EXHIBIT 2.1
THE ACQUISITION AGREEMENT
ACQUISITION AGREEMENT
BY AND AMONG
SERVICEMASTER LIMITED PARTNERSHIP (A DELAWARE LIMITED PARTNERSHIP)
SERVICEMASTER ACQUISITION CORPORATION (A DELAWARE CORPORATION)
AND
BAREFOOT INC. (A DELAWARE CORPORATION)
DECEMBER 5, 1996
ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT, dated December 5, 1996, is entered into by and
among ServiceMaster Limited Partnership ("ServiceMaster"), a Delaware limited
partnership, ServiceMaster Acquisition Corporation (the "MergerSub"), a
Delaware corporation and wholly-owned subsidiary of ServiceMaster and Barefoot
Inc. ("Barefoot"), a Delaware corporation.
WHEREAS: ServiceMaster desires to make a tender offer to acquire all of the
outstanding shares of common stock, par value $0.01 per share, of Barefoot
(the "Barefoot Common Stock") together with the associated Series A Junior
Participating Preferred Stock Purchase Rights (the "Stock Purchase Rights"),
in accordance with the terms and subject to the conditions provided for
herein. The term "Share" whenever it is used in this Agreement means a share
of Barefoot Common Stock issued or issuable by Barefoot. Unless the context
otherwise requires, all references in this Agreement to Barefoot Common Stock
or the Shares shall include the associated Stock Purchase Rights.
WHEREAS: The parties intend that, for United States federal income tax
purposes, the exchange of Shares for ServiceMaster Shares pursuant to the
Offer as provided for herein will qualify as a tax free contribution to
ServiceMaster within the meaning of Section 721 of the Internal Revenue Code
("Code").
WHEREAS: To complete its acquisition of Barefoot, ServiceMaster desires to
effect as promptly as possible after consummation of the Offer a cash-out
merger of MergerSub with and into Barefoot upon the terms and subject to the
conditions set forth in a Merger Agreement executed simultaneously with this
Agreement (the "Merger Agreement").
WHEREAS: The Board of Directors of Barefoot, has, in light of and subject to
the terms and conditions set forth herein, (i) determined that each of the
Offer and the Merger (as defined in Section 2.1) is fair to the stockholders
of Barefoot and in the best interests of such stockholders and (ii) approved
and adopted this Agreement and the Merger Agreement and the transactions
contemplated hereby and thereby and resolved to recommend acceptance of the
Offer and approval and adoption by the stockholders of Barefoot of the Merger
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Barefoot, ServiceMaster and MergerSub hereby agree as follows:
ARTICLE 1.0
THE OFFER
1.1 Commitment to Make the Offer.
(a) All Shares Offer. Subject to the terms and conditions set forth in this
Agreement, ServiceMaster shall make a tender offer (herein called the
"Offer") to acquire all of the outstanding Shares on the terms
specified in this Article 1, subject to the conditions prescribed in
Annex 1 to this Agreement and on such other terms as shall be approved
by ServiceMaster and Barefoot. Subject to the terms and conditions of
the Offer, at the Closing Time (as defined in Section 1.7)
ServiceMaster shall accept all Shares which have been properly tendered
and not withdrawn pursuant to the Offer by 12:00 midnight New York City
time on the Expiration Date (as defined in subsection 1.1(b)). The
Offer shall be conducted in accordance with all applicable requirements
of the Securities Act of 1933 (the "Securities Act"), the Securities
Exchange Act of 1934 (the "Exchange Act") and all other applicable
legal and regulatory requirements.
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(b) Consideration for Shares. Upon the terms and subject to the conditions
of the Offer, the Offer shall commit ServiceMaster to acquire each
Share for, at the election of the holder as provided in and subject to
the limitations set forth in this Article 1, either:
(i) a fraction (the "Conversion Fraction") of a validly issued, fully
paid and nonassessable share ("ServiceMaster Share") of limited
partnership interest in ServiceMaster, determined by dividing $16
by the greater of (x) $23.00 or (y) the average (without rounding)
of the closing price (the "Average ServiceMaster Share Price") of
ServiceMaster Shares on the New York Stock Exchange ("NYSE") as
reported on the NYSE Composite Tape for the 15 consecutive NYSE
trading days ending on the fifth NYSE trading day immediately
preceding the date that the Offer expires (the "Expiration Date")
and rounding the result to the nearest one one-hundred thousandth
of a share (the "Share Consideration"); or
(ii) $16 in cash, without any interest thereon (the "Cash
Consideration" and collectively with the Share Consideration, the
"Offer Consideration").
(c) Commencement Date. ServiceMaster shall commence the Offer not later
than the fifth business day after the Registration Statement (as
defined in Section 1.4(a) hereof) is declared effective pursuant to the
Securities Act by the Securities and Exchange Commission (the "SEC").
ServiceMaster shall not be obligated to commence the Offer if any state
of facts shall exist which would entitle ServiceMaster not to acquire
the Shares tendered in response to the Offer under the conditions
expressly set forth in paragraphs (b), (c), (d), (e), (f), (g), (h),
(i) and (n) of Annex 1, provided that the condition in clause (f) shall
be applied as of the date on which ServiceMaster would otherwise be
obligated to commence the Offer and that the condition in (g) shall
apply only with respect to the terms, agreements and conditions which
this Agreement contemplates would be satisfied or performed prior to
the time the Offer commences.
(d) 25 Business Day Minimum Duration. If ServiceMaster shall commence the
Offer, then (except as otherwise provided in Section 1.7 or Section
6.2) ServiceMaster shall keep the Offer open for at least 25 business
days after the Commencement Date.
