AGREEMENT AND PLAN OF MERGER
dated as of
March 22, 1999
by and among
AMERICAN RESIDENTIAL SERVICES, INC.
THE SERVICEMASTER COMPANY
and
SVM M9 ACQUISITION CORPORATION
TABLE OF CONTENTS
Page
----
ARTICLE 1 THE OFFER............................................................... 1
Section 1.1 The Offer................................................. 1
Section 1.2 ARS Actions............................................... 3
ARTICLE 2 THE MERGER...............................................................5
Section 2.1 The Merger................................................ 5
Section 2.2 Closing................................................... 5
Section 2.3 Effective Time............................................ 5
Section 2.4 Effects of the Merger..................................... 5
ARTICLE 3 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; PAYMENT OF MERGER CONSIDERATION; ARS STOCK OPTIONS........ 6
Section 3.1 Effect on Capital Stock................................... 6
Section 3.2 Payment of Merger Consideration........................... 7
Section 3.3 Stock Options............................................. 9
ARTICLE 4 ARS WARRANTIES..........................................................10
Section 4.1 Organization..............................................10
Section 4.2 Corporate Authorization; Validity of Agreement;
Board Action..............................................10
Section 4.3 Consents and Approvals; No Violations.....................11
Section 4.4 Capitalization............................................12
Section 4.5 Subsidiaries; Capitalization of Subsidiaries..............13
Section 4.6 SEC Reports and Financial Statements......................13
Section 4.7 Information Supplied......................................14
Section 4.8 Absence of Certain Changes................................14
Section 4.9 No Undisclosed Liabilities................................16
Section 4.10 Employee Benefit Plans....................................16
Section 4.11 Compliance with Law.......................................18
Section 4.12 Litigation................................................19
Section 4.13 No Default................................................19
Section 4.14 Taxes.....................................................19
Section 4.15 Contracts.................................................23
Section 4.16 Transactions with Affiliates..............................23
Section 4.17 Environmental Matters.....................................23
Section 4.18 Intellectual Property.....................................25
Section 4.19 Opinion of Financial Advisor..............................25
Section 4.20 Finders and Investment Bankers............................25
Section 4.21 Takeover Statutes.........................................25
TABLE OF CONTENTS
Page
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Section 4.22 Insurance.................................................26
Section 4.23 Board Action Regarding ARS Option Plans...................26
Section 4.24 Board Action Regarding Rights Agreement...................26
ARTICLE 5 WARRANTIES OF SERVICEMASTER AND ACQUISITION SUBSIDIARY..................26
Section 5.1 Organization..............................................27
Section 5.2 Corporate Authorization; Validity of Agreement;
Necessary Action.........................................27
Section 5.3 Consents and Approvals; No Violations.....................27
Section 5.4 Capitalization............................................28
Section 5.5 SEC Reports and Financial Statements......................29
Section 5.6 Absence of Certain Changes................................29
Section 5.7 No Undisclosed Liabilities................................29
Section 5.8 Litigation................................................30
Section 5.9 Compliance with Law.......................................30
Section 5.10 No Default................................................30
Section 5.11 Information Supplied......................................30
Section 5.12 Opinion of Financial Advisor..............................31
Section 5.13 Finders and Investment Bankers............................31
Section 5.14 Ownership of ARS Common Stock.............................31
ARTICLE 6 COVENANTS OF ARS........................................................31
Section 6.1 Conduct of Business by ARS Pending the Merger.............31
Section 6.2 ARS Stockholder Approval; Preparation of Proxy Statement..33
Section 6.3 Access to Information.....................................34
Section 6.4 No Solicitation...........................................34
Section 6.5 Corporate Organization....................................36
Section 6.6 Monthly Financial Statements..............................36
Section 6.7 Resignation of ARS Directors..............................36
ARTICLE 7 COVENANTS OF SERVICEMASTER..............................................37
Section 7.1 Obligations of Acquisition Subsidiary.....................37
Section 7.2 Indemnification...........................................37
ARTICLE 8 COVENANTS OF SERVICEMASTER AND ARS......................................38
Section 8.1 Diligent Efforts..........................................38
Section 8.2 Certain Filings...........................................38
Section 8.3 Public Announcements......................................38
Section 8.4 Further Assurances........................................38
Section 8.5 Notices of Certain Events.................................39
Section 8.6 Regulatory Matters and Approvals..........................39
Section 8.7 Representations...........................................39
Section 8.8 Material Consents.........................................39
ARTICLE 9 CONDITIONS........................................................40
Section 9.1 Conditions to the Offer...................................40
Section 9.2 Conditions to the Merger..................................40
ARTICLE 10 TERMINATION.......................................................41
Section 10.1 Termination...............................................41
Section 10.2 Waiver....................................................43
Section 10.3 Effect of Termination; Termination Fee....................44
ARTICLE 11 MISCELLANEOUS.....................................................45
Section 11.1 Notices...................................................45
Section 11.2 Survival of Representations and Warranties................46
Section 11.3 Amendments; No Waivers....................................46
Section 11.4 Expenses..................................................46
Section 11.5 Successors and Assigns....................................46
Section 11.6 Governing Law.............................................46
Section 11.7 Counterparts; Effectiveness...............................46
Section 11.8 Headings..................................................46
Section 11.9 No Third Party Beneficiaries..............................47
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") has been made as of
March 22, 1999 (the "date hereof") by and among American Residential Services,
Inc., a Delaware corporation ("ARS"), The ServiceMaster Company, a Delaware
corporation ("ServiceMaster"), and SVM M9 ARS Acquisition Corporation, a
Delaware corporation and a wholly-owned subsidiary of ServiceMaster
("Acquisition Subsidiary").
WHEREAS, in furtherance of the acquisition of ARS by ServiceMaster on the
terms and subject to the conditions set forth in this Agreement, ServiceMaster
proposes to cause Acquisition Subsidiary to make a tender offer (as it may be
amended from time to time as permitted under this Agreement, the "Offer") to
purchase all the outstanding shares of Common Stock, par value $0.001 per share,
of ARS, together with the related preferred stock purchase rights (the "ARS
Common Stock" and the shares of ARS Common Stock being hereinafter collectively
referred to as the "ARS Shares"), at a purchase price of $5.75 per ARS Share, or
such higher price as ServiceMaster may decide to offer in its sole and absolute
discretion in the Offer (the "Offer Price"), net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in this
Agreement.
WHEREAS, the respective boards of directors of ServiceMaster, Acquisition
Subsidiary and ARS have declared advisable and approved the Offer and the merger
of Acquisition Subsidiary with and into ARS (the "Merger") upon the terms and
subject to the conditions set forth in this Agreement, whereby each issued and
outstanding ARS Share, other than ARS Shares owned directly or indirectly by
ServiceMaster or ARS and Dissenting Shares (as hereinafter defined), will be so
purchased in the Offer or converted in the Merger into the right to receive the
price per ARS Share paid in the Offer.
WHEREAS, ServiceMaster, Acquisition Subsidiary and ARS desire to make
certain representations, warranties, covenants and agreements in connection with
the Offer and the Merger and also to prescribe various conditions to the Offer
and the Merger.
The parties hereto agree as follows:
ARTICLE 1
THE OFFER
Section 1.1 The Offer.
(a) Subject to the provisions of this Agreement and the satisfaction
or waiver of the conditions set forth in this Agreement, as promptly as
practicable but in no event later than
March 29, 1999, Acquisition Subsidiary shall, and ServiceMaster shall cause
Acquisition Subsidiary to, commence the Offer. ServiceMaster shall not be
obligated to commence the Offer if any state of facts or events shall exist
which would entitle ServiceMaster to not acquire the ARS Shares tendered in
response to the Offer under the conditions set forth in Section 9.1, other than
the Minimum Condition (as hereinafter defined). The initial scheduled expiration
date for the Offer shall be April 26, 1999. Acquisition Subsidiary shall be
obligated to, and ServiceMaster shall cause Acquisition Subsidiary to, accept
for payment, and pay for as promptly as practicable after the expiration of the
Offer, all ARS Shares validly tendered pursuant to the Offer and not withdrawn,
subject only to the conditions with respect to the Offer set forth in Section
9.1 (any of which may be waived in whole or in part by Acquisition Subsidiary in
its sole discretion); provided that, without the consent of ARS, Acquisition
Subsidiary shall not waive the Minimum Condition. Acquisition Subsidiary
expressly reserves the right to modify the terms of the Offer, except that,
without the consent of ARS, Acquisition Subsidiary shall not (i) reduce the
number of ARS Shares subject to the Offer, (ii) reduce the Offer Price below
$5.75 per ARS Share, net to the seller in cash, (iii) add to the conditions with
respect to the Offer set forth in Section 9.1, (iv) except as provided in the
next sentence, extend the Offer, (v) change the form of consideration payable in
the Offer or (vi) amend any other term of the Offer in any manner adverse to the
holders of the ARS Shares. Notwithstanding the foregoing, Acquisition Subsidiary
may, without the consent of ARS, (A) extend the Offer, if at the initial
scheduled or extended expiration date of the Offer any of the conditions with
respect to the Offer set forth in Section 9.1 shall not be satisfied or waived,
until such time as such conditions are satisfied or waived, (B) extend the Offer
for any period required by any rule, regulation, interpretation or position of
the Securities and Exchange Commission (the "SEC") or the staff thereof
applicable to the Offer and (C) extend the Offer on one or more occasions for an
aggregate period of not more than 5 business days beyond the latest expiration
date that would otherwise be permitted under clauses (A) or (B) of this
sentence, if on such expiration date there shall not have been tendered at least
90 percent of the outstanding ARS Shares. ServiceMaster will (and will cause
Acquisition Subsidiary to) consummate the Merger as soon as practicable after
the consummation of the Offer.
(b) On the date of commencement of the Offer, ServiceMaster and
Acquisition Subsidiary shall file with the SEC a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") with respect to the Offer, which shall
contain an offer to purchase and a related letter of transmittal and summary
advertisement (such Schedule 14D-1 and the documents included therein pursuant
to which the Offer will be made, together with any supplements or amendments
thereto, the "Offer Documents"). ServiceMaster and Acquisition Subsidiary agree
that the Offer Documents shall comply as to form in all material respects with
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
rules and regulations promulgated thereunder and the Offer Documents, on the
date first published, sent or given to the stockholders of ARS, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by ServiceMaster
or
2
Acquisition Subsidiary with respect to information supplied by ARS or any of its
affiliates or representatives specifically for inclusion or incorporation by
reference in the Offer Documents. Each of ServiceMaster, Acquisition Subsidiary
and ARS agree promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that such information shall have become
false or misleading in any material respect, and ServiceMaster and Acquisition
Subsidiary further agree to take all steps reasonably necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to the stockholders of ARS, in each
case as and to the extent required by applicable federal securities laws. ARS
and its counsel shall be given reasonable opportunity to review and comment upon
the Offer Documents prior to their filing with the SEC or dissemination to the
stockholders of ARS. ServiceMaster and Acquisition Subsidiary agree to provide
ARS and its counsel any comments ServiceMaster, Acquisition Subsidiary or their
counsel may receive from the SEC or its staff with respect to the Offer
Documents promptly after the receipt of such comments.
(c) ServiceMaster shall provide or cause to be provided to Acquisition
Subsidiary on a timely basis the funds necessary to accept for payment, and to
pay for, any ARS Shares that Acquisition Subsidiary becomes obligated to accept
for payment, and to pay for, pursuant to the Offer.
Section 1.2 ARS Actions.
(a) ARS hereby approves of and consents to the Offer and represents
that the board of directors of ARS, at a meeting duly called and held, duly and
unanimously adopted resolutions approving this Agreement, the Offer and the
Merger, determining, as of the date of such resolutions, that the terms of the
Offer and the Merger are fair to, and in the best interests of, the stockholders
of ARS, unanimously recommending that the stockholders of ARS accept the Offer,
tender their shares pursuant to the Offer and adopt this Agreement if such
adoption is required and approving the acquisition of ARS Shares by Acquisition
Subsidiary pursuant to the Offer and the other transactions contemplated by this
Agreement. ARS believes that each of its directors currently intends to tender
all ARS Shares (other than ARS Shares, if any, held by such person that, if
tendered, could cause such person to incur liability under the provisions of
Section 16(b) of the Exchange Act) owned by such person pursuant to the Offer.
(b) On the date the Offer Documents are filed with the SEC, ARS shall
file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 with
respect to the Offer (such Schedule 14D-9, as supplemented or amended from time
to time, the "Schedule 14D-9") containing, subject to the terms of this
Agreement, the recommendation described in paragraph (a) of this Section and
shall mail the Schedule 14D-9 to the stockholders of ARS; provided that the
board of directors of ARS may, prior to the purchase of the ARS Shares pursuant
to the Offer, withdraw or modify such recommendation if the board of directors
of ARS, after having consulted with outside counsel, determines that the refusal
to do so would constitute a breach by the board of
3
directors of ARS of its fiduciary duties under applicable laws; provided further
that the board of directors of ARS may not approve or recommend (and in
connection therewith, withdraw or modify the recommendation described in
paragraph (a) of this Section) an Acquisition Transaction (as hereinafter
defined) other than the Offer and the Merger unless such Acquisition Transaction
is a bona fide unsolicited written proposal from a third party that constitutes
a Qualified Competing Proposal (as hereinafter defined) under the criteria
prescribed in Section 6.4(c). The Schedule 14D-9 shall comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder and, on the date filed with the SEC and on
the date first published, sent or given to the stockholders of ARS, shall not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation or warranty is made by ARS with
respect to information supplied by ServiceMaster or any of its Subsidiaries (as
hereinafter defined) or representatives specifically for inclusion or
incorporation by reference in the Schedule 14D-9. Each of ARS, ServiceMaster and
Acquisition Subsidiary agrees promptly to correct any information provided by it
for use in the Schedule 14D-9 if and to the extent that such information shall
have become false or misleading in any material respect, and ARS further agrees
to take all steps necessary to amend or supplement the Schedule 14D-9 and to
cause the Schedule 14D-9 as so amended or supplemented to be filed with the SEC
and disseminated to the stockholders of ARS, in each case as and to the extent
required by applicable federal securities laws. ServiceMaster and its counsel
shall be given reasonable opportunity to review and comment upon the Schedule
14D-9 prior to its filing with the SEC or dissemination to stockholders of ARS.
