 11.95
Transactions during 1996
Granted to employees 2,769,750 $13.89 - 16.17 $ 14.11 --- ---
Exercised, paid, or vested (3,647,097) $ 1.09 - 11.45 $ 8.33 (265,998) $ 4.30 - 11.95
Terminated or resigned (240,183) $ 4.19 - 11.45 $ 5.83 --- ---
Total exercisable, December 31, 1996 5,468,494 $ 1.09 - 11.45 $ 8.24 --- ---
Total outstanding, December 31, 1996 11,050,744 $ 1.09 - 16.17 $ 11.35 1,204,494 $ 4.30 - 11.95
Transactions during 1997
Granted to employees 3,530,523 $16.84 - 27.63 $ 17.43 --- ---
Exercised, paid, or vested (1,261,356) $ 3.26 - 13.89 $ 7.75 (286,973) $ 4.30 - 11.95
Cancelled, related to WMX (2,812,500) $ 14.67 $ 14.67 --- ---
Terminated or resigned (293,973) $ 2.96 - 16.83 $ 10.67 (80,117) $ 4.30 - 11.95
Total exercisable, December 31, 1997 4,613,145 $ 1.09 - 16.17 $ 9.08 --- ---
Total outstanding, December 31, 1997 10,213,438 $ 1.09 - 27.63 $ 12.98 837,404 $ 4.30 - 11.95
</TABLE>
<TABLE>
<CAPTION>
Options outstanding at December 31, 1997:
Range of Number Outstanding Remaining Weighted Average Number Exercisable Weighted Average
Exercise Prices at 12/31/97 Life Exercise Price at 12/31/97 Exercise Price
--------------- ----------- ---- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$ 1.09 - 7.70 1,747,859 5.5 years $ 5.52 1,747,859 $ 5.52
$ 9.67 - 14.67 4,696,706 8.5 years $ 12.25 2,812,786 $ 11.15
$ 16.17 - 27.63 3,768,873 9.0 years $ 17.34 52,500 $ 16.17
- -----------------------------------------------------------------------------------------------------------------------------------
$ 1.09 - 27.63 10,213,438 8.0 years $ 12.98 4,613,145 $ 9.08
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Earnings Per Share
The Company adopted the Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" which requires the dual presentation of basic and diluted
earnings per share. Basic earnings per share replaces the previously required
presentation of primary earnings per share. The difference between primary and
basic earnings per share is that basic earnings per share includes no dilution
from options, debentures or other financial instruments and is computed by
dividing income available to common stockholders by the weighted average number
of shares outstanding for the period. Diluted earnings per share reflects the
potential dilution of convertible securities and options to purchase common
stock. Diluted earnings per share is comparable to the previously reported fully
diluted earnings per share.
The following chart reconciles both the numerator and the denominator of the
basic earnings per share computation to the numerator and the denominator of the
diluted earnings per share computation on a pro forma basis. The reconciling
items would be identical for actual earnings per share purposes.
<TABLE>
<CAPTION>
For year ended 1997 For year ended 1996 For year ended 1995
-------------------------- ------------------------- ---------------------------
(in thousands, except per share data) Income Shares EPS Income Shares EPS Income Shares EPS
-------- ------- ----- -------- ------- ----- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pro forma Basic EPS $163,470 190,629 $0.86 $150,429 211,587 $0.71 $105,854 173,588 $0.61
----- ----- -----
Effect of Dilutive Securities,
net of tax
Options 5,556 5,072 4,866
9% convertible debenture 986 3,143 986 3,195 1,002 3,249
6% convertible debenture 128 432 129 432 129 432
-------- ------- -------- ------- -------- -------
Pro forma Diluted EPS $164,584 199,760 $0.82 $151,544 220,286 $0.69 $106,985 182,135 $0.59
======== ======= ===== ======== ======= ===== ======== ======= =====
</TABLE>
40
<PAGE>
Quarterly Operating Results
Quarterly operating results and related growth for the last three years in
revenues, gross profit, net income, pro forma net income and pro forma basic and
diluted net income per share are shown in the table below. For interim
accounting purposes, certain costs directly associated with the generation of
lawn care revenues are initially deferred and recognized as expense as the
related revenues are recognized. Full year results are not affected.
Certain amounts from prior periods have been reclassified to conform with the
current presentation.
<TABLE>
<CAPTION>
(Unaudited, in thousands, except per share data)
Percent Incr. Percent Incr.
