<PAGE>
Filed Pursuant to Rule 424(b)(1)
Registration Statement No. 333-32167
PROSPECTUS SUPPLEMENT
(To Prospectus dated August 6, 1997)
THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP LOGO
$100,000,000
6.95% Notes due August 15, 2007
ISSUE PRICE: 99.696%
$200,000,000
7.45% Notes due August 15, 2027
ISSUE PRICE: 99.716%
FULLY AND UNCONDITIONALLY GUARANTEED BY
SERVICEMASTER LIMITED PARTNERSHIP
Interest on the 6.95% Notes due August 15, 2007 (the "2007 Notes") and on the
7.45% Notes due August 15, 2027 (the "2027 Notes") (collectively, the "Notes")
is payable semi-annually on February 15 and August 15 of each year, commencing
February 15, 1998. The 2007 Notes and 2027 Notes may be redeemed at any time
at the option of The ServiceMaster Company Limited Partnership ("The
ServiceMaster Company" or the "Company"), in whole or in part, at a redemption
price equal to the greater of (i) 100% of their principal amount or (ii) the
sum of the present values of the Remaining Scheduled Payments (as defined
herein) thereon discounted to the redemption date, on a semi-annual basis, at
the Treasury Yield (as defined herein) plus 15 basis points (for the redemp-
tion of the 2007 Notes) or 20 basis points (for the redemption of the 2027
Notes), together with all accrued but unpaid interest, if any, to the date of
redemption in either case. See "Description of Notes--Optional Redemption of
2007 and 2027 Notes" herein.
Each series of Notes will be represented by a Registered Global Security (as
defined in the Indenture) registered in the name of The Depository Trust Com-
pany (the "Depositary") or its nominee. Interest in the Registered Global Se-
curities will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary (with respect to beneficial in-
terests of participants) or by participants or persons that hold interests
through participants (with respect to beneficial interests of beneficial own-
ers). Except as described in the accompanying Prospectus, Notes in certifi-
cated form will not be issued. See "Description of Debt Securities--Global Se-
curities" in the accompanying Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE AC-
CURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC (1) DISCOUNT (2) COMPANY (1)(3)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per 2007 Note 99.696% .650% 99.046%
- -------------------------------------------------------------------------------------------------
Total $99,696,000 $650,000 $99,046,000
- -------------------------------------------------------------------------------------------------
Per 2027 Note 99.716% .875% 98.841%
- -------------------------------------------------------------------------------------------------
Total $199,432,000 $1,750,000 $197,682,000
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from August 19, 1997.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities under the Securities Act of 1933, as amended. See
"Underwriting" herein.
(3) Before deducting expenses of the Company estimated at $860,000.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriters and subject to approval of certain legal matters by Davis Polk &
Wardwell, counsel for the Underwriters. It is expected that delivery of the
Notes will be made in book-entry form only on or about August 19, 1997 through
the facilities of the Depositary, against payment therefor in immediately
available funds.
J.P. MORGAN & CO. GOLDMAN, SACHS & CO.
BANCAMERICA SECURITIES, INC. FIRST CHICAGO CAPITAL MARKETS, INC. NATIONSBANC
CAPITAL MARKETS, INC.
August 14, 1997
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY,
THE UNDERWRITERS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID
FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained or
incorporated by reference in this Prospectus Supplement and the accompanying
Prospectus, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or by any Underwriter.
This Prospectus Supplement and the accompanying Prospectus do not constitute an
offer to sell or the solicitation of an offer to buy the Notes by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder and thereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or thereof or that
the information contained or incorporated by reference herein or therein is
correct as of any time subsequent to the date of such information.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PROSPECTUS SUPPLEMENT
<S> <C>
ServiceMaster.............................................................. S-3
Recent Developments........................................................ S-5
Capitalization............................................................. S-6
Use of Proceeds............................................................ S-6
Selected Historical Financial Information.................................. S-7
Description of the Notes and Guarantee..................................... S-8
Underwriting............................................................... S-10
Legal Opinions............................................................. S-11
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Information by Reference.......................... 2
ServiceMaster.............................................................. 4
Ratio of Earnings to Fixed Charges......................................... 5
Summarized Financial Information for The ServiceMaster Company............. 5
Use of Proceeds............................................................ 6
Description of Debt Securities and Guarantee............................... 6
The Reincorporating Merger and the Partnership Liquidations................ 19
Plan of Distribution....................................................... 20
Validity of Debt Securities................................................ 22
Experts.................................................................... 22
</TABLE>
S-2
<PAGE>
Unless otherwise indicated or the context otherwise requires, all references
herein to: (i) the "Parent Partnership" refers to ServiceMaster Limited
Partnership; (ii) "The ServiceMaster Company" or the "Company" refer to The
ServiceMaster Company Limited Partnership; and (iii) "ServiceMaster" refers to
the Parent Partnership and The ServiceMaster Company, together with all
entities affiliated with these two limited partnerships and their respective
predecessors. As described in this Prospectus Supplement and the attached
Prospectus, the shareholders of the Parent Partnership have approved a
Reincorporating Merger, which is scheduled to occur on or before December 31,
1997. The Reincorporating Merger will install ServiceMaster Incorporated of
Delaware as the ultimate parent in the ServiceMaster enterprise, and the term
"ServiceMaster" as used in this Prospectus Supplement with respect to periods
at and after the Reincorporating Merger refers to ServiceMaster Incorporated of
Delaware and its subsidiaries.
SERVICEMASTER
ServiceMaster provides a range of services to individual consumers, businesses
and institutions in the United States and over 30 other countries throughout
the world. ServiceMaster is functionally divided into three operating units:
Consumer Services, Management Services and International. Consumer Services and
Management Services are the principal operating units.
CONSUMER SERVICES
ServiceMaster Consumer Services provides specialty services to homeowners and
commercial facilities through seven market-leading companies. The services
provided by these companies include: lawn care, tree and shrub services and
indoor plant maintenance services under the "TruGreen-ChemLawn" and "Barefoot"
service marks; termite and pest control services under the "Terminix" service
mark; home systems and appliance warranty contracts under the "American Home
Shield" service mark; residential and commercial cleaning and disaster
restoration services under the "ServiceMaster" service mark; domestic
housekeeping services under the "Merry Maids" service mark; home inspection
services under the "AmeriSpec" service mark; and on-site furniture repair and
restoration under the "Furniture Medic" service mark.
ServiceMaster focuses on providing easy access to its various services and
establishing relationships to provide one or more of these services on a
repetitive basis to customers. Since 1986, the number of domestic customers
served by ServiceMaster Consumer Services has increased from fewer than one
million customers to more than 6,500,000 customers. The International unit is
primarily responsible for overseeing the Consumer Services businesses that are
conducted in foreign markets. The services provided by the seven Consumer
Services companies are part of the ServiceMaster "Quality Service Network" and
can be accessed by calling a single toll-free telephone number: 1-800-WE SERVE
or by contacting the individual companies directly.
TruGreen-ChemLawn. As of March 21, 1997, TruGreen-ChemLawn (following the
acquisition of Barefoot) was operating in 47 states through 198 company-owned
branches and 126 franchised branches. With over 3 million residential and
commercial customers, TruGreen-ChemLawn is the leading provider of lawn care
services in the United States and also provides interior plantscape services to
commercial customers. TruGreen-ChemLawn also provides lawn, tree and shrub care
services in Saudi Arabia through a licensing arrangement and in Canada through
an affiliate. The TruGreen-ChemLawn businesses are seasonal in nature.
In February 1997, ServiceMaster, for the benefit of TruGreen-ChemLawn,
completed the acquisition of Barefoot Inc. ("Barefoot") for aggregate
consideration having a value of approximately $237,000,000. At the time of the
transaction, Barefoot was the second largest provider of professional lawn care
services in the United States.
Terminix. With over 3 million residential and commercial customers, Terminix is
the leading provider of termite and pest control services in the United States.
As of December 1996, Terminix was providing these services in 45 states and in
Mexico through 316 company-owned branches and 250 franchised branches. Terminix
also provides termite and pest control services through subsidiaries in
Belgium, The Netherlands, Norway, Sweden, Ireland, the United Kingdom, Germany
and Mexico and through local licensees in 11 other countries. The Terminix
business is seasonal in nature.
American Home Shield. American Home Shield ("AHS") is a leading provider of
home service warranty contracts in the United States. AHS warranty contracts
cover the repair or replacement of built-in appliances, hot water heaters
S-3
<PAGE>
and electrical, plumbing, central heating, and central air conditioning systems
that malfunction by reason of normal wear and tear. Service contracts are sold
through participating real estate brokerage offices in conjunction with resales
of single-family residences to homeowners. AHS also sells service warranty
contracts directly to non-moving homeowners by renewing existing contracts and
through various other distribution channels which are currently being expanded.
As of December 31, 1996, AHS was providing services to approximately 503,000
homes through approximately 13,000 independent repair maintenance contractors
in 49 states and the District of Columbia. AHS also provides home service
warranty contracts through licensing arrangements with local service providers
in three other countries.
ServiceMaster Residential/Commercial Services ("Res/Com"). ServiceMaster,
through Res/Com, is the leading franchiser in the United States in the
residential and commercial cleaning field. Res/Com provides carpet and
upholstery cleaning and janitorial services, disaster restoration services and
window cleaning services to over 1.6 million residential and commercial
customers worldwide through a network of over 4,500 independent franchisees.
Res/Com provides its services through subsidiaries in Germany, Ireland and the
United Kingdom, through an affiliate in Canada, and through licensees in 13
other countries.
Merry Maids. Merry Maids provides domestic house cleaning services. With
approximately 225,000 customers, Merry Maids is the leading provider of
domestic house cleaning services in the United States. As of December 31, 1996,
these services were provided through 27 company-owned branches in 18 states and
836 licensees operating in 49 states. Merry Maids also provides domestic
housecleaning services in the United Kingdom through a subsidiary, in Canada
through an affiliate and in five other countries through licensing arrangements
with local service providers.
AmeriSpec. AHS acquired AmeriSpec in February 1996. AmeriSpec is a leading
provider of home inspection services in the United States. During 1996,
AmeriSpec conducted 85,000 home inspections in 41 states and Canada. AmeriSpec
provides home inspection services in Canada through licensing arrangements with
local service providers.
Furniture Medic. ServiceMaster acquired Furniture Medic in July 1996. Furniture
Medic provides on-site furniture repair and restoration services in all 50
states. As of December 31, 1996, these services were provided through 549
licensees. Furniture Medic also provides its services in Canada through an
affiliate and in two other countries through licensing arrangements with local
service providers.
MANAGEMENT SERVICES
Management Services is organized into three discrete operating units, each
providing a separate functional service on a nationwide basis. These units are:
Healthcare Services (including Diversified Health Services); Education
Management Services; and Business and Industry Management Services. The
services provided by the Healthcare Management Services unit and the services
provided by ServiceMaster Diversified Health Services have been integrated to
provide a coordinated range of services to the health care market.
ServiceMaster pioneered the providing of management of support services to
health care facilities by instituting housekeeping management services in 1962.
Since then, ServiceMaster has expanded its management services business such
that it now provides management of a variety of support services 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. The Diversified Health
Services' portion of Healthcare Services provides management and other services
to nursing homes, skilled nursing facilities, assisted living facilities and
home health care agencies. ServiceMaster's 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.
As of December 31, 1996, ServiceMaster was providing management of support
services to approximately 1,800 health care facilities and to approximately 700
educational and commercial facilities. These services were being provided in
all 50 states and the District of Columbia. Outside of the United States,
ServiceMaster provides management services through a subsidiary in Japan,
through affiliated companies in Canada, Japan, Germany, Mexico, and the United
Kingdom, and through licensees in 15 other countries. The International unit is
responsible for overseeing the management services which are provided in
foreign markets.
S-4
<PAGE>
INTERNATIONAL
The International unit oversees the management of support services and consumer
services in international markets through licensing arrangements, ownership of
foreign operating companies acquired by ServiceMaster and joint ventures.
The International unit currently owns controlling interests in Terminix Peter
Cox Ltd., a leading pest control and wood preservation company in the United
Kingdom; Terminix Protekta B.V. and Riwa B.V., each a leading pest control
company in the Netherlands; Anticimex Development AB, a holding company for the
leading pest control company in Sweden; and the Stenglein group of pest control
companies in Germany.
BACKGROUND
The Parent Partnership and its immediate subsidiary, The ServiceMaster Company,
were formed in December 1986 as limited partnerships to succeed to the business
and assets of ServiceMaster Industries, Inc., which began operations in 1947.
The principal executive offices of the Parent Partnership and The ServiceMaster
Company are located at One ServiceMaster Way, Downers Grove, Illinois 60515-
9969. Their telephone number is (630) 271-1300.
RECENT DEVELOPMENTS
Second Quarter Operating Results. On July 24, 1997, ServiceMaster reported
record revenues for the second quarter of 1997 of $1 billion, up 10.2% over the
comparable 1996 period, reflecting solid growth from base operations and
acquisitions. This marked the first time in ServiceMaster's 50-year history in
which quarterly revenues exceeded $1 billion. Net income of $75.7 million was
up 6.2%, with earnings per share increasing 21% to $0.40.
Revenues for the six months ended June 30, 1997 rose 10.3% to $1.8 billion. Net
income for the six months was $122.6 million, a 9.7% increase over 1996, with
earnings per share increasing 18% to $0.60.