ARS agrees to provide ServiceMaster and its counsel any comments ARS or its
counsel may receive from the SEC or its staff with respect to the Schedule 14D-9
promptly after the receipt of such comments.
(c) In connection with the Offer and the Merger, ARS shall cause its
transfer agent to furnish Acquisition Subsidiary promptly with mailing labels
containing the names and addresses of the record holders of ARS Shares as of a
recent date and of those persons becoming record holders subsequent to such
date, together with copies of all lists of stockholders, security position
listings and computer files and all other information in the possession or
control of ARS regarding the beneficial owners of ARS Shares, and shall furnish
to Acquisition Subsidiary such information and assistance (including updated
lists of stockholders, security position listings and computer files) as
ServiceMaster may reasonably request in communicating the Offer to the
stockholders of ARS. Subject to the requirements of applicable law, and except
for such steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, ServiceMaster and Acquisition
Subsidiary and their agents shall hold in confidence the information contained
in any such labels, listings and files, will use such information only in
connection with the Offer and the Merger and, if the Offer and this Agreement
shall be terminated, will deliver, and will use their reasonable efforts to
cause their agents to deliver, to ARS all copies and any extracts or summaries
from such information then in their possession or control.
4
ARTICLE 2
THE MERGER
Section 2.1 The Merger. Subject to the last two sentences of this
Section 2.1, upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), Acquisition Subsidiary shall be merged with and into
ARS at the Effective Time (as hereinafter defined). Following the Effective
Time, the separate corporate existence of Acquisition Subsidiary shall cease and
ARS shall continue as the surviving corporation (the "Surviving Corporation")
and shall succeed to and assume all the rights and obligations of Acquisition
Subsidiary in accordance with Delaware Law. At the election of ServiceMaster,
to the extent that any such action would not cause a failure of a condition to
the Offer or the Merger, (i) any direct or indirect wholly-owned subsidiary of
ServiceMaster may be substituted for and assume all of the rights and
obligations of Acquisition Subsidiary as a constituent corporation in the Merger
or (ii) ARS may be merged with and into Acquisition Subsidiary with Acquisition
Subsidiary continuing as the Surviving Corporation with the effects set forth
above and in Section 2.4. In either such event, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect the foregoing.
Section 2.2 Closing. The closing (the "Closing") of the Merger will take
place at 10:00 a.m. (Chicago time) on a date to be specified by ServiceMaster or
Acquisition Subsidiary, which shall be no later than the second business day
after satisfaction or waiver of the conditions set forth in Section 9.2 (the
"Closing Date"), at the offices of Xxxxxxxx & Xxxxx, unless another date, time
or place is agreed to in writing by the parties hereto.
Section 2.3 Effective Time. Subject to the provisions of this
Agreement, as soon as practicable on or after the Closing Date, the parties
shall file with the Delaware Secretary of State a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger") executed
in accordance with the relevant provisions of Delaware Law and shall make all
other filings or recordings required under Delaware Law. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the Delaware Secretary of State, or at such other time as Acquisition Subsidiary
and ARS shall agree should be specified in the Certificate of Merger (the time
the Merger becomes effective being hereinafter referred to as the "Effective
Time").
Section 2.4 Effects of the Merger.
(a) The Merger shall have the effects set forth in Section 259 of
Delaware Law.
(b) The certificate of incorporation of ARS shall be amended and
restated at the Effective Time of the Merger to be identical to the certificate
of incorporation of Acquisition Subsidiary (except that the name of the
Surviving Corporation shall remain American Residential
5
Services, Inc.) and as so amended and restated it shall be the restated
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law.
(c) The bylaws of Acquisition Subsidiary in effect at the Effective
Time shall be the bylaws of the Surviving Corporation until amended in
accordance with applicable law.
For purposes of this Agreement, "Person" or "person" means an individual, a
corporation, a limited liability company, a partnership, an association, a trust
or any other entity or organization, including a government or political
subdivision or any agency or instrumentality thereof. For purposes of this
Agreement, the word "Subsidiary" when used with respect to any Person means any
other corporation or other entity of which a majority of the securities or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions are directly or
indirectly owned by such Person.
ARTICLE 3
EFFECT OF THE MERGER ON THE CAPITAL
STOCK OF THE CONSTITUENT CORPORATIONS;
PAYMENT OF MERGER CONSIDERATION; ARS STOCK OPTIONS
Section 3.1 Effect on Capital Stock. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any ARS
Shares or any shares of capital stock of Acquisition Subsidiary:
(a) Each issued and outstanding share of capital stock of Acquisition
Subsidiary shall be converted into and become one fully paid and nonassessable
share of Common Stock, par value $0.01 per share, of the Surviving Corporation.
(b) Each ARS Share that is owned by ARS or by any Subsidiary of ARS
and each ARS Share that is owned by ServiceMaster, Acquisition Subsidiary or any
other Subsidiary of ServiceMaster shall automatically be canceled and retired
and shall cease to exist, and no consideration shall be delivered in exchange
therefor.
(c) Subject to paragraph (d) of this Section, each issued and
outstanding ARS Share, other than ARS Shares to be canceled in accordance with
paragraph (b) of this Section, shall be converted into the right to receive from
the Surviving Corporation in cash, without interest, the Offer Price (the
"Merger Consideration").
(d) Notwithstanding anything in this Agreement to the contrary, any
issued and outstanding ARS Shares held by a person (a "Dissenting Stockholder")
who complies with all the provisions of Delaware Law concerning the right of
holders of ARS Shares to require appraisal of
6
their ARS Shares ("Dissenting Shares") shall not be converted as described in
Section 3.1(c), but shall be converted into the right to receive such
consideration as may be determined to be due to such Dissenting Stockholder
pursuant to Delaware Law. If, after the Effective Time, such Dissenting
Stockholder withdraws his demand for appraisal or fails to perfect or otherwise
loses his right to appraisal, in any case pursuant to Delaware Law, his ARS
Shares shall be deemed to be converted as of the Effective Time into the right
to receive the Merger Consideration, without interest. ARS shall give
ServiceMaster (i) prompt notice of any demands for appraisal of ARS Shares
received by ARS or the receipt by ARS of any documents or instruments with
respect to rights of appraisal pursuant to Delaware Law and (ii) the opportunity
to participate in and direct all negotiations and proceedings with respect to
any such demands. ARS shall not, without the prior written consent of
ServiceMaster, make any payment with respect to, or settle, offer to settle or
otherwise negotiate, any such demands.
(e) From and after the Effective Time, all ARS Shares converted in
accordance with Section 3.1 shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate formerly representing any such ARS Shares (other than any Dissenting
Shares) shall cease to have any rights with respect thereto, except the right to
receive the Merger Consideration without interest.
Section 3.2 Payment of Merger Consideration.
(a) Prior to the Effective Time, ServiceMaster shall appoint an agent
reasonably acceptable to ARS (the "Exchange Agent") for the purpose of
exchanging certificates formerly representing ARS Shares for the Merger
Consideration. Immediately following the Effective Time, ServiceMaster shall
deposit with the Exchange Agent, for the benefit of the holders of certificates
formerly representing ARS Shares, the Merger Consideration issuable pursuant to
Section 3.1(c). Promptly after the Effective Time, ServiceMaster will send, or
will cause the Exchange Agent to send, to each holder of ARS Shares at the
Effective Time (i) a letter of transmittal for use in such exchange (which shall
specify that delivery of the Merger Consideration shall be effected, and risk of
loss and title to the certificates representing ARS Common Stock shall pass,
only upon proper deliver of the certificates formerly representing ARS Shares to
the Exchange Agent) and (ii) instructions for use in effecting the surrender of
the certificates formerly representing ARS Shares in exchange for the Merger
Consideration.
(b) Each holder of ARS Shares that have been converted into a right to
receive the Merger Consideration, upon surrender to the Exchange Agent of a
certificate or certificates formerly representing such ARS Shares, together with
a properly completed and duly executed letter of transmittal covering such ARS
Shares and such other documents as may reasonably be required by the Exchange
Agent, will be entitled to receive the Merger Consideration payable in respect
of such ARS Shares. Until so surrendered, each such certificate shall, after
the Effective Time, represent for all purposes only the right to receive the
Merger Consideration without interest.
7
(c) If any portion of the Merger Consideration is to be paid to a
Person other than the registered holder of the ARS Shares formerly represented
by the certificate or certificates surrendered in exchange therefor, it shall be
a condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the Person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a Person other than the
registered holder of such ARS Shares formerly represented by the certificate or
certificates so surrendered or establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable.
(d) After the Effective Time, there shall be no further registration
of transfers of ARS Shares. If, after the Effective Time, certificates formerly
representing ARS Shares are presented to the Surviving Corporation, they shall
be canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article.
(e) Any portion of the Merger Consideration made available to the
Exchange Agent pursuant to Section 3.2(a) that remains unclaimed by the holders
of certificates formerly representing ARS Shares one year after the Effective
Time shall be returned to ServiceMaster, upon demand, and any such holder who
has not exchanged his certificates formerly representing ARS Shares for the
Merger Consideration in accordance with this Section prior to that time shall
thereafter look only to ServiceMaster for payment of the Merger Consideration.
Neither ServiceMaster, ARS nor the Exchange Agent shall be liable to any person
in respect of any Merger Consideration delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any certificate
formerly representing ARS Shares shall not have been surrendered prior to two
years after the Effective Time, or immediately prior to such earlier date on
which any Merger Consideration would otherwise escheat to or become the property
of any Governmental Entity (as hereinafter defined), any such Merger
Consideration shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(f) The Exchange Agent shall invest any cash deposited with the
Exchange Agent, as directed by ServiceMaster, on a daily basis. Any interest
and other income resulting from such investments shall be paid to ServiceMaster.
(g) If any certificate representing ARS Shares outstanding as of the
Effective Time shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting
by such person of a bond in such reasonable amount as the Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such certificate, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed certificate the Merger Consideration due to such
person pursuant to this Agreement.
8
Section 3.3 Stock Options.
(a) Upon consummation of the Merger, (i) every outstanding stock
option granted by ARS (the "ARS Stock Options") under its 1996 Incentive Plan or
under its 1997 Employee Incentive Plan (the "ARS Option Plans") and (ii) the
March 6, 1996 warrant of ARS held by Equus II Incorporated, if such warrant is
outstanding at the Effective Time (the "ARS Warrant") shall automatically
convert so that: (i) common stock, par value $0.01 per share, of ServiceMaster
(the "ServiceMaster Common Stock") shall be substituted for ARS Common Stock as
the security purchasable under the option or warrant; (ii) the number of shares
of ServiceMaster Common Stock subject to the option or warrant immediately after
the Merger shall be equal to the product derived by multiplying the number of
shares of ARS Common Stock that shall have been subject to the option or warrant
immediately prior to the Merger by the Option Exchange Ratio (as hereinafter
defined); and (iii) the exercise price per share at which ServiceMaster Common
Stock shall be purchasable immediately after the Merger shall be equal to
quotient derived by dividing the exercise price per share at which ARS Common
Stock shall have been purchasable prior to the Merger by the Option Exchange
Ratio. "Option Exchange Ratio" means a fraction equal to (i) the Offer Price
divided by (ii) the average of the closing prices of ServiceMaster Common Stock
on the New York Stock Exchange (the "NYSE") Composite Transaction Tape (as
reported in The Wall Street Journal or, if not reported thereby, any other
authoritative source reasonably designated by the Chief Financial Officer of
ServiceMaster), on the 20 consecutive Trading Days (as hereinafter defined)
ending on the Trading Day on which the Offer is consummated (or if such day is
not a Trading Day, the Trading Day first preceding such consummation day).
"Trading Day" means any day on which the NYSE is open for trading.
(b) All ARS Stock Options and the ARS Warrant as modified pursuant to
this Section shall remain in effect after the Effective Time and all conditions
and restrictions relating to all such options and warrant, including limitations
on exercisability, risks of forfeiture and conditions and restrictions requiring
continued performance of services with respect to the exercisability or
settlement of such ARS Stock Options or ARS Warrant, shall remain in effect
(except that for purposes of this Agreement, the ARS Stock Options granted to
non-employee directors of ARS shall be treated as if the respective director had
resigned with the consent of the majority of the other directors).
(c) As soon as practicable after the Effective Time, ServiceMaster
shall deliver to the holders of ARS Stock Options appropriate notices setting
forth the rights of such holders pursuant to the respective ARS Option Plans and
the agreements evidencing the grants of such ARS Stock Options. ARS has
concurrent with the execution and delivery of this Agreement delivered to
ServiceMaster a true and correct agreement (originally executed) of the holder
of the ARS Warrant which contains the consent and agreement of such holder to
the treatment of the ARS Warrant contemplated by paragraph (a) above.
9
(d) ServiceMaster shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of ServiceMaster Common Stock
for delivery on exercise of the ARS Stock Options and the ARS Warrant assumed in
accordance with this Section. As soon as reasonably practicable after the
Effective Time, ServiceMaster shall file a registration statement on Form S-8
(or any successor or other appropriate form) with respect to the shares of
ServiceMaster Common Stock subject to such ARS Stock Options and shall use
reasonable efforts to maintain the effectiveness of such registration statement
for so long as any such ARS Stock Options remain outstanding.
ARTICLE 4
ARS WARRANTIES
References in this Agreement to the "ARS Disclosure Schedule" and in this
Article to "Schedule" mean the document captioned "ARS Disclosure Schedule" as
constituted upon its delivery to ServiceMaster prior to ServiceMaster's
execution and delivery of this Agreement. ARS warrants to ServiceMaster and
Acquisition Subsidiary as follows, subject in the case of the warranties in each
particular section below to the exceptions set forth in the corresponding
section of the ARS Disclosure Schedule.