(e) Tax-Free Contributions of Shares. The parties intend that, for United
States federal income tax purposes, the exchange of Shares for
ServiceMaster Shares pursuant to the Offer as provided for herein will
qualify as a tax free contribution to ServiceMaster within the meaning
of Section 721 of the Code.
1.2 Election Procedure. Each holder of Shares which have been properly
tendered and not withdrawn pursuant to the Offer by 12:00 midnight New York
City time on the Expiration Date ("Tendered Shares"), shall have the right,
subject to the limitations set forth in this Article 1, to submit a request
specifying the number of Tendered Shares that such holder desires to have
exchanged into the Share Consideration pursuant to the Offer and the number of
Tendered Shares that such holder desires to have exchanged for the Cash
Consideration pursuant to the Offer in accordance with the following
procedures:
(a) Each holder of Tendered Shares may specify in a request made in
accordance with the provisions of this Section 1.2 (herein called an
"Election") (i) the number of Tendered Shares owned by such holder that
such holder desires to exchange for the Share Consideration in the
Offer (a "Share Election") and (ii) the number of Shares owned by such
holder that such holder desires to have exchanged for the Cash
Consideration in the Offer (a "Cash Election").
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(b) ServiceMaster shall prepare a form reasonably acceptable to Barefoot
(the "Form of Election") which shall upon commencement of the Offer be
mailed to Barefoot's stockholders as part of the Offer Documents (as
defined in Section 1.4(b)) so as to permit Barefoot's stockholders to
exercise their right to make an Election on or prior to the Expiration
Date.
(c) Any Election shall have been made properly only if the person
authorized to receive Elections and to act as exchange agent pursuant
to the Offer, which person shall be designated by ServiceMaster and
shall be reasonably satisfactory to Barefoot (the "Exchange Agent"),
shall have received, by 12:00 midnight New York City time on the
Expiration Date, a Form of Election properly completed and signed and
accompanied or preceded by certificates for the Shares to which such
Form of Election relates (or by an appropriate guarantee of delivery of
such certificates, as set forth in the notice of guaranteed delivery,
from a member of any registered national securities exchange or of the
National Association of Securities Dealers, Inc. or a commercial bank
or trust company in the United States provided such certificates are in
fact delivered to the Exchange Agent by the time required in such
guarantee of delivery).
(d) Any Barefoot stockholder may at any time prior to 12:00 midnight New
York City time on the Expiration Date, change his or her Election by
written notice received by the Exchange Agent prior to 12:00 midnight
New York City time on the Expiration Date, accompanied by a properly
completed and signed, revised Form of Election. A revised Form of
Election shall be deemed to invalidate any previously submitted Form of
Election.
(e) Any Barefoot stockholder may, at any time prior to 12:00 midnight New
York City time on the Expiration Date, revoke such stockholder's
Election by written notice received by the Exchange Agent prior to
12:00 midnight New York City time on the Expiration Date, or by
withdrawal prior to 12:00 midnight New York City time on the Expiration
Date of such stockholder's certificates for Shares, or of the guarantee
of delivery of such certificates, previously deposited with the
Exchange Agent pursuant to the procedures for withdrawal set forth in
the Offer Documents.
(f) ServiceMaster shall have the right to make rules (which shall be not
inconsistent with the terms of this Agreement and shall be reasonably
acceptable to Barefoot) governing the validity of the Forms of
Election, the manner and extent to which Elections are to be taken into
account in making the determinations prescribed by Sections 1.2 and
1.3, the issuance and delivery of certificates for ServiceMaster Shares
into which Tendered Shares are to be exchanged pursuant to the Offer
and the payment of Cash Consideration pursuant to the Offer.
1.3 Issuance of ServiceMaster Shares and Payment of Cash Consideration at
the Closing Time. The manner in which each Tendered Share shall be exchanged
for either the Share Consideration or the Cash Consideration pursuant to the
Offer shall be as set forth in this Section 1.3.
(a) Each Tendered Share for which a Share Election has been received shall
be, at the Closing (as defined in Section 1.7), exchanged for the Share
Consideration in the Offer; provided, however, no certificates or scrip
representing fractional ServiceMaster Shares shall be issued upon the
exchange for such Tendered Shares. In lieu of any such fractional
ServiceMaster Share, ServiceMaster shall pay to each such stockholder
of Barefoot who otherwise would be entitled to receive a fractional
ServiceMaster Share an amount in cash determined by multiplying (i) the
greater of $23.00 or the Average ServiceMaster Share Price by (ii) the
fractional interest in a ServiceMaster Share to which such holder would
otherwise be entitled.
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(b) Each Tendered Share for which a Cash Election has been received and
each Tendered Share as to which an Election is not in effect at 12:00
midnight New York City time on the Expiration Date, (a "Non-Electing
Share") shall be, at the Closing, exchanged for the Cash Consideration
in the Offer.
(c) If ServiceMaster shall determine that any Election is not properly made
with respect to any Tendered Shares, such Election shall be deemed to
be not in effect, and the Tendered Shares covered by such Election
shall, for purposes hereof and the Offer, be deemed to be Non-Electing
Shares.
(d) In the event that, between the date of this Agreement and the Closing
Time, the issued and outstanding ServiceMaster Shares shall have been
affected or changed into a different number of shares or a different
class of shares as a result of a share split, reverse share split,
share distribution, spin-off, extraordinary distribution,
recapitalization, reclassification or other similar transaction with a
record date within such period, the Conversion Fraction shall be
equitably adjusted by ServiceMaster in a manner reasonably satisfactory
to Barefoot.