Share and Option Repurchase. On December 31, 1995, ServiceMaster completed a
transaction with WMI Urban Services, Inc. ("WMUS"), a wholly owned subsidiary
of WMX Technologies, Inc. ("WMX") in which WMUS contributed its 27.76% interest
in ServiceMaster Consumer Services L.P. to ServiceMaster and, in exchange
therefor, the Parent Partnership issued to WMUS approximately 40.7 million
unregistered limited partner shares of ServiceMaster and an option to purchase
approximately 2.8 million additional shares of ServiceMaster's limited partner
shares (the "Option"). On April 1, 1997, the Parent Partnership completed the
repurchase from WMUS of all the restricted shares of the Parent Partnership
owned by WMUS and the Option (the "WMUS Repurchase") for the sum of
approximately $626 million. ServiceMaster financed the WMUS Repurchase with
short-term bank financing.
Share Dividend. On May 9, 1997, ServiceMaster's Board of Directors declared a
three-for-two share split effective June 25, 1997. All share and per share data
included herein have been restated for all periods presented to reflect this
three-for-two split.
S-5
<PAGE>
CAPITALIZATION
The following table sets forth as of June 30, 1997: (a) the actual consolidated
capitalization of the Parent Partnership and (b) the consolidated
capitalization of the Parent Partnership as adjusted to reflect the sale of the
Notes offered hereby and application of net proceeds therefrom as described
under "Use of Proceeds." No separate financial information for The
ServiceMaster Company has been provided in this Prospectus Supplement because:
(i) the Parent Partnership does not itself conduct any operations but rather
all operations of the ServiceMaster enterprise are conducted by The
ServiceMaster Company and the direct and indirect subsidiaries of The
ServiceMaster Company; (ii) the Parent Partnership has no material assets other
than substantially all of the ownership interest in The ServiceMaster Company;
and (iii) all of the assets and liabilities shown in the consolidated financial
statements for the Parent Partnership are located at The ServiceMaster Company
and at the direct and indirect subsidiaries of The ServiceMaster Company.
<TABLE>
<CAPTION>
JUNE 30, 1997
---------------------
AS
ACTUAL ADJUSTED
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................ $ 91,047 $ 91,047
========== ==========
Current maturities of long-term debt..................... $ 16,324 $ 16,324
Long-term debt:
Notes payable.......................................... 386,001 386,001
Revolving credit facilities............................ 686,915 391,047
Other.................................................. 93,590 93,590
2007 Notes............................................. -- 100,000
2027 Notes............................................. -- 200,000
---------- ----------
Total long-term debt................................. 1,166,506 1,170,638
Total Debt............................................... $1,182,830 $1,186,962
========== ==========
Total Net Debt........................................... $1,091,783 $1,095,915
========== ==========
Minority interest........................................ 2,939 2,939
Shareholders' equity..................................... 402,559 402,559
Total capitalization (including short-term debt)......... $1,497,281 $1,501,413
========== ==========
</TABLE>
USE OF PROCEEDS
The net proceeds from the sale of the Notes will be approximately $296 million.
The Company expects to use the net proceeds from the sale of the Notes to repay
a portion of its borrowings incurred to finance the WMUS Repurchase. The
indebtedness to be repaid with the proceeds of the Notes was incurred under a
five-year revolving bank credit facility, which matures April 1, 2002 and bears
interest at floating rates (equal to approximately 6% at June 30, 1997).
Affiliates of J.P. Morgan Securities Inc., BancAmerica Securities, Inc., First
Chicago Capital Markets, Inc. and NationsBanc Capital Markets, Inc. are lenders
under the revolving bank credit facility. See "Underwriting."
S-6
<PAGE>
SELECTED HISTORICAL FINANCIAL INFORMATION
The summary of selected historical financial information set forth below as of
and for each of the years in the five-year period ended December 31, 1996 has
been derived from the consolidated financial statements of ServiceMaster, which
statements have been audited by Arthur Andersen LLP, independent public
accountants for ServiceMaster. Such information is contained in and should be
read in conjunction with the consolidated financial statements and accompanying
notes included in ServiceMaster's Annual Reports on Form 10-K for such years,
incorporated herein by reference. The historical data as of and for the six
months ended June 30, 1996 and 1997 are derived from unaudited financial
statements which, in the opinion of ServiceMaster management, reflect all
adjustments (consisting only of normal recurring adjustments) necessary for a
fair presentation of the financial position and results of operations for such
dates and for such periods. Historical results for the interim periods ended
June 30 are not necessarily indicative of the results for the full year. No
separate financial information for The ServiceMaster Company has been provided
in this Prospectus Supplement because: (i) the Parent Partnership does not
itself conduct any operations but rather all operations of the ServiceMaster
enterprise are conducted by The ServiceMaster Company and the direct and
indirect subsidiaries of The ServiceMaster Company; (ii) the Parent Partnership
has no material assets other than substantially all of the ownership interest
in The ServiceMaster Company; and (iii) all of the assets and liabilities shown
in the consolidated financial statements for the Parent Partnership are located
at The ServiceMaster Company and at the direct and indirect subsidiaries of The
ServiceMaster Company. For certain summarized unaudited financial information
for The ServiceMaster Company, see "Summarized Financial Information for The
ServiceMaster Company" in the attached Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- ----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT FOR PER SHARE
(UNAUDITED) DATA)(1)
OPERATING RESULTS
Operating revenue....... $ 1,828 $ 1,657 $3,458 $3,203 $2,985 $2,759 $2,489
Cost of services
rendered and products
sold................... 1,411 1,294 2,681 2,500 2,356 2,193 2,030
Selling and
administrative
expenses............... 260 230 482 451 415 393 326
Restructuring charges... -- -- -- -- -- -- 70
------- ------- ------ ------ ------ ------ ------
Operating income(2)..... 157 133 295 252 214 173 63
Non-operating expense... 30 18 43 74 71 55 37
Realized gain on
issuance of subsidiary
shares................. -- -- -- -- -- (30) (105)
Provision for income
taxes.................. 4 3 7 6 3 2 1
Cumulative effect of
change in accounting
for postretirement
medical benefits....... -- -- -- -- -- -- 8
------- ------- ------ ------ ------ ------ ------
Net income(2)........... $ 123 $ 112 $ 245 $ 172 $ 140 $ 146 $ 122
======= ======= ====== ====== ====== ====== ======
Net income per share(2). $ 0.60 $ 0.51 $ 1.13(3) $ 0.96(3) $ 0.80(3) $ 0.84(3) $ 0.72(3)
Cash distributions per
share to shareholders.. $ 0.23 $ 0.21 $ 0.44 $ 0.42 $ 0.41 $ 0.40 $ 0.39
FINANCIAL POSITION AT
PERIOD END
Current assets.......... $ 579 $ 494 $ 499 $ 393 $ 331 $ 291 $ 258
Current liabilities..... 499 403 426 373 304 244 207
Working capital......... 80 91 74 20 27 47 51
Total assets............ 2,200 1,809 1,847 1,650 1,231 1,122 1,006
Non-current liabilities. 1,295 606 608 518 484 471 511
Minority interest....... 3 14 17 13 135 118 78
Shareholders' equity.... 403 787 797 747 307 289 210
Book value per share.... $ 1.97 $ 3.61 $ 3.68 $ 4.18 $ 1.76 $ 1.67 $ 1.23
OTHER DATA
Ratio of earnings to
fixed charges(4)....... 3.85x 4.76x 5.16x 4.83x 4.72x 4.55x 3.85x
</TABLE>
- --------
(1) All per share data reflect the three-for-two share splits in 1992, 1993,
1996 and 1997.
(2) Operating results on a basis which excludes restructuring and unusual
charges, gains on issuance of subsidiary shares and the change in
accounting for postretirement benefits in prior years are as follows (there
were no such unusual items in 1994, 1995, 1996 or 1997):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
-------------- -----------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
(UNAUDITED)
Operating income.............. $ 157 $ 133 $ 295 $ 252 $ 214 $ 173 $ 141
Net income.................... 123 112 245 172 140 116 94
Net income per share.......... $ 0.60 $ 0.51 $1.13 $0.96 $0.80 $0.67 $0.55
</TABLE>
S-7
<PAGE>
(3) Most operations conducted by The ServiceMaster Company and its subsidiary
partnerships have been conducted since 1986 free of federal corporate
income tax. The Internal Revenue Code as presently constituted will impose
federal corporate income tax on ServiceMaster's operations beginning in
1998. In anticipation of this change, in January 1992, ServiceMaster's
shareholders approved a Reincorporating Merger the purpose of which is to
reorganize the ServiceMaster enterprise so that ServiceMaster Incorporated
of Delaware (the "Successor Parent Corporation") will be substituted for
the Parent Partnership as the ultimate parent in the ServiceMaster
enterprise. See "The Reincorporating Merger and the Partnership
Liquidations" in the Prospectus.
As a result of the Reincorporating Merger and related transactions (which are
collectively referred to herein as the "Reincorporation") and the WMUS
Repurchase, ServiceMaster will be entitled to recognize a step-up in the tax
basis of its assets, which will be amortized against ServiceMaster's taxable
income in future years, resulting in an annual cash benefit currently
estimated at between $20 and $25 million. Reincorporation will have no impact
on the "book basis" of ServiceMaster's assets reflected in the Selected
Historical Financial Information above and in the financial statements from
which such information was derived. The tax basis step-up will result in the
recognition of a deferred tax asset on ServiceMaster's balance sheet and a
corresponding unusual gain in ServiceMaster's income statement in the period
of Reincorporation. The exact amount of the tax basis step-up (and the
deferred tax asset and unusual gain that will result therefrom) will depend
in part on the price and trading volume of the Parent Partnership's shares
prior to the Reincorporating Merger. It is currently estimated that the
effective book tax rate upon Reincorporation will be approximately 40% of
pretax earnings. This estimate is necessarily subject to change based on
changes in circumstances, statutory tax rates, etc. Pro forma earnings per
share would be $0.69 in 1996, $0.59 in 1995, $0.49 in 1994, $0.51 in 1993,
and $0.43 in 1992, assuming Reincorporation had occurred at the beginning of
each respective period.
(4) In the calculation of the Parent Partnership's ratio of earnings to fixed
charges, "earnings" consist of income from continuing operations before
income taxes, fixed charges (excluding capitalized interest) and minority
interest expense of subsidiaries with fixed charges and "fixed charges"
consist of interest and amortization of debt expense, including the
interest portion of rental obligations deemed representative of the
interest factor.
DESCRIPTION OF THE NOTES AND GUARANTEE
The following description of the particular terms of the Notes and Guarantee
offered hereby supplements, and to the extent inconsistent therewith replaces,
the description of the general terms and provisions of the Debt Securities and
Guarantee set forth in the Prospectus, to which description reference is hereby
made.
GENERAL
The Notes will be issued under the Indenture (the "Indenture") dated as of
August 15, 1997 among The ServiceMaster Company, as issuer, the Parent
Partnership, as guarantor, and Harris Trust and Savings Bank, as trustee (the
"Trustee"). The Notes will be guaranteed by the Parent Partnership and will
rank pari passu with all other unsubordinated indebtedness of The ServiceMaster
Company. Capitalized terms not defined herein have meanings as set forth in the
Indenture.
The 2007 Notes will be limited to $100,000,000 aggregate principal amount and
will mature on August 15, 2007 (the "2007 Notes Maturity Date") at 100% of
their principal amount, unless earlier redeemed pursuant to the terms thereof.
See "Optional Redemption of 2007 Notes and 2027 Notes" below. The 2027 Notes
will be limited to $200,000,000 aggregate principal amount and will mature on
August 15, 2027 (the "2027 Notes Maturity Date") at 100% of their principal
amount, unless earlier redeemed pursuant to the terms thereof. See "Optional
Redemption of 2007 Notes and 2027 Notes" below.
The Notes will bear interest at the rate per annum set forth on the cover page
of this Prospectus Supplement from August 19, 1997 or from the most recent
interest payment date to which interest has been paid or provided for, payable
semi-annually on February 15 and August 15 of each year (an "Interest Payment
Date"), beginning February 15, 1998 until the 2007 Notes Maturity Date or the
2027 Notes Maturity Date, as the case may be. Interest will be payable to the
persons in whose names the Notes are registered at the close of business on the
February 1 or August 1, as the case may be, next preceding such Interest
Payment Date.
The Notes will be issued as Registered Global Securities. See "Book-Entry
System" below. Principal of and interest on the Notes will be payable, and the
transfer of Notes will be registrable, through the Depository Trust Company, as
Depositary (the "Depositary"), as described under "Description of Debt
Securities--Global Debt Securities" in the Prospectus.
The Notes are not subject to any sinking fund.
GUARANTEE
The Notes are unconditionally guaranteed as to the payment of principal,
premium, if any, and interest in respect thereof by the Parent Partnership,
pursuant to the Indenture, as described under "Guarantee" in the accompanying
S-8
<PAGE>
Prospectus. The Guarantee will constitute an unsecured obligation of the Parent
Partnership and will rank equally in right of payment with all existing and
future unsubordinated and unsecured indebtedness of the Parent Partnership.