The term "ARS Material Adverse Effect" means any change or effect that
would be materially adverse to the business, financial condition or results of
operations of ARS and its Subsidiaries taken as a whole, other than any change
or effect to the extent it results from (i) the announcement and performance of
this Agreement and the transactions contemplated hereby and the compliance with
the covenants set forth herein, (ii) any actions required under this Agreement
to obtain any approval or authorization under applicable antitrust or
competition laws for the consummation of the Merger, (iii) changes in any tax
laws or regulations or applicable accounting regulations or principles or (iv)
changes in weather patterns adverse to ARS or in corporate interest rates.
Section 4.1 Organization. Each of ARS and its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate or other
power and authority and all necessary governmental approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority and governmental approvals would not have an ARS
Material Adverse Effect. Each of ARS and its Subsidiaries is duly qualified or
licensed to do business and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification or licensing necessary, except where the failure
to be so duly qualified or licensed and in good standing would not have an ARS
Material Adverse Effect.
10
Section 4.2 Corporate Authorization; Validity of Agreement; Board Action.
ARS has full corporate power and authority to execute and deliver this Agreement
and, subject to obtaining, if required by applicable law, the adoption of this
Agreement by an affirmative vote of the holders of a majority of the outstanding
ARS Shares (the "ARS Stockholder Approval"), to consummate the transactions
contemplated hereby. The execution, delivery and performance by ARS of this
Agreement, and the consummation by it of the transactions contemplated hereby,
have been duly and validly authorized by its board of directors and, except for
obtaining the ARS Stockholder Approval if such is required, no other corporate
action or proceedings on the part of ARS is necessary to authorize the execution
and delivery by ARS of this Agreement, and the consummation by it of the
transactions contemplated hereby. The ARS Stockholder Approval if such is
required is the only vote of the holders of any class or series of the capital
stock of ARS which is necessary to adopt this Agreement. This Agreement has been
duly executed and delivered by ARS and, assuming this Agreement constitutes a
valid and binding obligation of ServiceMaster and Acquisition Subsidiary,
constitutes a valid and binding obligation of ARS, enforceable against ARS in
accordance with its terms, except that (i) such enforcement may be subject to
applicable bankruptcy, insolvency or other similar laws, now or hereafter in
effect, affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the court before which any
proceeding therefor may be brought.
Section 4.3 Consents and Approvals; No Violations. Except for all filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act of 1933,
as amended (the "Securities Act"), the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the NYSE, the state securities or "blue
sky" laws and any applicable state takeover laws, and except for the ARS
Stockholder Approval if such is required and the filing of the Certificate of
Merger as required by Delaware Law, neither the execution, delivery or
performance of this Agreement nor the consummation by ARS of the transactions
contemplated hereby nor compliance by ARS with any of the provisions hereof
will:
(a) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws (or other organizational documents with
respect to entities that are not corporations) of ARS or of any of its
Subsidiaries;
(b) require any filing with, or permit, authorization, consent or
approval of, any court, arbitral tribunal, administrative agency or commission
or other governmental or other regulatory authority, commission or agency (a
"Governmental Entity"), except where the failure to obtain such permits,
authorizations, consents or approvals or to make such filings would not have an
ARS Material Adverse Effect and would not, or would not be reasonably likely to,
materially impair the ability of ARS or, to the knowledge of ARS, ServiceMaster
or Acquisition Subsidiary to consummate the transactions contemplated by this
Agreement;
11
(c) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration) under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, guarantee,
other evidence of indebtedness (collectively, the "Debt Instruments"), lease,
license, contract, agreement or other instrument or obligation to which ARS or
any of its Subsidiaries is a party or by which any of them or any of their
properties or assets may be bound (an "ARS Agreement"), except for any
violation, breach or default which would not have an ARS Material Adverse
Effect;
(d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to ARS, any of its Subsidiaries or any of their properties
or assets, except for any violation which would not have an ARS Material Adverse
Effect; or
(e) result in the creation or imposition of any mortgage, lien,
pledge, charge, encumbrance or other security interest on any asset of ARS or
any of its Subsidiaries, except for any such results which would not have an ARS
Material Adverse Effect.
Section 4.4 Capitalization.
(a) The authorized capital stock of ARS consists of 50,000,000 shares
of ARS Common Stock and 10,000,000 shares of Preferred Stock, par value $0.001
per share ("ARS Preferred Stock"). As of the close of business on the date
hereof, (i) 15,887,704 shares of ARS Common Stock were issued and outstanding
and 24,744 shares of ARS Common Stock were held in treasury and (ii) no shares
of ARS Preferred Stock were issued and outstanding or held in treasury. All
outstanding shares of the capital stock of ARS are, and all shares which may be
issued pursuant to the exercise of ARS Stock Options will be, when issued in
accordance with the respective terms thereof, duly authorized, validly issued,
fully paid and non-assessable.
(b) As of the date hereof, options to acquire an aggregate of
2,780,491 shares of ARS Common Stock are outstanding under the ARS Option Plans.
Schedule 4.4(b) lists each holder of an option under the ARS Option Plans, the
number of shares of ARS Common Stock issuable with respect to each such option
(assuming full vesting) and the exercise price of such option. 85,000 of the ARS
Stock Options were issued under the caption "incentive stock options" and the
balance of the ARS Stock Options were issued under the caption "nonqualified
stock options."
(c) There are no bonds, debentures, notes or other indebtedness having
voting rights (or convertible into securities having such rights) ("Voting
Debt") of ARS or any of its Subsidiaries issued and outstanding. There are no
shares of capital stock of ARS authorized, issued or outstanding, and there are
no existing options, warrants, calls, preemptive rights, subscriptions or other
rights, convertible securities, agreements, arrangements or commitments of any
character, relating to the issued or unissued capital stock of ARS or any of its
Subsidiaries, obligating ARS or
12
any of its Subsidiaries to issue, transfer or sell or cause to be issued,
transferred or sold any shares of capital stock or Voting Debt of, or other
equity interest in, ARS or any of its Subsidiaries or securities convertible
into or exchangeable for such shares or equity interests or obligations of ARS
or any of its Subsidiaries to grant, extend or enter into any such option,
warrant, call, subscription or other right, convertible security, agreement,
arrangement or commitment.
(d) There are no outstanding contractual obligations of ARS or any of
its Subsidiaries requiring ARS or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any capital stock of ARS or any Subsidiary or affiliate of
ARS or to provide funds to make any investment (in the form of a loan, capital
contribution or otherwise) in any Subsidiary or any other entity. None of ARS or
its Subsidiaries is required to redeem, repurchase or otherwise acquire shares
of capital stock of ARS, or any of its Subsidiaries, respectively, as a result
of the transactions contemplated by this Agreement.
(e) There are no voting trusts or other agreements or understandings
to which ARS or any of its Subsidiaries is a party with respect to the voting of
the capital stock of ARS or any of its Subsidiaries. To the knowledge of ARS,
there are no voting trusts or other agreements or understandings to which any
stockholder of ARS is a party with respect to the voting of the capital stock of
ARS.
Section 4.5 Subsidiaries; Capitalization of Subsidiaries. Schedule 4.5
sets forth a complete and correct list of the direct and indirect Subsidiaries
of ARS. All of the outstanding shares of capital stock of, or other ownership
interests in, each Subsidiary of ARS is owned by ARS, directly or indirectly,
free and clear of any mortgage, lien, pledge, charge, encumbrance or other
security interest (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests), and all
such shares or other ownership interests have been validly issued and are fully
paid and nonassessable.
Section 4.6 SEC Reports and Financial Statements.
(a) ARS has filed with the SEC and has heretofore made available to
ServiceMaster true and complete copies of all forms, reports, schedules,
statements and other documents required to be filed by it and its Subsidiaries
under the Exchange Act and the Securities Act since the date of the initial
public offering of the ARS Common Stock (as such documents have been amended
since the time of their filing, collectively, the "ARS SEC Documents"). As of
their respective dates or, if amended, as of the date of the last such
amendment, the ARS SEC Documents, including, without limitation, any financial
statements and schedules included therein, (i) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading and (ii) complied
in all material respects with the applicable
13
requirements of the Exchange Act and the Securities Act, as the case may be, and
the rules and regulations of the SEC thereunder applicable to such ARS SEC
Documents.
(b) Each of the consolidated financial statements included in ARS SEC
Documents and the Annual Financial Statements (as hereinafter defined) was
prepared from, and is in accordance with, the books and records of ARS and/or
its consolidated Subsidiaries, complies in all material respects with the
published rules and regulations of the SEC with respect thereto, was prepared in
accordance with United States generally accepted accounting principles ("GAAP")
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by Regulation S-X of the SEC and for the exclusion of footnotes
therein) and fairly presents in all material respects the consolidated financial
position and the consolidated results of operations (and changes in financial
position, if any) of ARS and its consolidated Subsidiaries as at the dates
thereof or for the periods presented therein (subject, in the case of unaudited
interim financial statements, to normal year end adjustments, other adjustments
discussed therein (if any) and lack of footnote disclosures). "Annual Financial
Statements" means the unaudited consolidated balance sheets and statements of
income, changes in stockholders' equity and statements of cash flows of ARS as
of and for the fiscal year ended December 31, 1998 contained in the ARS
Disclosure Schedule corresponding to this Section.
(c) The consolidated financial statements included in the January 1999
Financial Statements (as hereinafter defined) were prepared in accordance with
the books and records of ARS and/or its consolidated Subsidiaries and with GAAP
applied on a consistent basis and fairly present in all material respects the
consolidated results of operations of ARS and its consolidated Subsidiaries for
the period presented therein (subject to normal year end adjustments, other
adjustments discussed therein (if any) and lack of footnote disclosures).
"January 1999 Financial Statements" means the consolidated financial statements
for the fiscal month ended January 31, 1999 contained in the ARS Disclosure
Schedule corresponding to this Section.
Section 4.7 Information Supplied. None of the information supplied or to be
supplied by ARS or any of its affiliates or representatives specifically for
inclusion or incorporation by reference in (i) the Offer Documents, (ii) the
Schedule 14D-9 or the Proxy Statement (as hereinafter defined) or (iii) the
information to be filed by ARS in connection with the Offer pursuant to
Rule 14f-1 promulgated under the Exchange Act (the "Information Statement"),
will, in the case of the Offer Documents, the Schedule 14D-9 and the Information
Statement, at the respective times the Offer Documents, the Schedule 14D-9 and
the Information Statement are filed with the SEC or first published, sent or
given to the stockholders of ARS, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they are made, not misleading. The Schedule 14D-9 and the
Information Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by ARS with respect to
statements made or incorporated by
14
reference therein based on information supplied by ServiceMaster or any of its
Subsidiaries or representatives specifically for inclusion or incorporation by
reference therein.
Section 4.8 Absence of Certain Changes. Except as set forth in the
Annual Financial Statements, except as set forth or incorporated in the ARS SEC
Documents filed prior to the date of this Agreement or except as expressly
permitted by this Agreement, since September 30, 1998, ARS and its Subsidiaries
have conducted their respective businesses and operations in the ordinary course
of business and there has not occurred:
(a) any events, changes or effects (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having, or which would be reasonably likely to have, in the aggregate, an ARS
Material Adverse Effect;
(b) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to the equity
interests of ARS or of any of its Subsidiaries, other than dividends paid by
wholly-owned Subsidiaries;
(c) any material change by ARS or any of its Subsidiaries in
accounting principles or methods, except for any such change required by reason
of a change in GAAP;
(d) any amendment of any material term of any outstanding security of
ARS or any of its Subsidiaries that would materially increase the obligations of
ARS or of such Subsidiary under such security;
(e) any incurrence or assumption by ARS or any of its Subsidiaries of
any indebtedness for borrowed money, other than (i) indebtedness that can be
repaid at any time without any prepayment penalty or other similar fee or (ii)
borrowings under credit facilities of ARS existing on the date hereof;
(f) any guarantee, endorsement or other incurrence or assumption of
liability (whether directly, contingently or otherwise) by ARS or any of its
Subsidiaries for the obligations of any other person (other than any wholly-
owned Subsidiary of ARS), other than in the ordinary course of business;
(g) any making of any loan, advance or capital contribution to or
investment in any person by ARS or any of its Subsidiaries other than (i) loans,
advances or capital contributions to or investments in wholly-owned Subsidiaries
of ARS or (ii) loans or advances to employees of ARS or any of its Subsidiaries
made in the ordinary course of business;
(h) any commitment by ARS or any of its Subsidiaries to any contract
or agreement relating to any material acquisition or disposition of any assets
or business or any
15
modification, amendment, assignment, termination or relinquishment by ARS or any
of its Subsidiaries of any contract, license or other right (including any
insurance policy naming it or any of its Subsidiaries as a beneficiary or a loss
payable payee) that would have an ARS Material Adverse Effect; or
(i) any employment, deferred compensation, severance, retirement or
other similar agreement with any director, officer or employee of ARS or any of
its Subsidiaries (or any amendment to any such existing agreement), grant of any
severance or termination pay to any director, officer or employee of ARS or any
of its Subsidiaries or change in compensation or other benefits payable to any
director, officer or employee of ARS or any of its Subsidiaries pursuant to any
severance or retirement plans or policies thereof, except in each case in the
ordinary course of business with respect to any employee who is not also an
officer or director of ARS.
Section 4.9 No Undisclosed Liabilities. Neither ARS nor any of its
Subsidiaries has incurred any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, that have, or would be reasonably
likely to have, individually or in the aggregate, an ARS Material Adverse
Effect, other than (i) any liability or obligation reflected on the balance
sheet contained in the Annual Financial Statements (or reflected in the notes
thereto), (ii) any liability or obligation disclosed in the ARS 1997 SEC
Information (as hereinafter defined) and (iii) any liability or obligation
permitted to be incurred by ARS under this Agreement or caused by the
transactions contemplated by this Agreement. "ARS 1997 SEC Information" means
the Form 10-K of ARS with respect to its fiscal year ended December 31, 1997 and
its Form 10-Q for each of the fiscal quarters ended March 31, 1998, June 30,
1998 and September 30, 1998, but excluding all risk factor and forward-looking
statements contained therein and all exhibits filed therewith. Schedule 4.9
sets forth each instrument evidencing indebtedness of ARS and its Subsidiaries
which will accelerate or become due or payable, or result in a right of
redemption or repurchase on the part of the holder of such indebtedness, or with
respect to which any other payment or amount will become due or payable, in any
such case with or without due notice or lapse of time, as a result of this
Agreement or the transactions contemplated hereby.
