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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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BAREFOOT INC.
(NAME OF SUBJECT COMPANY)
BAREFOOT INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, $.01 PAR VALUE, TOGETHER WITH THE ASSOCIATED
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK PURCHASE RIGHTS
(Title of Class of Securities)
067512103
(CUSIP Number of Class of Securities)
MICHAEL R. GOODRICH
CHIEF FINANCIAL OFFICER, PRINCIPAL ACCOUNTING OFFICER
BAREFOOT INC.
450 WEST WILSON BRIDGE ROAD
WORTHINGTON, OHIO 43085
(614) 846-1800
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
ROGER E. LAUTZENHISER, ESQ.
VORYS, SATER, SEYMOUR AND PEASE
52 EAST GAY STREET
COLUMBUS, OHIO 43215
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is Barefoot Inc., a Delaware corporation (the
"Company"), and the address of the principal executive offices of the Company
is 450 West Wilson Bridge Road, Columbus, Ohio 43085. The title of the class
of equity securities to which this Solicitation/Recommendation Statement on
Schedule l4D-9 (the "Schedule l4D-9") relates is the Company's common stock,
par value $.01 per share (the "Shares"), together with the associated Series A
Junior Participating Preferred Stock Purchase Rights (the "Stock Purchase
Rights").
ITEM 2. TENDER OFFER OF THE BIDDER.
The Offer. This statement relates to a tender offer (the "Offer") by
ServiceMaster Limited Partnership ("ServiceMaster"), a Delaware limited
partnership, disclosed in a Tender Offer Statement on Schedule 14D-1, dated
December 17, 1997 (the "Schedule 14D-1"). The Offer is being made by
ServiceMaster pursuant to the terms of an Acquisition Agreement (the
"Acquisition Agreement"), dated December 5, 1996, by and among the Company,
ServiceMaster and ServiceMaster Acquisition Corporation (the "Merger Sub"), a
Delaware corporation and a wholly-owned subsidiary of ServiceMaster, and a
Plan and Agreement of Merger (the "Merger Agreement"), dated December 5, 1996,
by and among the Company, ServiceMaster and Merger Sub. Pursuant to the terms
of the Offer, ServiceMaster has agreed to purchase each of the outstanding
Shares, together with the associated Stock Purchase Rights, not already owned
by ServiceMaster, for, at the election of the holder, either: (i) $16.00 in
cash, without any interest thereon (the "Cash Consideration"); or (ii) a
fraction (the "Conversion Fraction") of a validly issued, fully paid and
nonassessable share ("ServiceMaster Share") of limited partnership interest in
ServiceMaster, determined by dividing $16.00 by the greater of (x) $23.00 or
(y) the average (without rounding) of the closing price (the "Average
ServiceMaster Share Price") of ServiceMaster Shares on the New York Stock
Exchange ("NYSE") as reported on the NYSE Composite Tape for the 15
consecutive NYSE trading days ending on the fifth NYSE trading day immediately
preceding the Expiration Date (as hereinafter defined) and rounding the result
to the nearest one one-hundred thousandth of a share (the "Share
Consideration" and collectively with the Cash Consideration, the "Offer
Consideration"). Pursuant to the Offer, the Company's stockholders may elect
to receive all cash or all ServiceMaster Shares or any combination thereof.
There is no limit on the percentage of the Offer Consideration which may be
received as cash or as ServiceMaster Shares. The Expiration Date is defined in
the Acquisition Agreement as 12:00 midnight, New York City time, on February
21, 1997, unless extended.
The Offer is conditioned on a minimum number (the "Minimum Number") of the
outstanding Shares being tendered for either cash or ServiceMaster Shares
pursuant to the Offer such that, when added to all Shares owned by
ServiceMaster prior to consummation of the Offer, ServiceMaster will own at
least 75% of the Shares which shall be outstanding at the time ServiceMaster
shall acquire Shares pursuant to the Offer (the "Closing Time"). The Offer is
also subject to certain other conditions, any or all of which may be waived in
the sole discretion of ServiceMaster. ServiceMaster has reported that, as of
January 17, 1997, it beneficially owned 289,000 Shares or approximately 2.0%
of the outstanding Shares.
Patrick J. Norton (Barefoot's Chief Executive Officer) has informed the
Company that it is his present intention to tender all of his Shares (which
represent approximately 9.5% of all outstanding Shares) and to elect the Share
Consideration for substantially all of such tendered Shares. Mr. Norton's
action is not intended to constitute advice or a recommendation as to whether
or not any stockholder should tender or how any other Company stockholder
should choose between the Cash Consideration and Share Consideration.
THE COMPANY MAKES NO RECOMMENDATION AS TO WHETHER STOCKHOLDERS SHOULD ELECT
TO RECEIVE THE CASH CONSIDERATION OR THE SHARE CONSIDERATION PURSUANT TO THE
OFFER. EACH COMPANY STOCKHOLDER MUST MAKE SUCH STOCKHOLDER'S OWN DECISION WITH
RESPECT TO SUCH ELECTION.
The Offer is being made on the terms and subject to the conditions set forth
in the Offering Circular/Prospectus of ServiceMaster (the "Offering
Circular/Prospectus") and the related Letter of Transmittal/Form of Election,
copies of which are included with this mailing. The Company's stockholders are
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encouraged to review the information set forth in the sections of the Offering
Circular/Prospectus entitled "SUMMARY--The Offer" and "THE OFFER", which are
incorporated herein by reference.
The Schedule l4D-l states that the principal executive offices of
ServiceMaster are located at One ServiceMaster Way, Downers Grove, Illinois
60515.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, is set forth in Item 1 above. All information contained in this
Statement or incorporated herein by reference concerning ServiceMaster, Merger
Sub or their affiliates, or actions or events with respect to any of them, was
provided by ServiceMaster, and the Company takes no responsibility for such
information.
(b) Each material contract, agreement, arrangement or understanding and any
actual or potential conflict of interest between the Company or its affiliates
and (i) the Company, its executive officers, directors or affiliates or (ii)
ServiceMaster, its executive officers, directors or affiliates, is set forth
below.
THE ACQUISITION AGREEMENT AND THE MERGER AGREEMENT
The following summarizes certain portions of the Acquisition Agreement and
the Merger Agreement, which relate to arrangements among the Company,
ServiceMaster and the Company's executive officers and directors. The
summaries of the Acquisition Agreement and the Merger Agreement provided below
are qualified in their entirety by reference to the Acquisition Agreement and
the Merger Agreement. Copies of the Acquisition Agreement and the Merger
Agreement are included with this mailing as Annex I and Annex II,
respectively, to the Offering Circular/Prospectus, and are incorporated herein
by reference as Exhibits 1 and 2, respectively. The Offering
Circular/Prospectus was filed with the Securities and Exchange Commission (the
"Commission") by ServiceMaster on January 17, 1997 as Exhibit (a)(1) to the
Schedule 14D-1. In addition, the summaries of the Acquisition Agreement and
the Merger Agreement contained in the Offering Circular/Prospectus under the
section entitled "DESCRIPTION OF THE ACQUISITION AGREEMENT AND MERGER
AGREEMENT", are incorporated herein by reference and should be read in their
entirety for a more complete description of the terms and provisions of the
Acquisition Agreement and the Merger Agreement.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings ascribed thereto in the Acquisition Agreement.
Treatment of Stock Options. The Acquisition Agreement provides that at the
Closing, the Company will pay to each Company employee or director who holds
any option to acquire Shares (a "Barefoot Stock Option"), an amount of cash
equal to the number of Shares subject to such Barefoot Stock Option at the
Closing (whether or not then vested) times the remainder derived by
subtracting the exercise price per share from $16. The Company has agreed to
obtain an agreement in a form reasonably satisfactory to ServiceMaster from
each holder of each Barefoot Stock Option to accept such payment in exchange
for a surrender of all rights of such holder under or by reason of such
Barefoot Stock Option, including but not limited to, the termination of the
holder's rights to purchase any Shares with such Barefoot Stock Option after
the Closing. The obtaining of such an agreement from each holder of a Barefoot
Stock Option is a condition to ServiceMaster's obligation to consummate the
Closing.
Severance and Stay Protection Plan. The Acquisition Agreement provides that,
at or before the Closing Time, the Company shall adopt a severance and stay
protection plan which, from and after the Closing Time, ServiceMaster and
Merger Sub shall honor. The substantive terms of the Severance and Stay
Protection Plan are as follows:
A. Severance: One week of compensation for each year of service with the
Company, provided that the employee leaves in good standing.
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B. Stay pay: additional compensation of four, six or eight weeks, as
applicable, to employees who are scheduled to remain for extended
periods to assist with the transaction. The specific amount of stay pay
for an employee shall be determined by the employee's position. These
benefits may be modified based on individual circumstances and/or
critical value.
C. Vacation: vested vacation shall be paid in addition to items A and B,
above.
The Acquisition Agreement also provides that ServiceMaster shall not
communicate with any employees of the Company or any subsidiary of the Company
about future employment relationships or terms prior to the Closing without the
prior consent of the Company's Chief Executive Officer or Chief Financial
Officer.
No Solicitation. The Acquisition Agreement provides that the Company (and its
subsidiaries and affiliates) shall not, and the Company (and its subsidiaries
and affiliates) will use their best efforts to ensure that their respective
officers, directors, employees, investment bankers, attorneys, accountants and
other agents do not, directly or indirectly: (i) initiate, solicit or
encourage, or (except to the extent permitted by clause (ii) below) take any
action to facilitate the making of, any offer or proposal which constitutes or
is reasonably likely to lead to any Takeover Proposal (as hereinafter defined)
of the Company or any subsidiary or an inquiry with respect thereto, or, (ii)
in the event of an unsolicited bona fide Takeover Proposal for the Company or
any subsidiary of the Company, engage in negotiations or discussions with, or
provide any information or data to, any corporation, partnership, person or
other entity or group (other than ServiceMaster or any of its affiliates or
representatives) ("Person") relating to any Takeover Proposal; except in the
case of clause (ii) above, to the extent that the Company's Board of Directors
reasonably concludes, after having received the advice of outside legal counsel
to the Company and the advice of the Company's financial advisor, and after
having had the opportunity to discuss the Takeover Proposal with such person
making the Takeover Proposal (which discussions shall not be deemed to be a
violation of the Acquisition Agreement) that such Takeover Proposal is
reasonably likely to result in consideration per Share in excess of the Offer
Consideration and the failure to engage in such negotiations or discussions or
provide such information is reasonably likely to result in a breach of the
Board of Directors' fiduciary duties under applicable law; provided, however,
that notwithstanding the foregoing, the Company's Board of Directors may take,
and disclose to the Company's stockholders a position contemplated by Rules for
14d-9 and 14e-2 promulgated under the Securities Exchange Act of 1934 (the
"Exchange Act") with respect to any tender offer for shares of capital stock of
the Company. Prior to furnishing any information to any such Person making a
Takeover Proposal, the Company shall have obtained a confidentiality agreement
from such Person containing confidentiality provisions substantially similar to
the confidentiality provisions in the Confidentiality Agreement, dated November
11, 1996, between ServiceMaster and the Company. The Company shall notify
ServiceMaster of any such offers, proposals, inquiries or Takeover Proposals
(including, without limitation, the material terms and conditions thereof and
the identity of the Person making it), within 24 hours of the receipt thereof,
and shall provide ServiceMaster with a copy of any written Takeover Proposal or
amendments or supplements thereto, and shall thereafter inform ServiceMaster on
a reasonable basis of the status of any discussions or negotiations with such a
third party, and any material changes to the terms and conditions of such
Takeover Proposal, and shall promptly give ServiceMaster a copy of any
information delivered to such Person which has not previously been reviewed by
ServiceMaster.
As it is used in the Acquisition Agreement, the term "Takeover Proposal"
means any tender or exchange offer involving the capital stock of the Company,
any proposal for a merger, consolidation or other business combination
involving the Company, any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the business or
assets of, the Company or any subsidiary of the Company, any proposal or offer
with respect to any recapitalization or restructuring with respect to the
Company or any subsidiary of the Company or any proposal or offer with respect
to any other transaction similar to any of the foregoing with respect to the
Company or any subsidiary of the Company other than pursuant to the
transactions to be effected pursuant to the Acquisition Agreement.
The Company Franchises. The Acquisition Agreement provides that as soon as
practicable after the Closing Time, ServiceMaster shall make every effort to
provide to each of the Company's franchisees the option to do any of the
following: (i) to sell such franchise to the Company on terms and conditions as
the franchisee and
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ServiceMaster may agree; (ii) to continue to operate its franchise in
accordance with existing agreements between the franchisee and the Company; or
(iii) to terminate the existing agreement between the franchisee and the
Company and to operate its business independently without use of the Company
trade names, service marks or similar rights.
Officers' and Directors' Insurance; Indemnification. The Acquisition
Agreement provides that, at all times after the Closing Time, ServiceMaster
will indemnify (and advance expenses to) each person who is now, or has been
at any time prior to the date of the Acquisition Agreement, a director or
officer of the Company or of any of the Company's subsidiaries (individually
an "Indemnified Party" and collectively the "Indemnified Parties"), to the
same extent and in the same manner as is now provided in the respective
charters or by-laws of the Company and such subsidiaries or otherwise in
effect on the date of the Acquisition Agreement, with respect to any claim,
liability, loss, damage, cost or expense (whenever asserted or claimed)
("Indemnified Liability") based in whole or in part on, or arising in whole or
in part out of, any matter existing or occurring at or prior to the Closing
Time. ServiceMaster shall, or shall cause the Company to, maintain in effect
for not less than six (6) years after the Closing the current policies of
directors' and officers' liability insurance maintained by the Company and its
subsidiaries on the date of the Acquisition Agreement with respect to matters
existing or occurring at or prior to the Closing Time (provided that
ServiceMaster may substitute therefor policies having at least the same
coverage and containing terms and conditions which are no less advantageous to
the persons currently covered by such policies and with carriers reasonably
comparable to the Company's existing carriers in terms of creditworthiness).
The insurance required by the preceding sentence shall be in an amount at any
particular time equal to the greater of (i) the amount of coverage provided by
the Company's insurance on the date of the Acquisition Agreement or (ii) the
amount of coverage provided to ServiceMaster's own directors at the particular
time. Promptly after receipt by an Indemnified Party of notice of the
assertion (an "Assertion") of any claim or the commencement of any action
against him or her in respect to which indemnity or reimbursement may be
sought against ServiceMaster, the Company, the Surviving Corporation or a
subsidiary of the Company or the Surviving Corporation ("Indemnitors")
hereunder, such Indemnified Party shall notify any Indemnitor in writing of
the Assertion, but the failure to so notify any Indemnitor shall not relieve
any Indemnitor of any liability it may have to such Indemnified Party
hereunder except where such failure shall have materially prejudiced
Indemnitor in defending against such Assertion. No Indemnified Party shall
settle any Assertion without the prior written consent of ServiceMaster. The
foregoing provisions are intended for the benefit of, and are enforceable by,
the respective Indemnified Parties.