OPTIONAL REDEMPTION OF 2007 AND 2027 NOTES
The 2007 Notes and the 2027 Notes will be redeemable in whole or in part, at
the option of the Company, upon not less than 30 or more than 60 days prior
written notice, at any time, at a redemption price equal to the greater of (i)
100% of their principal amount or (ii) the sum of the present values of the
Remaining Scheduled Payments (as hereinafter defined) thereon discounted to the
redemption date, on a semi-annual basis, at the Treasury Yield plus15 basis
points (for the redemption of the 2007 Notes) or 20 basis points (for the
redemption of the 2027 Notes), together with all accrued but unpaid interest,
if any, to the date of redemption in either case; provided, however, that
interest installments due on an Interest Payment Date which is on or prior to
the date of redemption will be payable to holders who are holders of record of
such 2007 Notes or 2027 Notes, as the case may be, as of the close of business
on the fifteenth day next preceding such Interest Payment 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.
"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, 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.
"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.
"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.
"Reference Treasury Dealer" means each of J.P. Morgan Securities Inc. and its
respective successors; provided, however, that if such firm ceases to be a
primary U.S. Government securities dealer in New York, New York (a "Primary
Treasury Dealer") or otherwise fails to provide a Reference Treasury Dealer
Quotation, the Company will substitute therefor any other Primary Treasury
Dealer.
"Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by the
Trustee, of the bid and asked prices for the Comparable Treasury Issues
(express in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m., New
York, New York time, on the third business day preceding such redemption date.
"Remaining Scheduled Payments" means, with respect to any Notes, the remaining
scheduled payments of the principal thereof to be redeemed and interest thereon
that would be due after the related redemption date but for such redemption;
provided, however, that, if such redemption date is not an Interest Payment
Date with respect to such Note, the amount of the next succeeding scheduled
interest payment thereon will be reduced by the amount of interest accrued
thereon to such redemption date.
BOOK-ENTRY SYSTEM
Upon issuance, all 2007 Notes and all 2027 Notes will be represented
respectively by one or more Registered Global Securities. Each Registered
Global Security representing any of the Notes will be deposited with, or on
behalf of, the Depositary and registered in the name of a nominee of the
Depositary. The provisions set forth under "Description of
S-9
<PAGE>
Debt Securities--Global Debt Securities" in the accompanying Prospectus will be
applicable to the Notes. Accordingly, beneficial interests in the Notes will be
shown on, and transfers thereof will be effected only through, records
maintained by the Depositary and its participants. Except as described under
"Description of Debt Securities--Global Debt Securities" in the accompanying
Prospectus, owners of beneficial interests in the Registered Global Security
will not be entitled to receive Notes in certificated form and will not be
considered holders of Notes.
Ownership of beneficial interests in the Registered Global Security will be
limited to institutions that have accounts with the Depositary or its nominee
("participants") or persons that may hold interests through participants.
Payments of principal, premium, if any, and interest will be made in
immediately available funds to the Depositary's nominee as the registered owner
of the Registered Global Security. Under the terms of the Indenture, the
Company and the Trustee will treat the person in whose name the Registered
Global Security is registered as the owner of the Notes for the purpose of
receiving payments of principal, premium, if any, and interest and for all
other purposes. Therefore, neither the Company, the Trustee nor any other agent
will have any direct responsibility or liability for the payment of principal,
premium, if any, or interest to owners of beneficial interests in the
Registered Global Security.
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting Agreement,
dated the date hereof (the "Underwriting Agreement"), the Company has agreed to
sell to each of the underwriters named below (the "Underwriters"), and each of
the Underwriters has severally agreed to purchase, the principal amount of
Notes set forth opposite its name below:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF NOTES
-------------------------
NAME 2007 NOTES 2027 NOTES
---- ------------ ------------
<S> <C> <C>
J.P. Morgan Securities Inc.................... $ 45,500,000 $ 91,900,000
Goldman, Sachs & Co........................... 45,500,000 91,900,000
BancAmerica Securities, Inc................... 3,000,000 5,400,000
First Chicago Capital Markets, Inc............ 3,000,000 5,400,000
NationsBanc Capital Markets, Inc.............. 3,000,000 5,400,000
------------ ------------
Total..................................... $100,000,000 $200,000,000
============ ============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the Underwriters
are obligated to take and pay for all of the Notes if any are taken.
The Underwriters propose to offer the Notes directly to the public initially at
the initial public offering price set forth on the cover page of this
Prospectus Supplement and to certain dealers at such price less a concession
not in excess of .40% of the principal amount of the 2007 Notes and .50% of the
principal amount of the 2027 Notes. The Underwriters may allow, and such
dealers may re-allow, a concession not in excess of .25% of the principal
amount of the 2007 Notes or .25% of the principal amount of the 2027 Notes to
certain other dealers. After the initial public offering, the public offering
price and such concessions may be changed by the Underwriters.
The Notes are new issues of securities with no established trading market and
will not be listed on any national securities exchange. The Company has been
advised by the Underwriters that the Underwriters intend to make a market for
the Notes, but are not obligated to do so and may discontinue market making at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes.
In connection with this offering, the Underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the Notes.
Specifically, the Underwriters may overallot the offering, creating a syndicate
short position. In addition, the Underwriters may bid for, and purchase, Notes
in the open market to cover the syndicate short position or to stabilize the
price of the Notes. Finally, the underwriting syndicate may reclaim selling
concessions allowed for distributing the Notes in the offering if the syndicate
repurchases previously distributed Notes in transactions to cover syndicate
short positions, in stabilization transactions or otherwise. Any of these
activities may stabilize or maintain the market price of the Notes above
independent market levels. The Underwriters are not required to engage in these
activities, and may end these activities at any time.
S-10
<PAGE>
The Company and the Parent Partnership have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended, or contribute to payments which the
Underwriters may be required to make in respect thereof.
When more than 10% of the proceeds of a public offering of certain securities
are to be paid to members of the National Association of Securities Dealers,
Inc. ("NASD") participating in such public offering or to affiliates of such
members, Rule 2710(c)(8) of the NASD's Rules of Fair Practice requires
disclosure of such fact.
Each of J.P. Morgan Securities Inc., BancAmerica Securities, Inc., First
Chicago Capital Markets, Inc. and NationsBanc Capital Markets, Inc. and/or
certain affiliates thereof is a member of the NASD. The Underwriters and/or
their affiliates may indirectly receive more than 10% of the net proceeds from
the offering of the Notes as a result of the use of such proceeds to repay
borrowings by the Company under a five-year revolving bank credit facility. See
"Use of Proceeds."
In the ordinary course of their respective businesses, the Underwriters and
their affiliates have engaged and may in the future engage in commercial
banking and investment banking transactions with ServiceMaster and its
affiliates.
LEGAL OPINIONS
Certain legal matters in connection with the Notes will be passed upon for the
Company by Vernon T. Squires, Esq., Senior Vice President and General Counsel
of the Company, and for the Underwriters by Davis Polk & Wardwell, New York,
New York. As of the date of this Prospectus Supplement, Mr. Squires holds
255,887 shares and options to acquire 54,000 shares of limited partnership
interests of the Parent Partnership.
S-11
<PAGE>
PROSPECTUS
THE SERVICEMASTER COMPANY LIMITED PARTNERSHIP
DEBT SECURITIES
The ServiceMaster Company Limited Partnership ("The ServiceMaster Company")
may offer from time to time in one or more series its debt securities
consisting of debentures, notes or other evidence of indebtedness (the "Debt
Securities," which term shall include any guarantees thereof), in amounts as
may be sold for an aggregate public offering price of up to $950,000,000 on
terms to be determined at the time of each offering. The Debt Securities may
be issued as unsecured Debt Securities that will not be subordinated to other
obligations of The ServiceMaster Company. The payment of principal and
interest with respect to such Debt Securities will be unconditionally
guaranteed by ServiceMaster Limited Partnership (the "Parent Partnership").
The Parent Partnership holds the entire limited partnership interest in The
ServiceMaster Company, which interest represents 99% of the entire equity
interest in The ServiceMaster Company. See "Description of Debt Securities--
Guarantee." The Debt Securities may be offered separately or together, in
separate series, in amounts, at prices and on terms determined by market
conditions at the time of sale and to be set forth in one or more supplements
to this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Debt Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement, which
will include, where applicable: the specific title, aggregate principal
amount, authorized denominations, maturity (which may be fixed or extendible),
interest rate or rates (which may be fixed or variable) (or manner of
calculation thereof), if any, the time of payment of interest, if any, any
terms of redemption at the option of The ServiceMaster Company or repayment at
the option of the holder, any terms for sinking fund payments, additional
covenants, initial public offering price, purchase price and other terms with
respect to the Debt Securities. The Debt Securities may be issued as Original
Issue Discount Securities to be sold at a substantial discount below their
principal amount and, if issued, certain terms thereof will be set forth in
the Prospectus Supplement related thereto. The Debt Securities will be
represented by global notes registered in the name of a nominee of The
Depository Trust Company, as Depositary. Beneficial interests in the Debt
Securities will be shown on, and transfers thereof will be effected only
through, records maintained by the Depositary (with respect to participants'
interests) and its participants. Except as described in this Prospectus, Debt
Securities in certificated form will not be issued in exchange for the global
notes. See "Description of Debt Securities--Global Debt Securities."
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Debt Securities
covered by such Prospectus Supplement.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The Debt Securities may be offered directly to one or more purchasers,
through agents designated from time to time by The ServiceMaster Company or to
or through underwriters or dealers. If any agents or underwriters are involved
in the sale of the Debt Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable Prospectus Supplement. See "Plan of Distribution." No Debt
Securities may be sold without delivery of a Prospectus Supplement describing
the method and terms of the offering of such Debt Securities.
---------------
The date of this Prospectus is August 6, 1997.
<PAGE>
AVAILABLE INFORMATION
The Parent Partnership, The ServiceMaster Company and ServiceMaster
Incorporated of Delaware have filed with the Securities and Exchange
Commission (the "Commission") a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended (the "Securities Act"), for the
registration of, among other things, the Debt Securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement,
certain items of which are contained in exhibits and schedules to, or
incorporated by reference in, the Registration Statement as permitted by the
rules and regulations of the Commission. For further information with respect
to the Parent Partnership, The ServiceMaster Company, ServiceMaster
Incorporated of Delaware, and the Debt Securities offered hereby, reference is
made to the Registration Statement, including the exhibits thereto, and
financial statements and notes filed as a part thereof or incorporated by
reference therein. Statements made in this Prospectus concerning the contents
of any document referred to herein are not necessarily complete. With respect
to each such document filed with the Commission as an exhibit to, or
incorporated by reference in, the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
The Parent Partnership is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
accordance therewith, the Parent Partnership files consolidated reports, proxy
statements and other information with the Commission. Upon consummation of the
Reincorporating Merger described in this Prospectus (which is scheduled to
occur on or before December 31, 1997), ServiceMaster Incorporated of Delaware
will become the successor to the Parent Partnership and The ServiceMaster
Company and will become subject to the informational requirements identified
in the preceding sentence. Reports, proxy statements and other information
filed by the Parent Partnership may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World
Trade Center, 13th Floor, New York, New York 10048. Copies of such material
may be obtained by mail from the Public Reference Branch of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding the Parent
Partnership, The ServiceMaster Company and ServiceMaster Incorporated of
Delaware. In addition, such material may also be inspected and copied at the
offices of the New York Stock Exchange. Partnership shares issued by the
Parent Partnership are listed on the New York Stock Exchange.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents have been filed with the Commission and are
incorporated by reference in this Prospectus: (i) the Annual Report on Form
10-K of the Parent Partnership (File No. 1-9378) for the year ended December
31, 1996 (the "1996 Form 10-K"), (ii) the Parent Partnership's Quarterly
Report on Form 10-Q for the period ended March 31, 1997 and (iii) the Parent
Partnership's Quarterly Report on Form 10-Q for the period ended June 30,
1997. All documents filed by the Parent Partnership pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Debt Securities
and the other securities registered on the Registration Statement shall be
deemed to be incorporated herein by reference and to be a part hereof from the
respective dates of filing of such documents. As indicated in this Prospectus,
the Parent Partnership, The ServiceMaster Company and ServiceMaster
Incorporated of Delaware are parties to a Merger and Reorganization Agreement,
which provides for a Reincorporating Merger that is scheduled to occur on or
before December 31, 1997. Upon consummation of the Reincorporating Merger,
ServiceMaster Incorporated of Delaware will (i) assume the obligations of The
ServiceMaster Company on all Debt Securities issued prior to the
Reincorporating Merger and the obligations of the Parent Partnership under its
Guarantees of those Debt Securities and (ii) become the successor to the
Parent Partnership as the ultimate
2
<PAGE>
parent in the ServiceMaster enterprise. All documents filed by ServiceMaster
Incorporated of Delaware after the Reincorporating Merger pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the termination of the offering of the Debt Securities and other
securities registered on the Registration Statement shall be deemed to be
incorporated herein by reference and to be a part hereof from the respective
dates of filing of such documents.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon written or oral request. Copies of this
Prospectus, as amended or supplemented from time to time, and any other
documents (or parts of documents) that constitute part of the Prospectus under
Section 10(a) of the Securities Act will also be provided without charge to
each such person, upon written or oral request. Requests should be directed to
ServiceMaster at One ServiceMaster Way, Downers Grove, Illinois 60515-9969,
Attention: Investor Relations (telephone number: (630) 271-1300).
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS,
AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE SERVICEMASTER COMPANY, THE PARENT
PARTNERSHIP OR SERVICEMASTER INCORPORATED OF DELAWARE. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE DEBT SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION TO SUCH PERSON.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREBY SHALL UNDER
ANY CIRCUMSTANCES IMPLY THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE HEREOF.