1997 '97-'96 1996 '96-'95 1995
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenue:
First Quarter $ 817,136 10% $ 740,299 5% $ 707,764
Second Quarter 1,010,794 10 916,931 8 852,791
Third Quarter 1,090,114 18 927,227 9 854,383
Fourth Quarter 1,043,458 19 873,871 11 787,566
---------- -------- ---------
$3,961,502 15% $3,458,328 8% $3,202,504
Gross Profit:
First Quarter $ 159,991 13% 142,116 6% $ 133,458
Second Quarter 257,260 16 221,505 10 200,728
Third Quarter 257,449 17 219,127 10 199,684
Fourth Quarter 228,642 18 194,572 15 168,934
---------- -------- ---------
$ 903,342 16% $ 777,320 11% $ 702,804
Net Income:
First Quarter $ 46,860 16% $ 40,513 40% $ 28,880
Second Quarter 75,707 6 71,264 42 50,160
Third Quarter 75,759 10 68,800 44 47,750
Fourth Quarter 130,750 NA 64,563 43 45,229
-------- ------- --------
$ 329,076 34% $ 245,140 43% $ 172,019
Pro forma
Corporate Net Income:
First Quarter $ 28,982 15% $ 25,188 44% $ 17,494
Second Quarter 46,707 8 43,326 41 30,655
Third Quarter 46,793 11 42,262 43 29,587
Fourth Quarter 40,988 3 39,653 41 28,118
------- ------- --------
$ 163,470 9% $ 150,429 42% $ 105,854
Pro forma Basic
Net Income Per Share:
First Quarter $ 0.13 8% $ 0.12 20% $ 0.10
Second Quarter 0.26 24 0.21 17 0.18
Third Quarter 0.26 30 0.20 18 0.17
Fourth Quarter 0.22 16 0.19 19 0.16
----- ----- ----
$ 0.86 21% $ 0.71 16% $ 0.61
Pro forma Diluted
Net Income Per Share:
First Quarter $ 0.13 8% $ 0.12 20% $ 0.10
Second Quarter 0.25 25 0.20 18 0.17
Third Quarter 0.25 32 0.19 19 0.16
Fourth Quarter 0.21 17 0.18 13 0.16
----- ----- ----
$ 0.82 19% $ 0.69 17% $ 0.59
Cash Distributions
Per Share:
First Quarter $ .11 1/3 6% $ .10 2/3 7% $ .10
Second Quarter .11 1/3 6 .10 2/3 0 .10 2/3
Third Quarter .12 6 .11 1/3 6 .10 2/3
Fourth Quarter .12 6 .11 1/3 6 .10 2/3
----------- -------- -------
$ .46 2/3 6% $ .44 5% .42
Price Per Share:
First Quarter $18.50 - 16.38 $14.89 - 12.92 $ 11.11 - 9.56
Second Quarter 23.88 - 18.13 15.67 - 13.75 12.11 - 10.50
Third Quarter 29.50 - 22.75 16.50 - 14.33 12.83 - 11.78
Fourth Quarter 29.25 - 21.00 17.75 - 15.83 13.50 - 12.28
</TABLE>
All share and per share data reflect the three-for-two share splits in June 1997
and June 1996.
41
Exhibit 21 to 1997 Form 10-K
<TABLE>
<CAPTION>
SUBSIDIARIES OF THE SERVICEMASTER COMPANY
As of March 6, 1998, ServiceMaster had the following subsidiaries:
<S> <C>
State or Country
of
Incorporation
Subsidiary or Organization
- ------------------------------------------------------------- ----------------
ServiceMaster Consumer Services Limited Partnership........................................................Delaware
ServiceMaster Consumer Services, Inc. .....................................................................Delaware
TruGreen Limited Partnership...............................................................................Delaware
TruGreen, Inc..............................................................................................Delaware
Barefoot Inc. .............................................................................................Delaware
Barefoot Grass Canada, Inc. ...............................................................................Delaware
Barefoot Services L.L.C. ..................................................................................Delaware
The Terminix International Company Limited Partnership.....................................................Delaware
Terminix International, Inc................................................................................Delaware
ServiceMaster Residential/Commercial Services Limited Partnership..........................................Delaware
ServiceMaster Residential/Commercial Services Management Corporation.......................................Delaware
ServiceMaster Direct Distributor Company Limited Partnership...............................................Delaware
ServiceMaster DDC, Inc.....................................................................................Delaware
Merry Maids Limited Partnership............................................................................Delaware
Merry Maids, Inc...........................................................................................Delaware
American Home Shield Corporation (1).......................................................................Delaware
AmeriSpec, Inc. ...........................................................................................Delaware
Furniture Medic Limited Partnership .......................................................................Delaware
Furniture Medic, Inc.......................................................................................Delaware
Rescue Rooter L.L.C........................................................................................Delaware
ServiceMaster Management Services Limited Partnership......................................................Delaware
ServiceMaster Management Services, Inc.....................................................................Delaware
ServiceMaster Aviation Services Limited Partnership........................................................Delaware
ServiceMaster Aviation Management Corporation..............................................................Delaware
ServiceMaster Aviation L.L.C...............................................................................Illinois
Premier Manufacturing Support Services Limited Partnership (2)...................................................Delaware
CMI Group, Inc............................................................................................Wisconsin
ServiceMaster Employer Services, Inc. (3)..................................................................Delaware
The ServiceMaster Acceptance Company Limited Partnership...................................................Delaware
ServiceMaster AM Limited Partnership.......................................................................Delaware
ServiceMaster Acceptance Corporation.......................................................................Delaware
- ---------------------
(1) American Home Shield Corporation has 18 subsidiaries through which it
carries on its business in the various states in which it markets its
products.