1.4 ServiceMaster Action.
(a) In connection with the registration pursuant to the Securities Act of
ServiceMaster Shares to be issued by ServiceMaster as the Share
Consideration pursuant to the Offer, ServiceMaster shall as soon as
practicable after execution of this Agreement file with the SEC a
Registration Statement on Form S-4 (together with all amendments,
schedules, and exhibits thereto, the "Registration Statement").
ServiceMaster shall use reasonable efforts to have the Registration
Statement declared effective by the SEC at the earliest practicable
date. Barefoot shall reasonably assist and cooperate with ServiceMaster
in the preparation of the Registration Statement and shall use
reasonable efforts to assist ServiceMaster to have the Registration
Statement declared effective by the SEC at the earliest practicable
date.
(b) Subject to Section 1.1(c), as soon as practicable after the
Registration Statement is declared effective by the SEC, ServiceMaster
shall commence the Offer. As soon as practicable on the date of
commencement of the Offer, ServiceMaster shall file with the SEC a
Tender Offer Statement on Schedule 14D-1 with respect to the Offer
which will contain the offer to purchase and form of the related letter
of transmittal (together with any supplements or amendments thereto,
collectively the "Offer Documents"). The Offer Documents shall comply
with the provisions of the applicable securities laws.
1.5 Barefoot Actions.
(a) Approvals. Barefoot hereby approves of and consents to the Offer and
represents and warrants that Barefoot's Board of Directors (the
"Board"), at a meeting duly called and held took all of the following
actions in the manner and to the extent indicated in Annex 4: (i)
determined that this Agreement and the Merger Agreement and the
transactions contemplated hereby, including the Offer and the Merger,
are fair to, and in the best interests of, the stockholders of
Barefoot, (ii) approved this Agreement and the Merger Agreement and the
transactions contemplated hereby and thereby, including the Offer and
the Merger, in all respects and determined that such approval
constitutes approval of the Offer, this Agreement, the Merger Agreement
and the Merger for purposes of Section 251(b) of the Delaware General
Corporation Law (the "DGCL") and (iii) resolved to recommend that the
stockholders of Barefoot accept the Offer, tender their Shares
thereunder to ServiceMaster (subject to the reservation with respect to
the Share Election contained in Annex 4) and to recommend that the
stockholders of Barefoot approve and adopt the Merger Agreement and the
Merger. Barefoot consents to the inclusion of such recommendation and
approval in the Offer
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Documents. Barefoot warrants to ServiceMaster that a complete an
accurate copy of the resolution by its Board taking the actions
specified in the preceding sentence is attached to this Agreement as
Annex 4. Barefoot's Board shall not withdraw, modify or amend its
recommendation specified in Annex 4 unless and until either
(i) prior to the consummation of the Offer another offer to acquire
Barefoot shall be made and the Board of Directors of Barefoot
determines, after having received the advice of outside legal
counsel to Barefoot and the advice of Barefoot's financial advisor,
that such offer is for consideration per Share in excess of the
Offer Consideration and the Board is required in the exercise of its
fiduciary duties under applicable law to withdraw, modify or amend
its recommendation specified in Annex 4 and (ii) all conditions
specified in Section 6.1(c)(1) of this Agreement as requisite to
Barefoot's termination of this Agreement have been satisfied, or
(ii) this Agreement shall have been terminated in accordance with
the terms specified in Section 6.1 and any amount due from Barefoot
under Section 7.1 shall have been paid to ServiceMaster.
(b) 14D-9 SEC Filing. Contemporaneously with the commencement of the Offer,
Barefoot shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9"), which shall reflect
the recommendation of the Offer and of the Merger by Barefoot's Board
of Directors, provided that if Barefoot shall become entitled to
withdraw its recommendation of the Offer or the Merger under the
provisions of Section 1.5(a), then neither such withdrawal nor the
modification of the Schedule 14D-9 to reflect such withdrawal and any
position taken by the Board subsequent to such withdrawal shall
constitute a breach by Barefoot of this Agreement. The Schedule 14D-9
shall contain the information required by Section 14(f) of the Exchange
Act and Rule 14f-1 promulgated thereunder with respect to
ServiceMaster's designees for election to Barefoot's Board of Directors
pursuant to Section 1.7(e) hereof. ServiceMaster shall supply any
information with respect to itself or its designees which may be
required for inclusion therein. The Schedule 14D-9, together with any
supplements or amendments thereto, shall comply with the provisions of
the applicable federal securities laws.
(c) Stockholder Lists. In connection with the Offer, Barefoot shall within
two business days after a request from ServiceMaster furnish
ServiceMaster with mailing labels, security position listings and any
available listing or computer file containing the names and addresses
of the record holders of the Shares as of the latest practicable date
and shall furnish ServiceMaster with such additional information and
assistance (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) as
ServiceMaster or its agents may reasonably request in communicating the
Offer to the record and beneficial holders of Shares. 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 its affiliates
and associates shall use the information contained in any such labels,
listings and files only in connection with and for the purpose of the
Offer and the Merger, and if this Agreement shall be terminated
ServiceMaster will deliver to Barefoot or destroy all copies of such
information then in the possession of ServiceMaster or any of
ServiceMaster's affiliates or associates.
1.6 Treatment of Barefoot Stock Options. Barefoot warrants to ServiceMaster
that Section 1.6 of the Disclosure Schedule accurately shows the number of
shares subject to issuance under each outstanding option granted under
Barefoot's stock option program for officers and other employees (and all
options outstanding under such programs are herein called "Barefoot Stock
Options") and the exercise price per share of each such option. At the
Closing, Barefoot shall pay to each person who
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holds any Barefoot Stock Option an amount of cash equal to the number of shares
subject to that Option at the Closing (whether or not then vested) times the
remainder derived by subtracting the exercise price per share from $16.