Existing Stockholders Agreements and Registration Rights Agreements. The
Acquisition Agreement provides that the Company will use its best efforts to
terminate or cause to be terminated, prior to the Closing Time, any
stockholders agreements or registration rights agreements with or among any of
its stockholders.
Termination. The Acquisition Agreement provides that the Acquisition
Agreement may be terminated and the Merger abandoned at any time prior to the
Closing Time:
(i) by the mutual consent of the Board of Directors of ServiceMaster and
the Board of Directors of the Company;
(ii) by either of the Board of Directors of the Company or the Board of
Directors of ServiceMaster; (a) if the Offer shall not have been commenced
by February 15, 1997; provided, however, that the right to terminate the
Acquisition Agreement under this clause (ii) (a) shall not be available to
any party whose failure to fulfill any obligation under the Acquisition
Agreement has been the primary and but-for cause of the failure of the
Offer to have been commenced by February 15, 1997; or (b) if any
Governmental Entity shall have issued an order, decree or ruling or taken
any other action (which order, decree, ruling or other action the parties
hereto shall use their diligent efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the Offer or the Merger or
any material aspect of the Offer or the Merger and such order, decree,
ruling or other action shall have become final and non-appealable;
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(iii) by the Board of Directors of the Company:
(a) if the Board of Directors of the Company shall have (I)
withdrawn, or modified or changed in a manner adverse to ServiceMaster
its approval or recommendation of the Acquisition Agreement, the Offer
or the Merger as a result of a Takeover Proposal (other than the Offer
or the Merger), in order to approve a Takeover Proposal (other than the
Offer or the Merger), or to permit the Company to execute a definitive
agreement relating to a Takeover Proposal, and (II) determined, after
having received the advice of outside legal counsel to the Company and
the advice of the Company's financial advisor, that such Takeover
Proposal is for consideration per Share in excess of the Offer
Consideration and the failure to take such action as set forth in the
preceding clause (II) would result in a breach of the Board of
Directors' fiduciary duties under applicable law; provided, however,
that Barefoot shall have given ServiceMaster forty-eight (48) hours
advance notice of any termination pursuant to this clause (a) and that
the Company shall have paid ServiceMaster the fees and expenses
required by Section 7.1(b) of the Acquisition Agreement;
(b) if ServiceMaster or Merger Sub breaches or fails in any material
respect to perform or comply with any of its material covenants and
agreements contained in the Acquisition Agreement; provided, however,
that if any such breach is curable by the breaching party through the
exercise of the breaching party's diligent efforts and for so long as
the breaching party shall be so using diligent efforts to cure such
breach, the Company may not terminate the Acquisition Agreement
pursuant to this clause (iii)(b); or
(c) if ServiceMaster breaches any of its representations or
warranties in the Acquisition Agreement and such breach (I) is
reasonably likely to have a material adverse effect upon ServiceMaster
and its subsidiaries taken as a whole and (II) has not been
incorporated into this Offering Circular/Prospectus.
(iv) by the Board of Directors of ServiceMaster;
(a) if the Company (I) breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements
contained in the Acquisition Agreement or (II) breaches its
representations and warranties in any material respect and such breach
would have or would be reasonably likely to have a material adverse
effect on the Company and its subsidiaries or create a situation in
which any of the conditions set forth in Annex 1 to the Acquisition
Agreement would not reasonably be expected to be satisfied prior to
Closing; provided, however, that if any such breach is curable by the
Company through the exercise of the Company's diligent efforts and for
so long as the Company shall be so using diligent efforts to cure such
breach, ServiceMaster may not terminate the Acquisition Agreement
pursuant to this clause (iv) (a); or
(b) if the Board of Directors of the Company shall have withdrawn, or
modified or changed in a manner adverse to ServiceMaster its approval
or recommendation of the Acquisition Agreement, the Offer or the Merger
or shall have recommended a Takeover Proposal or other business
combination, or the Company shall have entered into an agreement in
principle (or similar agreement) or definitive agreement providing for
a Takeover Proposal or other business combination with a person or
entity other than ServiceMaster, Merger Sub or their subsidiaries (or
the Board of Directors of the Company resolves to do any of the
foregoing by formal action); or
(c) by ServiceMaster if the Offer shall have expired or been
terminated without any Shares being purchased thereunder as a result of
the occurrence of any event that would result in the failure to satisfy
any of the conditions set forth in Annex 1 to the Acquisition
Agreement; or
(d) as provided in Annex 3 to the Acquisition Agreement.
If the Acquisition Agreement is validly terminated by the Company or
ServiceMaster as set forth above, the Acquisition Agreement and the Merger
Agreement will forthwith become null and void and there will be no liability
or obligation on the part of either the Company, ServiceMaster or Merger Sub
(or any of their respective
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representatives or affiliates) in respect of the Acquisition Agreement or the
Merger Agreement, except that the provisions of this paragraph and Section 7.1
of the Acquisition Agreement which, among other things, provides for a
termination fee, shall continue to apply after such termination. Without
limiting by implication the generality of the preceding sentence,
ServiceMaster shall not be obligated to continue the Offer after any
termination of the Acquisition Agreement. No termination of the Acquisition
Agreement or the Merger Agreement shall impair or terminate the rights or
obligations of ServiceMaster or the Company under the Confidentiality
Agreement (as hereinafter defined) to which they are parties.
Termination Fee. Section 7.1 of the Acquisition Agreement provides that in
the event the Board of Directors of the Company shall terminate the
Acquisition Agreement pursuant to clause (iii)(a) set forth immediately above
under the section entitled "Termination", or the Board of Directors of
ServiceMaster shall terminate the Acquisition Agreement pursuant to clause
(iv)(b) set forth immediately above under the section entitled "Termination",
then Barefoot shall pay $9,300,000 in cash to ServiceMaster.
Section 7.1 of the Acquisition Agreement also provides that in the event
ServiceMaster shall not consummate the Offer and shall be entitled to take
such action because of the failure of any of the conditions specified in
clause (a), (b), (h), (k), or (l) in Annex 1 to the Acquisition Agreement or
because rights to purchase Shares representing more than 1% of the Shares
would remain outstanding after the Closing, then the Company shall pay
$7,000,000 in cash to ServiceMaster.
Payment of the termination fee would become due on the date (the "due date")
upon which the Company received written request from ServiceMaster for such
payment after the occurrence of the event entitling ServiceMaster to the fee.
If the Company should for any reason fail to make such termination payment on
its due date, then the Company would be obligated to pay ServiceMaster on
demand interest at 300 basis points in excess of the prime rate (as reported
in the Wall Street Journal) on the amount remaining unpaid from that due date
until such payment is received by ServiceMaster for all attorney's fees and
other expenses which ServiceMaster reasonably incurred to enforce its rights
to such payment.
The Merger. To complete its acquisition of the Company, ServiceMaster has
agreed to effect as promptly as possible after consummation of the Offer, a
cash-out merger (the "Merger" and collectively with the Offer, the
"Transaction") of Merger Sub with and into the Company for $16.00 in cash per
Share without interest thereon (the "Merger Consideration") and upon the terms
and subject to the conditions set forth in the Merger Agreement.
AMENDMENT TO THE RIGHTS AGREEMENT
On December 5, 1996, the Company amended its Rights Agreement, dated as of
April 11, 1995 and as amended on October 10, 1995 (the "Rights Agreement"), to
provide that neither ServiceMaster nor any of its affiliates or associates
will be deemed to be the "Beneficial Owner" of, or to "beneficially own," any
securities of the Company which such person may, directly or indirectly,
acquire or have the right to vote or dispose of, or may be deemed to have the
right to acquire, to vote or dispose of, as a result of any of the
transactions contemplated by the Acquisition Agreement and the Merger
Agreement, including without limitation securities acquired as a result of the
Offer and the Merger. The purpose of the amendment to the Rights Agreement was
to prevent the Stock Purchase Rights under the Rights Agreement from becoming
exercisable as a result of such transactions.
The foregoing summary is qualified in its entirety by reference to the
Rights Agreement, the First Amendment to the Rights Agreement and the Second
Amendment to the Rights Agreement, copies of which are respectively filed as
Exhibits 3(a), 3(b) and 3(c) hereto and are incorporated herein by reference.
CONFIDENTIALITY AGREEMENT
The Company and ServiceMaster have entered into a Confidentiality Agreement
dated November 11, 1996 (the "Confidentiality Agreement"). The Confidentiality
Agreement provides that ServiceMaster will keep
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confidential any confidential information furnished to it by the Company. The
Confidentiality Agreement also contains customary "standstill" provisions
prohibiting ServiceMaster, for a period of two years, from purchasing Shares,
soliciting proxies or consents to vote any voting securities of the Company or
to make any public announcement with respect to, or submit a proposal for, or
offer of, any extraordinary transaction involving the Company or its
subsidiaries, without the prior approval of the Company.
The foregoing summary is qualified in its entirety by reference to the
Confidentiality Agreement, a copy of which is filed hereto as Exhibit 4, and
is incorporated herein by reference.
POTENTIAL OR ACTUAL CONFLICTS OF INTEREST
Branchises. The Company's business has expanded in part through the sale of
franchises to corporations whose operations are managed by the Company
pursuant to management agreements ("branchises"). Branchises are separate
legal and tax entities, which are generally majority-owned and controlled by
certain Company stockholders and members of management. At December 31, 1996,
the two existing branchises were Coast to Coast Lawn Care, Inc. ("Coast to
Coast") and Discovery Lawn Care, Inc. ("Discovery"), both of which remain in
existence. Set forth in the table below is the percentage of the issued and
outstanding shares of capital stock of each of the existing branchises held by
the named directors and executive officers of the Company:
<TABLE>
<CAPTION>
DIRECTORS AND EXECUTIVE OFFICERS COAST TO COAST DISCOVERY
-------------------------------- -------------- ---------
<S> <C> <C>
Donald R. Brattain............................... 30% 30%
Patrick J. Norton................................ 10% 10%
Michael R. Goodrich.............................. 3% 3%
Donald R. Nichols................................ -- 2%
</TABLE>
The Company has entered into a franchise agreement with each branchise
pursuant to which each has agreed, among other things, to pay an initial
franchise fee, together with an ongoing royalty equal to 10% of revenues.
Interest on overdue balances is charged at 1% per month. The initial franchise
fees payable to the Company from Coast to Coast and Discovery were $150,000
and $250,000, respectively. In payment of these franchise fees, the Company in
each case initially received cash in the amount of 20% of the franchise fee
and a promissory note (a "Franchise Fee Note") deferring payment of the
balance of the franchise fee over a period of four years. The notes were
repaid in full in February, 1996.
The Company has also entered into management agreements with each branchise
pursuant to which the Company manages the operations of the branchise. For
such services, the Company is reimbursed at the Company's cost for all direct
costs and expenses incurred (including payroll) and receives a management fee
of 2 1/2% of revenues. Amounts payable to the Company for management fees and
reimbursement of expenses are due monthly and interest charged on all amounts
not paid timely charged at the rate of 1% per month.
As part of the services provided under the management agreements, the
Company leases certain equipment and facilities and in turn subleases such
equipment and facilities to the branchises at cost. The net investment by the
Company in direct financing leases in connection with subleases to the
branchises was $177,000 at December 31, 1996.
The following table sets forth as to Coast to Coast and Discovery, (i) the
aggregate franchise fees, royalty and management fee income and interest
earned by the Company during the fiscal year ended December 31, 1996; (ii) the
aggregate outstanding principal amount of Franchise Fee Notes, and aggregate
royalty receivables, management fee receivables and expense reimbursement
receivables (together, the "branchise receivables")
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owed to the Company at December 31, 1996; and (iii) the maximum amount of
branchise receivables outstanding during the fiscal year ended December 31,
1996:
FISCAL YEAR ENDED
DECEMBER 31, 1996
<TABLE>
<S> <C>
Franchise fees................................................ None
Royalty and management fee income............................. $ 256,000
Interest income............................................... $ 140,000
AT
DECEMBER 31, 1996
Franchise fee notes........................................... None
Branchise receivables......................................... $1,258,000
MAXIMUM BALANCE OUTSTANDING
DURING THE FISCAL YEAR ENDED DECEMBER 31, 1996
Franchise fee notes........................................... $ 30,000
Branchise receivables......................................... $1,281,000
</TABLE>
Pursuant to written agreements, the Company has options to purchase all of
the remaining assets of Coast to Coast and Discovery. The purchase price under
each of these agreements is equal to the net asset value of the branchise
being purchased plus $125 per active customer of the branchise. The option to
acquire the assets of Coast to Coast expires December 15, 1997 and the option
to acquire the assets of Discovery expires December 15, 1998.
Stock Option Plan. The Acquisition Agreement provides that at the Closing,
the Company shall pay to each Company employee or director who holds any
Barefoot Stock Options, an amount of cash equal to the number of Shares
subject to such Barefoot Stock Option at the Closing (whether or not then
vested) times the remainder derived by subtracting the exercise price per
share from $16. The Company has agreed to obtain an agreement in a form
reasonably satisfactory to ServiceMaster from each holder of each Barefoot
Stock Option to accept such payment in exchange for a surrender of all rights
of such holder under or by reason of such Barefoot Stock Option, including but
not limited to, the termination of the holder's rights to purchase any Shares
with such Barefoot Stock Option after the Closing. The obtaining of such an
agreement from each holder of a Barefoot Stock Option is a condition to
ServiceMaster's obligation to consummate the Closing.
The following schedule sets forth the number of Shares of the Company
subject to issuance under each outstanding Barefoot Stock Option granted under
the Company's stock option program for the directors and executive officers of
the Company and the exercise price per share of each such Barefoot Stock
Option:
<TABLE>
<CAPTION>
$7 $12 $9.8125 $11.75 $10
DIRECTOR AND/OR EMPLOYEE 12/2/91 6/22/93 3/9/95 5/21/96 8/30/96
- ------------------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Donald R. Brattain...................... -- -- -- 5,000 --
William R. Griffin...................... -- -- -- 5,000 --
J. Martin Erbaugh....................... -- -- -- 5,000 --
Stanley C. Golder....................... -- -- -- 5,000 --
Patrick J. Norton....................... -- 36,000 30,000 -- 30,000
Michael R. Goodrich..................... 10,000 16,000 12,000 -- 12,000
Donald R. Nichols....................... 7,500 6,000 8,000 -- 12,000
Jeffrey K. Shufelt...................... 3,000 4,000 12,000 -- 12,000
------ ------ ------ ------ ------
Total............................... 20,500 62,000 62,000 20,000 66,000
====== ====== ====== ====== ======
</TABLE>
8
<PAGE>
Change in Control Agreements. The Company has entered into agreements (the
"Change in Control Agreements") with the following officers of the Company:
Patrick J. Norton, President and Chief Executive Officer, Michael R. Goodrich,
Chief Financial Officer, Donald R. Nichols, Vice President, Marketing, and
Jeffrey K. Shufelt, Vice President, Operations (the Change in Control
Agreement between the Company and Mr. Shufelt is an oral agreement with terms
that are substantially similar to the terms in the Change in Control
Agreements between the Company and Messrs. Goodrich and Nichols). Each Change
in Control Agreement provides for the payment of severance benefits if the
respective officer's employment is terminated within one year after a "Change
in Control" (other than by the Company for cause, by reason of such officer's
death or by such officer other than for Good Reason (as defined in the Change
in Control Agreement)). Such severance benefits include:
(i) payment of all accrued compensation;
(ii) payment of the full amount of non-vested benefits under any Company
tax qualified deferred compensation plan;
(iii) payment of a severance amount to Mr. Norton equal to 200% of annual
compensation (current annual base salary plus most recent bonus) and for
each of the other employees covered by the Change in Control Agreements, an
amount equal to 100% of annual compensation (current annual base salary
plus most recent annual bonus); and
(iv) full vesting of all outstanding stock options.