Section 4.10 Employee Benefit Plans.
(a) Schedule 3.10(a) contains an accurate and complete list of (i)
each "employee benefit plan" (as such term is defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
contributed to, maintained or sponsored by ARS or any of its Subsidiaries, or
with respect to which ARS or any of its Subsidiaries has any liability or
potential liability; and (ii) each other retirement, savings, thrift, deferred
compensation, severance, stock ownership, stock purchase, stock option,
performance, bonus, incentive, vacation or holiday pay, travel, fringe benefit,
hospitalization or other medical, disability, life or other insurance, and any
other welfare benefit policy, trust, understanding or arrangement of any kind,
whether written or oral, contributed to, maintained or sponsored by ARS or any
of its Subsidiaries for the benefit of any
16
present or former employee, officer or director of ARS or any of its
Subsidiaries, or with respect to which ARS or any of its Subsidiaries has any
liability or potential liability. Each item listed on Schedule 3.10(a) is
referred to herein as a "Benefit Plan."
(b) Schedule 3.10(b) contains an accurate and complete list of each
collective bargaining agreement and each other agreement, arrangement,
commitment, understanding, plan, or policy of any kind, whether written or oral,
of ARS or any Subsidiary of ARS or to which ARS or any of its Subsidiaries may
have any liability, with or for the benefit of any current or former employee,
officer, director or consultant of ARS or any of its Subsidiaries (including,
without limitation, each employment, compensation, termination or consulting
agreement or arrangement). Each item listed on Schedule 3.10(b) is referred to
herein as a "Compensation Commitment."
(c) Each Benefit Plan that is intended to be qualified within the
meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and each trust which forms a part of any such Benefit Plan (i) has
received a determination from the Internal Revenue Service (the "IRS") that such
Benefit Plan is qualified under Section 401(a) of the Code and that such related
trust is exempt from taxation under Section 501(a) of the Code, and nothing has
occurred since the date of such determination that could adversely affect the
qualification of such Benefit Plan or the exemption from taxation of such
related trust; and (ii) is in compliance with the requirements of Sections
401(a)(4) and 410(b) of the Code for each plan year of such Benefit Plan
commencing on or before the Closing Date.
(d) Neither ARS nor any of its Subsidiaries currently contribute to,
maintain, sponsor or have any liability with respect to any "employee pension
benefit plan" (as such term is defined in Section 3(2) of ERISA) that is subject
to Section 302 of ERISA or Section 412 of the Code, and neither ARS nor any of
its Subsidiaries has contributed to, maintained or sponsored or has any
liability with respect to any such employee pension benefit plan for any time
during the six years preceding the Closing Date.
(e) None of the Benefit Plans or Compensation Commitments obligates
ARS or any of its Subsidiaries to pay any separation, severance, termination or
similar benefit solely as a result of any transaction contemplated by this
Agreement or solely as a result of a change in control or ownership within the
meaning of Section 280G of the Code.
(f) (i) Each Benefit Plan and any related trust, insurance contract or
fund has been maintained, funded and administered in compliance with its
respective terms and the terms of any applicable collective bargaining
agreements and in compliance with all applicable laws and regulations,
including, but not limited to, ERISA and the Code; (ii) there has been no
application for or waiver of the minimum funding standards imposed by Section
412 of the Code with respect to any Benefit Plan, and neither ARS nor any of its
Subsidiaries is aware of any facts or circumstances that would materially change
the funded status of any such Benefit Plan; (iii) no asset of ARS or any
17
of its Subsidiaries that is to be acquired by ServiceMaster, directly or
indirectly, pursuant to this Agreement is subject to any lien under ERISA or the
Code; (iv) neither ARS nor any of its Subsidiaries has incurred any liability
under Title IV of ERISA (other than for contributions not yet due) or to the
Pension Benefit Guaranty Corporation (other than for payment of premiums not yet
due); and (v) there are no pending or threatened actions, suits, investigations
or claims with respect to any Benefit Plan or Compensation Commitment (other
than routine claims for benefits) which could result in liability to ARS or any
of its Subsidiaries (whether direct or indirect), and neither ARS nor any of its
Subsidiaries has knowledge of any facts which could give rise to (or be expected
to give rise to) any such actions, suits, investigations or claims.
(g) (i) ARS and each of its Subsidiaries has complied with the health
care continuation requirements of Part 6 of Title I of ERISA; and (ii) ARS and
its Subsidiaries have no obligation under any Benefit Plan or otherwise to
provide health benefits to former employees of ARS or any of its Subsidiaries or
any other person, except as specifically required by Part 6 of Title I of ERISA.
(h) (i) Neither ARS nor any of its Subsidiaries has incurred any
liability on account of a "partial withdrawal" or a "complete withdrawal"
(within the meaning of Sections 4205 and 4203, respectively, of ERISA) from any
Benefit Plan subject to Title IV of ERISA which is a "multiemployer plan" (as
such term is defined in Section 3(37) of ERISA) (a "Multiemployer Plan"), nor,
to the knowledge of ARS or any of its Subsidiaries, has any such liability been
asserted, and there are no events or circumstances which could result in any
such partial or complete withdrawal; and (ii) neither ARS nor any of its
Subsidiaries is bound by any contract or agreement or has any obligation or
liability described in Section 4204 of ERISA. To the best knowledge of ARS and
each of its Subsidiaries, each Multiemployer Plan complies in form and has been
administered in accordance with the requirements of ERISA and, where applicable,
the Code; and each Multiemployer Plan is qualified under Section 401(a) of the
Code.
(i) The actions contemplated by this Agreement will not give rise to
any liability with respect to any "employee welfare benefit plan" (as such term
is defined in Section 3(1) of ERISA) that is a "multiemployer plan" (as such
term is defined in Section 3(37) of ERISA) with regard to which ARS or any of
its Subsidiaries has any contribution obligation or other liabilities
thereunder.
(j) Neither ARS nor any ERISA Affiliate has any liability or potential
liability with respect to any "employee benefit plan" (as defined in Section
3(3) of ERISA) solely by reason of being treated as a single employer under
Section 414 of the Code with any trade, business or entity.
(k) Neither ARS nor any of its Subsidiaries has, contributes to,
maintains or sponsors or has any liability with respect to any employee benefit
plan, agreement or arrangement
18
applicable to employees of ARS or any of its Subsidiaries located outside the
United States (the "Foreign Plans").
(l) With respect to each Benefit Plan and each Compensation
Commitment, ARS or the appropriate Subsidiary of ARS has made available to
ServiceMaster true, complete and correct copies of (to the extent applicable)
(i) all documents pursuant to which the Benefit Plan or Compensation Commitment
is maintained, funded and administered, (ii) the most recent annual report (Form
5500 series) filed with the IRS (with applicable attachments), (iii) the most
recent financial statement, (iv) the most recent actuarial valuation of benefit
obligations, and (v) the most recent determination letter received from the IRS
and the most recent application to the IRS for such determination letter.
Section 4.11 Compliance with Law. Except with regard to occupational
safety and health, environmental, Taxes (as hereinafter defined) and ERISA (the
representations and warranties in respect of which are set forth in Sections
4.10, 4.14 and 4.17), ARS and its Subsidiaries have complied with all laws,
statutes, regulations, rules, ordinances and judgments, decrees, orders, writs
and injunctions, of any court or Governmental Entity relating to any of the
property owned, leased or used by them, or applicable to their business,
including, but not limited to, equal employment opportunity, discrimination,
insurance, regulatory and antitrust laws, except to the extent that any such
non-compliance would not have an ARS Material Adverse Effect.
Section 4.12 Litigation. There is no suit, claim, action or proceeding
pending or, to the knowledge of ARS, threatened against or affecting, ARS or any
of its Subsidiaries, or, to the knowledge of ARS, any review or investigation
pending or threatened against or affecting ARS or any of its Subsidiaries, which
would be reasonably likely to have an ARS Material Adverse Effect or would
prevent ARS from consummating the transactions contemplated by this Agreement.
Section 4.13 No Default. The business of ARS and each of its
Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (a) its respective certificate of incorporation or
bylaws or similar organizational documents, or (b) any ARS Agreement, excluding
from the foregoing clause (b) defaults or violations that would not have an ARS
Material Adverse Effect and would not, or would not be reasonably likely to,
materially impair the ability of ARS or, to the knowledge of ARS, ServiceMaster
or Acquisition Subsidiary to consummate the transactions contemplated by this
Agreement.
Section 4.14 Taxes.
(a) Definitions. For purposes of all of Section 4.14:
19
(i) The term "ARS" includes ARS and each Subsidiary of ARS,
including without limitation any corporation or other
entity that became or becomes a Subsidiary of ARS prior to
the Effective Time.
(ii) The term "Tax" means any federal, state, local or foreign
income, gross receipts, franchise, estimated, alternative
minimum, add-on minimum, sales, use, transfer,
registration, value added, excise, natural resources,
severance, stamp, occupation, premium, windfall profit,
environmental, customs, duties, real property, personal
property, capital stock, social security, unemployment,
disability, payroll, license, employee or other
withholding, or other tax, of any kind whatsoever,
including any interest, penalties or additions to tax or
additional amounts in respect of the foregoing.
(iii) The term "Return" means any returns, declarations, reports,
claims for refund, amended returns, information returns or
other documents (including any related or supporting
schedules, statements or information) filed or required to
be filed in connection with the determination, assessment
or collection of any Tax, or the administration of any
laws, regulations or administrative requirements relating
to any Tax.
(b) Tax Filings and Payments.
------------------------
(i) All federal Returns and all material state, local and
foreign Returns required to be filed on or before the date
hereof and the date of the Closing by or on behalf of ARS
have been or will be duly filed on a timely basis (taking
into account any extensions) and such Returns are or will
be true, correct and complete in all material respects.
(iii) ARS has timely paid or will pay or made or will make
adequate provision for all Taxes (whether or not shown on
or reportable on the Returns) described in Section
4.14(b)(i), except as would not, individually or in the
aggregate, have an ARS Material Adverse Effect.
(iii) ARS has made or will make adequate provision for all Taxes
payable for any periods that end on or before the Closing
for which no Returns have yet been filed and for any
periods that begin before the Closing and end after the
Closing to the extent such Taxes are attributable to the
portion of any such period ending at the Closing.
20
(iv) The charges, accruals and reserves for current Taxes
(excluding reserves for deferred Taxes) reflected on the
books of ARS are not materially less than the Tax
liabilities accruing or payable by ARS in respect of
periods prior to the date hereof, and the charges,
accruals and reserves for current Taxes (excluding
reserves for deferred Taxes) reflected on the Annual
Financial Statements are not materially less than the Tax
liabilities accruing or payable by ARS in respect of the
period covered by the Annual Financial Statements.
(v) ARS is not delinquent in the payment of any material Taxes
and has not requested any extension of time within which
to file or send any material Return, which Return has not
since been filed or sent and which Taxes have not been
paid.
(vi) No deficiencies exist for any Taxes nor have any been
proposed, asserted, or assessed against ARS that are not
adequately reserved for.
(vii) There is no dispute or claim concerning any material Tax
liability of ARS either (A) claimed or raised by any
taxing authority in writing or (B) as to which ARS has
knowledge based upon personal contact with any agent of a
taxing authority.
(viii) There is no currently pending audit, examination, or, to
ARS's knowledge, any investigation of any Return by any
taxing authority nor has ARS received any written notice
of such audit, examination, or investigation.
(ix) ARS has not agreed in writing to waive any statute of
limitations in respect of Taxes or agreed in writing to
any extension of the limitations period applicable to the
assessment or collection of Taxes.
(x) ARS is not subject to liability for Taxes of any person
(other than ARS or any other member of the affiliated
group of corporations that is included in a consolidated
federal income tax return of which ARS is the common
parent), including, without limitation, liability arising
from the application of U.S. Treasury Regulation section
1.1502-6 or any analogous provision of state, local or
foreign law.
(xi) ARS is not nor has it ever been a party to any tax sharing
agreement with any entity.
21
(xii) No written claim has ever been made by an authority in a
jurisdiction where ARS does not file Returns that it is or
may be subject to taxation by that jurisdiction.
(xiii) There are no liens on any of the assets of ARS that arose
in connection with any failure (or alleged failure) to pay
any Taxes other than Taxes which are not yet delinquent.
(xiv) ARS has complied in all material respects with applicable
Tax laws relating to the withholding of Taxes and the
payment thereof to the appropriate taxing authorities, and
has complied with all material information reporting and
backup withholding requirements, including, without
limitation, maintenance of required records with respect
thereto, in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder,
or other third party.
(xv) ARS has provided or made available to ServiceMaster or its
representatives (A) correct and complete copies of the
consolidated federal income tax Returns of ARS for the
taxable periods ended December 31, 1996 and 1997, (B)
complete and correct copies of the separate, consolidated
and combined state, local and foreign income tax Returns
of ARS for the taxable periods ended December 31, 1996 and
1997 and (C) all examination reports, closing agreements
and statements of deficiencies, if any, relating to the
audit of such Tax Returns by the IRS or the relevant
state, local or foreign taxing authorities.
(xvi) ARS is not a party to any safe harbor lease within the
meaning of Section 168(f)(8) of the Code, as in effect
prior to the amendment by the Tax Equity and Fiscal
Responsibility Act of 1982.
(c) Tax Characteristics of ARS.
--------------------------
(i) To ARS's knowledge, no stockholder of ARS who owns more
than 5% of ARS's Common Stock is a "foreign person" (as
that term is defined in Section 1445(f)(3) of the Code).