3
<PAGE>
Unless otherwise indicated or the context otherwise requires, all references
herein to: (i) the "Parent Partnership" refers to ServiceMaster Limited
Partnership; (ii) "The ServiceMaster Company" or the "Company" refer to The
ServiceMaster Company Limited Partnership; and (iii) "ServiceMaster" refers to
the Parent Partnership and The ServiceMaster Company, together with all
entities affiliated with these two limited partnerships and their respective
predecessors. As described under"The Reincorporating Merger and the
Partnership Liquidations" below, the shareholders of the Parent Partnership
have approved a Reincorporating Merger, which is scheduled to occur on or
before December 31, 1997. The Reincorporating Merger will install a
corporation as the ultimate parent in the ServiceMaster enterprise and that
corporation is called the "Successor Parent Corporation" in this Prospectus.
The term "ServiceMaster" as used in this Prospectus with respect to periods at
and after the Reincorporating Merger refers to ServiceMaster Incorporated of
Delaware and its subsidiaries.
SERVICEMASTER
The Parent Partnership and The ServiceMaster Company were formed in December
1986 as limited partnerships to succeed to the business and assets of
ServiceMaster Industries Inc., which began its operation in 1947. The Parent
Partnership is a holding company whose limited partnership shares are listed
on the New York Stock Exchange and whose principal asset consists of all of
the common limited partner interest of The ServiceMaster Company. The actual
operations of the ServiceMaster enterprise are conducted by The ServiceMaster
Company and its subsidiaries. Accordingly, The ServiceMaster Company has
essentially the same degree of ownership of the businesses which make up the
ServiceMaster enterprise as does the Parent Partnership and the descriptions
of those businesses incorporated into this Prospectus are essentially the same
with respect to The ServiceMaster Company as they are for the Parent
Partnership.
The Debt Securities will be issued by The ServiceMaster Company. The Debt
Securities will be guaranteed by the Parent Partnership.
ServiceMaster, through its subsidiaries, provides a range of services to
individual consumers, businesses and institutions in the United States and 30
other countries throughout the world. ServiceMaster is divided into three
operating units: Consumer Services, Management Services and International.
Consumer Services and Management Services are the principal operating units.
ServiceMaster Consumer Services L.P. is a wholly owned first-tier subsidiary
of The ServiceMaster Company and provides services to over 6,500,000
residential and commercial customers through seven market leading companies:
TruGreen L.P., which provides lawn care, tree and shrub services and indoor
plant maintenance under the "TruGreen," "ChemLawn," "TruGreen-ChemLawn" and
"Barefoot" service marks; The Terminix International Company, L.P., which
provides termite and pest control services under the "Terminix" service mark;
American Home Shield Corporation, which provides home system and appliance
warranty contracts and home inspection services under the "American Home
Shield" and "AmeriSpec" service marks; ServiceMaster Residential/Commercial
Services L.P., which provides residential and commercial cleaning and disaster
restoration services under the "ServiceMaster" service mark; Merry Maids L.P.,
which provides domestic housekeeping services under the "Merry Maids" service
mark; and Furniture Medic L.P., which provides in-home furniture repair and
restoration services under the "Furniture Medic" service mark. These services
are part of the "ServiceMaster Quality Network" and may be accessed by calling
a single toll-free telephone number: 1-800-WE SERVE.
ServiceMaster Management Services L.P. is a wholly owned first-tier
subsidiary of The ServiceMaster Company and is organized into three discrete
operating units: ServiceMaster Healthcare Management Services, Education
Management Services and Business and Industry Management Services. Each of
these three units provides to its respective customers a variety of supportive
management services, including the management of housekeeping, plant
operations and maintenance, clinical equipment maintenance, laundry and linen,
grounds and landscaping, energy management services and food service. In
addition, Healthcare Management Services provides management and other
services to the long-term care, assisted living and home health care markets.
4
<PAGE>
On January 13, 1992, the Parent Partnership's limited partners approved a
Reincorporating Merger. The purpose of the Reincorporating Merger is to
install ServiceMaster Incorporated of Delaware as the ultimate parent in the
ServiceMaster enterprise. The Reincorporating Merger is scheduled to be
consummated on or before December 31, 1997. When and if the Reincorporating
Merger consummates: a subsidiary of the Successor Parent Corporation will be
merged into the Parent Partnership; as a result of the merger, each
outstanding limited partnership share issued by the Parent Partnership will be
converted into one share of common stock issued by the Successor Parent
Corporation; and the Parent Partnership will become wholly owned by the
Successor Parent Corporation. ServiceMaster expects that after the
Reincorporating Merger, the Parent Partnership and The ServiceMaster Company
will be merged or liquidated into the Successor Parent Corporation. Upon
consummation of these actions, the Successor Parent Corporation will become
the successor to both the Parent Partnership and The ServiceMaster Company
Limited Partnership. ServiceMaster intends to change the name of the Successor
Parent Corporation to "The ServiceMaster Company" not later than the time the
Partnership Liquidations (as defined) are completed.
Upon consummation of the Partnership Liquidations, the Successor Parent
Corporation will assume all obligations of The ServiceMaster Company on the
Debt Securities and will become the primary obligor on the Debt Securities.
See "The Reincorporating Merger and the Partnership Liquidations."
RATIO OF EARNINGS TO FIXED CHARGES
The following are the consolidated ratios of earnings to fixed charges for
the Parent Partnership for the six months ended June 30, 1996 and 1997 and
each of the fiscal years 1992 through 1996:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, YEAR ENDED DECEMBER 31,
--------------- -----------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated ratios of
earnings to fixed charges... 3.85x 4.76x 5.16x 4.83x 4.72x 4.55x 3.85x
</TABLE>
The Parent Partnership's consolidated ratios of earnings to fixed charges
were computed by dividing earnings by fixed charges. For this purpose,
"earnings" consist of income from continuing operations before income taxes,
fixed charges (excluding capitalized interest) and minority interest expenses
of subsidiaries with fixed charges and "fixed charges" consist of interest and
amortization of debt expense, including the interest portion of rental
obligations deemed representative of the interest factor.
SUMMARIZED FINANCIAL INFORMATION
FOR THE SERVICEMASTER COMPANY
The Debt Securities being offered hereby will be issued by The ServiceMaster
Company. The ServiceMaster Company is the only direct subsidiary of the Parent
Partnership. Set forth below is summarized unaudited financial information for
The ServiceMaster Company as of and for each of the three years in the period
ended December 31, 1996. Such information should be read in conjunction with
the consolidated financial statements and accompanying notes included in the
Parent Partnership's Annual Reports on Form 10-K for such years, incorporated
herein by reference. This information is substantially the same as the
corresponding information reported for the Parent Partnership because: (i) the
Parent Partnership does not itself conduct any operations but rather
operations of the ServiceMaster enterprise are conducted by The ServiceMaster
Company and the direct and indirect subsidiaries of The ServiceMaster Company;
(ii) the Parent Partnership has no material assets other than substantially
all of the ownership interest in The ServiceMaster Company; and (iii)
substantially all of the assets and liabilities shown in the consolidated
financial statements for the Parent Partnership are located at The
ServiceMaster Company and at the direct and indirect subsidiaries of The
ServiceMaster Company.
5
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1996 1995 1994
------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Current assets......................................... $ 499 $ 393 $ 331
Noncurrent assets...................................... 1,348 1,257 900
Current liabilities.................................... 426 373 304
Noncurrent liabilities................................. 651 561 527
Minority interests..................................... 16 12 134
INCOME STATEMENT DATA:
Operating revenue...................................... $3,458 $3,203 $2,985
Cost of sales.......................................... 2,681 2,500 2,356
Selling and administrative............................. 482 451 415
------ ------ ------
Total operating costs.................................. 3,163 2,951 2,771
------ ------ ------
Operating income....................................... 295 252 214
Income from continuing operations...................... 247 174 141
Net income............................................. 247 174 141
</TABLE>
USE OF PROCEEDS
The ServiceMaster Company (and the Successor Parent Corporation after the
Reincorporating Merger) intend to use the net proceeds from the sale of the
Debt Securities for general business purposes, which may include, but are not
limited to, repayment, redemption or repurchase of outstanding indebtedness;
repurchase of outstanding shares issued by the Parent Partnership (or the
Successor Parent Corporation after the Reincorporating Merger); acquisitions,
capital expenditures and working capital requirements; and such other purposes
as may be specified in the relevant Prospectus Supplement. A description of
any indebtedness to be refinanced with the proceeds from the sale of the Debt
Securities will be set forth in the applicable Prospectus Supplement.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEE
The Debt Securities will be issued under an Indenture (the "Indenture")
dated as of August 15, 1997 among The ServiceMaster Company, as issuer, the
Parent Partnership, as guarantor, and Harris Trust and Savings Bank, as
trustee (the "Trustee"). The following description of certain provisions of
the Indenture and the Debt Securities summarizes the material terms thereof
but does not purport to be complete, and such summary is subject to the
detailed provisions of the Indenture to which reference is hereby made,
including the definition of certain terms used herein, and for other
information regarding the Debt Securities. The Indenture has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
Numerical references in parentheses below are to sections in the Indenture.
Wherever particular sections or defined terms of the Indenture are referred
to, such sections or defined terms are incorporated herein by reference as
part of the statement made, and the statement is qualified in its entirety by
such reference. Any Debt Securities offered by this Prospectus and the
accompanying Prospectus Supplement are referred to herein as the "Offered Debt
Securities."
GENERAL
The Indenture provides for issuance of Debt Securities by The ServiceMaster
Company in an unlimited amount from time to time in one or more series. Debt
Securities may be denominated and payable in foreign currencies or units based
on or relating to foreign currencies. Special United States federal income tax
considerations applicable to any Debt Securities so denominated will be
described in the relevant Prospectus Supplement.
6
<PAGE>
The Debt Securities will be unsecured obligations of The ServiceMaster
Company and will be guaranteed by the Parent Partnership. The Indenture does
not limit the amount of additional indebtedness that The ServiceMaster Company
or the Parent Partnership may incur and does not contain provisions which
would afford the holders (the "Holders") of the Debt Securities protection in
the event of a decline in The ServiceMaster Company's or the Parent
Partnership's credit quality resulting from highly leveraged or other
transactions involving The ServiceMaster Company or the Parent Partnership, as
the case may be.
Reference is made to the Prospectus Supplement for the following terms of
and information relating to the Offered Debt Securities (to the extent such
terms are applicable to such Offered Debt Securities): (i) the specific
designation, aggregate principal amount, purchase price and denomination; (ii)
currency or units based on or relating to currencies in which such Offered
Debt Securities are denominated and in which principal of, premium, if any,
and any interest on such Offered Debt Securities will or may be payable; (iii)
any date of maturity; (iv) interest rate or rates, which may be fixed or
variable, and the method by which such rate or rates will be determined, if
any; (v) the dates on which any such interest will be payable; (vi) the place
or places where the principal of, premium, if any, and any interest on the
Offered Debt Securities will be payable; (vii) any redemption, repayment or
sinking fund provisions; (viii) whether the Offered Debt Securities will be
issuable in registered form or bearer form ("Bearer Securities") or both and,
if Bearer Securities are issuable, any restrictions applicable to the exchange
of one form for another and to the offer, sale and delivery of Bearer
Securities; (ix) any applicable United States federal income tax consequences,
including whether and under what circumstances The ServiceMaster Company will
pay additional amounts on Offered Debt Securities held by a person who is not
a U.S. person (as defined in the Prospectus Supplement) in respect of any tax,
assessment or governmental charge withheld or deducted and, if so, whether The
ServiceMaster Company will have the option to redeem such Offered Debt
Securities rather than pay such additional amounts; and (x) any other specific
terms of the Offered Debt Securities, including any additions to or
modifications or deletions of any events of default or covenants provided for
with respect to such Offered Debt Securities, and any terms which may be
required by or be advisable under applicable laws or regulations (Section
2.03).
Debt Securities may be presented for exchange and registered Debt Securities
may be presented for transfer in the manner, at the places and subject to the
restrictions set forth in the Debt Securities and the Prospectus Supplement.
Subject to the limitations provided in the Indenture, such services will be
provided without charge, other than any tax or other governmental charge
payable in connection therewith. Debt Securities in bearer form and the
coupons, if any, appertaining thereto will be transferable by delivery.
Debt Securities will bear interest at a fixed rate (a "Fixed Rate Security")
or a floating rate (a "Floating Rate Security"). Debt Securities bearing no
interest or interest at a rate that at the time of issuance is below the
prevailing market rate will be sold at a discount below their stated principal
amount. Special United States federal income tax considerations applicable to
any such discounted Debt Securities or to certain Debt Securities issued at
par which are treated as having been issued at a discount for United States
federal income tax purposes will be described in the relevant Prospectus
Supplement.
Debt Securities may be issued, from time to time, with the principal amount
payable on any principal payment date, or the amount of interest payable on
any interest payment date, to be determined by reference to one or more
currency exchange rates, commodity prices, equity indices or other factors.
Holders of such Debt Securities may receive a principal amount on any
principal payment date, or a payment of interest on any interest payment date,
that is greater than or less than the amount of principal or interest
otherwise payable on such dates, depending upon the value on such dates of the
applicable currency, commodity, equity index or other factors. Information as
to the methods for determining the amount of principal or interest payable on
any date, the currencies, commodities, equity index, or other factors to which
the amount payable on such date is linked and certain additional tax
considerations will be set forth in the applicable Prospectus Supplement.