All of the foregoing amounts will be reduced to the extent necessary to
avoid federal excise taxes under Section 4999 of the Internal Revenue Code.
For purposes of these Change in Control Agreements, a "Change in Control"
includes (i) the acquisition by any person (or group of persons) of 40% or
more of the issued and outstanding Shares of the Company (other than such an
acquisition by an employee benefit plan maintained by the Company or such an
acquisition by the Company or any majority-owned subsidiary of the Company),
(ii) the change in the composition of a majority of the directors of the
Company during a two-year period or (iii) the occurrence of certain
extraordinary transactions, such as certain mergers or reorganizations, the
liquidation or dissolution of the Company or the Company's entering into an
agreement for the sale or transfer of all or substantially all the assets of
the Company.
The severance pay and benefits provided for under the Change in Control
Agreements are in lieu of any other severance or termination pay to which the
officers listed above who are parties to such Change in Control Agreements are
entitled under any of the Company's severance or termination plans (including
Mr. Patrick J. Norton's Management Agreement with the Company which is
described immediately below under the section entitled "Management
Agreements"), programs, practices or arrangements, unless such employees elect
to waive the benefits under the Change in Control Agreements in favor of the
benefits to which he is entitled under such other plans, programs, practices,
or arrangements.
The following description is qualified in its entirety by reference to the
Change in Control Agreements, copies of which are filed as Exhibits 5(a) and
5(b) hereto, and are incorporated herein by reference.
Management Agreements. The Company or Barefoot Grass Lawn Service, Inc.
entered into management agreements (the "Management Agreements") with Patrick
J. Norton, Michael R. Goodrich, Donald R. Nichols, Jeffrey K. Shufelt and
seven other employees in April, 1989, which agreements were amended in 1991.
The Management Agreements contain non-compete clauses and restrictions on the
disclosure of confidential business information.
Mr. Norton's Management Agreement (the "Senior Management Agreement"), as
amended September 9, 1991, provides that he is to be paid an annual base
salary and bonus in an amount determined by the Board in its sole discretion.
Mr. Norton's Senior Management Agreement also provides for severance pay for
one year at the
9
<PAGE>
higher of $150,000 or his actual base salary at that time if he is terminated
without cause. None of the other Management Agreements between the Company and
the employees listed in the preceding paragraph contain provisions providing
for any benefits to be awarded to such employees upon their severance from the
Company.
The foregoing descriptions are qualified in their entirety by reference to
the Management Agreements and the amendments to the Management Agreements,
copies of which are filed as Exhibits 6(a), 6(b), 7(a), 7(b) and 7(c) hereto,
and are incorporated herein by reference.
Limited Liability of Directors and Indemnification of Officers and
Directors. Article IX of the Company's Restated Certificate of Incorporation
provides that to the fullest extent permitted by the General Corporation Law
of the State of Delaware, as the same exists or may be amended (the "DGCL"),
the directors of the Company shall not be liable to the Company or its
stockholders for monetary damages for a breach of fiduciary duty as a
director.
The foregoing description is qualified in its entirety by reference to the
Company's Restated Certificate of Incorporation, a copy of which is filed as
Exhibit 8 hereto, and is incorporated herein by reference.
The Company's Restated By-laws (the "By-laws") provide that each person who
is or was made a party or is threatened to be made a party to or is involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he or she, or a person of whom he or
she is the legal representative, is or was a director or officer of the
Company or is or was serving at the request of the Company as a director,
officer, employee, fiduciary, or agent or another corporation or of a
partnership, joint venture, trust or other enterprise, shall be indemnified
and held harmless by the Company to the fullest extent which it is empowered
to do so by the DGCL; provided, however, except under certain limited
circumstances, the Company shall indemnify any such person seeking
indemnification in connection with a proceeding initiated by such person only
if such proceeding was authorized by the Board of Directors of the
Corporation. The right of indemnification provided in the By-laws is not
exclusive of, nor does it affect, any other rights to which any such person
may be entitled. Nothing contained in the applicable provisions of the By-laws
affects any other rights to indemnification to which any such person may be
entitled by contract or otherwise under law.
The foregoing description is qualified in its entirety by reference to the
By-laws, a copy of which is filed as Exhibit 9 hereto and is incorporated
herein by reference.
See "Officers' and Directors' Insurance; Indemnification", located at page 4
of this Schedule 14D-9, which discusses the obligations of ServiceMaster under
the Acquisition Agreement to provide the directors and officers of the Company
with Officers' and Directors' Insurance and to indemnify such officers and
directors in certain circumstances.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) History of the Negotiations. On October 9, 1996, the President of
ServiceMaster telephoned the President of the Company and requested an
opportunity to meet to discuss maximizing stockholder value of their
respective companies. The Presidents of the Company and ServiceMaster met on
October 16, 1996, at which time the President of ServiceMaster expressed
ServiceMaster's interest in combining the lawn care operations of the two
companies. The President of ServiceMaster presented a proposal in which the
stockholders of the Company would have the opportunity to obtain cash or
ServiceMaster Shares in exchange for their Shares, and that on a preliminary
basis and without conducting any due diligence, ServiceMaster believed that it
could pay a price for the outstanding Shares within a range of $13.00 to
$15.00 per share. The President of ServiceMaster also stated that the proposal
for the acquisition of the Company had not been approved by the ServiceMaster
Board and that it should be considered as a preliminary expression of interest
on the part of ServiceMaster. The closing price of the Shares on October 16,
1996, as reported on the NASDAQ National Market was $10.75 per share.
10
<PAGE>
The Company's Board met on October 23, 1996 to review the ServiceMaster
proposal. At that meeting, the directors discussed whether or not the Company
should continue its discussions with ServiceMaster with respect to a possible
acquisition by ServiceMaster. The directors also discussed with the Company's
investment bankers the reasonableness of the range of prices for the Company
proposed by ServiceMaster. The directors concluded that it was in the best
interest of the Company's stockholders to continue discussions with
representatives of ServiceMaster with regard to a possible business
combination. The directors concluded, however, that the Company should seek a
price above the proposed price range of $13.00 to $15.00 per Share.
ServiceMaster advised the Company that it could not submit a more formal
acquisition proposal unless it first conducted preliminary due diligence with
respect to the Company. On November 11, 1996, the Company and ServiceMaster
entered into the Confidentiality Agreement. The Company agreed that for a
period ending on December 12, 1996, it would not solicit any prospective
purchasers of all or substantially all of the assets of the Company or of
equity interests in the Company. ServiceMaster agreed that for a period of two
years from the date of the Confidentiality Agreement it would not, without the
prior consent of the Company, acquire, directly or indirectly, any additional
Shares or take certain other actions in regard to the Company. Following the
execution of the Confidentiality Agreement, ServiceMaster conducted a
preliminary due diligence investigation.
The President of the Company continued to discuss a possible acquisition with
representatives of ServiceMaster and members of the Company's Board following
the October 23, 1996 meeting of the Company's Board. On November 15, 1996, the
President of the Company and representatives of Robert W. Baird & Co.
Incorporated ("Baird") met with ServiceMaster financial executives in Downers
Grove, Illinois and presented arguments and analyses in support of their
position that the value per Share to ServiceMaster was in excess of $15.00.
They were advised that ServiceMaster considered $15.00 per Share to be the
maximum amount that ServiceMaster was willing to pay. Both the President of the
Company and the ServiceMaster representatives agreed that, if discussions were
to continue, the discussions would have to progress quickly because of the
seasonal nature of the lawn care business.
On November 22, 1996, ServiceMaster submitted to the Company a letter from
the President of ServiceMaster in which he stated that he was prepared to
recommend to the ServiceMaster Board an acquisition by ServiceMaster of all of
the outstanding Shares at a price of $15.00 per Share. The ServiceMaster
proposal stated that each Company stockholder would have the right to take cash
or ServiceMaster Shares in exchange for such stockholder's Shares. The
ServiceMaster proposal also addressed severance payments and employment
continuation bonuses to the Company's employees and issues relating to the
Company's franchisees.
The Company's Board held a telephonic meeting later that day to discuss the
proposal from ServiceMaster. The directors discussed the proposed price and
reviewed possible structures for accomplishing the acquisition. The directors
discussed the potential benefit to the Company stockholders of a transaction in
which such stockholders could elect to receive cash or ServiceMaster Shares.
The Company's Board concluded that it could not fully evaluate the
ServiceMaster proposal until it had an opportunity to review in detail the
terms of the proposed transaction. The Company's Board requested that the
President of the Company obtain from ServiceMaster a more detailed explanation
of the acquisition proposal or a draft of an acquisition agreement. The
Company's Board also instructed the President of the Company to continue to
seek an increase in the proposed purchase price.
On November 26, 1996, the Company received from ServiceMaster an initial
draft of an acquisition agreement. The President of the Company discussed the
principal terms of the proposed transaction as set forth in the draft of the
acquisition agreement with a majority of the members of the Company's Board.
The directors with whom the Company's President spoke recommended that the
President continue to seek an increase in the proposed purchase price and
concessions on other terms of the acquisition agreement.
On November 27, 1996, the President of the Company advised the President of
ServiceMaster by telephone that the Company's Board could not accept a price of
$15.00 per Share. The President of ServiceMaster responded that he was not
prepared to recommend to the ServiceMaster Board a price in excess of $15.00
per
11
<PAGE>
Share. However, the President of ServiceMaster suggested that he might be
willing to consider a price greater than $15.00 per Share if the Company were
willing to consider committing to pay a termination fee if ServiceMaster's
Offer failed to attract enough Shares to give ServiceMaster ownership of at
least 75.0% of the outstanding Shares. The President of the Company agreed to
take that idea under consideration and, on that basis, the two officers agreed
to keep in touch with each other over the forthcoming holiday. Later that day,
the President of the Company discussed the proposal with the members of the
Company's Board and received their oral authorization to proceed with further
discussions.
On November 28, 1996 (Thanksgiving Day), the President of ServiceMaster
called the President of the Company and indicated that he might be able to
support a price greater than $15.00 per Share if the Company agreed to pay a
termination fee in the event that the requisite 75.0% Share ownership were not
obtained as a result of the Offer and that he would state his position to the
President of the Company during the next day.
On November 29, 1996, the President of ServiceMaster advised the President of
the Company in a telephone call that he (the President of ServiceMaster) would
support an increase in the acquisition price from $15.00 per Share to $16.00
per Share if the key terms and conditions set forth in the initial draft of the
acquisition agreement were satisfactory to the Company and if such terms and
conditions were expanded to include the payment of a termination fee in the
event that the requisite 75.0% Share ownership by ServiceMaster was not
attained as a result of the Offer and provided, as to all of the foregoing,
that the transaction was approved by the ServiceMaster Board. Following this
telephone conversation, the President of the Company communicated with the
Company's directors and they authorized him to proceed with the negotiation of
the final terms of the acquisition agreement and to authorize Baird to consider
whether the proposed acquisition was fair to the stockholders of the Company
from a financial point of view.
From November 30, 1996 through December 4, 1996, the Company and
ServiceMaster conducted extensive negotiations of the terms and conditions of
the acquisition agreement. The principal points at issue were the duration of
the Offer, the circumstances in which the termination fee would be payable and
the amount of the termination fee. With respect to the tender offer,
ServiceMaster considered that, because of the seasonality of the lawn care
business and the resulting need to commence combined operations as soon as
possible, the Offer should remain open no longer than the time legally
required, i.e., 20 business days. The Company, on the other hand, insisted on a
longer period. On December 4, 1996, the two sides agreed on a period of 25
business days. With respect to the termination fee, ServiceMaster considered
that a fee of approximately $9,300,000 was appropriate in all circumstances in
which a fee was payable. The Company sought a lower fee. On December 4, 1996,
the two sides agreed on a two-tier termination fee: $9,300,000 if the Company
Board ceased to support ServiceMaster's Offer and $7,000,000 if, as a result of
the Offer, with the Company's support, ServiceMaster failed to attain the
requisite 75.0% Share ownership.
On December 3, 1996, the Company's directors met to review the status of the
negotiations between the Company and ServiceMaster and to review and discuss in
detail the terms and conditions of the proposed transactions contemplated by
the Acquisition Agreement. The directors also discussed with Baird the
procedures being taken to evaluate the fairness, from a financial point of
view, of the transactions provided for in the Acquisition Agreement.
In a telephonic meeting on December 4, 1996, the Company's Board unanimously
approved the terms and conditions of the Acquisition Agreement and the related
Merger Agreement. During such meeting, the directors reviewed in detail the
Acquisition Agreement and received the opinion of Baird to the effect that as
of such date the Cash Consideration and the Merger Consideration are fair, from
a financial point of view, to Barefoot stockholders. Baird has also rendered
its opinion to the Company's Board to the effect that, as of December 4, 1996,
the Share Consideration is fair, from a financial point of view, to the
Barefoot stockholders subject to the proviso that because the Barefoot
stockholders can elect to receive cash pursuant to the Offer at any time prior
to the expiration of the Offer, Baird expresses no opinion as to the fairness
of the Share Consideration if the Average ServiceMaster Share Price is less
than $23.00 (the full text of Baird's written opinion, which sets forth
12
<PAGE>
the assumptions made, matters considered and limitations on the review
undertaken by Baird, is filed herewith as Exhibit 13 and attached hereto as
Annex II, and is incorporated herein by reference). In a telephonic meeting on
December 4, 1996, the ServiceMaster Board, by a vote of 16-0 with one
abstention and one absence, and the Board of Directors of Merger Sub by a
unanimous written consent, approved the terms and provisions of the
Acquisition Agreement and the Merger Agreement on December 4, 1996.