(ii) ARS is not a "consenting corporation" under Section 341(f)
of the Code.
22
(iii) ARS has not entered into any compensatory agreement with
respect to the performance of services which payment
thereunder would result in a nondeductible expense to ARS
pursuant to Sections 162(m) of the Code or an excise tax
to the recipient of such payment pursuant to Section 4999
of the Code.
(iv) ARS has not agreed, nor is it required to make, any
adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise.
(v) ARS has not executed any "closing agreement" described in
Section 7121 of the Code (or any corresponding provision
of state, local or foreign income Tax law) that requires
ARS to include any item of income in, or exclude any item
of deduction from, taxable income for any taxable period
(or portion thereof) ending after the Closing.
(vi) ARS will not be required as a result of any deferred
intercompany gain described in Treasury Regulation Section
1.1502-13 or any excess loss account described in Treasury
Regulation Section 1.1502-19 (or any corresponding or
similar provision or administrative rule of federal,
state, local or foreign income tax law) to include any
item of income in taxable income for any period (or
portion thereof) ending after the Closing Date.
Section 4.15 Contracts. Each material ARS Agreement is valid, binding and
enforceable and is in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have an ARS
Material Adverse Effect, and there are no defaults thereunder, except those
defaults that would not have an ARS Material Adverse Effect. Neither ARS nor any
of its Subsidiaries is a party to any agreement that expressly and materially
limits the ability of ARS or any of its Subsidiaries to compete in or conduct
any line of business or compete with any person or in any geographic area or
during any period of time. No material contract of ARS or any of its
Subsidiaries will cease to be legal, valid, binding and enforceable as a result
of the Merger.
Section 4.16 Transactions with Affiliates. Except to the extent disclosed
in ARS SEC Documents filed prior to the date of this Agreement, since September
30, 1998 there have been no material transactions, agreements, arrangements or
understandings between ARS or its Subsidiaries, on the one hand, and the
affiliates of ARS (other than wholly-owned Subsidiaries of ARS) or other
Persons, on the other hand, that would be required to be disclosed under Item
404 of Regulation S-K under the Securities Act.
23
Section 4.17 Environmental Matters. Except as set forth in ARS SEC
Documents filed prior to the date hereof:
(a) For purposes of this Agreement, "Environmental, Health and Safety
Requirements" shall mean all federal, state, local and foreign statutes,
regulations, ordinances and other rules or orders having the force or effect of
law concerning public health and safety, worker health and safety, and pollution
or protection of the environment, including without limitation all those
relating to the presence, use, production, generation, handling, transportation,
treatment, storage, disposal, distribution, labeling, testing, processing,
discharge, release, threatened release, control, or cleanup of any hazardous
materials, substances or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts,
asbestos or polychlorinated biphenyls, each as amended.
(b) Each of ARS and its Subsidiaries has complied and is in compliance
with all Environmental, Health, and Safety Requirements, except for any
noncompliance that would not, in the aggregate, have an ARS Material Adverse
Effect.
(c) Without limiting the generality of the foregoing, each of ARS and
its Subsidiaries has obtained, and is in compliance with, all permits, licenses
and other authorizations that are required pursuant to Environmental, Health and
Safety Requirements ("Environmental Permits") for the occupation of its
facilities and the operation of its business, except for any failure to maintain
or comply with Environmental Permits that would not, in the aggregate, have an
ARS Material Adverse Effect.
(d) Neither ARS, nor any of its Subsidiaries has received any written
or oral notice, report or other information regarding any actual or alleged
violation of Environmental, Health and Safety Requirements, or any actual or
alleged liabilities or potential liabilities, including any investigatory,
remedial or corrective obligations, relating to any of them or their facilities
arising under Environmental, Health and Safety Requirements, or common law, as
it relates to health, safety, pollution or protection of the environment, except
for such notices, reports or other information, the subject of which would not,
in the aggregate, have an ARS Material Adverse Effect.
(e) None of ARS or its Subsidiaries, or to the knowledge of ARS their
respective predecessors, has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any petroleum,
hazardous substance or waste, or owned or operated any property or facility (and
no such property or facility is contaminated by any such substance) in a manner
that has given or would give rise to liabilities, including any liability for
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Solid Waste Disposal Act, as amended ("SWDA"), or any other
Environmental, Health and Safety Requirements, or the common law, as it relates
to health, safety, pollution or
24
protection of the environment, except for such liabilities that would not, in
the aggregate, have an ARS Material Adverse Effect.
(f) Neither this Agreement nor the consummation of the transaction
that is the subject of this Agreement will result in any obligations for site
investigation or cleanup, or notification to or consent of government agencies
or third parties, pursuant to any of the so-called "transaction-triggered" or
"responsible property transfer" Environmental, Health and Safety Requirements.
(g) Neither ARS nor its Subsidiaries has, either expressly or, to the
knowledge of ARS, by operation of law, assumed, undertaken or otherwise become
subject to any liability, including without limitation any obligation for
corrective or remedial action, of any other person or entity relating to
Environmental, Health and Safety Requirements except that ARS has acquired
ownership of businesses by merging the entity owning the business with a
subsidiary of ARS or by acquiring the assets of a company or other entity and in
such acquisitions the resulting subsidiary would be subject to the liabilities
to which the merging entity was subject or the subsidiary acquiring the assets
contractually agreed to assume or be responsible for, or became responsible for
by operation of law, liabilities of the company or other entity transferring the
assets.
(h) No facts, events or conditions relating to the past or present
facilities, properties or operations of ARS or its Subsidiaries (or to the
knowledge of ARS any of their predecessors) will prevent continued compliance
with Environmental, Health and Safety Requirements, give rise to any
investigatory, remedial or corrective obligations pursuant to Environmental,
Health and Safety Requirements or give rise to any other liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental, Health and Safety Requirements, or the common law, as it relates
to health, safety, pollution or protection of the environment, including without
limitation any relating to onsite or offsite releases or threatened releases of
hazardous materials, substances or wastes, personal injury, property damage or
natural resources damage, except for such liabilities or matters which would
not, in the aggregate, have an ARS Material Adverse Effect.
Section 4.18 Intellectual Property. ARS and its Subsidiaries own or have
adequate rights to use all patents, trademarks, service marks, trade names,
copyrights, trade secrets and other intellectual property rights (collectively,
the "ARS Intellectual Property") necessary to carry on their respective business
as currently conducted; and neither ARS nor any of its Subsidiaries has received
any notice of infringements of or conflict with, and to ARS's knowledge, there
are no infringements of or conflicts with, the rights of others with respect to
the use of any of ARS Intellectual Property that, in either such case, would
have an ARS Material Adverse Effect.
Section 4.19 Opinion of Financial Advisor. ARS has received an opinion from
Jefferies & Company, Inc. ("Jefferies") to the effect that, as of the date
hereof, the consideration to be
25
received in the Offer and the Merger Consideration to be received by the holders
of ARS Shares in connection with the Merger is fair to such holders from a
financial point of view. ARS shall promptly upon receipt deliver to
ServiceMaster a correct and complete copy of the written fairness opinion of
Jefferies delivered to ARS with respect to such matters.
Section 4.20 Finders and Investment Bankers. No broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission, or to the reimbursement of any of its expenses, in connection with
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of ARS, except for the arrangements between ARS and Jefferies. ARS
has supplied to ServiceMaster a correct and complete copy of the engagement
letter for Jefferies and all other agreements or understandings affecting the
amount that may be payable by ARS to Jefferies.
Section 4.21 Takeover Statutes. To the knowledge of ARS, no "fair price,"
"moratorium," "control share acquisition" or other similar antitakeover statute
or regulation (other than Section 203 of Delaware Law) enacted under state or
federal laws in the United States (each, a "Takeover Statute") applicable to ARS
or any of its Subsidiaries is applicable to the Offer, the Merger or the other
transactions contemplated by this Agreement. Assuming the accuracy of the
representation and warranty of ServiceMaster and Acquisition Subsidiary set
forth in Section 5.14, the action of the board of directors of ARS prior to the
execution of this Agreement is sufficient to render inapplicable to the Offer,
the Merger and this Agreement (and the transactions provided for herein) the
restrictions on "business combinations" (as defined in Section 203 of Delaware
Law) set forth in Section 203 of Delaware Law.
Section 4.22 Insurance. The ARS Disclosure Schedule lists the insurance
policies covering ARS on the date hereof and on the date hereof each such policy
is in full force and effect. Neither ARS nor any Subsidiary of ARS is in default
with respect to its obligations under any insurance policy maintained by it, and
neither ARS nor any ARS Subsidiary (since the time any such Subsidiary became a
Subsidiary of ARS) has been denied insurance coverage at any time for any
reason.
Section 4.23 Board Action Regarding ARS Option Plans. The committee acting
under the ARS Option Plans, the board of directors of ARS and all other
necessary persons have taken all actions reasonably necessary to cause the
conversions prescribed by Section 3.3(a) to occur automatically upon
consummation of the Merger and that such conversions will in fact so occur.
Section 4.24 Board Action Regarding Rights Agreement. The board of
directors of ARS has taken all actions reasonably necessary to cause the Rights
Agreement of ARS to not apply to the Offer, the Merger, the acquisition of ARS
Shares by Acquisition Subsidiary pursuant to the Offer and any purchase of ARS
Shares by ServiceMaster or Acquisition Subsidiary subsequent to the purchase of
ARS Shares by Acquisition Subsidiary pursuant to the Offer and the other
transactions
26
contemplated by this Agreement and to cause it and the rights issued thereunder
to expire prior to the Merger. In addition, the board of directors of ARS has
taken all actions reasonably necessary such that the beneficial ownership of ARS
Common Stock by ServiceMaster or Acquisition Subsidiary shall not cause either a
triggering event or ServiceMaster or Acquisition Subsidiary to become an
acquiring person as contemplated by such Rights Agreement during such time as
this Agreement has not been terminated in accordance with Article 10.
ARTICLE 5
WARRANTIES OF
SERVICEMASTER AND ACQUISITION SUBSIDIARY
References in this Agreement to the "ServiceMaster Disclosure Schedule" and
in this Article to the "Schedules" mean the document captioned "ServiceMaster
Disclosure Schedule" as constituted upon its delivery to ARS prior to ARS's
execution and delivery of this Agreement. ServiceMaster warrants to ARS, subject
in the case of the warranties in each particular section below to the exceptions
set forth in the corresponding section of the ServiceMaster Disclosure Schedule:
The term "ServiceMaster Material Adverse Effect" means any change or effect
that would be materially adverse to the business, financial condition or results
of operations of ServiceMaster and its Subsidiaries taken as a whole, other than
any change or effect to the extent it results from (i) the announcement and
performance of this Agreement and the transactions contemplated hereby and the
compliance with the covenants set forth herein, (ii) any actions required under
this Agreement to obtain any approval or authorization under applicable
antitrust or competition laws for the consummation of the Merger, (iii) changes
in any tax laws or regulations or applicable accounting regulations or
principles or (iv) changes in weather patterns adverse to ServiceMaster or in
corporate interest rates.
Section 5.1 Organization. ServiceMaster is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Acquisition Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of ServiceMaster and
its Subsidiaries has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure to
be so organized, existing and in good standing or to have such power, authority
and governmental approvals would not have a ServiceMaster Material Adverse
Effect. ServiceMaster and each of its Subsidiaries is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing would not in the aggregate,
have a ServiceMaster Material Adverse Effect.
27
Acquisition Subsidiary has not heretofore conducted any business other than in
connection with this Agreement and the transactions contemplated hereby.
Section 5.2 Corporate Authorization; Validity of Agreement; Necessary
Action. ServiceMaster and Acquisition Subsidiary have full corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
ServiceMaster and Acquisition Subsidiary of this Agreement, and the consummation
by ServiceMaster and Acquisition Subsidiary of the transactions contemplated
hereby, have been duly and validly authorized by their respective boards of
directors and no other corporate action or proceedings on the part of
ServiceMaster and Acquisition Subsidiary is necessary to authorize the execution
and delivery by ServiceMaster and Acquisition Subsidiary of this Agreement, and
the consummation by ServiceMaster and Acquisition Subsidiary of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
ServiceMaster and Acquisition Subsidiary and, assuming this Agreement
constitutes a valid and binding obligation of ARS, constitutes a valid and
binding obligation of each of ServiceMaster and Acquisition Subsidiary,
enforceable against each of them in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights generally,
and (ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought. No vote of the
holders of ServiceMaster Common Stock is necessary for ServiceMaster to
consummate the Merger or for Acquisition Subsidiary to consummate the Merger.
The stockholder of Acquisition Subsidiary will adopt by requisite vote the
resolutions necessary to authorize the execution, delivery and performance by
Acquisition Subsidiary of this Agreement.
Section 5.3 Consents and Approvals; No Violations. Except for filings,
permits, authorizations, consents and approvals as may be required under, and
other applicable requirements of, the Exchange Act, the Securities Act, the HSR
Act, the NYSE, state securities or "blue sky" laws and any applicable state
takeover laws, and the filing of the Certificate of Merger as required by
Delaware Law, neither the execution, delivery or performance of this Agreement
by ServiceMaster and Acquisition Subsidiary nor the consummation by
ServiceMaster and Acquisition Subsidiary of the transactions contemplated hereby
nor compliance by ServiceMaster and Acquisition Subsidiary with any of the
provisions hereof will:
(a) conflict with or result in any breach of any provision of the
certificate of incorporation or bylaws (or other organizational documents with
respect to entities that are not corporations) of ServiceMaster or Acquisition
Subsidiary or any other Subsidiary of ServiceMaster;
(b) require any filing with, or permit, authorization, consent or
approval of, any Governmental Entity, except where the failure to obtain such
permits, authorizations, consents or approvals or to make such filings would not
have a ServiceMaster Material Adverse Effect, or would
28
not be reasonably likely to, materially impair the ability of ServiceMaster or
Acquisition Subsidiary or, to the knowledge of ServiceMaster, ARS to consummate
the transactions contemplated by this Agreement;
(c) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
guarantee, other evidence of indebtedness, lease, license, contract, agreement
or other instrument or obligation to which ServiceMaster or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound other than any violation, breach or default which would not
have a ServiceMaster Material Adverse Effect; or
(d) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to ServiceMaster, any of its Subsidiaries or any of their
properties or assets, other than any violation which would not have a
ServiceMaster Material Adverse Effect.