Barefoot shall obtain an agreement in a form reasonably satisfactory to
ServiceMaster from each holder of every Barefoot Stock Option to accept such
payment in exchange for a surrender of all rights of such holder under or by
reason of such Option including but not limited to the termination of the
holder's rights to purchase any shares with such Option after the Closing. The
obtaining of such an agreement from each Option holder shall be a condition to
ServiceMaster's obligation to consummate the Closing. ServiceMaster consents to
Barefoot's actions prescribed by this Section 1.6.
1.7 The Closing; Minimum Number of Shares. ServiceMaster shall consummate the
Offer and acquire all Shares properly tendered and not withdrawn (the
"Closing") at the earliest time permitted under the Exchange Act and the
earliest time as of which: (i) the Minimum Number of Shares shall have been
properly tendered and not withdrawn and shall be available for purchase under
the terms of the Offer and applicable law and (ii) all conditions to
ServiceMaster's obligation to consummate the Offer contained in Annex 1 shall
have been satisfied or waived by ServiceMaster; provided, that ServiceMaster
may allow the Offer to remain open for an additional period of time but no
later than 20 business days after the Minimum Number of Shares shall have been
properly tendered. For purposes of this Agreement, the "Closing Time" shall be
the time at which ServiceMaster shall acquire Shares by means of the Offer. The
Minimum Number shall be such number that when added to all Shares owned by
ServiceMaster and its affiliates prior to consummation of the Offer will
provide ServiceMaster and its affiliates with ownership of 75% of the Shares
which shall be outstanding at the Closing Time. The Closing shall take place in
the offices of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ in Chicago, Illinois at the Closing Time. At
the Closing:
(a) ServiceMaster shall deliver, in trust, to the Exchange Agent, for the
benefit of the holders of Shares, certificates representing an
aggregate number of ServiceMaster Shares as nearly as practicable equal
to the product of the Conversion Fraction and the number of Tendered
Shares to be converted into ServiceMaster Shares as determined in
subsections 1.1(b)(i) and 1.3(a). As soon as practicable after the
Closing Time, each holder of Tendered Shares exchanged into
ServiceMaster Shares pursuant to the Offer, shall be, upon such
holder's compliance with the Offer Documents regarding the delivery of
certificates representing Tendered Shares not previously delivered),
entitled to receive certificates representing the number of
ServiceMaster Shares for which such Tendered Shares shall have been
exchanged as determined in subsections 1.1(b)(i) and 1.3(a). If any
certificate for such ServiceMaster Shares is to be issued in a name
other than that in which the certificate for Tendered Shares
surrendered in exchange therefor is registered, it shall be a condition
of such exchange that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required by reason of
issuance of certificates for such ServiceMaster Shares in a name other
than the registered holder of the certificate surrendered, or shall
establish to the reasonable satisfaction of the Exchange Agent that
such tax has been paid or is not applicable.
(b) ServiceMaster shall deposit in trust with the Exchange Agent, for the
benefit of the holders of Tendered Shares, an amount in cash equal to
the Cash Consideration multiplied by the number of Tendered Shares to
be exchanged for the Cash Consideration as determined in subsections
1.1(b)(ii) and 1.3(b). As soon as practicable after the Closing Time,
the Exchange Agent shall distribute to such holders of Tendered Shares,
upon such holder's compliance with the Offer Documents regarding the
delivery of certificates representing Tendered Shares not previously
delivered), the Cash Consideration in the form of a bank check for an
amount equal to the Cash Consideration times the number of Tendered
Shares so exchanged. In no event shall the holder of any such
surrendered certificates be entitled to receive interest on
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any of the Cash Consideration to be received in the Offer. If such check
is to be issued in the name of a person other than the person in whose
name the certificates for the Tendered Shares surrendered for exchange
therefor are registered, it shall be a condition of the exchange that
the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of issuance of such check to
a person other than the registered holder of the certificates
surrendered, or shall establish to the reasonable satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
(c) The Exchange Agent shall deliver to ServiceMaster such stock
certificates representing Tendered Shares as the Exchange Agent shall
have received by the Closing Time against receipt of the Offer
Consideration therefor. The Exchange Agent shall promptly deliver to
ServiceMaster stock certificates representing Tendered Shares not
previously delivered as the Exchange Agent shall receive after the
Closing Time.
(d) Barefoot shall deliver to ServiceMaster the agreement from the holder
of every Barefoot Stock Option required by Section 1.6.
(e) The incumbent directors of Barefoot shall appoint designees of
ServiceMaster to the Board of Directors of Barefoot and all incumbent
directors of Barefoot shall resign.