After the foregoing actions by the Board of Directors of the Company, the
ServiceMaster Board and the Board of Directors of Merger Sub, the Company,
ServiceMaster and Merger Sub executed the Acquisition Agreement and the Merger
Agreement and publicly announced the transaction before the United States
trading markets opened on December 5, 1996.
Recommendation of the Company's Board. The Company's Board has determined
that the Cash Consideration available in the Offer and the Merger
Consideration are fair to the Company's stockholders and in their best
interests. The Company's Board has also determined that the Share
Consideration which the stockholders have the right to choose as an
alternative to receiving $16.00 per Share in cash is also fair to stockholders
and in their best interests, provided that the Company's Board expresses no
opinion as to the fairness of the Share Consideration if the Average
ServiceMaster Share Price turns out to be less than $23.00. Subject to this
provision, the Company's Board has concluded that the Offer and the Merger are
in the best interests of the Company and its stockholders and that such
transactions are fair to the stockholders of the Company, and it recommends
that the Company's stockholders accept the Offer, tender their Shares pursuant
to the Offer and, if required by applicable law, approve and adopt the Merger
Agreement.
(b) Reasons for the Transaction. The Company's Board determined to approve
the Acquisition Agreement, the Merger Agreement and the transactions
contemplated thereby for a number of reasons, including:
. (i) the results of operations of the Company, (ii) the businesses and
prospects of the Company, with emphasis upon the uncertainties inherent
in the seasonal nature of such businesses, and (iii) the dependence of
management's business strategy upon successfully completing acquisitions;
. the Company's Board's belief that the market price of the Shares would
not reach $16.00 in the reasonably foreseeable future;
. $16.00 per Share represents a 25.5% premium over the $12.75 per Share
closing price on the NASDAQ National Market on December 4, 1996, the last
full trading day prior to the public announcement of the execution of the
Acquisition Agreement, and a 48.8% premium over the $10.75 per Share
closing price on the NASDAQ National Market on October 23, 1996, the date
on which the Company's Board first met to consider the ServiceMaster
acquisition proposal;
. the Shares had not traded at a price higher than $13.00 during the
preceding twelve months;
. the Opinion of Baird regarding the fairness of the Consideration to be
provided in the Offer and the Merger from a financial point of view;
. the Acquisition Agreement is structured to accommodate certain
unsolicited third-party proposals to acquire the Company and specifically
permits the Company to provide information to and negotiate or discuss
such proposals if the Company's Board concludes, after having received
the advice of the Company's financial advisor and legal counsel, that
such proposals are reasonably likely to result in consideration per Share
in excess of the Consideration and that the failure of the Board to
provide such information or to engage in such negotiations or discussions
or to accept such proposals are reasonably likely to result in a breach
of the Company's Board's fiduciary duties under applicable law (although
the Company's ability to accept competing proposals is subject, in
certain cases, to the obligation to pay a termination fee of $9,300,000
to ServiceMaster);
. the time period between the public announcement of the Transaction and
the expiration of the Offer is expected to be in excess of 60 days, which
could allow for third party offers to be made;
13
<PAGE>
. the other terms and conditions of the Acquisition Agreement, including
specifically the right of the Company's stockholders to elect to receive
cash on a taxable basis in exchange for their Shares in the Offer or to
receive ServiceMaster Shares on a tax-free basis;
. the representation and warranty of ServiceMaster to the Company in the
Acquisition Agreement that ServiceMaster has sufficient financial
resources to enable it to make all cash payments for the Shares in the
Offer and the Merger and ServiceMaster's willingness not to impose any
limitation on the proportion of the Shares which could be converted into
cash or ServiceMaster Shares;
. the presentations by Baird with respect to other potential acquirers of
the Company and the range of prices that such acquirers would likely be
willing to pay, and the likelihood that a strategic buyer such as
ServiceMaster is in a position to pay a higher price than a financial
buyer due among other things to cost savings resulting from consolidation
of the businesses;
. the Offer gives the Company stockholders who elect to receive
ServiceMaster Shares the opportunity to participate in a more diversified
company which is expected to have a greater potential for growth than the
Company would have alone, and there are a number of benefits that could
reasonably be expected to be realized by former stockholders of the
Company from their continuing interest in the combined company, including
but not limited to (a) the future stock value and earnings per share
prospects of the combined company, (b) the potential for growth in the
business of the combined company as the result of the possibility of
cross-marketing of services, (c) the opportunity to diversify earnings,
and (d) the business synergies that might be realized, with consequent
cost savings.
. ServiceMaster had agreed that the Company would implement a severance and
employee continuation bonus plan for the Company employees and would
accelerate vesting of all outstanding employee stock options; and
. ServiceMaster had agreed that, as soon as practicable after the Closing
Time, ServiceMaster would make every effort to provide to each of the
Company's franchisee the option to do any of the following: (i) to sell
such franchise to the Company on terms and conditions as the franchisee
and ServiceMaster may agree; (ii) to continue to operate its Company
franchise in accordance with existing agreements between the franchisee
and the Company; or (iii) to terminate the existing agreement between the
franchisee and the Company and to operate its business independently
without use of the Company trade names, service marks or similar rights.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Compensation. Pursuant to an engagement letter agreement dated October 16,
1996, between the Company and Baird, the Company agreed to pay Baird a retainer
fee of $50,000 (such fee to be creditable against the transaction fee described
below), a fee of $150,000, payable upon delivery of its opinion, regardless of
the conclusions reached by Baird in such opinion (such fee to be creditable
against the transaction fee described below), and a transaction fee, payable
upon consummation of the Transaction, equal to 0.625 percent of the aggregate
consideration paid or payable in connection with the Transaction. The Company
also agreed to reimburse Baird for its reasonable out-of-pocket expenses,
including fees and disbursements of counsel. In addition, the Company agreed to
indemnify Baird, its affiliates and their respective directors, officers,
employees and agents and controlling persons against certain liabilities
relating to or arising out of its engagement, including liabilities under the
federal securities laws. In the past, Baird has provided investment banking
services to the Company, for which it received agreed upon compensation.
Neither the Company nor any person acting on its behalf currently intends to
employ, retain or compensate any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in Shares have
been effected during the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company.
14
<PAGE>
(b) Patrick J. Norton (the Company's President and Chief Executive Officer)
has advised the Company that it is his present intention to tender all of his
Shares (which represent approximately 9.5% of all outstanding Shares) and to
elect the Share Consideration for substantially all of such tendered Shares.
Mr. Norton's action is not intended to constitute advice or a recommendation
as to whether or not any stockholder should tender or how any other of the
Company's stockholders should choose between the Cash Consideration and Share
Consideration alternatives. The Company does not have information with respect
to whether the Company's executive officers (other than Mr. Norton), directors
(other than Mr. Norton) and affiliates who own Shares presently intend to
tender such Shares pursuant to the Offer or how, if they decide to tender,
they intend to choose between the Cash Consideration and the Share
Consideration alternatives.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as indicated above in Items 3 and 4 with respect to the Offer and
the Merger, no discussions or negotiations are being undertaken or are
underway by the Company in response to the Offer or the Merger which relate
to, or would result in, (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company, (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary of the Company, (iii) a tender offer for or other acquisition
of securities by, or of, the Company, or (iv) any material change in the
present capitalization or dividend policy of the Company.
(b) Except as indicated above in Items 3 and 4 hereto in connection with the
Offer and the Merger, there are no transactions, board resolutions, agreements
in principle or signed contracts in response to the Offer which would relate
to or would result in one or more of the matters referred to in this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Merger. The Acquisition Agreement and the Merger Agreement provide that
following the completion of the Offer, the approval and adoption of the Merger
Agreement by the stockholders of the Company, if required by applicable law,
and the satisfaction or waiver of certain other conditions, the Merger Sub
will be merged with and into the Company with the Company as the surviving
corporation (the "Surviving Corporation"), and the separate existence of the
Merger Sub shall cease. As a result of the Merger, the Company will become a
wholly-owned subsidiary of ServiceMaster. Pursuant to the Merger, each
outstanding Share (other than Shares held by ServiceMaster or any subsidiary
of ServiceMaster and other than Shares held by stockholders who perfect their
appraisal rights under Delaware law) will be converted into the right to
receive the Merger Consideration ($16.00 in cash per Share without interest
thereon).
If necessary, following the expiration of the Offer, the Company shall take
all action necessary in accordance with applicable law, its Restated
Certificate of Incorporation and its By-laws to (i) distribute a proxy
statement and convene a meeting of its stockholders as promptly as practicable
to consider and vote upon the approval of the Merger and the Merger Agreement
or (ii) submit the Merger and the Merger Agreement for approval by written
consent in lieu of a meeting of stockholders. The Acquisition Agreement also
provides that the Company's Board of Directors will recommend that
stockholders of the Company approve the Merger and the Merger Agreement, and
that the Company will use its best efforts to solicit such approval. At any
such meeting, or in response to any solicitation of proxies or consents,
ServiceMaster and its affiliates shall vote all Shares held by them in favor
of the Merger and the Merger Agreement, and the Company shall vote all Shares
with respect to which proxies in the form distributed by the Company shall
have been given in favor of the Merger and the Merger Agreement.
Under the Company's Restated Certificate of Incorporation, the affirmative
vote of 75% of all votes represented by all issued and outstanding voting
securities of the Company is required to approve the Merger. If ServiceMaster
holds the Minimum Number of Shares following the Offer, it would have
sufficient voting power to effect the Merger without the vote of any other
stockholder of the Company. The DGCL also provides that if a company owns at
least 90% of each class of stock of a subsidiary, the company can effect a
merger with the
15
<PAGE>
subsidiary without the authorization of the other stockholders of the
subsidiary. Accordingly, if, as a result of the Offer or otherwise,
ServiceMaster attains ownership of at least 90% of the outstanding Shares,
ServiceMaster could, and intends to, effect the Merger without approval of any
other stockholder of the Company.
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders of the Company may have certain rights
under the DGCL to dissent and demand appraisal of, and payment in cash of the
fair value of, their Shares. Such rights, if the statutory procedures are
complied with, could lead to a judicial determination of the fair value
(excluding any element of value arising from the accomplishment or expectation
of the Merger) required to be paid in cash to such dissenting holders for
their Shares. Any such judicial determination of the fair value of Shares
could be based upon considerations other than or in addition to the price paid
in the Offer and the market value of the Shares, including asset values and
the investment value of the Shares. The value so determined could be more or
less than the Cash Consideration pursuant to the Offer or the Merger
Consideration.
The foregoing description is qualified in its entirety by reference to the
Company's Restated Certificate of Incorporation, a copy of which is filed as
Exhibit 8 hereto, and is incorporated herein by reference. The terms of the
Merger are set forth in the Merger Agreement, which is filed as Exhibit 2
hereto, and is incorporated herein by reference. Summaries of the terms of the
Merger are contained in the sections of the Offering Circular/Prospectus
entitled "SUMMARY--The Merger" and "THE OFFER--The Merger", and are
incorporated herein by reference. The Offering Circular/Prospectus was filed
with the Commission by ServiceMaster on January 17, 1997 as Exhibit (a)(1) to
the Schedule 14D-1.
Conditions to the Merger. Section 2.5 of the Acquisition Agreement provides
that the respective obligations of each party to effect the Merger are subject
to the fulfillment or waiver of each of the conditions set forth below:
(i) If ServiceMaster and its affiliates shall own less than 90% or all
Shares outstanding at the conclusion of the Offer, the Merger and the
Merger Agreement shall have been approved and adopted by the requisite vote
or consent of stockholders of the Company in accordance with the Company's
Restated Certificate of Incorporation and By-laws and Delaware law.
(ii) The Offer shall have been consummated pursuant to the terms of the
Acquisition Agreement; and
(iii) No injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission nor any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority shall be in effect,
which would make the acquisition or holding by ServiceMaster or its
subsidiaries of the Shares illegal or otherwise prevent the consummation of
the Merger.
Anti-takeover Effects of Certain Provisions of the Company's Restated
Certificate of Incorporation and By-laws. In addition to the Stock Purchase
Rights, certain provisions of the Restated Certificate of Incorporation and
the By-laws may be deemed to have an anti-takeover effect and may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might
consider in its best interest, including those attempts that might result in a
premium over the market price for the Shares. The following is a brief summary
of these provisions.
Supermajority Voting Provisions. The Restated Certificate of Incorporation
requires a vote of the holders of not less than 75% of the total voting power
of the Company to approve or authorize (a) any merger, consolidation or share
exchange of the Company or any subsidiary into or with any person in which the
Company is not the continuing or surviving corporation or pursuant to which
shares of the Company's voting stock would be converted into cash, securities
or other property, other than a transaction in which the holders of the
Company's voting stock have the same proportionate ownership of voting
securities of the surviving corporation immediately after such transaction;
(b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of all or substantially all of the assets of the Company, and (c) any
agreement providing for any of the foregoing transactions.
16
<PAGE>
In addition, the affirmative vote of the holders of at least 85% of the total
voting power of the Company and a majority of the voting power of the Company
held by stockholders other than an interested stockholder (generally, an entity
which owns or controls 20% of the voting power of the Company) is required for
the approval or authorization of certain business combinations (e.g. merger or
consolidation, sale or other disposition of assets having a fair market value
in excess of 10% of the Company's total assets, dissolution of the Company,
etc.) involving such "interested stockholder" unless the "business combination"
has been approved by a majority of the "disinterested directors" or the
"business combination" satisfies certain "fair price" requirements.
Anti-Greenmail. The acquisition by the Company of voting stock from any
interested security holder (generally, an entity which owns or controls 5% of
the voting power of the Company) which has beneficially owned such securities
for less than two years requires the affirmative vote of the holders of at
least a majority of the voting power of the Company, excluding Shares
beneficially owned by such "interested security holder."
Advance Notice Requirements for Director Nominations. The By-laws provide
that stockholders seeking to nominate candidates for election as directors at
an annual or special meeting of stockholders must provide timely notice thereof
in writing. To be timely, a stockholder's notice must be delivered to or mailed
and received at the principal executive offices of the Company not less than 60
days nor more than 90 days prior to the meeting; provided, however, that in the
event that less than 70 days' notice or prior public disclosure of the date of
the meeting is given or made to stockholders, notice by the stockholder to be
timely must be received no later than the close of business on the 10th day
following the day on which such notice of the date of the meeting was mailed or
such public disclosure was made. The By-laws also specify certain requirements
for a stockholder's notice to be in proper written form. This provision may
preclude some stockholders from making nominations for directors at an annual
or special meeting.
Anti-Takeover Effects of Delaware Law. Section 203 of the DGCL contains
certain provisions that may make more difficult the acquisition of control of
the Company by means of a tender offer, open market purchase, proxy fight or
otherwise. The Certificate provides that Section 203 of the DGCL does not apply
to the Company.
The foregoing descriptions are qualified in their entirety by reference to
the Company's Restated Certificate of Incorporation and By-laws, copies of
which are filed as Exhibits 8 and 9, respectively, hereto and are incorporated
herein by reference.