(2) Premier Manufacturing Support Services Limited Partnership has 7 subsidiaries through which it carries
on its business outside of the United States.
(3) ServiceMaster Employer Services, Inc. has 6 subsidiaries.
<PAGE>
ServiceMaster International Limited Partnership............................................................Delaware
ServiceMaster International Management Corporation.........................................................Delaware
ServiceMaster Limited................................................................................United Kingdom
ServiceMaster Operations Germany GmbH.......................................................................Germany
ServiceMaster Japan, Inc......................................................................................Japan
TMX-Europe B.V......................................................................................The Netherlands
Terminix Peter Cox Ltd...............................................................................United Kingdom
Terminix Protekta B.V...............................................................................The Netherlands
Riwa B.V............................................................................................The Netherlands
Anticimex Development AB (1).................................................................................Sweden
TMX-Schadlingsbekampfungsgesellschaft mbH (2)...............................................................Germany
LTCS Investment Limited Partnership........................................................................Delaware
ServiceMaster Home Health Care Services Inc................................................................Delaware
ServiceMaster Diversified Health Services, Inc. (3)........................................................Delaware
ServiceMaster Diversified Health Services Limited Partnership (4).........................................Tennessee
We Serve America, Inc......................................................................................Delaware
TSSGP Limited Partnership................................................................................ Delaware
TSSGP, Inc.................................................................................................Delaware
- ------------------------------------------------
(1) Anticimex Development AB has 5 subsidiaries.
(2) The Stenglein group includes 2 subsidiaries.
(3) ServiceMaster Diversified Health Services, Inc. has 4 subsidiaries.
(4) ServiceMaster Diversified Health Services, L.P. has 29 subsidiaries.
</TABLE>
Exhibit 23 to 1997 Form 10-K
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form 10-K of our report dated January 26,
1998, included in The ServiceMaster Company Annual Report to Stockholders for
the Year Ended December 31, 1997. It should be noted that we have not audited
any financial statements of the Company subsequent to December 31, 1997, or
performed any audit procedures subsequent to the date of our report.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Chicago, Illinois
March 26, 1998
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
Exhibit 27 to 1997 Form 10-K
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS APPEARING IN EXHIBIT 13 TO THIS FORM 10-K AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1997 JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1997 DEC-31-1996 DEC-31-1995
<CASH> 64,876 72,009 23,113
<SECURITIES> 59,248 42,404 26,316
<RECEIVABLES> 331,359 296,688 264,117
<ALLOWANCES> 32,221 26,287 20,468
<INVENTORY> 48,157 43,529 40,583
<CURRENT-ASSETS> 594,084 499,334 393,239
<PP&E> 362,653 320,713 292,283
<DEPRECIATION> 204,383 174,313 146,431
<TOTAL-ASSETS> 2,475,224 1,846,841 1,649,890
<CURRENT-LIABILITIES> 558,177 425,552 372,930
<BONDS> 1,247,845 482,315 411,903
0 0 0
0 0 0
<COMMON> 1,866 0 0
<OTHER-SE> 522,572 796,767 746,660
<TOTAL-LIABILITY-AND-EQUITY> 2,475,224 1,846,841 1,649,890
<SALES> 0 0 0
<TOTAL-REVENUES> 3,961,502 3,458,328 3,202,504
<CGS> 0 0 0
<TOTAL-COSTS> 3,058,160 2,681,008 2,499,700
<OTHER-EXPENSES> 559,409 482,102 450,937
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 76,447 38,298 35,855
<INCOME-PRETAX> 274,279 252,397 177,607
<INCOME-TAX> 110,809 101,968 71,753
<INCOME-CONTINUING> 163,470 150,429 105,854
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 163,470 150,429 105,854
<EPS-PRIMARY> 0.86 0.71 0.61
<EPS-DILUTED> 0.82 0.69 0.59
</TABLE>