RANKING
The Debt Securities, when issued, will rank pari passu in right of payment
with all other unsecured and unsubordinated indebtedness of The ServiceMaster
Company (Section 2.03).
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The Debt Securities may, under certain circumstances, be equally and ratably
secured with other senior indebtedness of The ServiceMaster Company. See "--
Certain Covenants of the Company--Restrictions on Liens."
GLOBAL DEBT SECURITIES
The registered Debt Securities of a series may be issued in the form of one
or more fully registered global Debt Securities (a "Registered Global
Security") that will be deposited with a depository (a "Depositary") or with a
nominee for a Depositary identified in the Prospectus Supplement relating to
such series and registered in the name of the Depositary or a nominee thereof.
In such case, one or more Registered Global Securities will be issued in a
denomination or aggregate denominations equal to the portion of the aggregate
principal amount of outstanding registered Debt Securities of the series to be
represented by such Registered Global Security or Registered Global
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in debenture registered form, a Registered Global Security may not
be transferred except as a whole by the Depositary for such Registered Global
Security to a nominee of such Depositary or by a nominee of such Depositary to
such Depositary or another nominee of such Depositary or such Depositary or
any such nominee to a successor of such Depositary or a nominee of such
successor.
The specific terms of the depositary arrangement with respect to any portion
of a series of Debt Securities to be represented by a Registered Global
Security will be described in the Prospectus Supplement relating to such
series. The ServiceMaster Company anticipates that the following provisions
will apply to all depositary arrangements.
Ownership of beneficial interests in a Registered Global Security will be
limited to persons that have accounts with the Depositary for such Registered
Global Security ("participants") or persons that may hold interests through
participants. Upon the issuance of a Registered Global Security, the
Depositary for such Registered Global Security will credit, on its book-entry
registration and transfer systems the participants' accounts with the
respective principal amounts of the Debt Securities represented by such
Registered Global Security beneficially owned by such participants. The
accounts to be credited will be designated by any dealers, underwriters or
agents participating in the distribution of such Debt Securities. Ownership of
beneficial interests in such Registered Global Security will be shown on, and
the transfer of such ownership interests will be effected only through,
records maintained by the Depositary for such Registered Global Security (with
respect to interests of participants) and on the records of participants (with
respect to interests of persons holding through participants). The laws of
some states may require that certain purchasers of securities take physical
delivery of such securities in definitive form. Such limits and such laws may
impair the ability to own, transfer or pledge beneficial interests in
registered Global Securities.
So long as the Depositary for a Registered Global Security, or its nominee,
is the owner of record of such Registered Global Security, such Depositary or
such nominee, as the case may be, will be considered the sole owner or holder
of the Debt Securities represented by such Registered Global Security for all
purposes under the Indenture. Except as set forth below, owners of beneficial
interests in a Registered Global Security will not be entitled to have the
Debt Securities represented by such Registered Global Security registered in
their names, and will not receive or be entitled to receive physical delivery
of such Debt Securities in definitive form and will not be considered the
owners or holders thereof under the Indenture. Accordingly, each person owning
a beneficial interest in a Registered Global Security must rely on the
procedures of the Depositary for such Registered Global Security and, if such
person is not a participant, on the procedures of the participant through
which such person owns its interest to exercise any rights of a holder of
record under the Indenture. The ServiceMaster Company understands that under
existing industry practices, if The ServiceMaster Company requests any action
of holders or if any owner of a beneficial interest in a Registered Global
Security desires to give or take any action which a holder is entitled to give
or take under the Indenture, the Depositary for such Registered Global
Security would authorize the participants holding the relevant beneficial
interests to give or take such action, and such participants would authorize
beneficial owners owning through such participants to give or take such action
or would otherwise act upon the instruction of beneficial owners holding
through them.
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Payments of principal of, premium, if any, and any interest on Debt
Securities represented by a Registered Global Security registered in the name
of a Depositary or its nominee will be made to such Depositary or its nominee,
as the case may be, as the registered owner of such Registered Global
Security. None of The ServiceMaster Company, the Trustee or any other agent of
The ServiceMaster Company or agent of the Trustee will have any responsibility
or liability for any aspect of the records relating to or payments made on
account of beneficial ownership interests in such Registered Global Security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The ServiceMaster Company expects that the Depositary for any Debt
Securities represented by a Registered Global Security, upon receipt of any
payment of principal, premium, if any, or interest in respect of such
Registered Global Security, will immediately credit participants' accounts
with payments in amounts proportionate to their respective beneficial
interests in such Registered Global Security as shown on the records of such
Depositary. The ServiceMaster Company also expects that payments by
participants to owners of beneficial interests in such Registered Global
Security held through such participants will be governed by standing customer
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name,"
and will be the responsibility of such participants.
If the Depositary for any Debt Securities represented by a Registered Global
Security notifies The ServiceMaster Company that it is at any time unwilling
or unable to continue as Depositary or ceases to be eligible under applicable
law, and a successor Depositary eligible under applicable law is not appointed
by The ServiceMaster Company within 90 days, The ServiceMaster Company will
issue such Debt Securities in definitive form in exchange for such Registered
Global Security. In addition, The ServiceMaster Company may at any time and in
its sole discretion determine not to have any of the Debt Securities of a
series represented by one or more Registered Global Securities and, in such
event, will issue Debt Securities of such series in definitive form in
exchange for all of the Registered Global Security or Registered Global
Securities representing such Debt Securities. Any Debt Securities issued in
definitive form in exchange for a Registered Global Security will be
registered in such name or names as the Depositary shall instruct the Trustee
(Section 2.07). It is expected that such instructions will be based upon
directions received by the Depositary from participants with respect to
ownership of beneficial interests in such Registered Global Security. The Debt
Securities of a series may also be issued in the form of one or more bearer
global Debt Securities (a "Bearer Global Security") that will be deposited
with a common depositary for Euroclear and CEDEL, or with a nominee for such
depositary identified in the Prospectus Supplement relating to such series.
The specific terms and procedures, including the specific terms of the
depositary arrangement, with respect to any portion of a series of Debt
Securities to be represented by a Bearer Global Security will be described in
the Prospectus Supplement relating to such series.
CERTAIN COVENANTS OF THE COMPANY
The following restrictions apply to each series of Debt Securities unless
the terms of such series of Debt Securities provide otherwise.
Restrictions on Liens. The Indenture provides that the ServiceMaster Company
and the Parent Partnership will not, and will not permit any Significant
Subsidiary to, create, incur or suffer to exist any lien on any Equity
Interests (as defined in the Indenture), indebtedness or other obligations of
a Significant Subsidiary held by the Parent Partnership, the Company or any
Subsidiary or any Principal Property of The ServiceMaster Company or a
Significant Subsidiary, whether such Equity Interests, indebtedness or other
obligations of a Significant Subsidiary or Principal Property are owned at the
date of this Indenture or hereafter acquired, unless The ServiceMaster Company
secures or causes such Significant Subsidiary to secure the outstanding Debt
Securities equally and ratably with all indebtedness secured by such Lien, so
long as such indebtedness shall be so secured; provided, however, that this
covenant shall not apply in the case of: (i) the creation of any Lien on any
Equity Interests, indebtedness or other obligations of a Significant
Subsidiary or any Principal Property hereafter acquired (including
acquisitions by way of merger or consolidation) by The ServiceMaster Company
or a Significant Subsidiary contemporaneously with such acquisition, or within
180 days thereafter, to secure or provide for the payment or financing of any
part of the purchase price thereof, or the assumption of any Lien
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upon any Equity Interests, indebtedness or other obligations of a Significant
Subsidiary or any Principal Property hereafter acquired (including acquisition
by way of merger or consolidation) existing at the time of such acquisition,
provided that every such Lien referred to in this clause (i) shall not attach
to the Equity Interests, indebtedness or other obligations of a Significant
Subsidiary or any Principal Property other than the Equity Interests,
indebtedness or other obligations of the Significant Subsidiary or any
Principal Property other than the Equity Interests, indebtedness or other
obligations of the Significant Subsidiary or any Principal Property so
acquired and fixed improvements thereon; (ii) any Lien on any Equity
Interests, indebtedness or other obligations of a Significant Subsidiary or
any Principal Property existing at the date of this Indenture; (iii) any Lien
on any Equity Interests, indebtedness or other obligations of a Significant
Subsidiary or any Principal Property in favor of The ServiceMaster Company or
any Significant Subsidiary; (iv) any Lien on any Principal Property being
constructed or improved securing loans to finance such construction or
improvements; (v) any Lien on Equity Interests, indebtedness or other
obligations of a Significant Subsidiary or any Principal Property incurred in
connection with the issuance of tax-exempt governmental obligations; (vi)
Liens on any Principal Property for taxes not yet due or which are being
contested in good faith by appropriate proceedings and with respect to which
adequate reserves, to the extent required by GAAP, have been made; (vii)
carriers', warehousemen's, mechanics', materialmen's, repairmen's or other
like Liens on any Principal Property arising in the ordinary course of
business and securing obligations that are not due and payable or which are
being contested in good faith by appropriate proceedings and with respect to
which adequate reserves, to the extent required by GAAP, have been made;
(viii) zoning restrictions, easements, rights-of-way, restrictions on use of
real property and other similar encumbrances incurred in the ordinary course
of business which, in the aggregate, are not substantial in amount and do not
materially detract from the value of the property subject thereto or interfere
with the ordinary conduct of business of any of the Company, the Parent
Partnership or any Significant Subsidiary; (ix) any Lien on Equity Interests,
indebtedness or other obligations of a Non-U.S. Subsidiary held by a Non-U.S.
Subsidiary or any Principal Property of a Non-U.S. Subsidiary; provided that
at the time of the creation or incurrence of any such Lien the aggregate book
value of the total assets of the Non-U.S. Subsidiaries then subject to Liens
securing indebtedness for borrowed money (and after giving effect to the
proposed Lien), shall not exceed 25% of the Total Assets of the Parent
Partnership and its Subsidiaries; (x) any Lien on Equity Interests,
indebtedness or other obligations of a Securitization Subsidiary created,
incurred, assumed or suffered to exit in connection with Permitted Receivables
Financing; (xi) Liens arising by reason of any attachment, judgment, decree or
order of any court or other governmental authority, so long as any appropriate
legal proceedings which may have been initiated for review of such attachment,
judgment, decree or order shall not have been finally terminated or so long as
the period within which such proceedings may be initiated shall not have
expired; (xii) any Lien on Equity Interests, indebtedness or other obligations
of a Significant Subsidiary that was not a Significant Subsidiary at the time
such Lien was created or incurred; and (xiii) any renewal of or substitution
for any Lien permitted by any of the preceding clauses (i), (ii), (iv), (v),
(vi), (vii), (viii), (ix), (x), (xi) or (xii), provided, that the indebtedness
secured is not increased (except for increases in the amount of premiums or
fees payable in connection with such renewal or substitution) nor the Lien
extended to any additional assets (other than assets as to which the creation,
incurrence or existence of Liens is not governed by this clause). (Section
5.03(a))
Notwithstanding the foregoing, The ServiceMaster Company or any Significant
Subsidiary may create, incur, assume or suffer to exist Liens in addition to
those permitted above and renew, extend or replace such Liens, provided that
at the time of such creation, incurrence, assumption, renewal, extension or
replacement, and after giving effect thereto, the aggregate outstanding
principal or face amount of all indebtedness secured by Liens not permitted by
clauses (i) through (xiii) above does not exceed 10% of Consolidated Net
Worth. (Section 5.03(b))
Restrictions on Sale and Lease-Back Transactions. The Indenture provides
that The ServiceMaster Company will not, and will not permit any Significant
Subsidiary to, sell or transfer, directly or indirectly, except to The
ServiceMaster Company or a Significant Subsidiary, any Principal Property as
an entirety, or any substantial portion thereof, with the intention of taking
back a lease of such property, except a lease for a period of three years or
less at the end of which it is intended that the use of such property by the
lessee will be discontinued and any transaction for the sale and lease-back of
any property if such lease is entered into within
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180 days after the later of the acquisition, completion of construction or
commencement of operation of such property; provided that, notwithstanding the
foregoing, The ServiceMaster Company or any Significant Subsidiary may sell
any such Principal Property and lease it back for a period longer than three
years if The ServiceMaster Company or such Significant Subsidiary would be
entitled to create a Lien on the property to be leased securing indebtedness
in an amount equal to the Attributable Debt with respect to such sale and
lease-back transaction without equally and ratably securing the outstanding
Debt Securities or The ServiceMaster Company promptly informs the Trustee of
such transaction, the net proceeds of such transaction are at least equal to
the fair value (as determined by Board Resolution of The ServiceMaster
Company) of such property and The ServiceMaster Company causes an amount equal
to the net cash proceeds of the sale to be applied to the retirement, within
120 days after receipt of such proceeds, of Funded Debt incurred or assumed by
The ServiceMaster Company or a Significant Subsidiary (including the Debt
Securities); provided further that, in lieu of applying all of or any part of
such net cash proceeds to such retirement, The ServiceMaster Company may,
within 75 days after such sale, deliver or cause to be delivered to the
applicable trustee for cancellation either debentures or notes evidencing
Funded Debt of The ServiceMaster Company (which may include the Debt
Securities) or of a Significant Subsidiary previously authenticated and
delivered by the applicable trustee, and not theretofore tendered for sinking
fund purposes or called for a sinking fund or otherwise applied as a credit
against an obligation to redeem or retire such notes or debentures, and an
Officers' Certificate (which shall be delivered to the Trustee and which need
not contain the statements prescribed by Section 11.04) stating that The
ServiceMaster Company elects to deliver or cause to be delivered such
debentures or notes in lieu of retiring Funded Debt as hereinabove provided.