The Ohio Take-Over Act. The Ohio Take-Over Act Sections 1707.041, 1707.042,
1707.23 and 1707.26 of the Ohio Revised Code (collectively, the "Ohio Take-Over
Act") regulate tender offers. The Ohio Take-Over Act applies to the purchase of
or offer to purchase any equity security of a subject company from a resident
of Ohio if, after the purchase, the offeror would directly or indirectly be the
beneficial owner of more than 10% of any class of issued and outstanding equity
securities of the company (a "Control Bid"). A subject company includes an
issuer, such as the Company, that either has its principal place of business or
principal executive offices located in Ohio or owns or controls assets located
in Ohio that have a fair market value of at least one million dollars, and that
has more than one thousand beneficial or record equity security holders who
reside in Ohio. A subject company, however, need not be incorporated in Ohio.
Notwithstanding the definition of subject company contained in the Ohio
Takeover Act, the Ohio Division of Securities (the "Ohio Division"), by rule or
an adjudicatory proceeding, may make a determination that an issuer does not
constitute a subject company if appropriate review of Control Bids involving
the issuer is to be made by any regulatory authority of another jurisdiction.
The Ohio Division has not adopted any rules under this provision.
The Ohio Take-Over Act prohibits an offeror from making a Control Bid for
securities of a subject company pursuant to a tender offer until the offeror
has filed specified information with the Ohio Division. In addition, the
offeror is required to deliver a copy of such information to the subject
company not later than the offeror's filing with the Ohio Division and to send
or deliver such information and the material terms of this proposed offer to
all offerees in Ohio as soon as practicable after the offeror's filing with the
Ohio Division.
17
<PAGE>
Within three calendar days of such filing, the Ohio Division may by order
summarily suspend the continuation of the Control Bid if it determines that
the offeror has not provided all of the specified information or that the
Control Bid materials provided to offerees do not provide full disclosure of
all material information concerning the Control Bid. If the Ohio Division
summarily suspends a Control Bid, it must schedule and hold a hearing within
ten calendar days of the date on which the suspension is imposed and must make
its determination within three calendar days after the hearing has been
completed but no later than sixteen calendar days after the date on which the
suspension is imposed. The Ohio Division may maintain its suspension of the
continuation of the Control Bid if, based upon the hearing, it determines that
all of the information required to be provided by the Ohio Take-Over Act has
not been provided by the offeror, that the Control Bid materials provided to
offerees do not provide full disclosure of all material information concerning
the Control Bid, or that the Control Bid is in material violation of any
provision of the Ohio securities laws. If, after the hearing, the Ohio
Division maintains the suspension, the offeror has the right to correct the
disclosure and other deficiencies identified by the Ohio Division and to
reinstitute the Control Bid by filing new or amended information pursuant to
the Ohio Take-Over Act.
ServiceMaster has stated that it believes that the Company is a subject
company pursuant to the Ohio Take-Over Act and that the Offer constitutes a
Control Bid for securities of the Company pursuant to a tender offer.
ServiceMaster has stated that it intends to file specified information with
the Ohio Division and otherwise comply with the Ohio Take-Over Act.
Antitrust. In addition to required compliance with federal and state
securities laws and state corporate laws, the Offer is subject to the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"),
which provides that certain acquisition transactions may not be consummated
unless certain required information is filed with the Antitrust Division of
the Department of Justice and the Federal Trade Commission, and certain
waiting period requirements have been satisfied.
On December 6, 1996, the Company and ServiceMaster made filings with the
Department of Justice and the Federal Trade Commission under the HSR Act. The
waiting period under the HSR Act expired on January 5, 1996, without a request
by these governmental authorities for additional information and, accordingly,
the requirements of the HSR Act necessary to close the Transaction have been
satisfied.
A summary of the requirements of the HSR Act is set forth in the section of
the Offering Circular/Prospectus entitled "THE OFFER--Antitrust", and is
incorporated herein by reference.
18
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S> <C>
1 Acquisition Agreement, dated December 5, 1996, among
ServiceMaster, the Company and Merger Sub (filed as Annex
I to ServiceMaster's Offering Circular/Prospectus (the
"Offering Circular/Prospectus") and incorporated herein by
reference)*
2 Plan and Agreement of Merger, dated December 5, 1996,
among ServiceMaster, the Company and Merger Sub (filed as
Annex II to ServiceMaster's Offering Circular/Prospectus
and incorporated herein by reference)*
3(a) Rights Agreement, dated as of April 11, 1995, between the
Company and Bank One, Indianapolis, N.A., as rights agent
(incorporated herein by reference to the Company's Current
Report on Form 8-K filed April 12, 1995 (File No. 0-
19602))
3(b) First Amendment to the Rights Agreement, dated as of Octo-
ber 10, 1995, between the Company and National City Bank,
as rights agent (incorporated herein by reference to the
Company's Current Report on Form 8-K filed October 20,
1995 (File No. 0-19602))
3(c) Second Amendment to the Rights Agreement, dated December
5, 1996, between the Company and National City Bank, as
rights agent (incorporated herein by reference to Regis-
trant's Current Report on Form 8-K filed on December 11,
1996 (File No. 0-19602))
4 Confidentiality Agreement, dated November 11, 1996, be-
tween the Company and ServiceMaster**
5(a) Change in Control Agreement, dated September 16, 1991, be-
tween Barefoot Inc. and Patrick J. Norton (incorporated
herein by reference to Exhibit 10.29 to the Company's Reg-
istration Statement on Form S-1 filed September 6, 1991
(Registration No. 33-42633) (the "Company's Form S-1"))
5(b) Change in Control Agreement, dated September 16, 1991, be-
tween Barefoot Inc. and Michael R. Goodrich** (Change in
Control Agreements that were identical to the Change in
Control Agreement entered into by and between the Company
and Mr. Goodrich and filed as Exhibit 5(b) to this Sched-
ule 14D-9 were also entered into by and between the Com-
pany and Jeffrey K. Shufelt (oral) and the Company and
Donald R. Nichols (written))
6(a) Senior Management Agreement, dated March 31, 1989, by and
between the Company and Patrick J. Norton (the "Senior
Management Agreement") (incorporated herein by reference
to Exhibit 10.5 to the Company's Form S-1)
6(b) First Amendment to the Senior Management Agreement, dated
September 9, 1991 (amending Exhibit 6(a)) (incorporated
herein by reference to Exhibit 10.24 to the Company's Form
S-1)
7(a) Management Agreement, dated April 28, 1989, entered into
by and between the Company and Michael R. Goodrich (the
"Management Agreement") (Management Agreements that were
identical to the Management Agreement were also entered
into by the Company and each of Jeffrey K. Shufelt, Donald
R. Nichols and seven other employees of the Company, one
of whom is no longer an employee (incorporated by refer-
ence to Exhibit 10.10 of the Company's Form S-1))
7(b) First Amendment to the Management Agreement (the "First
Amendment to the Management Agreement"), dated June 15,
1989 (amending Exhibit 7(a)) (First Amendments of the var-
ious management agreements referenced in the description
of Exhibit 7(a) above that were identical to the First
Amendment to the Management Agreement were also entered
into by the Company and each of Jeffrey K. Shufelt, Donald
R. Nichols and seven other employees, one of whom is no
longer an employee (incorporated by reference to Exhibit
10.11 of the Company's Form S-1))
</TABLE>
19
<PAGE>
<TABLE>
<C> <S> <C>
7(c) Second Amendment to the Management Agreement (the "Second
Amendment to the Management Agreement"), dated September
9, 1991 (further amending Exhibit 7(a)) (Second Amendments
of the various management agreements referenced in the de-
scription of Exhibit 7(a) above that were identical to the
Second Amendment to the Management Agreement were also en-
tered into by the Company and each of Jeffrey K. Shufelt,
Donald R. Nichols and seven other employees, one of whom
is no longer an employee (incorporated herein by reference
to Exhibit 10.11 of the Company's Form S-1))
8 Restated Certificate of Incorporation of Barefoot Inc.
(incorporated herein by reference to Exhibit 3.4 to the
Company's Annual Report on Form 10-K for the fiscal year
ended March 31, 1995 (File No. 0-19602)
9 Restated By-laws of Barefoot Inc. (incorporated herein by
reference to Exhibit 10.23 to the Company's Form S-1 filed
September 6, 1991)
10 Letter dated January 17, 1997, to the stockholders of the
Company from the Chief Executive Officer of the Company*
11 Opinion of Robert W. Baird & Co. Incorporated dated Decem-
ber 4, 1996 (attached as Annex B to the Offering
Circular/Prospectus and incorporated herein by reference)*
</TABLE>
- --------
*These documents are included in the materials mailed to stockholders
pursuant to the Offer.
**These documents were filed with the Securities and Exchange Commission as
exhibits to the Schedule 14D-9, but were not included in the mailing to
stockholders.
20
<PAGE>
SIGNATURE
AFTER REASONABLE INQUIRY AND TO THE BEST OF OUR KNOWLEDGE AND BELIEF, THE
UNDERSIGNED HEREBY CERTIFY THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS
TRUE, COMPLETE AND CORRECT.
Board of Directors of Barefoot Inc.
<TABLE>
<CAPTION>
SIGNATURE DATE
--------- ----
<S> <C>
/s/ Patrick J. Norton January 17, 1997
___________________________________________
Patrick J. Norton
/s/ Donald R. Brattain January 17, 1997
___________________________________________
Donald R. Brattain
/s/ J. Martin Erbaugh January 17, 1997
___________________________________________
J. Martin Erbaugh
/s/ Stanley C. Golder January 17, 1997
___________________________________________
Stanley C. Golder
/s/ William R. Griffin January 17, 1997
___________________________________________
William R. Griffin
</TABLE>
21
<PAGE>
ANNEX I
BAREFOOT INC.
450 WEST WILSON BRIDGE ROAD
WORTHINGTON, OHIO 43085
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
This Information Statement ("Information Statement") is being mailed on or
about January 17, 1997, as part of the Company's Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") to the holders of record of
the Shares at the close of business on January 15, 1997. You are receiving
this Information Statement in connection with the possible appointment of
persons designated by ServiceMaster to fill all of the seats on the Board of
Directors of the Company (the "Board"). The Acquisition Agreement provides
that, at the time ServiceMaster shall consummate the Offer and acquire all
Shares properly tendered and not withdrawn (the "Closing"), the Company will
cause the officers and directors of the Company and its subsidiary as
ServiceMaster may request to resign their positions as such and/or shall
arrange for the election or appointment as officers and directors of the
Company and its subsidiary of the persons designated by ServiceMaster. This
Information Statement is required by Section 14(f) of the Exchange Act and
Rule 14f-1 thereunder. See "Change in Board of Directors Upon Consummation of
the Offer -- Right to Designate Directors; the ServiceMaster Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in the accompanying Schedule
14D-9.
Pursuant to the Acquisition Agreement, ServiceMaster commenced the Offer on
January 17, 1997. The Offer is scheduled to expire at 12:00 midnight on
February 21, 1997, unless ServiceMaster extends the Offer. The Offer is
conditioned on a minimum number of the outstanding Shares being tendered for
cash or ServiceMaster Shares pursuant to the Offer such that, when added to
all Shares owned by ServiceMaster prior to consummation of the Offer,
ServiceMaster will own at least 75% of the Shares which shall be outstanding
at the Closing Time. The Offer is also subject to certain other conditions.
Upon the expiration of the Offer, if all conditions of the Offer have been
satisfied or waived, ServiceMaster has agreed to purchase all Shares validly
tendered pursuant to the Offer and not withdrawn.
The information contained in this Information Statement concerning
ServiceMaster has been furnished to the Company by ServiceMaster and the
Company assumes no responsibility for the accuracy or completeness of such
information.
CHANGE IN BOARD OF DIRECTORS
UPON CONSUMMATION OF THE OFFER
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of January 16, 1997, the Company had
14,519,760 Shares outstanding, together with the associated Series A Junior
Participating Preferred Stock Purchase Rights. The Board currently consists of
five members. Each director holds office until such director's successor is
elected and qualified or until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE SERVICEMASTER DESIGNEES
Pursuant to the Acquisition Agreement, the Company has agreed at the Closing
to cause the officers and directors of the Company as ServiceMaster may
request to resign their positions as such and/or shall arrange for
A-1
<PAGE>
the election or appointment as officers and directors of the Company and its
subsidiary of the following persons designated by ServiceMaster (the
"ServiceMaster Designees"): Carlos H. Cantu, President and Chief Executive
Officer of ServiceMaster, and a member of the Board of Directors of
ServiceMaster; Ernest J. Mrozek, Senior Vice President and Chief Financial
Officer of ServiceMaster and President and Chief Operating Officer of Consumer
Services; and Vernon T. Squires, Senior Vice President and General Counsel. A
more detailed description of each of the ServiceMaster Designees is included
in Schedule I to the Offering Circular/Prospectus of ServiceMaster (the
"Offering Circular/Prospectus"). The Offering Circular/Prospectus has been
filed with the Commission as Exhibit (a)(1) to the Schedule 14D-1 of
ServiceMaster. A copy of the Offering Circular/Prospectus is included with
this mailing. The information included in Schedule I to the Offering
Circular/Prospectus is incorporated herein by reference.
ServiceMaster shall not be required to purchase any Shares tendered pursuant
to the Offer if, prior to the time of purchase of any Shares, any director of
the Company (as requested by ServiceMaster) shall have failed to resign
effective as of the consummation of the Offer.
It is expected that the ServiceMaster Designees will assume office
immediately following the consummation of the Offer, and that, upon assuming
office, the ServiceMaster Designees will thereafter constitute all of the
members of the Board of Directors of the Company. The appointment of the
ServiceMaster Designees is expected to be accomplished at a meeting or by
written consent of the Board of Directors of the Company.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS
The names of the Company's current directors, their ages as of January 16,
1997 and certain other information about them are set forth below. As
indicated above, it is anticipated that all of the current directors of the
Company will be requested to resign effective as of the consummation of the
Offer.
<TABLE>
<CAPTION>
EXPIRATION
PRINCIPAL OCCUPATION AND EMPLOYMENT; DIRECTOR OF PRESENT
NAME POSITION WITH THE COMPANY AGE SINCE TERM
- ---- ------------------------------------ --- -------- ----------
<S> <C> <C> <C> <C>
Patrick J. Norton....... President and Chief Executive Officer of the 46 1989 1997
Company and its subsidiary, Barefoot Grass
Lawn Service, Inc., (the "Subsidiary") since
1989 and President of the Subsidiary's prede-
cessor from 1985 to 1989. Director of the
Company.
Donald R. Brattain...... President, Brattain and Associates LLC, an 56 1989 1997
investment management company, since 1980.