Section 5.4 Capitalization. The authorized capital stock of ServiceMaster
consists of 1,000,000,000 shares of ServiceMaster Common Stock and 11,000,000
shares of preferred stock, par value $0.01 per share (the "ServiceMaster
Preferred Stock"). As of the close of business on February 28, 1999, (a)
299,124,018 shares of ServiceMaster Common Stock were issued and outstanding and
(b) no shares of ServiceMaster Preferred Stock were issued and outstanding. As
of the close of business on February 28, 1999, 547,253 shares of ServiceMaster
Common Stock were held in treasury. All of the issued and outstanding shares of
ServiceMaster Common Stock are duly authorized, validly issued, fully paid and
non-assessable.
Section 5.5 SEC Reports and Financial Statements.
-------------------------------------
(a) ServiceMaster has filed with the SEC and has heretofore made
available to ARS true and complete copies of all forms, reports, schedules,
statements and other documents required to be filed by ServiceMaster and its
Subsidiaries under the Exchange Act and the Securities Act since December 31,
1997 (as such documents have been amended since the time of their filing,
collectively, the "ServiceMaster SEC Documents"). As of their respective dates
or, if amended, as of the date of the last such amendment, ServiceMaster SEC
Documents, including, without limitation, any financial statements and schedules
included therein, (i) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading and (ii) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the rules and regulations of the SEC thereunder applicable to
such ServiceMaster SEC Documents.
29
(b) Each of the consolidated financial statements included in
ServiceMaster SEC Documents was prepared from, and is in accordance with, the
books and records of ServiceMaster and/or its consolidated Subsidiaries,
complies in all material respects with the published rules and regulations of
the SEC with respect thereto, was prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto or, in the case of unaudited statements, as permitted by
Regulation S-X of the SEC) and fairly presents in all material respects the
consolidated financial position and the consolidated results of operations and
cash flows (and changes in financial position, if any) of ServiceMaster and its
consolidated Subsidiaries as at the dates thereof or for the periods presented
therein (subject, in the case of unaudited interim financial statements, to
normal year end adjustments, other adjustments discussed therein (if any) and
lack of footnote disclosures).
Section 5.6 Absence of Certain Changes. Except as set forth or
incorporated in ServiceMaster SEC Documents filed with the SEC prior to the date
hereof, since September 30, 1998, ServiceMaster and its Subsidiaries have
conducted their respective businesses and operations in the ordinary course of
business consistent with past practice. Since September 30, 1998, there has not
occurred: (i) any events, changes or effects (including the incurrence of any
liabilities of any nature, whether or not accrued, contingent or otherwise)
having or, which would be reasonably likely to have, in the aggregate, a
ServiceMaster Material Adverse Effect; (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, shares or
property) with respect to the equity interests of ServiceMaster or of any of its
Subsidiaries, other than regular quarterly cash dividends or dividends paid by
wholly-owned Subsidiaries; or (iii) any material change by ServiceMaster or any
of its Subsidiaries in accounting principles or methods, except for any such
change required by reason of a change in GAAP.
Section 5.7 No Undisclosed Liabilities. Except (i) to the extent disclosed
in ServiceMaster SEC Documents filed prior to the date of this Agreement and
(ii) for liabilities and obligations incurred in the ordinary course of business
consistent with past practice, since September 30, 1998, neither ServiceMaster
nor any of its Subsidiaries has incurred any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, that have, or would be
reasonably likely to have, individually or in the aggregate, a ServiceMaster
Material Adverse Effect.
Section 5.8 Litigation. There is no suit, claim, action or proceeding
pending or, to the knowledge of ServiceMaster, threatened against or affecting,
ServiceMaster or any of its Subsidiaries, or to the knowledge of ServiceMaster,
any review or investigation pending or threatened against or affecting
ServiceMaster or any of its Subsidiaries, which, individually or in the
aggregate, is reasonably likely to have a ServiceMaster Material Adverse Effect,
or would prevent ServiceMaster or Acquisition Subsidiary from consummating the
transactions contemplated by this Agreement.
30
Section 5.9 Compliance with Law. ServiceMaster and its Subsidiaries have
complied with all laws, statutes, regulations, rules, ordinances and judgments,
decrees, orders, writs and injunctions, of any court or Governmental Entity
relating to any of the property owned, leased or used by them, or applicable to
their business, including, but not limited to, equal employment opportunity,
discrimination, occupational safety and health, environmental, insurance,
regulatory, antitrust laws, ERISA and laws relating to Taxes, except to the
extent that any such non-compliance would not have a ServiceMaster Material
Adverse Effect.
Section 5.10 No Default. The business of ServiceMaster and each of its
Subsidiaries is not being conducted in default or violation of any term,
condition or provision of (i) its respective certificate of incorporation or
bylaws or similar organizational documents, or (ii) agreements to which
ServiceMaster and its Subsidiaries are parties, excluding from the foregoing
clause (ii) defaults or violations that would not have a ServiceMaster Material
Adverse Effect and would not, or would not be reasonably likely to, materially
impair the ability of ServiceMaster or Acquisition Subsidiary or, to the
knowledge of ServiceMaster, ARS to consummate transactions contemplated by this
Agreement.
Section 5.11 Information Supplied. None of the information supplied or to
be supplied by ServiceMaster or any of its Subsidiaries or representatives
specifically for inclusion or incorporation by reference in (i) the Offer
Documents, (ii) the Schedule 14D-9, (iii) the Information Statement or (iv) the
Proxy Statement will, in the case of the Offer Documents, the Schedule 14D-9 and
the Information Statement, at the respective times the Offer Documents, the
Schedule 14D-9 and the Information Statement are filed with the SEC or first
published, sent or given to the stockholders of ARS, or, in the case of the
Proxy Statement, at the time the Proxy Statement is first mailed to the
stockholders of ARS or at the time of the ARS Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. The Offer
Documents will comply as to form in all material respects with the requirements
of the Exchange Act and the rules and regulations thereunder, except that (other
than with respect to the Proxy Statement) no representation or warranty is made
by ServiceMaster or Acquisition Subsidiary with respect to statements made or
incorporated by reference therein based on information supplied by ARS or any of
its affiliates or representatives specifically for inclusion or incorporation by
reference therein.
Section 5.12 Opinion of Financial Advisor. ServiceMaster has received an
opinion from Xxxxxxx, Xxxxx & Co. dated the date of this Agreement to the effect
that, as of such date, the consideration to be paid in the Offer and the Merger
Consideration to be paid in connection with the Offer and the Merger is fair to
ServiceMaster from a financial point of view.
31
Section 5.13 Finders and Investment Bankers. ServiceMaster is not a party
to any broker or finder fee agreement or arrangement in connection with the
transactions contemplated by this Agreement which creates any liability or
obligation on the part of ARS or any of its Subsidiaries.
Section 5.14 Ownership of ARS Common Stock. As of the date of this
Agreement, ServiceMaster, Acquisition Subsidiary and the other Subsidiaries of
ServiceMaster do not own (directly or indirectly, beneficially or of record) any
shares of ARS Common Stock and none of ServiceMaster, Acquisition Subsidiary or
the other Subsidiaries of ServiceMaster holds any rights to acquire any shares
of ARS Common Stock except pursuant to this Agreement.
ARTICLE 6
COVENANTS OF ARS
Section 6.1 Conduct of Business by ARS Pending the Merger. ARS covenants
and agrees that prior to the Effective Time or the date, if any, on which this
Agreement is earlier terminated pursuant to Section 10.1 hereof, unless
ServiceMaster and Acquisition Subsidiary shall otherwise consent in writing or
except as otherwise contemplated by this Agreement:
(a) the businesses of ARS and its Subsidiaries will be conducted only
in the ordinary course; ARS will use its diligent efforts to preserve intact its
business organization and goodwill, keep available the services of its officers
and employees and maintain satisfactory relationships with customers and others
having business relationships with it and its Subsidiaries; and ARS will
promptly notify ServiceMaster and Acquisition Subsidiary of any event or
occurrence or emergency not in the ordinary course of the business of ARS or any
of its Subsidiaries that would have an ARS Material Adverse Effect;
(b) ARS will not (i) amend its certificate of incorporation or bylaws
or (ii) split, combine or reclassify the outstanding ARS Shares or declare, set
aside or pay any dividend payable in cash, stock or property with respect to the
ARS Shares, other than dividends paid by any of its Subsidiaries to ARS;
(c) neither ARS nor any of its Subsidiaries will issue or agree to
issue any additional shares of, or rights of any kind to acquire shares of, its
capital stock of any class, other than (i) the issuance of shares of capital
stock of a Subsidiary of ARS to ARS, (ii) with respect to ARS, ARS Shares
issuable upon exercise of ARS Stock Options and ARS warrants outstanding on the
date hereof (together with the related preferred share purchase rights), (iii)
any ARS Shares issuable upon conversion of any convertible note of ARS described
on the ARS Disclosure Schedule (together with the related preferred share
purchase rights), and (iv) in accordance with the Rights Agreement;
32
(d) neither ARS nor any of its Subsidiaries will enter into or agree
to enter into any new or amended contract or agreement with any labor unions
representing employees of ARS or any of its Subsidiaries;
(e) except permitted by Section 6.4, ARS will not authorize,
recommend, propose or announce an intention to authorize, recommend or propose,
or enter into an agreement in principle or an agreement with respect to any
merger, consolidation or business combination (other than the Merger and the
Offer) or any acquisition or disposition of a material amount of assets or
securities (including, without limitation, the assets or securities of any of
its Subsidiaries);
(f) ARS will not authorize, recommend, propose or announce an
intention to authorize, recommend or propose, or enter into an agreement in
principle or an agreement with respect to any material change in its
capitalization (it being acknowledged however by ServiceMaster that ARS may
incur indebtedness except as may be prohibited by paragraph (j)(i) of this
Section), or enter, other than in the ordinary course of business, into a
material contract;
(g) neither ARS nor any of its Subsidiaries shall modify, amend or
terminate any of the material ARS Agreements or waive, release or assign any
material rights or claims, except in each case in the ordinary course of
business;
(h) except as contemplated by Section 3.3, neither ARS nor any of its
Subsidiaries shall: (i) grant any increase in the compensation payable or to
become payable by ARS or any of its Subsidiaries to any officer or management
employee other than scheduled annual increases in the ordinary course of
business; (ii) adopt any new, or amend or otherwise increase, or accelerate the
payment or vesting of the amounts payable or to become payable under any
existing, bonus, incentive compensation, deferred compensation, severance,
profit sharing, stock option, stock purchase, insurance, pension, retirement or
other employee benefit plan agreement or arrangement; (iii) enter into any, or
amend any existing, employment, consulting or severance agreement with or,
except in accordance with the existing written policies of ARS, grant any
severance or termination pay to any officer, director or employee of ARS or any
of its Subsidiaries; (iv) make any additional contributions to any grantor trust
created by ARS to provide funding for non-tax-qualified employee benefits or
compensation; or (v) provide any new severance program or rights;
(i) to the extent within its control, neither ARS nor any of its
Subsidiaries shall permit any material insurance policy naming it as a
beneficiary or a loss payable payee to be canceled or terminated, except in the
ordinary course of business;
(j) neither ARS nor any of its Subsidiaries shall: (i) incur or
assume any debt except for borrowings under credit facilities of ARS existing on
the date hereof in the ordinary course of business and other borrowings that can
be repaid at any time without any prepayment penalty or other similar fee; (ii)
assume, guarantee, endorse or otherwise become liable or
33
responsible (whether directly, contingently or otherwise) for the obligations of
any other person, except in the ordinary course of business; (iii) make any
loans, advances or capital contributions to, or investments in, any other person
(other than to wholly-owned Subsidiaries of ARS, customary loans or advances to
employees in the ordinary course of business and short-term investments pursuant
to customary cash management systems of ARS in the ordinary course of business);
or (iv) make or commit to make any material capital expenditure in an amount or
character that is not consistent with ARS's past practices;
(k) neither ARS nor any of its Subsidiaries shall change any of the
accounting principles used by it unless required by GAAP;
(l) ARS shall not make any material Tax election; and
(m) neither ARS nor any Subsidiary of ARS shall agree in writing or
otherwise to take (i) any action that it is prohibited from taking by this
Section 6.1 or (ii) any action that would constitute or is likely to cause or
result in a breach of any covenant, agreement, representation or warranty set
forth herein.
Section 6.2 ARS Stockholder Approval; Preparation of Proxy Statement
(a) If the ARS Stockholder Approval is required by applicable law, ARS
shall, as soon as practicable following the expiration of the Offer, duly call,
give notice of, convene and hold a meeting of its stockholders (the "ARS
Stockholders Meeting") for the purpose of obtaining the ARS Stockholder
Approval. ARS shall, through its board of directors, unanimously recommend to
its stockholders that the ARS Stockholder Approval be given. Notwithstanding the
foregoing, if ServiceMaster, Acquisition Subsidiary or any other Subsidiary of
ServiceMaster shall acquire at least 90 percent of the outstanding ARS Shares,
the Parties shall take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after the expiration of the Offer
without an ARS Stockholders Meeting in accordance with Section 253 of Delaware
Law.
(b) If the ARS Stockholder Approval is required by applicable law, ARS
shall, as soon as practicable following the expiration of the Offer, prepare and
file a preliminary proxy statement (the "Proxy Statement") with the SEC and
shall use its diligent efforts to respond to any comments of the SEC or its
staff and to cause the Proxy Statement to be mailed to the stockholders of ARS
as promptly as practicable after responding to all such comments to the
satisfaction of the staff, if any. ARS shall notify ServiceMaster promptly of
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff for amendments or supplements to the Proxy Statement or for
additional information and will supply ServiceMaster with copies of all
correspondence between ARS or any of its affiliates or representatives, on the
one hand, and the SEC or its staff, on the other hand, with respect to the Proxy
Statement or the Merger. If at any time prior to the ARS Stockholders Meeting
there shall occur any event that should be set forth in an
34
amendment or supplement to the Proxy Statement, ARS shall promptly prepare and
mail to its stockholders such an amendment or supplement.