If The ServiceMaster Company shall so deliver debentures or notes to the
applicable trustee and the ServiceMaster Company shall duly deliver such
Officers' Certificate, the amount of cash which The ServiceMaster Company
shall be required to apply to the retirement of Funded Debt shall be reduced
by an amount equal to the aggregate of the then applicable optional redemption
prices (not including any optional sinking fund redemption prices) of such
debentures or notes, or, if there are no such redemption prices, the principal
amount of such debentures or notes; provided, that in the case of debentures
or notes which provide for an amount less than the principal amount thereof to
be due and payable upon a declaration of the maturity thereof, such amount of
cash shall be reduced by the amount of principal of such debentures or notes
that would be due and payable as of the date of such application upon a
declaration of acceleration of the maturity thereof pursuant to the terms of
the indenture pursuant to which such debentures or notes were issued. (Section
5.04)
CERTAIN DEFINITIONS
The term "Attributable Debt" as defined in the Indenture means when used in
connection with a sale and lease-back transaction referred to above under "--
Restrictions on Sale and Lease-Back Transactions," on any date as of which the
amount thereof is to be determined, the product of (a) the net proceeds from
such sale and lease-back transaction multiplied by (b) a fraction, the
numerator of which is the number of full years of the term of the lease
relating to the property involved in such sale and lease-back transaction
(without regard to any options to renew or extend such term) remaining on the
date of the making of such computation and the denominator of which is the
number of full years of the term of such lease measured from the first day of
such term.
The term "Consolidated Net Worth" as defined in the Indenture means, at any
date of determination, the consolidated stockholders' equity of the Parent
Partnership, as set forth on the then most recently available consolidated
balance sheet of the Parent Partnership and its consolidated Subsidiaries.
The term "Funded Debt" as defined in the Indenture involves all indebtedness
for money borrowed, including purchase money indebtedness, and indebtedness
pursuant to a mandatory sinking fund or prepayment provision or otherwise,
having a maturity of more than one year from the date of its creation or
having a maturity of less than one year but by its terms being renewable or
extendible, at the option of the obligor in respect thereof, beyond one year
from the date of its creation.
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The term "Holder" or "Securityholder" as defined in the Indenture means the
registered holder of any Security with respect to registered Debt Securities
and the bearer of any Unregistered Security or any coupon appertaining
thereto, as the case may be.
"Non-U.S. Subsidiary" as defined in the Indenture means any Subsidiary that
is not a corporation, partnership or other entity created or organized in or
under the laws of the United States of America or any state thereof.
"Original Issue Discount Security" as defined in the Indenture means any
Security that provides for an amount less than the principal amount thereof to
be due and payable upon a declaration of acceleration of the maturity thereof.
"Permitted Receivables Financing" as defined in the Indenture means a
transaction or series of transactions (including amendments, supplements,
extensions, renewals, replacements, refinancings or modifications thereof)
pursuant to which a Securitization Subsidiary purchases Receivables and
Related Assets from the Company or any Subsidiary and finances such
Receivables and Related Assets through the issuance of Equity Interests or
indebtedness (either directly or through a trust) or through the sale of the
Receivables and Related Assets or a fractional undivided interest in the
Receivables and Related Assets; provided that (i) the Board of Directors of
the Company or the Parent Partnership, as the case may be, shall have
determined in good faith that such Permitted Receivables Financing is
economically fair and reasonable to the Company, (ii) all sales of Receivables
and Related Assets to the Securitization Subsidiary are made at fair market
value (as determined in good faith by the Board of Directors of the Company or
the Parent Partnership), (iii) the financing terms, covenants, termination
events and other provisions thereof shall be market terms (as determined in
good faith by the Board of Directors of the Company or the Parent
Partnership), (iv) no portion of the indebtedness of a Securitization
Subsidiary will be guaranteed by or will be recourse to the Company, the
Parent Partnership or any Significant Subsidiary (other than recourse for
customary representations, warranties, covenants and indemnities, none of
which shall relate to the collectibility (as opposed to the status) of the
Receivables and Related Assets) and (v) neither the Company, the Parent
Partnership nor any Subsidiary shall have any obligation to maintain or
preserve the Securitization Subsidiary's financial condition.
The term "Principal Property" as defined in the Indenture means The
ServiceMaster Company's principal office building and any manufacturing plant
or principal research facility of any of The ServiceMaster Company, the Parent
Partnership or any Significant Subsidiary which is located within the United
States of America, except any such principal office building, plant or
facility which the Board of Directors by resolution declares is not of
material importance to the total business conducted by The ServiceMaster
Company, the Parent Partnership and their respective Subsidiaries as an
entirety.
"Receivables and Related Assets" means accounts receivable and instruments,
chattel paper, obligations, general intangibles and other similar assets, in
each case, relating to such receivables, including interest in merchandise or
goods, the sale or lease of which gave rise to such receivables, related
contractual rights, guarantees, insurance proceeds, collections, other related
assets, and proceeds of all of the foregoing.
"Securitization Subsidiary" as defined in the Indenture means a Wholly Owned
Subsidiary which is established for the limited purpose of acquiring and
financing Receivables and Related Assets and engaging in activities ancillary
thereto.
The term "Significant Subsidiary", as defined in the Indenture means at any
time, any Subsidiary that would be a Significant Subsidiary at such time, as
such term is defined in Regulation S-X promulgated by the Commission, as in
effect on the date of the Indenture.
The term "Subsidiary" as defined in the Indenture means with respect to any
Person, any corporation, association or other business entity of which more
than 50% of the outstanding Voting Stock (as defined in the Indenture) or
other ownership interest is owned directly or indirectly, by such Person and
one or more other Subsidiaries of such Persons.
The term "Total Assets" as defined in the Indenture means, at any date of
determination, the total assets of the Parent Partnership and its Subsidiaries
on a consolidated basis as set forth on the then most recently available
consolidated balance sheet of the Parent Partnership and its consolidated
Subsidiaries.
"Wholly Owned Subsidiary" as defined in the Indenture means a Subsidiary all
of the Equity Interests of which (except directors' qualifying shares) is at
the time owned directly or indirectly by the Company.
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RESTRICTIONS ON MERGERS AND SALES OF ASSETS
Under the Indenture, The ServiceMaster Company shall not consolidate with,
merge with or into, or sell, convey, transfer, lease or otherwise dispose of
all or substantially all of its property and assets (as an entirety or
substantially as an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into The
ServiceMaster Company unless: (i) either (x) The ServiceMaster Company shall
be the continuing Person or (y) the Person (if other than The ServiceMaster
Company) formed by such consolidation or into which The ServiceMaster Company
is merged or that acquired or leased such property and assets of The
ServiceMaster Company shall be a corporation, partnership or limited liability
company organized and validly existing under the laws of the United States of
America or any jurisdiction thereof and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, all of the
obligations of The ServiceMaster Company on all of the Debt Securities and
under this Indenture and, if the successor corporation or partnership is not
the Parent Partnership (unless such successor is also the successor to the
Parent Partnership under Section 6.04 of the Indenture), the Parent
Partnership shall unconditionally guarantee the successor corporation's or
partnership's obligations on all of the Debt Securities and under this
Indenture and The ServiceMaster Company shall have delivered to the Trustee an
Opinion of Counsel stating that such consolidation, merger or transfer and
such supplemental Indenture complies with this provision and that all
conditions precedent provided for herein relating to such transaction have
been complied with and that such supplemental indenture constitutes the legal,
valid and binding obligation of The ServiceMaster Company or such successor
enforceable against such entity in accordance with its terms, subject to
customary exceptions; and (ii) immediately after giving effect to such
transaction, no Default shall have occurred and be continuing.
The Indenture also provides that the Parent Partnership shall not
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as
an entirety or substantially as an entirety in one transaction or a series of
related transactions) to, any Person or permit any Person to merge with or
into the Parent Partnership unless: (i) either (x) the Parent Partnership
shall be the continuing Person or (y) the Person (if other than the Parent
Partnership) formed by such consolidation or into which the Parent Partnership
is merged or that acquired or leased such property and assets of the Parent
Partnership shall be a corporation, partnership or limited liability company
organized and validly existing under the laws of the United States of America
or any jurisdiction thereof and shall expressly assume, by a supplemental
Indenture, executed and delivered to the Trustee, the due and punctual
performance of the Guarantees, and the due and punctual performance and
observance of all of the covenants and conditions of this Indenture and the
Debt Securities and the Guarantee to be performed by the Parent Partnership;
and (ii) immediately after giving effect to such transaction, no Default shall
have occurred and be continuing. (Sections 6.01 and 6.03)
EVENTS OF DEFAULT
Events of Default defined in the Indenture with respect to the Debt
Securities of any series are: (a) The ServiceMaster Company defaults in the
payment of the principal of any Debt Securities of such series when the same
becomes due and payable at maturity, upon acceleration, redemption or
mandatory repurchase, including as a sinking fund installment, or otherwise;
(b) The ServiceMaster Company defaults in the payment of interest on any Debt
Securities of such series when the same becomes due and payable, and such
default continues for a period of 30 days; (c) The ServiceMaster Company or
the Parent Partnership defaults in the performance of or breaches any other
covenant or agreement of The ServiceMaster Company or the Parent Partnership
in the Indenture with respect to any Security of such series or in the Debt
Securities of such series and such default or breach continues for a period of
60 consecutive days after written notice to The ServiceMaster Company by the
Trustee or to The ServiceMaster Company and the Trustee by the Holders of 25%
or more in aggregate principal amount of the Debt Securities of all series
then outstanding affected thereby; (d) an involuntary case or other proceeding
shall be commenced against The ServiceMaster Company, the Parent Partnership
or any Significant Subsidiary with respect to it or its debts under any
bankruptcy, insolvency or other similar law now or hereafter in effect seeking
the appointment of a trustee, receiver, liquidator, custodian or other similar
official of it or any substantial part of its property, and such involuntary
case or other proceeding shall remain undismissed and unstayed for a period of
60 days; or an order for relief shall be entered against The ServiceMaster
Company, the Parent Partnership or any Significant Subsidiary under the
federal bankruptcy laws as now or hereafter in effect;
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(e) The ServiceMaster Company, the Parent Partnership or any Significant
Subsidiary (i) commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such law, (ii)
consents to the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, Trustee, sequestrator or similar official of The
ServiceMaster Company, the Parent Partnership or any Significant Subsidiary or
for all or substantially all of the property and assets of The ServiceMaster
Company, the Parent Partnership or any Significant Subsidiary or (iii) effects
any general assignment for the benefit of creditors; or (f) any other Event of
Default established with respect to any series of Debt Securities issued
pursuant to the Indenture occurs. (Section 7.01)
The Indenture provides that if an Event of Default described in clauses (a)
or (b) of the immediately preceding paragraph with respect to the Debt
Securities of any series then outstanding occurs and is continuing, then, and
in each and every such case, except for any series of Debt Securities the
principal of which shall have already become due and payable, either the
Trustee or the Holders of not less than 25% in aggregate principal amount of
the Debt Securities of any such affected series then outstanding under the
Indenture (each such series treated as a separate class) by notice in writing
to The ServiceMaster Company or the Parent Partnership (and to the Trustee if
given by Securityholders), may declare the entire principal (or, if the Debt
Securities of any such series are Original Issue Discount Securities, such
portion of the principal amount as may be specified in the terms of such
series established pursuant to the Indenture) of all Debt Securities of such
affected series, and the interest accrued thereon, if any, to be due and
payable immediately, and upon any such declaration the same shall become
immediately due and payable. If an Event of Default described in clauses (c)
or (f) of the immediately preceding paragraph with respect to the Debt
Securities of one or more but not all series then outstanding or with respect
to the Debt Securities of all series then outstanding occurs and is
continuing, then, and in each and every such case, except for any series of
Debt Securities the principal of which shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Debt Securities of all such affected series then
outstanding under the Indenture (treated as a single class) by notice in
writing to The ServiceMaster Company (and to the Trustee if given by
Securityholders), may declare the entire principal (or, if the Debt Securities
of any such series are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of such series established
pursuant to the Indenture) of all Debt Securities of all such affected series,
and the interest accrued thereon, if any, to be due and payable immediately,
and upon any such declaration the same shall become immediately due and
payable. If an Event of Default described in clause (d) or (e) of the
immediately preceding paragraph occurs and is continuing, then the principal
amount (or, if any Debt Securities are Original Issue Discount Securities,
such portion of the principal as may be specified in the terms thereof
established pursuant to the Indenture) of all the Debt Securities then
outstanding and interest accrued thereon, if any, shall be and become
immediately due and payable, without any notice or other action by any Holder
or the Trustee to the full extent permitted by applicable law. Upon certain
conditions such declarations may be rescinded and annulled and past defaults
may be waived by the Holders of a majority in principal of the then
outstanding Debt Securities of all such series that have been accelerated
(voting as a single class). (Section 7.02)
The Indenture contains a provision under which, subject to the duty of the
Trustee during a default to act with the required standard of care, (i) the
Trustee may rely and shall be protected in acting or refraining from acting
upon any resolution, certificate, officers' certificate, opinion of counsel
(or both), statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed or
presented by the proper person or persons and the Trustee need not investigate
any fact or matter stated in the document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters as
it may see fit; (ii) before the Trustee acts or refrains from acting, it may
require an officers' certificate and/or an opinion of counsel, which shall
conform to the requirements of the Indenture and the Trustee shall not be
liable for any action it takes or omits to take in good faith in reliance on
such certificate or opinion; subject to the terms of the Indenture, whenever
in the administration of the trusts of the Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking
or suffering or omitting any action under the Indenture, such matter (unless
other evidence in respect thereof be specifically prescribed in the Indenture)
may, in the absence
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of wilful misconduct on the part of the Trustee, be deemed to be conclusively
proved and established by an officers' certificate delivered to the Trustee,
and such certificate, in the absence of wilful misconduct on the part of the
Trustee, shall be full warrant to the Trustee for any action taken, suffered
or omitted by it under the provisions of the Indenture upon the faith thereof;
(iii) the Trustee may act through its attorneys and agents not regularly in
its employ and shall not be responsible for the misconduct or negligence of
any agent or attorney appointed with due care; (iv) any request, direction,
order or demand of The ServiceMaster Company mentioned in the Indenture shall
be sufficiently evidenced by an officers' certificate (unless other evidence
in respect thereof be specifically prescribed in the Indenture); and any Board
Resolution may be evidenced to the Trustee by a copy thereof certified by the
Secretary or an Assistant Secretary of The ServiceMaster Company; (v) the
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by the Indenture at the request, order or direction of any of the
Holders, unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities that might
be incurred by it in compliance with such request or direction; (vi) the
Trustee shall not be liable for any action it takes, or omits to take in good
faith that it believes to be authorized or within its rights or powers or for
any action it takes or omits to take in accordance with the direction of the
Holders in accordance with the Indenture relating to the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under the Indenture;
(vii) the Trustee may consult with counsel and the written advice of such
counsel or any opinion of counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it under the
Indenture in good faith and in reliance thereon; (viii) prior to the
occurrence of an Event of Default under the Indenture and after the curing or
waiving of all Events of Default, the Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
officers' certificate, opinion of counsel, Board Resolution, statement,
instrument, opinion, report, notice, request, consent order, approval,
appraisal, bond, debenture, note, coupon, security, or other paper or document
unless requested in writing so to do by the Holders of not less than a
majority in aggregate principal amount of the Debt Securities of all series
affected then outstanding; provided that, if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of the
Trustee, not reasonably assured to the Trustee by the security afforded to it
by the terms of the Indenture, the Trustee may require reasonable indemnity
against such expenses or liabilities as a condition to proceeding; (ix) the
Trustee shall not be required to give any bond or surety in respect of the
performance of its powers and duties hereunder; (x) the Trustee shall not be
bound to ascertain or inquire as to the performance or observance of any
covenants, conditions or agreements on the part of the Company, except as
otherwise set forth herein, but the Trustee may require of the Company
reasonable information and advice as to the performance of the covenants,
conditions and agreements contained herein and shall be entitled in connection
herewith to examine the books, records and premises of the Company; (xi) the
permissive rights of the Trustee to do things enumerated in this Indenture
shall not be construed as a duty and the Trustee shall not be answerable for
other than its negligence or willful misconduct; (xii) except for any event of
which the Trustee has "actual knowledge" and which event, with the giving of
notice or the passage of time or both, would constitute an Event of Default
under this Indenture, the Trustee shall not be deemed to have notice of any
default or event unless specifically notified in writing of such event by the
Company or the Holders of not less than 25% of the Outstanding Securities; as
used herein, the term "actual knowledge" means the actual fact or statement of
knowing, without any duty to make any investigation with regard thereto.