Chairman of the Board of the Company. (1)
J. Martin Erbaugh....... President and Chairman, Erbaugh Corp., a lawn 48 1994 1997
care business, since 1978. Director of the
Company. (2)
Stanley C. Golder....... Consultant to Golder, Thoma, Cressey, Rauner 67 1989 1997
Inc., an investment company, since 1993; Gen-
eral Partner, Golder, Thoma & Cressey, an in-
vestment partnership from 1990 to 1993. Di-
rector of the Company.
William R. Griffin...... Director of the Company. (3) 53 1989 1997
</TABLE>
- --------
(1) Also a director of Sunrise Resources, Inc., Everest Medical, Inc., Harmony
Brook Inc. and Featherlite Manufacturing Inc.
(2) Also a director of Morgan Bank, N.A. and Lesco, Inc.
(3) Also a director of Globe Business Systems and Harmony Brook, Inc.
A-2
<PAGE>
EXECUTIVE OFFICERS
The names of the Company's executive officers, their ages and certain other
information about them are set forth below:
<TABLE>
<CAPTION>
NAME POSITION WITH COMPANY AND THE SUBSIDIARY AGE
---- ---------------------------------------- ---
<S> <C> <C>
Donald R. Brattain...... Chairman of the Board of the Company(1) 56
Patrick J. Norton....... President and Chief Executive Officer of the Company 46
and the Subsidiary
Michael R. Goodrich..... Chief Financial Officer and Secretary of the Company 44
and Vice President, Finance, of the Subsidiary
Donald R. Nichols....... Vice President, Marketing, of the Subsidiary 42
Jeffrey K. Shufelt...... Vice President, Operations, of the Subsidiary since 39
January 1, 1995; Regional Manager of the Subsidiary
(and its predecessor) from 1990 through 1994
</TABLE>
- --------
(1) See immediately preceding table for five-year employment history.
ADDITIONAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS
Each director of the Company holds office until the next annual meeting of
stockholders and until a successor has been elected and qualified. The
Company's executive officers are elected by the Board of Directors of the
Company and serve at the discretion of the Board.
There are no family relationships between any director or executive officer
and any other director or executive officer of the Company.
Except as described in this Information Statement or the Schedule 14D-9,
there are no arrangements or understandings between any of the executive
officers of the Company and other persons relating to their selection as
officers.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held 5 meetings during the fiscal year
ended December 31, 1996. All directors attended at least 75% of the total
number of meetings of the Board and the committees on which they served.
The Board of Directors presently has four committees.
The Audit Committee, which presently consists of Stanley C. Golder, Donald R.
Brattain and William R. Griffin, is responsible for selecting auditors,
monitoring the fiscal integrity of the Company and reviewing internal controls.
The Audit Committee held one meeting during the fiscal year ended December 31,
1996.
The Compensation Committee, which presently consists of Stanley C. Golder,
Donald R. Brattain and William R. Griffin, is responsible for developing a
broad plan of executive compensation for the Company that is competitive and
rewarding to the degree that it will attract, retain and inspire the
performance of executive, managerial and other key personnel. The Compensation
Committee is also responsible for reviewing and supervising the operation of
the Company's benefit plans and prescribing the terms of any stock options
("Barefoot Stock Options") granted under the Company's stock option plan (where
permitted). The Compensation Committee held one meeting during the fiscal year
ended December 31, 1996.
A-3
<PAGE>
The Nominating Committee, which presently consists of Stanley C. Golder,
Patrick J. Norton, Donald R. Brattain and William R. Griffin, is responsible
for searching out and recommending to the Board of Directors, for nomination,
candidates for election to the Board of Directors if a vacancy or vacancies
should occur. The Nominating Committee held no meetings during the fiscal year
ended December 31, 1996.
The Branchise Committee, which presently consists of Stanley C. Golder and
William R. Griffin, is responsible for reviewing and negotiating transactions
with "branchises" of the Company, including the exercise of purchase options,
if any, on behalf of the Company. The Branchise Committee is responsible for
approving (i) the markets to be opened by branchises, (ii) the amount of the
initial franchise fee to be paid by a new branchise, (iii) the deferral period
and terms for payment of the initial franchise fee, (iv) the capitalization
required of the branchise, (v) any demands for payment of branchise fees and
expense reimbursements, (vi) the timing and pricing formulas for Company
purchase option provisions, (vii) the exercise of a purchase option by the
Company, and (viii) the eligibility of Company officers or directors to
participate as shareholders of a branchise. The Branchise Committee held no
meetings during the fiscal year ended December 31, 1996. See "Transactions
Involving Directors and Executive Officers."
COMPENSATION OF DIRECTORS
Each director who is not an employee of the Company is paid $5,000 as an
annual retainer plus $1,250 for each meeting attended. Directors who are also
employees of the Company receive no separate compensation for serving as
directors.
The Company's Amended and Restated 1989 Stock Option Plan provides (the
"Stock Option Plan") for the automatic issuance of Barefoot Stock Options to
non-employee directors. Barefoot Stock Options to acquire 5,000 Shares were
granted to each non-employee director on May 21, 1996, at an exercise price of
$11.75, which was the fair market value on that date. Pursuant to the terms of
the Company's Stock Option Plan, Barefoot Stock Options for 2,500 Shares will
be awarded to non-employee directors in future years on the day following the
Annual Meeting of Stockholders.
BENEFICIAL OWNERSHIP OF THE COMPANY'S SHARES
The following table sets forth, as of January 16, 1997 (except as otherwise
indicated), certain information with respect to those persons known to the
Company to be the beneficial owners of more than 5% of the outstanding Shares
of the Company.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
- ------------------- ----------------------- -------------------
<S> <C> <C>
Patrick J. Norton.................. 1,433,345(3) 9.84%
450 W. Wilson Bridge Road
Worthington, OH 43085
State of Wisconsin Investment 1,240,000(4) 8.54%
Board..............................
P.O. Box 7842
Madison, WI 53707
Yacktman Asset Management Company.. 2,114,300(5) 14.56%
303 West Madison Street
Suite 1925
Chicago, IL 60606
Michael A. Roth and Brian J. Stark. 1,379,600(6) 9.50%
1500 West Market Street
MeQuon, WI 53092
</TABLE>
- --------
(1) Unless otherwise noted, the beneficial owner has sole voting and
investment power with respect to all of the Shares reflected in the table.
A-4
<PAGE>
(2) The percent of class is based upon the sum of 14,519,760 Shares
outstanding on January 16, 1997 and the number of Shares, if any, as to
which the named person has the right to acquire beneficial ownership upon
the exercise of Barefoot Stock Options exercisable within 60 days of
January 16, 1997.
(3) Includes 42,000 Shares as to which Mr. Norton has the right to acquire
beneficial ownership upon the exercise of Barefoot Stock Options
exercisable within 60 days of January 16, 1997 and 3,855 Shares
representing Mr. Norton's proportionate interest in the Company Stock Fund
of the Barefoot Grass Lawn Service, Inc. Profit Sharing Plan as of
December 31, 1996.
(4) According to a Schedule 13G dated February 1996, the State of Wisconsin
Investment Board had sole dispositive power with respect to 1,240,000
Shares.
(5) According to a Schedule 13D dated November 4, 1996, as of November 4,
1996, Yacktman Asset Management Co. had sole dispositive power with
respect to 2,114,300 Shares.
(6) According to a Schedule 13D dated January 10, 1997, as of January 10,
1997, Messrs. Roth and Stark have shared power to vote or direct the vote
and shared power to dispose or direct the disposition with respect to
1,379,600 Shares.
The following table sets forth, as of January 16, 1997, certain information
with respect to the Company's Shares beneficially owned by (i) each of the
directors, (ii) each of the executive officers of the Company named in the
Summary Compensation Table below and (iii) the executive officers and
directors of the Company as a group:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS(2)
- ---- ----------------------- -------------------
<S> <C> <C>
Directors
Patrick J. Norton(3)............ 1,433,345(4) 9.84%
Donald R. Brattain.............. 760,700(5) 5.24%
J. Martin Erbaugh............... 58,300(5) (8)
Stanley C. Golder............... 55,338(5) (8)
William R. Griffin.............. 52,600(5) (8)
Executive Officers
Michael R. Goodrich............. 83,950(6) (8)
All Directors and Executive
Officers as a Group
(6 persons)..................... 2,444,233(7) 16.73%
</TABLE>
- --------
(1) See Note (1) to preceding table.
(2) See Note (2) to preceding table.
(3) Mr. Norton is also an executive officer of the Company.
(4) See Note (3) to preceding table.
(5) Includes 5,000 shares as to which each director has the right to acquire
beneficial ownership upon the exercise of Barefoot Stock Options
exercisable within 60 days of January 16, 1997
(6) Includes 28,000 Shares as to which Mr. Goodrich has the right to acquire
beneficial ownership upon the exercise of Barefoot Stock Options
exercisable within 60 days of January 16, 1997 and 2,950 Shares
representing Mr. Goodrich's proportionate interest in the Company Stock
Fund of the Barefoot Grass Lawn Service, Inc. Profit Sharing Plan as of
December 31, 1996.
(7) Includes 90,000 Shares as to which certain directors and executive
officers included in the group have the right to acquire beneficial
ownership upon the exercise of options exercisable within 60 days of
January 16, 1997.
(8) Represents ownership of less than 1% of the outstanding Shares.
A-5
<PAGE>
SECTION 16. REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act"),
requires the Company's officers, directors and persons who are beneficial
owners of more than ten percent of the Company's Common Stock ("reporting
persons") to file reports of ownership and changes in ownership with the
Securities and Exchange Commission. Reporting persons are required by
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms filed by them.
Based on its review of the copies of Section 16(a) forms received by it, the
Company believes that, during 1996, all reporting persons fully complied with
the filing requirements applicable to such persons.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table set forth, for the fiscal year ended December 31, 1996,
the nine month period ended December 31, 1995 and the fiscal year ended March
31, 1995, the compensation awarded or paid to, or earned by the Company's Chief
Executive Officer and the only other executive officer of the Company whose
total salary and bonus for the fiscal year ended December 31, 1996 exceeded
$100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
-------------------- ------------
SECURITIES ALL OTHER
FISCAL UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#) ($)(1)
--------------------------- ------ ---------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Patrick J. Norton 1996 194,075 -- 30,000 1,358(4)
CEO, Barefoot Inc.; President 1995(2) 148,114 -- -- --
Barefoot Grass Lawn Service, Inc. 1995(3) 178,152 -- 30,000 3,813
Michael R. Goodrich, 1996 112,600 4,000 12,000 816(4)
CFO, Barefoot Inc.; VP Finance, 1995(2) 86,293 -- -- --
Barefoot Grass Lawn Service, Inc. 1995(3) 105,130 7,500 12,000 2,689
</TABLE>
- --------
(1) Represents Company contributions to the 401(k) portion and allocations in
the profit-sharing portion of the Profit Sharing Plan during the fiscal
years shown.
(2) Nine month period dated December 31, 1995.
(3) Fiscal year ended March 31, 1995.
(4) Represents only the Company's matching contribution for 1996 payable in
1997; amount of Company discretionary profit sharing contribution for 1996,
if any, has not been determined.
A-6
<PAGE>
GRANTS OF OPTIONS
The following table sets forth information with respect to stock options
granted to each of the executive officers named in the Summary Compensation
Table during the fiscal year ended December 31, 1996;
OPTIONS GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL
------------------------------------------ RATES OF STOCK
% OF TOTAL PRICE
OPTIONS EXERCISE APPRECIATION
OPTIONS GRANTED TO OR BASE FOR OPTION TERM
GRANTED EMPLOYEES PRICE EXPIRATION ---------------
NAME (#) IN FISCAL YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ------- -------------- -------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Patrick J. Norton... 30,000 17.1% $10 8/30/06 188,700 478,200
Michael R. Goodrich. 12,000 6.9% $10 8/30/06 75,480 191,280
</TABLE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth certain information with respect to stock
options exercised during the fiscal year ended December 31, 1996 by each of
the executive officers of the Company named in the Summary Compensation Table
and unexercised stock options held as of December 31, 1996 by such executive
officers.
OPTION EXERCISES IN LAST FISCAL YEAR ANDFISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
SHARES AT FISCAL YEAR-END (#) FISCAL YEAR-END ($)(1)(2)
ACQUIRED ON VALUE ---------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE(3) EXERCISABLE UNEXERCISABLE(3)
- ---- ------------ ------------ ----------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Patrick J. Norton....... -- -- 34,500 61,500 150,094 347,531
Michael R. Goodrich..... -- -- 25,000 25,000 153,438 140,563
</TABLE>
- --------
(1) All values are shown pre-tax.
(2) The values are based on a closing price of $15.875 for the Shares on
December 31, 1996, less the option exercise price.
(3) Upon consummation of the Offer, all options will become fully vested and
each optionholder will be entitled to receive an amount in cash equal to
the number of Shares subject to all stock options then held by the
optionholder (whether or not then vested) times the remainder derived by
subtracting the exercise price per share from $16.00.
CHANGE IN CONTROL ARRANGEMENTS
See "Change in Control Agreements", located on page 9 of the Schedule 14D-9,
for a description of the Change in Control Agreements.
Based upon compensation levels as of January 1, 1997, the dollar value of
the severance and other benefits payable to the officers named in the Summary
Compensation Table by virtue of the Change of Control Agreements (assuming the
officer's employment is terminated as a result of a change in control and the
severance and other benefits become payable) would be as follows: Mr. Norton,
$378,000 and Mr. Goodrich, $116,600.
MANAGEMENT AGREEMENTS
See "Management Agreements", located on page 9 of the Schedule 14D-9, for a
description of the Management Agreements.
A-7
<PAGE>
TRANSACTIONS INVOLVING DIRECTORS AND EXECUTIVE OFFICERS
J. Martin Erbaugh became a director of the Company on April 20, 1994. Mr.
Erbaugh is Chief Executive Officer and majority owner of Erbaugh Corp. which
operated lawn care businesses under the trade name "Lawnmark" in several
states including Ohio, New York, Maine and Vermont.
Effective April 1, 1994, the Company acquired Lawnmark's New York, Vermont
and Maine lawn care operations. In connection therewith, the Company issued a
$3,800,000 four-year promissory note with interest at the prime rate
established by Bank One, Columbus NA plus 1% (limited to 9%). Payments to
Erbaugh Corporation, or Mr. Erbaugh directly, in the fiscal year ended
December 31, 1996 for interest and principal were $155,183 and $633,333,
respectively. The Company also paid $43,200 in rent during 1996 for a branch
location operated by the Company to an entity in which Mr. Erbaugh has
majority ownership.
Mr. Erbaugh also provides services to the Company with regards to
identifying and analyzing potential acquisitions in the lawn care industry.
Mr. Erbaugh is paid $3,000 per month for these services plus an additional
size-based fee for acquisitions completed. In the year ended December 31,
1996, Mr. Erbaugh was paid $18,000 for consulting services rendered and is due
$35,570 for acquisitions completed in 1996.