1.8 It shall be a condition to ServiceMaster's obligation to consummate the
Closing that Barefoot shall deliver, or caused to be delivered, to
ServiceMaster all of the following:
(i) a certificate executed on its behalf by its Chief Executive Officer
and its Chief Financial Officer in their corporate capacity to the effect
that: (A) the representations and warranties of Barefoot set forth in this
Agreement are true and accurate as of the Closing Time as if made at and as
of such time (except for those representations and warranties that address
matters only as of a particular date or only with respect to a specific
period of time which need only be true and accurate as of such date or with
respect to such period), except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to "materiality" or "material adverse effect" set forth
therein), would not have, and is not reasonably likely to have,
individually or in the aggregate, a material adverse effect on Barefoot and
its subsidiaries taken as a whole; (B) Barefoot shall have performed in all
material respects its obligations hereunder required to be performed by it
at or prior to the Closing Time; and (C) since September 30, 1996, there
shall not have occurred any event, change or effect having, or which would
be reasonably likely to have, in the aggregate, a material adverse effect
on Barefoot and its subsidiaries, taken as a whole;
(ii) a certificate of good standing from the Secretary of State of each
state in which Barefoot and its subsidiaries are incorporated or qualified
to do business stating that each is a validly existing corporation in good
standing;
(iii) duly adopted resolutions of the Board of Directors of Barefoot
approving the execution, delivery and performance of this Agreement and the
instruments contemplated hereby, certified by the Secretary of Barefoot;
(iv) a true and complete copy of the Restated Certificate of
Incorporation, as amended, of Barefoot and each of Barefoot's subsidiaries
certified by the Delaware Secretary of State, and a true and complete copy
of the Bylaws, as amended, of Barefoot and each of Barefoot's subsidiaries
certified by the Secretary thereof;
(v) the duly executed Director and Officer Actions (as defined in Section
5.13); and
(vi) such other documents and instruments as ServiceMaster reasonably may
request.
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ARTICLE 2.0
THE MERGER
2.1 The Merger. As soon as practicable after the purchase of Shares pursuant
to the Offer and receipt of requisite approval by the holders of not less than
75% of the outstanding Shares, ServiceMaster, MergerSub and Barefoot shall
engage in a merger (herein called the "Merger") pursuant to which (i) MergerSub
shall be merged with and into Barefoot, (ii) the separate existence of
MergerSub (except as may be continued by operation of law) shall cease, (iii)
Barefoot shall continue as the surviving corporation, (iv) each Share
outstanding immediately prior to the Merger (other than Shares owned by
ServiceMaster and its affiliates) shall be converted into cash in an amount per
share equal to the Cash Consideration, and (v) Barefoot shall become a wholly
owned subsidiary of ServiceMaster. Contemporaneously with the execution of this
Agreement, ServiceMaster, MergerSub and Barefoot shall enter into a Plan and
Agreement of Merger (the "Merger Agreement"), providing for the Merger in
accordance with this Agreement, the Merger Agreement, and the DGCL. Barefoot,
in its capacity as the corporation surviving the Merger, sometimes is referred
to as the "Surviving Corporation."
2.2 Proxy Statement. As soon as practicable after execution of this
Agreement, Barefoot shall file with the SEC under the Exchange Act, and all
parties hereto shall use all reasonable efforts to have cleared by the SEC by
the Closing Time, a proxy statement or information statement, as Barefoot shall
designate (the "Proxy Statement"), with respect to the approval by Barefoot's
stockholders of the Merger Agreement and the Merger. The Proxy Statement shall
be in form and substance reasonably satisfactory to Barefoot and ServiceMaster.
The information provided and to be provided by ServiceMaster, MergerSub and
Barefoot, respectively, for use in the Proxy Statement shall be true and
correct in all material respects and shall not omit to state any material fact
necessary in order to make such information and the Proxy Statement not
misleading as of the date of mailing of the Proxy Statement. The Proxy
Statement shall comply in all material respects with the Exchange Act and the
rules and regulations thereunder. The Proxy Statement shall contain the
recommendation of the Board of Directors of Barefoot that stockholders approve
the Merger.
2.3 Short Form Merger. In the event that after consummation of the Offer,
ServiceMaster and its affiliates shall own at least 90% of the outstanding
Shares, then as soon as practicable after the Closing Time, MergerSub and
appropriate officers of MergerSub shall execute a certificate of ownership and
merger and shall cause such certificate to be filed with the Delaware Secretary
of State. Barefoot and MergerSub shall also take any other actions which shall
be necessary to cause the Merger to occur in accordance with Section 253 of the
Delaware Law and shall provide all notices to stockholders and take such other
actions as shall be required by the Delaware Law or other applicable
governmental requirements by reason of the consummation of the Merger.
2.4 Stockholder Approval. In the event that ServiceMaster and its affiliates
after consummation of the Offer, do not own at least 90% of all Shares
outstanding at that time, then as soon as practicable after the Closing Time,
Barefoot shall take all action necessary in accordance with the Delaware Law
and other applicable governmental requirements and its Restated Certificate of
Incorporation and By-Laws either (at Barefoot's election) to (a) distribute the
Proxy Statement and convene a meeting of its stockholders as promptly as
possible after the Closing Time to consider and vote upon the Merger Agreement
and the Merger or (b) submit the Merger Agreement and the Merger for approval
by written consent in lieu of a meeting of stockholders. If a stockholders'
meeting is convened or consents are to be solicited, the Board of Directors of
Barefoot shall recommend that the stockholders of Barefoot vote to adopt and
approve the Merger Agreement and the Merger. Barefoot shall use its best
efforts to solicit from stockholders of Barefoot proxies or consents in favor
of such adoption and approval to the extent such consents or approvals are
required and shall take all other action necessary or helpful to secure a vote
or consent of stockholders in favor of the Merger. At any such meeting
ServiceMaster
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and its affiliates shall vote all Shares held by them in favor of the Merger,
and Barefoot shall vote all Shares with respect to which proxies in the form
distributed by Barefoot shall have been given in favor of the Merger. In
connection with any such vote or consent, ServiceMaster and its affiliates
shall vote in favor of or consent to the Merger Agreement and the Merger with
respect to all Shares any of them have the power to vote and Barefoot shall
give any such consents which it is authorized to give by stockholder consent.
As soon as is practicable after the satisfaction or waiver of the conditions
set forth in Section 2.5 below, and in no event later than five business days
after such satisfaction or waiver, MergerSub will cause a Certificate of Merger
to be filed with the Secretary of State of the State of Delaware.