(Section 8.02)
Subject to such provisions in the Indenture for the indemnification of the
Trustee and certain other limitations, the Holders of at least a majority in
aggregate principal amount (or, if any Debt Securities are Original Issue
Discount Securities, such portion of the principal as may be specified in the
terms thereof established pursuant to the Indenture) of the outstanding Debt
Securities of all series affected (voting as a single class) may direct the
time, method and place of conducting any proceeding for any remedy available
to the Trustee or exercising any trust or power conferred on this Trustee with
respect to the Debt Securities of such series by the Indenture; provided, that
the Trustee may refuse to follow any direction that conflicts with law or the
Indenture, that may involve the Trustee in personal liability, or that the
Trustee determines in good faith may be unduly prejudicial to the rights of
Holders not joining in the giving of such direction, it being understood that
the Trustee shall have no duty to ascertain whether or not such actions or
forbearance are unduly prejudicial to
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such Holders and provided further, that the Trustee may take any other action
it deems proper that is not inconsistent with any directions received from
Holders of Debt Securities pursuant to this paragraph. (Section 7.05)
Subject to various provisions in the Indenture, the Holders of at least a
majority in principal amount (or, if the Debt Securities are Original Issue
Discount Securities, such portion of the principal as may be specified in the
terms thereof established pursuant to the Indenture) of the outstanding Debt
Securities of all series affected (voting as a single class), by notice to the
Trustee, may waive an existing Default or Event of Default with respect to the
Debt Securities of such series and its consequences, except a Default in the
payment of principal of or interest on any Security as specified in clauses
(a) or (b) of Section 6.1 of the Indenture or in respect of a covenant or
provision of the Indenture which cannot be modified or amended without the
consent of the Holder of each outstanding Security affected. Upon any such
waiver, such Default shall cease to exist, and any Event of Default with
respect to the Debt Securities of such series arising therefrom shall be
deemed to have been cured, for every purpose of the Indenture; but no such
waiver shall extend to any subsequent or other Default or Event of Default or
impair any right consequent thereto. (Section 7.04)
The Indenture provides that no Holder of any Debt Securities of any series
may institute any proceeding, juridical or otherwise, with respect to the
Indenture or the Debt Securities of such series, or for the appointment of a
receiver or trustee, or for any other remedy under the Indenture, unless: (i)
such Holder has previously given to the Trustee written notice of a continuing
Event of Default with respect to the Debt Securities of such series; (ii) the
Holders of at least 25% in aggregate principal amount of outstanding Debt
Securities of all such series affected shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its
own name as Trustee under the Indenture; (iii) such Holder or Holders have
offered to The Trustee indemnity reasonably satisfactory to the Trustee
against any costs, liabilities or expenses to be incurred in compliance with
such request; (iv) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding;
and (v) during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Debt Securities of all such affected
series have not given the Trustee a direction that is inconsistent with such
written request. A Holder may not use the Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
(Section 7.06)
The Indenture provides that each of The ServiceMaster Company and the Parent
Partnership will file with the Trustee, within 15 days after The ServiceMaster
Company is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports which The
ServiceMaster Company and the Parent Partnership, as the case may be, may be
required to file with the Commission pursuant to Section 13 or Section 15(d)
of the Exchange Act. (Sections 5.06 and 5.09)
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides with respect to each series of Debt Securities that
The ServiceMaster Company may terminate its obligations under the Debt
Securities of a series and the Indenture with respect to Debt Securities of
such series if: (i) all Debt Securities of such series previously
authenticated and delivered, with certain exceptions, have been delivered to
the Trustee for cancellation and The ServiceMaster Company has paid all sums
payable by it under the Indenture; or (ii) (A) the Debt Securities of such
series mature within one year or all of them are to be called for redemption
within one year under arrangements satisfactory to the Trustee for giving the
notice of redemption, (B) The ServiceMaster Company irrevocably deposits in
trust with the Trustee, as trust funds solely for the benefit of the Holders
of such Debt Securities, for that purpose, money or U.S. Government
Obligations or a combination thereof sufficient (unless such funds consist
solely of money, in the opinion of a nationally recognized firm of independent
public accountants expressed in a written certification thereof delivered to
the Trustee), without consideration of any reinvestment, to pay principal of
and interest on the Debt Securities of such series to maturity or redemption,
as the case may be, and to pay all other sums payable by it under the
Indenture, and (C) The ServiceMaster Company delivers to the Trustee an
officers' certificate and an opinion of counsel in each case stating that all
conditions precedent provided for in The
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ServiceMaster Company's Indenture relating to the satisfaction and discharge
of the Indenture with respect to the Debt Securities of such series have been
complied with. With respect to the foregoing clause (i), only The
ServiceMaster Company 's obligations to compensate and indemnify the Trustee
under the Indenture shall survive. With respect to the foregoing clause (ii),
only The ServiceMaster Company's obligations to execute and deliver Debt
Securities of such series for authentication, to set the terms of the Debt
Securities of such series, to maintain an office or agency in respect of the
Debt Securities of such series, to have moneys held for payment in trust, to
register the transfer or exchange of Debt Securities of such series, to
deliver Debt Securities of such series for replacement or to be canceled, to
compensate and indemnify the Trustee and to appoint a successor trustee, and
its right to recover excess money held by the Trustee shall survive until such
Debt Securities are no longer outstanding. Thereafter, only The ServiceMaster
Company's obligations to compensate and indemnify the Trustee, and its right
to recover excess money held by the Trustee shall survive. (Section 9.01)
The Indenture provides that The ServiceMaster Company (i) will be deemed to
have paid and will be discharged from any and all obligations in respect of
the Debt Securities of any series, and the provisions of the Indenture will,
except as noted below, no longer be in effect with respect to the Debt
Securities of such series ("legal defeasance") and (ii) may omit to comply
with any term, provision or condition of the Indenture described above under
"--Certain Covenants" (or any other specific covenant relating to such series
provided for in a Board Resolution or supplemental indenture which may by its
terms be defeased pursuant to the Indenture), and such omission shall be
deemed not to be an Event of Default under clauses (c) or (f) of the first
paragraph of "--Events of Default" with respect to the outstanding Debt
Securities of a series ("covenant defeasance"); provided that the following
conditions shall have been satisfied: (A) The ServiceMaster Company has
irrevocably deposited in trust with the Trustee as trust funds solely for the
benefit of the Holders of the Debt Securities of such series, for payment of
the principal of and interest on the Debt Securities of such series, money or
U.S. Government Obligations or a combination thereof sufficient (unless such
funds consist solely of money, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee) without consideration of any reinvestment and after
payment of all federal, state and local taxes or other charges and assessments
in respect thereof payable by the Trustee, to pay and discharge the principal
of and accrued interest on the outstanding Debt Securities of such series to
maturity or earlier redemption (irrevocably provided for under arrangements
satisfactory to the Trustee), as the case may be; (B) such deposit will not
result in a breach or violation of, or constitute a default under, the
Indenture or any other material agreement or instrument to which The
ServiceMaster Company is a party or by which it is bound; (C) no Default with
respect to such Debt Securities of such series shall have occurred and be
continuing on the date of such deposit; (D) The ServiceMaster Company shall
have delivered to the Trustee an opinion of counsel that (1) the Holders of
the Debt Securities of such series will not recognize income, gain or loss for
federal income tax purposes as a result of The ServiceMaster Company's
exercise of its option under this provision of the Indenture and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit and defeasance had
not occurred and (2) the Holders of the Debt Securities of such series have a
valid security interest in the trust funds subject to no prior liens under the
Uniform Commercial Code; and (E) The ServiceMaster Company has delivered to
the Trustee an officers' certificate and an opinion of counsel, in each case
stating that all conditions precedent provided for in the Indenture relating
to the defeasance contemplated have been complied with. In the case of legal
defeasance under clause (i) above, the opinion of counsel referred to in
clause (D)(1) above may be replaced by a ruling directed to the Trustee
received from the Internal Revenue Service to the same effect. Subsequent to
legal defeasance under clause (i) above, The ServiceMaster Company's
obligations to execute and deliver Debt Securities of such series for
authentication, to set the terms of the Debt Securities of such series, to
maintain an office or agency in respect of the Debt Securities of such series,
to have moneys held for payment in trust, to register the transfer or exchange
of Debt Securities of such series, to deliver Debt Securities of such series
for replacement or to be canceled, to compensate and indemnify the Trustee and
to appoint a successor trustee, and its right to recover excess money held by
the Trustee shall survive until such Debt Securities are no longer
outstanding. After such Debt Securities are no longer outstanding, in the case
of legal defeasance under clause (i) above, only The ServiceMaster Company's
obligations to compensate and indemnify the Trustee and its right to recover
excess money held by the Trustee shall survive. (Sections 9.02 and 9.03)
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MODIFICATION OF THE INDENTURE
The Indenture provides that The ServiceMaster Company, the Parent
Partnership and the Trustee may amend or supplement the Indenture or the Debt
Securities of any series without notice to or the consent of any Holder: (1)
to cure any ambiguity, defect or inconsistency in the Indenture; provided that
such amendments or supplements shall not materially and adversely affect the
interests of the Holders; (2) to comply with Article 6 of the Indenture; (3)
to comply with any requirements of the Commission in connection with the
qualification of the Indenture under the Trust Indenture Act; (4) to evidence
and provide for the acceptance of appointments under the Indenture with
respect to the Debt Securities of any or all series by a successor Trustee;
(5) to establish the form or forms or terms of Debt Securities of any series
or of the coupons appertaining to such Debt Securities as permitted under the
Indenture or the Guarantees; (6) to provide for uncertificated or Unregistered
Securities and to make all appropriate changes for such purpose; and (7) to
make any change that does not materially and adversely affect the rights of
any Holder. (Section 10.01)
The Indenture also contains provisions whereby The ServiceMaster Company,
the Parent Partnership and the Trustee, subject to certain conditions, without
prior notice to any Holders, may amend the Indenture, the outstanding Debt
Securities of any series and the Guarantees with the written consent of the
Holders of a majority in principal amount of the Debt Securities then
outstanding of all series affected by such supplemental indenture (all such
series voting as one class), and the Holders of a majority in principal amount
of the outstanding Debt Securities of all series affected thereby (all such
series voting as one class) by written notice to the Trustee may waive future
compliance by The ServiceMaster Company with any provision of the Indenture or
the Debt Securities of such series. Notwithstanding the foregoing provisions,
without the consent of each Holder affected thereby, an amendment or waiver,
including a waiver pursuant to Section 7.04 of the Indenture, may not: (i)
extend the stated maturity of the principal of, or any sinking fund obligation
or any installment of interest on, such Holder's Security, or reduce the
principal amount thereof or the rate of interest thereon (including any amount
in respect of original issue discount), or any premium payable with respect
thereto, or adversely affect the rights of such Holder under any mandatory
redemption or repurchase provision or any right of redemption or repurchase at
the option of such Holder, or reduce the amount of the principal of an
Original Issue Discount Security that would be due and payable upon an
acceleration of the maturity thereof or the amount thereof provable in
bankruptcy, or change any place of payment where, or the currency in which,
any Security or any premium or the interest thereon is payable, or impair the
right to institute suit for the enforcement of any such payment on or after
the due date therefor; (ii) reduce the percentage in principal amount of
outstanding Debt Securities of the relevant series the consent of whose
Holders is required for any such supplemental indenture, for any waiver of
compliance with certain provisions of the Indenture of certain Defaults and
their consequences provided for in the Indenture; (iii) waive a Default in the
payment of principal of or interest on any Security of such Holder; or (iv)
modify any of the provisions of this section of the Indenture, except to
increase any such percentage or to provide that certain other provisions of
the Indenture cannot be modified or waived without the consent of the Holder
of each outstanding Security affected thereby. A supplemental indenture which
changes or eliminates any covenant or other provision of the Indenture which
has expressly been included solely for the benefit of one or more particular
series of Debt Securities, or which modifies the rights of Holders of Debt
Securities of such series with respect to such covenant or provision, shall be
deemed not to affect the rights under the Indenture of the Holders of Debt
Securities of any other series or of the coupons appertaining to such Debt
Securities. It shall not be necessary for the consent of any Holder under this
section of the Indenture to approve the particular form of any proposed
amendment, supplement or waiver, but it shall be sufficient if such consent
approves the substance thereof. After an amendment, supplement or waiver under
this section of the Indenture becomes effective, The ServiceMaster Company
shall give to the Holders affected thereby a notice briefly describing the
amendment, supplement or waiver. The Company will mail supplemental indentures
to Holders upon request. Any failure of The ServiceMaster Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture or waiver. (Section 10.02)
GUARANTEE
The Parent Partnership will irrevocably and unconditionally guarantee the
payment of all obligations of The ServiceMaster Company under the Debt
Securities. If The ServiceMaster Company defaults in the payment of
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the principal of, premium if any, or interest on such Debt Securities when and
as the same shall become due, whether upon maturity, acceleration, call for
redemption or otherwise, without the necessity of action by the Trustee or any
Holder of such Debt Securities, the Parent Partnership shall be required
promptly to make such payment. As explained in more detail under "The
Reincorporating Merger and The Partnership Liquidations" below, upon
consummation of the Partnership Liquidations, the Successor Parent Corporation
will assume the obligations of both The ServiceMaster Company and the Parent
Partnership on the Debt Securities and both The ServiceMaster Company and the
Parent Partnership will be merged or liquidated into the Successor Parent
Corporation.