BRANCHISES
See "Branchises", located at page 7 of the Schedule 14D-9, for a description
of the branchises.
A-8
<PAGE>
EXHIBIT 4
BAREFOOT INC.
450 W. WILSON BRIDGE ROAD
WORTHINGTON, OHIO 43085
November 11, 1996
The ServiceMaster Company
One ServiceMaster Way
Downers Grove, Illinois 60515
Attention: Carlos H. Cantu
President and Chief Executive Officer
Re: Confidentiality Agreement
Gentlemen:
In connection with your consideration of a possible transaction with
Barefoot Inc. (the "Company") and its stockholders, you have requested
information concerning the Company. As a condition to your being furnished
such information (which may include information provided in writing, orally or
by inspection), you agree to treat any information concerning the Company
(whether prepared by the Company, its advisors or otherwise) which is
furnished to you or your advisors by or on behalf of the Company (herein
collectively referred to as the "Evaluation Material") in accordance with the
provisions of this letter and to take or abstain from taking certain other
actions herein set forth. The term "Evaluation Material" does not include
information which (i) is already in your possession, provided that such
information is not known by you to be subject to another confidentiality
agreement with or other obligation of secrecy to the Company or another party,
or (ii) becomes generally available to the public other than as a result of a
disclosure by you or your directors, officers, employees, agents or advisors,
or (iii) becomes available to you on a non-confidential basis from a source
other than the Company or its advisors, provided that such source is not known
by you to be bound by a confidentiality agreement with or other obligation of
secrecy to the Company or another party.
You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible transaction between the Company and its
stockholders and you, and that such information will be kept confidential by
you and your advisors; provided, however, that (i) any of such information may
be disclosed to your directors, officers and employees and representatives of
your advisors who need to know such information for the purpose of evaluating
any such possible transaction between the Company and you (it being understood
that such directors, officers, employees and representatives shall be informed
by you of (a) the confidential nature of such information and (b) the terms of
this agreement and the obligation of confidentiality undertaken by you under
this agreement, and shall be directed by you to treat such information
confidentially), (ii) any disclosure of such information may be made to which
the Company consents in writing, and (iii) any disclosure required by
applicable law or legal proceedings may be made, subject to compliance with
this agreement. You will be liable for any breach of this agreement by any of
your directors, officers, employees, representatives or advisors.
You hereby acknowledge that you are aware, and that you will advise such
directors, officers, employees and representatives who are informed as to the
matters which are the subject of this letter, that the United States
securities laws prohibit any person who has received from an issuer material,
non-public information, including information concerning the matters which are
the subject of this letter, from purchasing or selling securities of such
issuer or from communicating such information to any other person under
circumstances in which it is reasonably foreseeable that such person is likely
to purchase or sell such securities.
In addition, without the prior written consent of the Company, you will not,
and will direct such directors, officers, employees and representatives not to
disclose to any person the fact that discussions or negotiations are taking
place concerning a possible transaction between you and the Company and its
stockholders, including the
<PAGE>
status thereof, except for disclosures required by applicable law or legal
proceedings. Conversely, without your prior written consent, the Company will
not, and will direct its directors, officers, employees and representatives
not to, disclose to any person the fact that discussions or negotiations are
taking place concerning a possible transaction between the Company and you,
including the status thereof, except for disclosures required by applicable
law or legal proceedings. Notwithstanding any provision of this letter to the
contrary, in the event that you are requested or required in a judicial,
administrative or governmental proceeding to disclose any Evaluation Material,
you will provide us with prompt written notice of such request and all related
proceedings so that we may seek an appropriate protective order or waive your
compliance with the confidentiality provisions of this letter. If, as a result
of any such request or requirement, you are, in the written opinion of your
counsel, compelled to disclose Evaluation Material to any tribunal or else
stand liable for contempt or other censure or penalty, you may disclose such
Evaluation Material to such tribunal without liability hereunder provided that
you comply with the notice provisions of this paragraph.
You also agree that the Company shall be entitled to equitable relief,
including injunctive relief, in the event of any breach of the provisions of
this agreement and that you shall not oppose the granting of such relief.
Although the Company will endeavor to include in the Evaluation Material
information known to it which it believes to be relevant for the purpose of
your investigation, you understand that neither the Company nor any of its
representatives or advisors have made or make any representation or warranty
as to the accuracy or completeness of the Evaluation Material. You agree that
neither the Company nor its representatives or advisors shall have any
liability to you or any of your representatives or advisors resulting from the
use of the Evaluation Material.
In consideration of the fact that you will be expending time and incurring
costs in order to determine whether to propose a transaction with the Company
and its stockholders, we agree that for a period of 32 days from the date of
this letter, the Company will not solicit any prospective purchasers of all or
substantially all of the assets of the Company or of equity interests in the
Company.
If you determine that you do not wish to proceed with the transaction which
is the subject of this letter, you will promptly advise us of that decision.
In the event that the Company or you decides not to proceed with such
transaction, you shall promptly return to the Company at the Company's request
all written Evaluation Material and any other written material containing or
reflecting any information in the Evaluation Material (whether prepared by
you, the Company, your advisors or otherwise) and will not retain any copies,
extracts or other reproductions in whole or in part of such written material.
Notwithstanding the foregoing provisions, you shall not be required to deliver
to the Company the materials which you generate internally and which do not
constitute copies of the Evaluation Materials, including (but not limited to)
financial analyses prepared for your management and reports made to you board
of directors, provided that such materials shall be held by you and kept
subject to the terms of this agreement or destroyed.
We each understand and agree that no contract or agreement providing for a
transaction with the Company or its stockholders shall be deemed to exist
between you and the Company unless and until you and the Company execute and
deliver a definitive agreement (a "Transaction Agreement") and we each hereby
waive, in advance, any claims (including, without limitation, breach of
contract) in connection with a possible transaction with the Company unless
and until you and the Company shall have executed and delivered a Transaction
Agreement. We each also agree that unless and until a Transaction Agreement
between the Company and you has been executed and delivered, there is no legal
obligation of any kind whatsoever with respect to any such transaction by
virtue of this letter or any other written or oral expression with respect to
any such transaction except, in the case of this letter, for the matters
specifically agreed to herein. Nothing in this agreement shall be deemed to
require the Company to accept any offer in connection with a possible
transaction. For purposes of this paragraph, the term "Transaction Agreement"
does not include an executed letter of intent or any other preliminary written
agreement, nor does it include any written or verbal acceptance of an offer or
bid on your part. The agreements set forth in this letter may be modified or
waived only by a separate writing by the Company and you expressly so
modifying or waiving such agreements.
2
<PAGE>
Until the earlier of (i) the execution by you of a Transaction Agreement or
(ii) two years from the date of this letter agreement, you agree not to
initiate or maintain contact (except for those contacts made in the ordinary
course of business) with any officer, director or employee or agent of the
Company or any subsidiary of the Company regarding its business, operations,
prospects or finances, except with the express written permission of the
Company. You further agree that for a period of two years from the date hereof,
you will not hire any of the employees of the Company or any subsidiary of the
Company with whom you had contact or any key employees you became aware of
during the period of your investigation of the Company.
You also agree that for a period of two years from the date of this letter
agreement, neither you nor any of your affiliates (as that term is defined in
SEC Rule 144) will, without the prior written consent of the Company:
(a) acquire, offer to acquire, or agree to acquire, directly or indirectly,
by purchase or otherwise, any voting securities or direct or indirect
rights to acquire any voting securities of the Company or any
subsidiary thereof, or of any successor to or person in control of the
Company, or any assets of the Company or any subsidiary or division
thereof or of any such successor or controlling person;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" or consents to vote (as such terms are used
in the rules of the Securities and Exchange Commission), or seek to
advise or influence any person or entity with respect to the voting of,
any voting securities of the Company;
(c) make any public announcement with respect to, or submit a proposal for,
or offer of (with or without conditions), any extraordinary transaction
involving the Company or its securities or assets; or
(d) form, join or in any way participate in a "group" as defined in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended, in
connection with any of the foregoing.
This letter shall be governed by, and construed in accordance with, the laws
of the State of Ohio and may be executed in counterparts.
Very truly yours,
Barefoot Inc.
/s/ Patrick J. Norton
By: _________________________________
Patrick J. Norton
President and Chief Executive
Officer
Confirmed and Agreed to:
The ServiceMaster Company
/s/ Carlos H. Cantu
By: _________________________________
Carlos H. Cantu
President and Chief Executive
Officer
This 11th day of November, 1996
3
<PAGE>
EXHIBIT 5(B)
CHANGE IN CONTROL AGREEMENT
OF MICHAEL R. GOODRICH
This Change in Control Agreement (the "Agreement") between Barefoot, Inc., a
Delaware corporation (the "Company"), and Michael R. Goodrich (the "Executive")
is made this 16th day of September, 1991.
Whereas, the Company recognizes that the possibility of a Change in Control
(as hereinafter defined) exists and that the threat of the occurrence of a
Change in Control can result in significant distractions of its key management
personnel because of the uncertainties inherent in such a situation; and
Whereas, it is the best interests of the Company and its stockholders to
retain the services of the Executive in the event of a threat or occurrence of
a Change in Control and to ensure his continued dedication and efforts in such
event without undue concern for his personal financial and employment security;
and
Whereas, in order to induce the Executive to remain in the employ of the
Company, particularly in the event of a threat or the occurrence of a Change in
Control, the Company desires to enter into this Agreement with the Executive to
provide the Executive with certain benefits in the event his employment is
terminated as a result of, or in connection with, a Change in Control;
Now, Therefore, in consideration of the foregoing premises and the covenants
contained herein, the parties hereby agree as follows:
1. Term of Agreement. This Agreement shall commence as of the date first
above written and shall continue in effect until December 31, 1992; provided,
however, that commencing on January 1, 1993 and on each January 1 thereafter,
the term of this Agreement shall automatically be extended for one year unless
either the Company or the Executive shall have given written notice to the
other at least 90 days prior thereto that the term of this Agreement shall not
be so extended; and provided further that any notice by the Company not to
extend that is given after the occurrence of a Change in Control shall not be
effective to terminate this Agreement prior to the expiration of 12 months
after the occurrence of the Change in Control.
2. Definitions.
2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned or
accrued through the "Termination Date" but not paid as of the Termination Date,
including (i) base salary, (ii) reimbursement for reasonable and necessary
expenses incurred by the Executive on behalf of the Company during the period
ending on the Termination Date, (iii) vacation pay, and (iv) bonuses and
incentive compensation.
2.2. Base Amount. For purposes of this Agreement, "Base Amount" shall mean
the greater of the Executive's annual base salary (a) at the rate in effect on
the Termination Date or (b) at the highest rate in effect at any time during
the 90-day period prior to the Change in Control, and shall include all amounts
of his base salary that are deferred under any qualified or nonqualified
employee benefit plans of the Company or under any other agreement or
arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount" shall mean
the most recent annual bonus paid or payable to the Executive, or, if greater,
the annual bonus paid or payable for the full fiscal year ended prior to the
fiscal year during which a Change in Control occurred.
2.4. Cause. For purposes of this Agreement, a termination of employment is
for "Cause" if the Executive has been convicted of a felony or the termination
is evidenced by a resolution adopted in good faith by two-thirds of the Board
that the Executive (a) intentionally and continually failed substantially to
perform his reasonably assigned duties with the Company (other than a failure
resulting from the Executive's incapacity due to physical
1
<PAGE>
or mental illness or from the Executive's assignment of duties that would
constitute "Good Reason" as hereinafter defined), which failure continued for a
period of at least 30 days after a written notice of demand for substantial
performance was delivered to the Executive specifying the manner in which the
Executive has failed substantially to perform; or (b) intentionally engaged in
conduct that was demonstrably and materially injurious to the Company;
provided, however, that no termination of the Executive's employment shall be
for Cause as set forth in clause (b) above until (x) there shall have been
delivered to the Executive a copy of a written notice setting forth that the
Executive was guilty of the conduct set forth in clause (b) and specifying the
particulars thereof in detail, and (y) the Executive shall have been provided
an opportunity to be heard in person by the Board (with the assistance of the
Executive's counsel if the Executive so desires). No act, nor failure to act,
on the Executive's part shall be considered "intentional" unless the Executive
has acted, or failed to act, with a lack of good faith and with a lack of
reasonable belief that the Executive's action or failure to act was in the best
interests of the Company.
2.5. Change in Control. For purposes of this Agreement, a "Change in Control"
shall mean any of the following events:
(a) An acquisition (other than directly from the Company) of any voting
securities of the Company (the "Voting Securities") by any "Person" (as the
term person is used for purposes of Section 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), but not
including the underwriters in the Company's initial public offering),
immediately after which such Person has "Beneficial Ownership" (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 40% or more of
the combined voting power of the Company's then outstanding Voting
Securities; provided, however, that in determining whether a Change in
Control has occurred, the acquisition of Voting Securities in a "Non-
Control Acquisition" (as hereinafter defined) shall not cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part thereof) maintained by
either the Company or a Subsidiary, (ii) the Company or any Subsidiary, or
(iii) any Person in connection with a Non-Control Transaction.
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person acquired Beneficial Ownership of more than
the permitted amount of the outstanding Voting Securities as a result of
the acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities outstanding, increases the proportional number
of shares Beneficially Owned by the Subject Person, provided that if a
Change in Control would occur (but for the operation of this sentence) as a
result of the acquisition of Voting Securities by the Company, and after
such share acquisition by the Company, the Subject Person becomes the
Beneficial Owner of any additional Voting Securities which increases the
percentage of the then outstanding Voting Securities Beneficially Owned by
the Subject Person, then a Change in Control shall occur.
(b) During any period of two consecutive years, individuals who at the
beginning of such period constitute the entire Board of Directors (the
"Incumbent Board") cease for any reason to constitute a majority thereof;
provided, however, that if the election, or nomination for election by the
Company's stockholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for
purposes of this Agreement, be considered as a member of the Incumbent
Board.
(c) Approval by stockholders of the Company if required, or if not
required the approval by the Board, of:
(i) a merger, consolidation, or reorganization involving the Company,
unless such merger, consolidation, or reorganization is a Non-Control
Transaction;
(ii) a complete liquidation or dissolution of the Company; or
(iii) an Agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
(d) Notwithstanding anything contained in this Agreement to the contrary,
if the Executive's employment is terminated prior to a Change in Control
and the Executive reasonably demonstrates that such termination (i) was at
the request of a third party who has indicated an intention or taken steps
reasonably calculated to effect a Change in Control and who effectuates a
Change in Control (a "Third Party") or (ii) other-wise occurred in
connection with, or in anticipation of, a Change in Control which actually
occurs,
2
<PAGE>
then for all purposes of this Agreement, the date of a Change in Control
with respect to the Executive shall mean the date immediately prior to the
date of such termination of the Executive's employment.