Notwithstanding the foregoing, in lieu of holding a stockholders' meeting or
seeking consents for approval of the Merger Agreement and the Merger, the
Merger Agreement and the Merger may be approved by ServiceMaster and its
affiliates if they shall own at least 75% of all outstanding Shares upon
consummation of the Offer, in which event proxies need not be solicited from
other stockholders but all required statements and information shall be
furnished to such stockholders in accordance with all applicable laws and
regulations.
2.5 Conditions to the Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver of each of the conditions set forth below:
(a) If ServiceMaster and its affiliates shall own less than 90% of all
Shares outstanding at the conclusion of the Offer, the Merger and the
Merger Agreement shall have been approved and adopted by the requisite
vote or consent of stockholders of Barefoot in accordance with
Barefoot's Restated Certificate of Incorporation and By-laws and the
Delaware Law;
(b) The Offer shall have been consummated pursuant to the terms of this
Agreement; and
(c) No injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or
administrative agency or commission nor any statute, rule, regulation
or executive order promulgated or enacted by any governmental authority
shall be in effect, which would make the acquisition or holding by
ServiceMaster or its subsidiaries of the Shares or shares of common
stock of the Surviving Corporation illegal or otherwise prevent the
consummation of the Merger.
2.6 Dissenters' Rights. Barefoot shall not settle or compromise any claim for
dissenters' rights without the prior written consent of ServiceMaster.
ARTICLE 3.0
REPRESENTATIONS AND WARRANTIES OF BAREFOOT
Barefoot represents and warrants to ServiceMaster and MergerSub as follows:
3.1 Organization. Each of Barefoot and its subsidiaries (as defined below) is
a corporation, partnership or other entity duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation or
organization, 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 a material adverse effect
(as defined below) on Barefoot and its subsidiaries taken as a whole. Each of
Barefoot 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
9
qualified or licensed and in good standing would not, in the aggregate, have a
material adverse effect on Barefoot and its subsidiaries taken as a whole. As
used in this Agreement, the word "subsidiary" means, with respect to any party,
any corporation or other organization, whether incorporated or unincorporated,
of which (i) such party or any other subsidiary of such party is a general
partner (excluding such partnerships where such party or any subsidiary of such
party do not have a majority of the voting interest in such partnership) or
(ii) at least a majority of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or by
any one or more of its subsidiaries, or by such party and one or more of its
subsidiaries. As used in this Agreement, any reference to any event, change or
effect having a material adverse effect on or with respect to any entity (or
group of entities taken as a whole) means such event, change or effect, in the
aggregate with such other events, changes, or effects, which is materially
adverse to the financial condition, results of operations or business of such
entity. Section 3.1 of the Disclosure Schedule delivered by Barefoot to
ServiceMaster on or prior to the date hereof (the "Disclosure Schedule") sets
forth a complete list of Barefoot's subsidiaries.
3.2 Capitalization.
(a) The authorized capital stock of Barefoot consists of 45,000,000 shares
consisting of 40,000,000 shares of Barefoot Common Stock and 5,000,000
shares of Preferred Stock, $0.01 par value (the "Preferred Stock"). As
of the date hereof, 14,519,760 shares of Barefoot Common Stock are
issued and outstanding and 2,277,000 shares of Barefoot Common Stock
are held in the treasury of Barefoot. As of the date hereof, no shares
of Preferred Stock are issued and outstanding and 400,000 shares of
Preferred Stock has been designated as Series A Junior Participating
Preferred Stock issuable upon exercise of the Stock Purchase Rights. As
of the date hereof, options to acquire an aggregate of 412,550 shares
of Barefoot Common Stock have been issued pursuant to Barefoot Stock
Options. All the outstanding shares of Barefoot's capital stock are
duly authorized, validly issued, fully paid and non-assessable.
(b) There are no bonds, debentures, notes or other indebtedness having
voting rights (or convertible into securities having such rights)
("Voting Debt") of Barefoot or any of its subsidiaries issued and
outstanding. Except as set forth above and for the transactions
contemplated by this Agreement which will result in issuance of shares
to ServiceMaster, (i) there are no shares of capital stock of Barefoot
authorized, issued or outstanding and (ii) 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
Barefoot or any of its subsidiaries, obligating Barefoot or 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, Barefoot or any of its subsidiaries or
securities convertible into or exchangeable for such shares or equity
interests or obligations of Barefoot 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.
(c) There are no outstanding contractual obligations of Barefoot or any of
its subsidiaries to repurchase, redeem or otherwise acquire any Shares
or the capital stock of Barefoot or any subsidiary or affiliate of
Barefoot 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 Barefoot or its subsidiaries is required to redeem,
repurchase or otherwise acquire shares of capital stock of Barefoot, or
any of its subsidiaries, respectively, as a result of the transactions
contemplated by this Agreement.
10
(d) All of the outstanding shares of capital stock of each of the
subsidiaries are beneficially owned by Barefoot, directly or
indirectly, and all such shares have been validly issued and are fully
paid and nonassessable and are owned by either Barefoot or one of its
subsidiaries free and clear of all liens, charges, security interests,
options, claims or encumbrances of any nature whatsoever.
(e) There are no voting trusts or other agreements or understandings to
which Barefoot or any of its subsidiaries is a party with respect to
the voting of the capital stock of Barefoot or any of the subsidiaries.
(f) At the Closing Time, the number of shares of Barefoot Common Stock
outstanding shall not exceed 14,982,310. At and after the Closing Time,
neither Barefoot nor any of its subsidiaries will have any obligation
to issue, transfer or sell any shares of its capital stock to anyone
other than ServiceMaster.