The Parent Partnership conducts all of its business through The
ServiceMaster Company and Subsidiaries of The ServiceMaster Company and does
not own any material assets other than all of the limited partnership interest
of The ServiceMaster Company. The Parent Partnership's obligations under the
Guarantee are as a secondary obligor. The Parent Partnership is presently
dependent on the receipt of dividends or other payments from The ServiceMaster
Company to make payments on the Guarantee of the Debt Securities.
CONCERNING THE TRUSTEE
Harris Trust and Savings Bank is the Trustee under the Indenture. The
Trustee performs services for ServiceMaster in the ordinary course of
business.
THE REINCORPORATING MERGER AND THE PARTNERSHIP LIQUIDATIONS
The Parent Partnership was organized as a limited partnership at the end of
1986 to enable the parent entity in the ServiceMaster enterprise to function
free of the federal corporate income tax. In 1987, the Internal Revenue Code
was amended to reimpose federal corporate income tax on publicly traded
partnerships like ServiceMaster beginning January 1, 1998.
On December 11, 1991, the Parent Partnership issued a proxy
statement/prospectus (the "Reincorporation Proxy Statement") in which the
board of directors of ServiceMaster's Managing General Partner recommended
that the holders of the outstanding partnership shares approve, among other
things, a merger (the "Reincorporating Merger") having the characteristics
described in the Reincorporation Proxy Statement. The limited partners
approved and authorized the Reincorporating Merger at a special meeting held
on January 13, 1992.
The purpose of the Reincorporating Merger is to substitute a corporation for
the Parent Partnership as the ultimate parent in the ServiceMaster enterprise
before the Parent Partnership becomes subject to federal corporate income tax.
The Reincorporating Merger is scheduled to be consummated on or before
December 31, 1997. ServiceMaster Incorporated of Delaware has been organized
to serve as the ultimate parent in the ServiceMaster enterprise after the
Reincorporating Merger and is herein called the "Successor Parent
Corporation." The Successor Parent Corporation is at present a wholly owned
subsidiary of the Parent Partnership.
The Reincorporating Merger will be accomplished by merging a subsidiary of
the Successor Parent Corporation (which subsidiary was organized to serve as
the vehicle for the merger) into the Parent Partnership. Upon consummation of
the Reincorporating Merger: (i) each share of limited partnership interest
issued prior to that time by the Parent Partnership will be converted into one
share of common stock issued by the Successor Parent Corporation and (ii) each
share of common stock issued by the disappearing subsidiary corporation will
be converted into a limited partnership interest in the Parent Partnership.
Upon consummation of the Reincorporating Merger, the Parent Partnership will
be a wholly owned subsidiary of the Successor Parent Corporation.
ServiceMaster expects that after the Reincorporating Merger, the Parent
Partnership and The ServiceMaster Company will be merged or liquidated into
the Successor Parent Corporation (such transactions are called the
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"Partnership Liquidations" in this Prospectus). Upon consummation of the
Partnership Liquidations, the Successor Parent Corporation will become the
successor to both the Parent Partnership and The ServiceMaster Company and
will own all businesses previously owned (directly or indirectly) by the
Parent Partnership and The ServiceMaster Company. ServiceMaster intends to
change the name of the Successor Parent Corporation to "The ServiceMaster
Company" not later than the time the Partnership Liquidations are completed.
Upon consummation of the Partnership Liquidations, the Successor Parent
Corporation will assume all obligations of The ServiceMaster Company Limited
Partnership and the Parent Partnership on the Debt Securities and will become
the primary obligor on the Debt Securities. The term "Reincorporation" is used
in this Prospectus to refer to the Reincorporating Merger and the Partnership
Liquidations and related actions.
The Board of Directors of the Successor Parent Corporation immediately after
the Reincorporation will be comprised of the same individuals who served as
members of the Board of Directors of the Managing General Partner of the
Parent Partnership immediately prior to the Reincorporation. Each of the terms
"Board" and "Board of Directors" is used in this Prospectus to mean (i) the
Board of Directors of ServiceMaster Management Corporation (i.e.,
ServiceMaster's Managing General Partner) when it refers to any time prior to
the consummation of the Reincorporating Merger and (ii) the Board of Directors
of the Successor Parent Corporation when it refers to any time after
consummation of the Reincorporation.
Each individual who held a management or other employment position with the
Parent Partnership or The ServiceMaster Company immediately prior to the
Reincorporation will hold the same position with the Successor Parent
Corporation immediately after the Reincorporation. No payment or equity
issuance will be made to the ServiceMaster Management Corporation in its
capacity as Managing General Partner of either the Parent Partnership or The
ServiceMaster Company in connection with Reincorporation except for the pay
out of any income allocated its capital account prior to Reincorporation.
The Board of Directors has the right to elect not to consummate the
Reincorporating Merger.
After Reincorporation, ServiceMaster's operations will become subject to
federal income tax. ServiceMaster's management currently estimates that the
effective tax rate reflected in ServiceMaster's income statement after
Reincorporation will be approximately 40 percent. Pro forma earnings per share
would have been $0.69 in 1996 (contrasted with $1.13 reported by
ServiceMaster), $0.59 in 1995 (contrasted with $0.96 reported by
ServiceMaster), and $0.49 in 1994 (contrasted with $0.80 reported by
ServiceMaster) if the Reincorporation had occurred at the beginning of each of
those periods. These estimates are necessarily subject to change based on
changes in circumstances, statutory tax rates, and other relevant factors.
PLAN OF DISTRIBUTION
ServiceMaster may sell the Debt Securities in or outside the United States
through underwriters or dealers, directly to one or more purchasers, or
through agents. The Prospectus Supplement with respect to the Debt Securities
will set forth the terms of the offering of the Debt Securities, including the
name or names of any underwriters, dealers or agents, the purchase price of
the Debt Securities and the proceeds to ServiceMaster from such sale, any
delayed delivery arrangements, any underwriting discounts and other items
constituting underwriters' compensation, the initial public offering price,
any discounts or concessions allowed or re-allowed or paid to dealers, and any
securities exchanges on which the Debt Securities may be listed.
If underwriters are used in the sale, the Debt Securities will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Debt Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Debt Securities will be named
in the Prospectus Supplement relating to such offering,
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and, if an underwriting syndicate is used, the managing underwriter or
underwriters will be set forth on the cover of such Prospectus Supplement.
Unless otherwise set forth in the Prospectus Supplement relating thereto, the
obligations of the underwriters or agents to purchase the Debt Securities will
be subject to conditions precedent, and the underwriters will be obligated to
purchase all the Debt Securities if any are purchased. The initial public
offering price and any discounts or concessions allowed or re-allowed or paid
to dealers may be changed from time to time.
If dealers are used in the sale of Debt Securities with respect to which
this Prospectus is delivered, ServiceMaster will sell such Debt Securities to
the dealers as principals. The dealers may then resell such Debt Securities to
the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in the Prospectus Supplement relating thereto.
Debt Securities may be sold directly by ServiceMaster or through agents
designated by ServiceMaster from time to time at fixed prices, which may be
changed, or at varying prices determined at the time of sale. Any agent
involved in the offer or sale of the Debt Securities with respect to which
this Prospectus is delivered will be named, and any commissions payable by the
Company to such agent will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its
appointment.
Debt Securities may be sold directly by ServiceMaster to institutional
investors or others, who may be deemed to be underwriters within the meaning
of the Securities Act with respect to any resale thereof. The terms of any
such sales will be described in the Applicable Prospectus Supplement.
In connection with the sale of the Debt Securities, underwriters or agents
may receive compensation from ServiceMaster or from purchasers of Offered
Securities for whom they may act as agents in the form of discounts,
concessions or commissions. Underwriters, agents and dealers participating in
the distribution of the Debt Securities may be deemed to be underwriters, and
any discounts or commissions received by them from The ServiceMaster Company
and any profit on the resale of the Debt Securities by them may be deemed to
be underwriting discounts or commissions under the Securities Act.
If so indicated in the Prospectus Supplement, ServiceMaster will authorize
agents, underwriters or dealers to solicit offers from certain types of
institutions to purchase Debt Securities from ServiceMaster at the public
offering price set forth in the Prospectus Supplement pursuant to delayed
delivery contracts providing for payment and delivery on a specified date in
the future. Such contracts will be subject only to those conditions set forth
in the Prospectus Supplement, and the Prospectus Supplement will set forth the
commission payable for solicitation of such contracts.
Agents, dealers and underwriters may be entitled under agreements entered
into with ServiceMaster to indemnification by ServiceMaster against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments that such agents, dealers, or
underwriters may be required to make with respect thereto. Agents, dealers,
and underwriters may be customers of, engage in transactions with or perform
services for ServiceMaster and its subsidiaries in the ordinary course of
business.
Some or all of the Debt Securities may be new issues of securities with no
established trading market. Any underwriters to whom Debt Securities are sold
by ServiceMaster for public offering and sale may make a market in such Debt
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of or the trading markets for any Debt Securities.
Certain of the underwriters, dealers or agents and their affiliates may be
customers of, engage in transactions with and perform services for
ServiceMaster and its subsidiaries in the ordinary course of business.
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VALIDITY OF DEBT SECURITIES
The validity of the Debt Securities will be passed upon for the
ServiceMaster Companies by Vernon T. Squires, Esq., Senior Vice President and
General Counsel of ServiceMaster. As of July 22, 1997, Vernon T. Squires owned
255,887 shares and options to acquire 54,000 shares of limited partnership
interests of the Parent Partnership.
EXPERTS
The financial statements and schedule of the Parent Partnership incorporated
by reference in this Prospectus and elsewhere in the registration statement
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their reports with respect thereto, and are incorporated by
reference in reliance upon the authority of said firm as experts in giving
said reports.
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