(c) ServiceMaster agrees to cause all ARS Shares purchased pursuant to
the Offer and all other ARS Shares owned by ServiceMaster or any of its
Subsidiaries to be voted in favor of the ARS Stockholder Approval.
Section 6.3 Access to Information. Subject to any limitations imposed
under confidentiality agreements to which ARS is subject, ARS will give
ServiceMaster, its counsel, financial advisors, auditors and other authorized
representatives full access throughout the period prior to the Effective Time to
all of the offices, properties, business and marketing plans, books, files and
records of ARS and the Subsidiaries of ARS, will furnish to ServiceMaster, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information as such persons may
reasonably request and will instruct ARS's employees, counsel and financial
advisors to cooperate with ServiceMaster in its investigation of the business of
ARS and its Subsidiaries and to promptly answer and respond to any questions and
inquiries of ServiceMaster, and ServiceMaster shall keep confidential such data
and other information to the extent provided in the letter agreement dated March
18, 1998 entered into by ARS and ServiceMaster. ARS will furnish promptly to
ServiceMaster and Acquisition Subsidiary (a) a copy of each report, schedule and
other document filed or received by it pursuant to the requirements of Federal
or state securities laws and (b) all such other information concerning its
business, properties and personnel as ServiceMaster or Acquisition Subsidiary
may reasonably request; provided that no investigation pursuant to this Section
6.3 shall affect any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
Section 6.4 No Solicitation.
(a) ARS represents to ServiceMaster that the board of directors of ARS
is satisfied that it has made such assessments of ARS's value and has taken such
other actions as to satisfy the fiduciary duties of its board of directors that
must be satisfied to enable ARS to enter into this Agreement and to render this
Agreement binding upon ARS in accordance with its terms.
(b) ARS agrees that, prior to the Effective Time, it shall not, and
shall not authorize or permit any of its Subsidiaries or any of its or its
Subsidiaries' directors, officers, employees, agents or representatives,
directly or indirectly, to solicit, initiate or knowingly encourage (including
by way of furnishing or disclosing non-public information) any inquiries or the
making of any proposal with respect to any merger, consolidation or other
business combination involving ARS or the acquisition of all or any material
portion of the assets or capital stock of ARS (an "Acquisition Transaction") or
negotiate, explore or otherwise engage in substantive discussions with any
person (other than ServiceMaster, Acquisition Subsidiary or their respective
directors, officers, employees, agents and representatives), or enter into any
agreement, with respect to any
35
Acquisition Transaction or enter into any agreement, arrangement or
understanding requiring it to abandon, terminate or fail to consummate the
Merger or any other transactions contemplated by this Agreement, other than as
expressly contemplated by this Section. The board of directors of ARS shall not
withdraw or modify, or propose to withdraw or modify, in a manner adverse to
ServiceMaster or Acquisition Subsidiary, the approval or recommendation by such
board of directors of the Offer, subject to the exception contained in the first
sentence of Section 1.2(b).
(c) Notwithstanding subsection (b) above, prior to the consummation of
the Offer, ARS may provide non-public information to and seek to negotiate an
Acquisition Transaction with a person other than ServiceMaster or any of
ServiceMaster's Subsidiaries (the "Competitor") provided that the Competitor
shall make a bona fide unsolicited written proposal to make an Acquisition
Transaction for all the capital stock or assets of ARS on Superior Terms. For
purposes of this Agreement, terms will be deemed to be "Superior Terms" only if
the proposal of such Competitor is more favorable than the Offer Price to the
stockholders of ARS as determined in good faith by the board of directors of
ARS. A proposal to acquire ARS on Superior Terms is herein called a "Qualified
Competing Proposal."
(d) If prior to the termination of this Agreement in accordance with
its terms, ARS receives an inquiry or proposal relating to an Acquisition
Transaction, it shall advise ServiceMaster in writing of the receipt, directly
or indirectly, of any such inquiry or proposal (and any change or modification
thereto) promptly upon such receipt and of its intention to enter into any
agreement relating to an Acquisition Transaction which is a Qualified Competing
Proposal, subject to the exercise of any rights of ServiceMaster under this
Agreement. ARS shall also promptly advise ServiceMaster in writing of any
actions taken pursuant to Section 6.4(c) hereof and furnish to ServiceMaster
either a copy of such proposal or a detailed description of the terms and
conditions of such proposal or any subsequent change or modification thereto,
and promptly supply ServiceMaster with any other information which is either in
the possession of ARS or available to ARS relating in any way to any possible
Acquisition Transaction as ServiceMaster shall request.
(e) ARS shall prior to entering into any Qualified Competing Proposal
pay or cause to be paid to ServiceMaster the amount specified in Section
10.3(b).
(f) Nothing contained in this Agreement shall prevent the board of
directors of ARS from complying with Rule 14d-9 and Rule 14e-2 under the
Exchange Act with regard to an Acquisition Transaction.
(g) ARS warrants that ARS is not bound by any contract or agreement
that would require it to take any action which would violate any restriction
contained in Section 6.4(b).
Section 6.5 Corporate Organization. Notwithstanding anything to the
contrary contained in this Agreement or in the disclosure schedules hereto, ARS
and each of its operating Subsidiaries
36
shall take all actions reasonably necessary in order to be duly qualified and in
good standing on the Effective Time with the Secretary of State in each
jurisdiction in which the character of its properties owned or held under lease
or the nature of its activities makes such qualification necessary, except where
the failure to be so qualified and in good standing would not have an ARS
Material Adverse Effect.
Section 6.6 Monthly Financial Statements. As soon as available but in
any event within 45 days after the end of each monthly accounting period in each
fiscal year, ARS shall deliver to ServiceMaster unaudited consolidated
statements of income of ARS and its Subsidiaries for such monthly period and for
the period from the beginning of the fiscal year to the end of such month, and
all such statements shall fairly present in all material respects the
consolidated results of operations of ARS and its consolidated subsidiaries for
the periods presented therein and shall be prepared in accordance with GAAP
consistently applied (subject to the absence of footnote disclosures and to
normal year-end adjustments) and shall set forth EBITA and a calculation thereof
for such monthly period. Each such monthly statement of income shall be
presented in such detail as is comparable to the January 1999 Financial
Statements.
Section 6.7 Resignation of ARS Directors. Prior to or simultaneously
with the acceptance for payment of, and payment for, ARS Shares by Acquisition
Subsidiary pursuant to the Offer, (i) ARS shall cause the directors of ARS and
its Subsidiaries to resign their positions as such upon such consummation of the
Offer and (ii) shall arrange for the appointment of Xxxxxxx X. Xxxxxx, Xxxxxx X.
Xxxxxx and Xxxxxx X. Xxxxxxx (or such other persons designated in writing by
ServiceMaster) as directors of ARS upon the consummation of the Offer. Subject
to applicable law, ARS shall take all action requested by Acquisition Subsidiary
necessary to effect any such requested election, including sending to its
stockholders the information required by Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder, and ARS agrees to make such mailing with the
mailing of the Schedule 14D-9 (provided that Acquisition Subsidiary shall have
provided to ARS on a timely basis all required information with respect to the
designees of Acquisition Subsidiary).
ARTICLE 7
COVENANTS OF SERVICEMASTER
Section 7.1 Obligations of Acquisition Subsidiary. Subject to the terms
and conditions in this Agreement, ServiceMaster will take all action necessary
to cause Acquisition Subsidiary to perform its obligations under this Agreement
and to consummate the Offer and the Merger on the terms and conditions set forth
in this Agreement.
Section 7.2 Indemnification.
37
(a) From and after the Effective Time, ServiceMaster and the Surviving
Corporation jointly and severally shall indemnify, to the full extent permitted
under Delaware Law, the present and former directors and officers of ARS and its
Subsidiaries (the "Indemnified Parties") in respect of actions taken prior to
and including the Effective Time in connection with their duties as directors or
officers of ARS or its Subsidiaries (including the transactions contemplated
hereby) for a period of not less than six years from the Effective Time;
provided that, in the event any claim or claims are asserted or made within such
six-year period, all rights to indemnification in respect of any such claim or
claims shall continue until final disposition of any and all such claims.
Without limitation of the foregoing, in the event any Indemnified Party becomes
involved in such capacity in any action, proceeding or investigation in
connection with any matter, including the transactions contemplated hereby,
occurring prior to and including the Effective Time, the Surviving Corporation,
to the extent permitted and on such conditions as may be required by applicable
law, will periodically advance expenses to such Indemnified Party for his legal
and other out-of-pocket expenses (including the cost of any investigation and
preparation) incurred in connection therewith.
(b) For not less than six years after the Effective Time,
ServiceMaster or the Surviving Corporation shall maintain in effect directors'
and officers' liability insurance covering the persons who are currently covered
by ARS's existing directors' and officers' liability insurance with respect to
actions that shall have taken place prior to the Effective Time, on terms and
conditions no less favorable to such persons than those in effect on the date
hereof under ARS's existing directors' and officers' liability insurance;
provided, however, that in no event shall ServiceMaster or the Surviving
Corporation be required to pay in any year an amount to maintain such insurance
covering the Indemnified Parties in excess of twice the amount paid by ARS as of
the Closing Date for such coverage; provided further that if the annual premiums
of such insurance coverage exceed such amount, ServiceMaster shall be obligated
to obtain a policy with a premium equal to such amount.
ARTICLE 8
COVENANTS OF SERVICEMASTER AND ARS
Section 8.1 Diligent Efforts. Subject to the terms and conditions of
this Agreement, each party will use its diligent efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement; provided that
nothing herein shall require ServiceMaster to hold, manage or operate any assets
separately or to enter into any sale or divestiture of assets. ARS,
ServiceMaster and Acquisition Subsidiary shall each furnish to one another and
to one another's counsel all such information as may be required in order to
accomplish the foregoing actions. In connection with and without limiting the
foregoing, ARS and ServiceMaster shall (i) take all action reasonably necessary
to ensure that no state takeover statute or similar statute or regulation is or
becomes applicable to the Offer, the Merger, this Agreement or any of the other
transactions contemplated hereby and (ii) if any state takeover statute or
similar
38
statute or regulation becomes applicable to the Offer, the Merger, this
Agreement or any of the other transactions contemplated hereby, take all action
reasonably necessary to ensure that the Offer, the Merger and the other
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated by this Agreement and otherwise to minimize the effect
of such statute or regulation on the Offer, the Merger and the other
transactions contemplated by this Agreement.
Section 8.2 Certain Filings. ARS and ServiceMaster shall cooperate with
one another (i) in connection with the preparation of all documents and filings
contemplated by this Agreement, (ii) in determining whether any other action by
or in respect of, or filing with, any governmental body, agency or official, or
authority or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts in connection with the
consummation of the transactions contemplated by this Agreement and (iii) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with any of
the documents and filings contemplated by this Agreement and seeking timely to
obtain any such actions, consents, approvals or waivers.
Section 8.3 Public Announcements. ServiceMaster and ARS will consult
with each other before issuing any press release or making any public statement
with respect to this Agreement and the transactions contemplated hereby and,
except as may be required by applicable law or any listing agreement with any
national securities exchange, will not issue any such press release or make any
such public statement prior to such consultation.
Section 8.4 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of ARS or Acquisition Subsidiary,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf ARS or Acquisition Subsidiary, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets of ARS acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger.
Section 8.5 Notices of Certain Events. ARS and ServiceMaster shall
promptly notify the other of:
(a) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement;
39
(c) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge, threatened against, relating to or
involving or otherwise affecting ARS or any of its Subsidiaries, on the one
hand, or ServiceMaster or Acquisition Subsidiary, on the other hand, which
relate to the consummation of the transactions contemplated by this Agreement;
and
(d) any action, event or occurrence that would constitute a breach of
any representation, warranty, covenant or agreement of it set forth in this
Agreement.
Section 8.6 Regulatory Matters and Approvals. Each of ARS and
ServiceMaster shall (and ServiceMaster shall cause Acquisition Subsidiary to)
give any notices to, make any filings with and use its diligent efforts to
obtain any authorizations, consents and approvals of, Governmental Entities in
connection with the transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, ARS and ServiceMaster shall each file
any Notification and Report Forms and related material that it may be required
to file in connection with the transactions contemplated by this Agreement with
the Federal Trade Commission and the Antitrust Division of the United States
Department of Justice under the HSR Act, shall each use its diligent efforts to
obtain an early termination of the applicable waiting period, and shall each
make any further filings pursuant thereto that may be necessary, proper or
advisable.
Section 8.7 Representations. Each of ARS, on the one hand, and
ServiceMaster and Acquisition Subsidiary, on the other, (i) will use their
diligent efforts to take all action necessary to render true and correct as of
the Closing, its representations and warranties contained in this Agreement and
(ii) will refrain from taking any action that would render any such
representation or warranty untrue or incorrect as of such time.
Section 8.8 Material Consents. Between the date of this Agreement and
the Closing Date, ARS and ServiceMaster and each of their respective
Subsidiaries shall in good faith use their diligent efforts to obtain all
consents and approvals of all lenders, lessors, vendors, customers and other
persons necessary to permit the transactions contemplated by this Agreement to
be consummated without violating any loan agreement, lease or other material
contract to which ARS, ServiceMaster or any of their respective Subsidiaries is
a party or by which ARS, ServiceMaster or any of their respective Subsidiaries
is bound.