3.3 Corporate Authorization; Validity of Agreement; Barefoot Action.
(a) Barefoot has full corporate power and authority to execute and deliver
this Agreement and, subject to obtaining any necessary approval of its
stockholders as contemplated by Section 2.2 hereof with respect to the
Merger, to consummate the transactions contemplated hereby. The
execution, delivery and performance by Barefoot 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 approval of its stockholders as contemplated by
Section 2.2 hereof with respect to the Merger, no other corporate
action or proceedings on the part of Barefoot is necessary to authorize
the execution and delivery by Barefoot of this Agreement, and the
consummation by it of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Barefoot and,
assuming this Agreement constitutes a valid and binding obligation of
ServiceMaster and MergerSub, constitutes a valid and binding obligation
of Barefoot enforceable against Barefoot 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.
(b) The Board of Directors of Barefoot has duly and validly approved and
taken all corporate action required to be taken by the Board of
Directors for the consummation of the transactions contemplated by this
Agreement. The affirmative vote of the holders of 75% of the Shares is
the only vote of the holders of any class or series of Barefoot capital
stock necessary to approve the Merger.
(c) A complete and accurate copy of the resolutions adopted by Barefoot's
Board of Directors with respect to the Offer and the Merger is attached
to this Agreement as Annex 5.
3.4 Consents and Approvals; No Violations. Except as set forth in Section 3.4
of the Disclosure Schedule and for all filings, permits, authorizations,
consents and approvals as may be required under, and other applicable
requirements of, the Exchange Act (as defined herein), the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the state
securities or "blue sky" laws, state takeover laws, and for the approval of the
Merger by Barefoot's stockholders and the filing and recordation of the
Certificate of Merger as required by the DGCL, neither the execution, delivery
or performance of this Agreement nor the consummation by Barefoot of the
transactions contemplated hereby nor compliance by Barefoot with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Certificate of Incorporation or by-laws or similar
organizational
11
documents of Barefoot or of any of its subsidiaries, (ii) 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 a material adverse effect on Barefoot
and its subsidiaries taken as a whole and would not, or would not be reasonably
likely to, materially impair the ability of Barefoot, ServiceMaster or
MergerSub to consummate the Offer, the Merger or the other transactions
contemplated hereby, (iii) 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 Barefoot or any of its subsidiaries is a party or by which
any of them or any of their properties or assets may be bound (a "Barefoot
Agreement") or (iv) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Barefoot, any of its subsidiaries or any of their
properties or assets, except in the case of clauses (iii) and (iv) for
violations, breaches or defaults which would not have a material adverse effect
on Barefoot and its subsidiaries taken as a whole.
3.5 SEC Reports and Financial Statements. Barefoot 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 since January 1, 1994 under the Exchange Act and the
Securities Act (as such documents have been amended since the time of their
filing, collectively, the "Barefoot SEC Documents"). As of their respective
dates or, if amended, as of the date of the last such amendment, Barefoot SEC
Documents, including, without limitation, any financial statements or 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 applicable rules and regulations of the SEC thereunder.
Each of the consolidated financial statements included in Barefoot SEC
Documents have been prepared from, and are in accordance with, the books and
records of Barefoot and/or its consolidated subsidiaries, comply in all
material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto, have been
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) and fairly present 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 Barefoot 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 and lack of footnote
disclosures).
3.6 Absence of Certain Changes. Except as disclosed in Barefoot SEC Documents
filed with the SEC prior to the date hereof, since January 1, 1996, Barefoot
and its subsidiaries have conducted their respective businesses and operations
in the ordinary course of business consistent with past practice. Since
September 30, 1996, 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 material adverse effect on Barefoot and its
subsidiaries taken as a whole; (ii) 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 Barefoot or of any of its subsidiaries,
other than regular quarterly cash dividends or dividends paid by wholly owned
subsidiaries; or (iii) any change by Barefoot or any of its subsidiaries in
accounting principles or methods.
12
3.7 No Undisclosed Liabilities. Except (a) as disclosed in Section 3.7 of the
Disclosure Schedule, (b) to the extent disclosed in Barefoot SEC Documents
filed prior to the date of this Agreement and (c) for liabilities and
obligations incurred in the ordinary course of business consistent with past
practice, since January 1, 1996, neither Barefoot 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, a material adverse effect on Barefoot and its subsidiaries. Section 3.7
of the Disclosure Schedule sets forth each instrument evidencing indebtedness
of Barefoot 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, the Offer, the Merger or the
other transactions contemplated hereby.
3.8 Employee Benefit Plans; ERISA. As of the date of this Agreement and as of
the Closing Time:
(a) There are no material employee or director benefit plans, arrangements,
practices, contracts or agreements (including, without limitation,
employment agreements, change of control employment agreements and
severance agreements, incentive compensation, bonus, stock option,
stock appreciation rights and stock purchase plans) of any type
(including but not limited to plans described in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
maintained by Barefoot, any of its subsidiaries or any trade or
business, whether or not incorporated (an "ERISA Affiliate"), that
together with Barefoot would be deemed a "controlled group" within the
meaning of Section 4001(a)(14) of ERISA, or with respect to which
Barefoot or any of its subsidiaries has or may have a liability, other
than those listed on Section 3.8(a) of the Disclosure Schedule (the
"Benefit Plans"). Except as disclosed in Section 3.8(a) of the
Disclosure Schedule (or as otherwise permitted by this Agreement)
neither Barefoot nor any ERISA Affiliate has any formal plan or
commitment, whether legally binding or not, to create any additional
Benefit Plan or modify or change any existing Benefit Plan that would
affect any employee or terminated employee of Barefoot or any ERISA
Affiliate.