2.6. Company. For purposes of this Agreement, "Company" shall mean Barefoot
Inc. and shall include Successors and Assigns. Any reference to the Company as
employer of the Executive shall also refer to any Subsidiary, if applicable.
2.7. Disability. For purposes of this Agreement, "Disability" shall mean a
physical or mental infirmity that impairs the Executive's ability to
substantially perform his duties with the Company for a period of 180
consecutive days and the Executive has not returned to his full-time
employment prior to the Termination Date as stated in the Notice of
Termination.
2.8. Good Reason. (a) For purposes of this Agreement, "Good Reason" shall
mean the occurrence after a Change in control of any of the events or
conditions described in paragraphs (i) through (viii) below, unless the
Executive expressly consents in writing to such events or conditions:
(i) a change in the Executive's status, title, position, or
responsibilities (including reporting responsibilities) that, in the
Executive's reasonable judgment, represents an adverse change from his
status, title, position, or responsibilities as in effect at any time
within 90 days preceding the date of a Change in Control or at any time
thereafter; the assignment to the Executive of any duties or
responsibilities that, in the Executive's reasonable judgment, are
inconsistent with his status, title, position, or responsibilities as in
effect at any time within 90 days preceding the date of a Change in Control
or at any time thereafter; or any removal of the Executive from or failure
to reappoint or reelect him to any of such offices or positions, except in
connection with the termination of his employment for Disability, Cause, as
a result of his death, or by the Executive other than for Good Reason;
(ii) a reduction in the Executive's base salary or any failure to pay the
Executive any compensation or benefits to which he is entitled within five
days of the date due;
(iii) the Company's requiring the Executive to be based at any place
outside a 30-mile radius from Worthington, Ohio, except for reasonably
required travel on the Company's business which is not materially greater
than such travel requirements prior to the Change in Control;
(iv) the failure by the Company to (x) continue in effect (without
reduction in benefit level and/or reward opportunities) any material
compensation or employee benefit plan or arrangement (including the
Company's profit sharing plan, group life insurance plan, and medical,
dental, accident and disability plans) in which the Executive was
participating at any time within 90 days preceding the date of a Change in
Control or at any time thereafter, unless such plan is replaced with a plan
that provides substantially equivalent compensation or benefits to the
Executive or (y) provide the Executive with compensation and benefits, in
the aggregate, at least equal (in terms of benefit levels and/or reward
opportunities) to those provided for under each other employee benefit
plan, program, and practice in which the Executive was participating at any
time within 90 days preceding the date of a Change in Control or at any
time thereafter;
(v) the insolvency or the filing (by any party, including the Company) of
a petition for bankruptcy of the Company, which petition is not dismissed
within 60 days;
(vi) any material breach by the Company of any provision of this
Agreement;
(vii) any purported termination of the Executive's employment for Cause
by the Company which does not comply with the terms of Section 2.4; or
(viii) the failure of the Company to obtain an agreement, satisfactory to
the Executive, from any Successors and Assigns to assume and agree to
perform this Agreement, as contemplated in Section 8 hereof.
(b) Any event or condition described in Section 2.8(a)(i) through (viii)
that occurs prior to a Change in Control but which the Executive reasonably
demonstrates either was at the request of a Third Party or otherwise arose in
connection with, or in anticipation of, a Change in Control that actually
occurs, shall constitute Good Reason for purposes of this Agreement
notwithstanding that it occurred prior to the Change in Control.
3
<PAGE>
(c) The Executive's right to terminate his employment pursuant to this
Section 2.8 shall not be effected by his incapacity due to physical or mental
illness.
2.9. Non-Control Transaction. For purposes of this Agreement, a "Non-Control
Transaction" is a merger, consolidation, or reorganization involving the
Company in which:
(a) the stockholders of the Company immediately before such merger,
consolidation, or reorganization own directly or indirectly, immediately
following such merger, consolidation, or reorganization, at least 60% of
the combined voting power of the outstanding voting securities of the
corporation resulting from such merger or consolidation or reorganization
(the "Surviving Corporation") in substantially the same proportion as their
ownership of the Voting Securities immediately before such merger,
consolidation, or reorganization;
(b) the individuals who were members of the Board of Directors
immediately prior to the execution of the agreement providing for such
merger, consolidation, or reorganization constitute at least two-thirds of
the members of the Board of Directors of the Surviving Corporation; and
(c) no Person (other than the Company, any Subsidiary, any employee
benefit plan (or any trust forming a part thereof) maintained by the
Company, the Surviving Corporation, or any Subsidiary, or any Person who,
immediately prior to such merger, consolidation, or reorganization had
Beneficial Ownership of 15% or more of the then outstanding Voting
Securities) has Beneficial Ownership of 15% or more of the combined voting
power of the Surviving Corporation's then outstanding voting securities.
2.10. Notice of Termination. For purposes of this Agreement, following a
Change in Control, "Notice of Termination" shall mean a written notice of
termination from the Company of the Executive's employment that indicates the
specific termination provision in this Agreement relied upon and that sets
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the provision so
indicated.
2.11. Subsidiary. For purposes of this Agreement, "Subsidiary" shall mean a
corporation or other Person, a majority of whose voting power or equity
securities or equity interest is owned directly or indirectly by the Company.
2.12. Successors and Assigns. For purposes of this Agreement, "Successors and
Assigns" shall mean a corporation or other entity acquiring all or
substantially all the assets and business of the Company (including this
Agreement) whether by operation of law or otherwise.
2.13. Termination Date. For purposes of this Agreement, "Termination Date"
shall mean in the case of the Executive's death, his date of death, in the case
of Good Reason, the last day of his employment, and in all other cases, the
date specified in the Notice of Termination; provided, however, that if the
Executive's employment is terminated by the Company for Cause or due to
Disability, the date specified in the Notice of Termination shall be at least
30 days from the date the Notice of Termination is given to the Executive,
provided that in the case of Disability the Executive shall not have returned
to the full-time performance of his duties during such period of at least 30
days.
3. Compensation Upon Termination of Employment. If, during the term of this
Agreement, the Executive's employment with the Company is terminated within 12
months following a Change in Control other than (x) by the Company for Cause or
Disability, (y) by reason of the Executive's death, or (z) by the Executive
other than for Good Reason, the Executive shall be entitled to the following
compensation and benefits, with the amounts in paragraphs (a) through (c) below
payable in cash within five business days after the Executive's Termination
Date:
(a) the Company shall pay the Executive all Accrued Compensation:
(b) the Company shall pay the Executive, as severance pay and in lieu of
any further compensation for periods subsequent to the Termination Date, an
amount equal to the sum of the Base Amount and the Bonus Amount;
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(c) the Company shall pay an amount equal to the excess of (x) the amount
to which the Executive would have been entitled had he been 100% vested and
entitled to receive a distribution as of the Termination Date under all of
the Company's tax-qualified retirement plans in which he was a participant,
over (y) the Executive's vested accrued benefit under such plans; and
(d) the restrictions on any outstanding incentive awards granted to the
Executive under any of the Company's incentive plans or arrangements shall
lapse and such incentive awards shall become 100% vested, all stock options
and stock appreciation rights granted to the Executive shall become
immediately exercisable and shall become 100% vested, and all performance
units granted to the Executive shall become 100% vested;
provided, however, that if any payment or benefit to the Executive or for his
benefit paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise in connection with, or arising out of, his
employment with the Company or a change in ownership or effective control of
the Company or of a substantial portion of its assets would constitute an
excess parachute payment (within the meaning of Section 280G(b) of the Internal
Revenue Code of 1986, as amended (the "Code")) the amount of payments or
benefits hereunder shall be reduced to the largest amount as will result in no
portion of such payments' being subject to the excise tax imposed by Section
4999 of the Code, with the order in which the foregoing benefits lapse to be
determined by the Executive.
4. Mitigation. The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, and no such payment shall be offset or reduced by the amount of any
compensation or benefits provided to the Executive in any subsequent
employment.
5. Relationship to Other Benefits. The severance pay and benefits provided
for in Section 3 hereof shall be in lieu of any other severance or termination
pay to which the Executive may be entitled under any Company severance or
termination plan, program, practice or arrangement, unless the Executive elects
to waive the benefits hereunder in favor of the benefits to which he is
entitled under such other plan, program, practice, or arrangement. Except as
provided in the preceding sentence regarding severance or termination benefits,
however, nothing in this Agreement shall prevent or limit the Executive's
continuing or future participation in any benefit, bonus, incentive, or other
plan or program provided by the Company for which the Executive may qualify, or
limit or reduce such rights as the Executive may have under any other
agreements with the Company. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or program of the
Company shall be payable in accordance with such plan or program, except as
explicitly modified by this Agreement.
6. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense, or other right that
the Company may have against the Executive or others.
7. Notice of Termination. Following a Change in Control, any purported
termination of the Executive's employment by the Company shall be communicated
by a Notice of Termination to the Executive. For purposes of this Agreement, no
such purported termination shall be effective without such Notice of
Termination.
8. Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the Company, its Successors and Assigns, and the
Company shall require any Successors and Assigns to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or assignment had
taken place. Neither this Agreement nor any right or interest thereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal personal representative.
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9. Notices. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, to the recipient at
the address indicated below:
To the Company:
Barefoot Inc.
1018 Proprietors Road
Worthington, Ohio 43085
Attn: Chairman of the Board of Directors
To the Executive:
Michael R. Goodrich
5588 Parker Hill Lane
Dublin, Ohio 43017
or such other address or to the attention of such other persons as the
recipient party shall have specified by prior written notice to the sending
party.
10. Waiver. No provision of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time.
11. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Ohio without giving effect
to the conflict of laws principles thereof. Any action brought by any party to
this Agreement shall be brought and maintained in a court of competent
jurisdiction in Franklin County in the State of Ohio.
12. Severability. The provisions of this Agreement shall be deemed severable,
and the invalidity or unenforceability of any provision shall not affect the
validity or enforceability of the other provisions hereof.
13. Entire Agreement. This Agreement constitutes the entire agreement between
the parties hereto and supersedes all prior agreements, if any, understandings,
and arrangements, oral or written, between the parties hereto with respect to
the subject matter hereof.
In Witness Whereof, the parties have executed this Agreement as of the day
and year first above written.
THE COMPANY:
Barefoot Inc.
/s/ Patrick J. Norton
By___________________________________
Patrick J. Norton, President
THE EXECUTIVE:
/s/ Michael R. Goodrich
-------------------------------------
Michael R. Goodrich
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January 17, 1997
IMPORTANT: This letter describes actions you need to take promptly in order to
take advantage of an opportunity to sell your Barefoot shares at a
substantial premium over the price which has been available in the
public market.
Dear Barefoot Shareholder:
On behalf of the Board of Directors of Barefoot, I am pleased to confirm
that Barefoot has reached an agreement with ServiceMaster Limited Partnership
("ServiceMaster") under which ServiceMaster is offering to acquire your shares
of Barefoot at a substantial premium over the market price for the Barefoot
shares prior to the public announcement of the offer.
This opportunity has been carefully studied by Barefoot's Board of
Directors. Barefoot's Board recommends that Barefoot's stockholders accept
ServiceMaster's offer and tender their Barefoot shares.
You have the right to choose to receive all cash, all ServiceMaster shares
or any combination thereof in exchange for your Barefoot shares. This choice
is completely up to you. Neither Barefoot nor ServiceMaster makes any
recommendation as to which choice you should make.
One important difference between the alternatives available to you is that
if you choose cash you will be obligated to pay federal income tax on the gain
you will realize on the sale of your Barefoot shares; if you choose instead to
receive ServiceMaster shares, you will be entitled to defer recognition of
your gain for federal income tax purposes until you sell the ServiceMaster
shares you receive. Among the non-tax factors a Barefoot stockholder may wish
to consider in choosing among the alternatives include: the stockholder's
willingness to assume the risk inherent in holding ServiceMaster shares with a
view to possibly realizing future gains (as to which no assurance can be
given); and the stockholder's evaluation of the attractiveness of alternative
investments which the stockholder would be able to make with the net after tax
proceeds which the stockholder would receive if the stockholder elected to
receive cash. A stockholder who would be subject to little or no tax upon the
disposition of Barefoot shares will likely give little or no weight to the tax
related factors identified above and may accordingly evaluate the relative
attractiveness of the alternatives differently from a stockholder who is in a
taxable situation.
In order to accept ServiceMaster's offer and to elect to receive cash and/or
ServiceMaster shares you need to act promptly. If your Barefoot shares are
registered in your own name, you should take the following steps:
. Fill out and sign the enclosed form entitled "Letter of Transmittal/Form
of Election." Be sure you complete the Election Form on Box B to specify
whether you wish to receive cash or ServiceMaster shares in exchange for
your Barefoot shares. If you don't fill out this election, you will
receive cash for your Barefoot shares.
. Send the completed Letter of Transmittal/Form of Election and the
certificates representing your shares to Harris Trust Company of New
York at the address given on the first page of the Letter of
Transmittal/Form of Election. An envelope is enclosed which you can use
to send your share certificates. It is your responsibility to send your
completed Transmittal Letter/Form of Election and Barefoot share
certificates in time so they will actually be received by Harris Trust
not later than 12:00 midnight, New York City time, on the Expiration
Date (which is currently scheduled to be Friday, February 21, 1997).
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If your Barefoot shares are held in an account for you at a brokerage firm,
bank, or other institution, you should instruct the institution that holds
your shares as to what you want done with your shares in response to the
ServiceMaster offer. The package which accompanies this letter should have a
letter from your broker (or other institution) advising you how to give your
instructions.
ServiceMaster has retained D. F. King & Co. to act as Information Agent for
this Offer. If you have any questions about what steps you need to take to
tender your shares or have other questions about the Offer, please call D. F.
King toll free at 1-800-848-3410.
This letter is accompanied by an Offering Circular/Prospectus which provides
information relevant to your decision whether to accept ServiceMaster's offer
and if you do, whether to choose to receive cash, ServiceMaster shares or a
combination of the two. The Offering Circular/Prospectus, for example,
contains a summary of the tax consequences of the alternatives, the
considerations examined by Barefoot's Board and its financial advisor, the
historical market prices for Barefoot shares and ServiceMaster shares, and
many other subjects. All information in this letter is qualified by reference
to that Offering Circular/Prospectus.
As indicated in the Offering Circular/Prospectus, ServiceMaster operates the
largest lawn care business in the United States under the TruGreen and
ChemLawn service marks. Barefoot is the next largest lawn care company, and
putting our business together with ServiceMaster's has the potential to
provide real benefits both to the businesses and to their customers.
I appreciate very much the opportunity I have had to serve as the chief
executive officer of your company. I hope you are as pleased as I am that
investment in Barefoot has led to the opportunity afforded by the
ServiceMaster offer.
With best wishes,
Patrick J. Norton
President