ARTICLE 9
CONDITIONS
Section 9.1 Conditions to the Offer. Acquisition Subsidiary shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the SEC, to pay for, and may delay the acceptance for payment of
or the payment for any ARS Shares tendered pursuant to the Offer, and may
terminate the Offer if:
40
(a) there shall not have been validly tendered and not withdrawn prior to
the expiration of the Offer such number of ARS Shares that would
constitute at least 52 percent of the then outstanding ARS Shares (the
"Minimum Condition");
(b) any waiting period under the HSR Act applicable to the purchase of ARS
Shares pursuant to the Offer shall not have expired or been
terminated;
(c) there shall have occurred any general suspension of, or limitation on
prices for, trading in securities on the NYSE or in the over-the-
counter market or the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States; or
(d) any state of facts shall exist that would entitle ServiceMaster to
terminate this Agreement under any of the provisions in Section 10.1
of this Agreement.
The foregoing conditions are for the sole benefit of ServiceMaster and
Acquisition Subsidiary and may, subject to the terms of this Agreement, be
waived by ServiceMaster and Acquisition Subsidiary in whole or in part at any
time and from time to time in their sole discretion. The failure by
ServiceMaster or Acquisition Subsidiary at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any right and all such rights
may be asserted at any time or from time to time.
Section 9.2 Conditions to the Merger. The obligations of ServiceMaster and
Acquisition Subsidiary to consummate the Merger are subject to the satisfaction
of the following conditions: (i) if required by applicable law, this Agreement
shall have been adopted by the stockholders of ARS in accordance with Delaware
Law; and (ii) Acquisition Subsidiary shall have previously accepted payment and
paid for ARS Shares pursuant to the Offer.
ARTICLE 10
TERMINATION
Section 10.1 Termination. This Agreement may be terminated prior to the
purchase of ARS Shares pursuant to the Offer:
(a) by mutual written consent of ARS and ServiceMaster;
(b) by either ServiceMaster or ARS, in the event the Offer shall have
terminated or expired in accordance with its terms without Acquisition
Subsidiary having accepted for payment any ARS Shares pursuant to the
Offer or in the event Acquisition Subsidiary shall not have accepted
for payment any ARS Shares pursuant to the
41
Offer prior to June 30, 1999 (except as otherwise indicated below, the
"Deadline") as a result of any of the conditions specified in Section
9.1 not being satisfied; provided, however, that (i) the right to
terminate this Agreement pursuant to this paragraph (b) shall not be
available to any party whose failure (including, in the case of
ServiceMaster, a failure by Acquisition Subsidiary) to perform any of
its obligations under this Agreement shall have been the primary and
but-for reason for the failure of the satisfaction of any such
conditions or the termination of the Offer without acceptance of any
ARS Shares; (ii) in the event that there has been any public
disclosure of a possible Acquisition Transaction other than the Offer
and in ServiceMaster's reasonable judgment the pendency of such
alternative Acquisition Transaction shall have been a significant
reason for the failure to satisfy the Minimum Condition in response of
the Offer, ARS shall not have a right to terminate under this clause
(b) until and unless ServiceMaster shall terminate the Offer; and
(iii) if at the date which could otherwise constitute the "Deadline"
there shall be an injunction or other governmental order prohibiting
ServiceMaster from consummating the Offer, then the Deadline shall be
extended until 30 business days after such prohibition shall cease be
apply;
(c) by either ARS or ServiceMaster, if any judgment, injunction, order or
decree enjoining ServiceMaster, Acquisition Subsidiary or ARS from
consummating the transactions contemplated by this Agreement
(including the Merger, the Offer and the acquisition of ARS Shares by
Acquisition Subsidiary pursuant to the Offer) is entered and such
judgment, injunction, order or decree shall have become final and
nonappealable;
(d) by ServiceMaster if the board of directors of ARS shall (i) withdraw,
modify or change its recommendation or approval in respect of the
Offer in a manner not approved by ServiceMaster or (ii) have
recommended any proposal other than by ServiceMaster or Acquisition
Subsidiary in respect of an Acquisition Transaction;
(e) by ServiceMaster if a "Flip-In Event," a "Flip-Over Event," a
"Distribution Date" or a "Stock Acquisition Date" occurs under the
Rights Agreement of ARS;
(f) by ServiceMaster if ARS takes any action that would permit any Person
(other than ServiceMaster or Acquisition Subsidiary) to acquire in
excess of 15 percent of the outstanding shares of ARS Common Stock
without causing a "Flip-In Event," a "Flip-Over Event," a
"Distribution Date" or a "Stock Acquisition Date" to occur under the
Rights Agreement of ARS;
(g) by ServiceMaster if ARS shall have breached in any material respect
any of its representations or warranties contained herein (which
representations and warranties
42
for purposes of determining if ServiceMaster can terminate this
Agreement pursuant to this clause (g) shall be deemed to be made as of
the time of such termination except that any particular representation
or warranty that addresses matters only as of a particular date shall
be deemed for purposes of this clause (g) to have been made as of the
particular date);
(h) by ServiceMaster if ARS shall have breached in any material respect
any of its covenants or agreements contained in Section 6.1(b), (c) or
(e) or its warranties in Section 4.24;
(i) by ServiceMaster if ARS shall have breached in any material respect
any of its covenants or agreements contained herein, other than the
covenants and agreements contained in Section 6.1(b), (c) or (e);
(j) by ARS if a Qualified Competing Proposal is made to ARS, subject to
the restrictions set forth in Section 6.4, provided that the right to
terminate described in this subsection shall not be effective unless
and until ARS shall have paid to ServiceMaster the fee described in
Section 10.3(b);
(k) by ARS if ServiceMaster or Acquisition Subsidiary shall have breached
in any material respect any of its covenants or agreements contained
herein or any of its representations or warranties contained herein
(which representations and warranties for purposes of determining if
ARS can terminate this Agreement pursuant to this clause (k) shall be
deemed to be made as of the time of such termination except that any
particular representation or warranty that addresses matters only as
of a particular date shall be deemed for purposes of this clause (k)
to have been made as of the particular date);
(l) by ServiceMaster if (i) in ServiceMaster's good faith judgment there
shall be a reasonable possibility that ARS will not generate EBITA for
1999 in excess of $33.3 million or (ii) any other events, changes or
effects (including the incurrence of any liabilities of any nature,
whether or not accrued, contingent or otherwise) shall occur having,
or which would be reasonably likely to have in the aggregate, in the
good faith judgment of ServiceMaster, a material adverse effect on ARS
and its subsidiaries taken as a whole;
(m) by ServiceMaster, if the directors of ARS do not resign and take all
other actions necessary to accomplish all of the results specified in
Section 6.7;
(n) by ServiceMaster, if the "loss before income taxes, discontinued
operations and extraordinary items" of ARS as shown in ARS' definitive
audited financial statements for the fiscal year ended December 31,
1998 exceeds $3.9 million;
43
provided that the ServiceMaster termination right set forth in this
paragraph (n) shall terminate and be of no further force or effect at
11:59 p.m. on the second business day after the actual receipt by
ServiceMaster of those definitive audited 1998 financial statements of
ARS together with a written notice from ARS that such delivery is
intended to begin the two business day time limit specified in this
clause (n); or
(o) by ServiceMaster, if ServiceMaster or Acquisition Subsidiary is
entitled to terminate the Offer pursuant to Section 9.1.
Any right of termination under this Section 10.1 shall be exercised by written
notice of termination given by the terminating party to the other parties hereto
in the manner hereinafter provided. In the event ServiceMaster shall terminate
this Agreement under clause (l) of this Section 10.1, ServiceMaster shall at the
time of such termination identify in writing for ARS the grounds which
ServiceMaster believes entitles it to effect such termination under clause (l).
Any right of termination shall not be an exclusive remedy hereunder but shall be
in addition to any other legal or equitable remedies that may be available to
any non-defaulting party hereto arising out of any default hereunder by any
other party hereto.
Section 10.2 Waiver. At any time prior to the Effective Time, the
parties hereto, by action taken by or pursuant to resolutions of their
respective boards of directors, may (but shall not be required to) (i) extend
the time for the performance of any of the obligations or other acts of the
parties hereto, (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid if set forth in an instrument in writing signed on behalf
of such party.
Section 10.3 Effect of Termination; Termination Fee.
(a) If this Agreement is terminated pursuant to Section 10.1 hereof,
this Agreement shall become void and of no effect with no liability on the part
of any party hereto, except that the agreements contained in Sections 10.3(b)
and (c) and 11.4 hereof shall survive the termination hereof and except that no
such termination shall relieve any party from liability for breach of this
Agreement or failure by it to perform its obligations hereunder. Without
limiting by implication the generality of the preceding sentence, ServiceMaster
shall not be obligated to continue the Offer after any termination of this
Agreement pursuant to any provision in Section 10.1.
(b) If this Agreement shall be terminated pursuant to clause (d), (f),
(h), (j) or (m) in Section 10.1, then (i) ARS shall promptly, but in no event
later than two business days after the date of such termination, pay
ServiceMaster a termination fee equal to $3.25 million and (ii)
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ServiceMaster shall be entitled to the termination fee in the amount specified
in this subsection (b) regardless of whether any other ground for termination
shall exist under or by reason of this Agreement. In no event shall ARS be
required to pay more than one termination fee pursuant to this Section 10.3(b)
and if any fee shall be payable under this Subsection (b), then no additional
amount shall be separately payable under Section 10.3(c).
(c) If this Agreement shall be terminated pursuant to clause (g) or
(i) in Section 10.1, then (except as otherwise specified in Section 10.3(b)) ARS
shall pay ServiceMaster an amount, not to exceed $1,000,000, equal to the
reasonable and documented actual out-of-pocket expenses incurred by
ServiceMaster directly attributable to the proposed acquisition of ARS,
including negotiation and execution of this Agreement and the attempted
completion of the Offer and the Merger. Each such expense shall be paid within
thirty days after ServiceMaster shall have submitted the written request for
payment of such expense except that in the event ARS shall in good faith raise
any question as to whether any particular expense is payable by ARS under this
subsection (c), then ARS shall be entitled to delay payment of such expense
until ServiceMaster shall supply documentation sufficient to establish that the
particular expense is payable under the standards specified in this subsection
(c). In no event shall any request for additional documentation to which ARS
shall be entitled under this subsection (c) of itself entitle ARS to delay
payment of any other expense owed by ARS under this subsection (c).
(d) If ARS shall for any reason fail to make the payment specified
under Section 10.3(b) or Section 10.3(c) at the time required by that Section,
then ARS shall pay ServiceMaster on demand interest at a per annum rate equal to
300 basis points in excess of the prime rate (as reported in the Wall Street
Journal) on the amount remaining unpaid from that time until such payment shall
be received by ServiceMaster and shall also reimburse ServiceMaster for all
attorney's fees and other expenses which ServiceMaster shall reasonably incur to
enforce its rights to such payment.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including facsimile, telex or similar
writing) and shall be given,
If to ServiceMaster or Acquisition Subsidiary, to:
Xxx XxxxxxxXxxxxx Xxx
Xxxxxxx Xxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
45
with a copy to:
Xxxxxxxx & Xxxxx
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Facsimile: (000) 000-0000
If to ARS, to:
Post Oak Tower
Suite 725
0000 Xxxxxxxxxx Xxxx
Xxxxxxx, XX 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Fulbright & Xxxxxxxx L.L.P.
0000 XxXxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
or such other address, telecopy or telex number as such party may hereafter
specify for the purpose by notice to the other parties hereto. Each such
notice, request or other communication shall be effective (a) if given by
facsimile or telex, upon confirmation of receipt, or (b) if given by any other
means, when delivered at the address specified in this Section 11.1.
Section 11.2 Survival of Representations and Warranties. The
representations and warranties contained herein shall not survive the Effective
Time.
Section 11.3 Amendments; No Waivers.
(a) This Agreement may be amended by the parties hereto, by duly
authorized action taken, at any time before or after obtaining the ARS
Stockholder Approval, but, after the purchase of ARS Shares pursuant to the
Offer, no amendment shall be made which decreases the Merger Consideration and,
after the ARS Stockholder Approval, no amendment shall be made which by law
requires further approval by such stockholders without obtaining such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the Parties hereto or, in the case of a waiver, by
the party against whom the waiver is to be effective. Following the election or
appointment of the designees of Acquisition Subsidiary pursuant to Section 6.7
and prior to the Effective Time, this Agreement shall not be amended or
terminated.
46
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 11.4 Expenses. Each party shall pay its own costs and expenses
relating to this Agreement and the transactions contemplated hereby, except that
each of ServiceMaster and ARS shall bear and pay one-half of the costs and
expenses incurred in connection with the filing, printing and mailing of the
Offer Documents and the Schedule 14D-9 (including SEC filing fees).
Section 11.5 Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
Section 11.6 Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Delaware, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of Delaware or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Delaware.
Section 11.7 Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts (including by means of telecopied signature
pages), each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received counterparts
hereof signed by all of the other parties hereto.
Section 11.8 Headings. Section headings used in this Agreement are for
convenience only and shall be ignored in the construction and interpretation
hereof.
Section 11.9 No Third Party Beneficiaries. Except for Section 7.2
hereof, no provision of this Agreement is intended to, or shall, confer any
third party beneficiary or other rights or remedies upon any person other than
the parties hereto.
* * * * *
47
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective authorized officers as of the day and year
first above written.
THE SERVICEMASTER COMPANY
By: _________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Vice Chairman
SVM M9 ACQUISITION CORPORATION
By: _________________________________
Name: Xxxxxx X. Xxxxxx
Title: President
AMERICAN RESIDENTIAL SERVICES, INC.
By: _________________________________
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Executive Officer
SERVICEMASTER DISCLOSURE SCHEDULE
Schedule 4.6
1. Xxxxxx Lurgrin et al. vs. American Home Shield of Texas, Inc. et al., In
the District Court of Xxxxxx County, Texas, 295/th/ Judicial District, No.
97-55341 and Xxxxxx Xxxxx III vs. American Home Shield of Texas, Inc. et
al., 000/xx/ Xxxxxxxx Xxxxxxxx Xxxxx, Xx. 0000000.
Schedule 4.7
See item 1 under Schedule 4.6
Schedule 4.8
See item 1 under Schedule 4.6
Schedule 4.9
See item 1 under Schedule 4.6