(b) With respect to any Benefit Plan, there are no material amounts accrued
but unpaid as of the most recent balance sheet date that are not
reflected on that balance sheet prepared in accordance with GAAP.
(c) With respect to each Benefit Plan: (i) if intended to qualify under
Section 401(a), 401(k) or 403(a) of the Code, such plan has received,
or an application is pending for, a determination letter from the
Service that the Plan so qualifies, and its trust is exempt from
taxation under Section 501(a) of the Code and Barefoot knows of no
event that would prevent such qualification; (ii) such plan has been
administered in all material respects in accordance with its terms and
applicable law; (iii) no breaches of fiduciary duty have occurred; (iv)
no material disputes are pending, or, to the knowledge of Barefoot,
threatened; (v) no prohibited transaction (within the meaning of
Section 406 of ERISA) has occurred; (vi) all contributions and premiums
due (including any extensions for such contributions and premiums) have
been made in full; (vii) no such Plan has incurred or will incur any
"accumulated funding deficiency," as such term is defined in Section
412 of the Code, whether or not waived; (viii) no such Plan provides
medical or death benefits with respect to current or former employees
of Barefoot or any of its subsidiaries beyond their termination of
employment, other than on an employee-pay-all basis; and (ix) no Plan
is a "multiemployer plan," as such term is defined in Section 3(37) of
ERISA, or is covered by Section 4063 or 4064 of ERISA.
(d) Neither Barefoot nor any ERISA Affiliate has incurred any material
liability under Title IV of ERISA since the effective date of ERISA
that has not been satisfied in full (including sections
13
4063-4064 and 4069 of ERISA) and, to the knowledge of Barefoot, no basis
for any such liability exists. Neither Barefoot nor any ERISA Affiliate
maintains (or contributes to), or has maintained (or has contributed to)
within the last six years, any employee benefit plan that is subject to
Title IV of ERISA (other than a Benefit Plan).
(e) Except as set forth in Section 3.8(e) of the Disclosure Schedule or to
the extent disclosed in Barefoot SEC Documents, the consummation of the
transactions contemplated by this Agreement will not entitle any
individual to severance pay or accelerate the time of payment or
vesting, or increase the amount, of compensation or benefits due to any
individual with respect to any Benefit Plan. As a result of the
transactions described herein, either alone or together with another
event such as termination of employment, except as set forth in Section
3.8(e) of the Disclosure Schedule, no party will be required to make a
"parachute payment" to a "disqualified individual" within the meaning
of Section 280G of the Code.
(f) Barefoot has delivered or made available to ServiceMaster accurate and
complete copies of all plan texts, summary plan descriptions, trust
agreements and other related agreements including all amendments to the
foregoing; the two most recent annual reports; the most recent annual
and periodic accounting of plan assets; the most recent determination
letter received from the United States Internal Revenue Service (the
"Service"); and the two most recent actuarial reports, to the extent
any of the foregoing may be applicable to a particular Benefit Plan.
3.9 Litigation; Compliance with Law.
(a) Except to the extent disclosed in Barefoot SEC Documents filed prior to
the date of this Agreement, there is no suit, claim, action,
proceeding, review or investigation pending or, to the knowledge of
Barefoot, threatened against or affecting, Barefoot or any of its
subsidiaries which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on Barefoot and its
subsidiaries taken as a whole, or would, or would be reasonably likely
to, materially impair the ability of ServiceMaster to consummate the
Offer or Barefoot and MergerSub to consummate the Merger or the other
transactions contemplated hereby.
(b) Barefoot 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
(as defined in Section 3.11) except to the extent that any such non-
compliance would not have a material adverse effect on Barefoot and its
subsidiaries taken as a whole.
3.10 No Default. Except as disclosed in Barefoot SEC Documents, the business
of Barefoot 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 by-laws or similar organizational documents, or (b) any
Barefoot Agreement, excluding from the foregoing clause (b), defaults or
violations that would not have a material adverse effect on Barefoot and its
subsidiaries taken as a whole or would not, or would not be reasonably likely
to, materially impair the ability of Barefoot or ServiceMaster to consummate
the Offer, the Merger or the other transactions contemplated hereby.
3.11 Taxes.
(a) Tax Filings and Payments.
(1) All Returns required to be filed on or before the date hereof and
the date of the Closing by or on behalf of Barefoot have been duly
filed on a timely basis and such Returns are,
14
to Barefoot's knowledge, true, correct and complete in all respects
except that such returns may contain inadvertent errors and
omissions which are not material.
(2) Barefoot will timely file all of its Returns for the year ending
March 31, 1996 no later than December 15, 1996. Barefoot's final
federal income tax return for the taxable year ended March 31, 1996
will be essentially consistent with the proforma return which was
furnished to ServiceMaster prior to the date hereof.
(3) Barefoot has timely paid all Taxes that have been shown as due and
payable on the Returns that have been filed in all respects, and,
to Barefoot's knowledge, no other Taxes are payable by Barefoot
with respect to items or periods covered by such Returns (whether
or not shown on or reportable on such Returns).
(4) Barefoot 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.
(5) The charges, accruals and reserves for current Taxes (excluding
reserves for deferred Taxes) reflected on the books of Barefoot are
not materially less than the Tax liabilities accruing or payable by
Barefoot in respect of periods prior to the date hereof and such
charges, accruals and reserves are reflected on Barefoot's most
recent financial statements.
(6) Barefoot is not delinquent in the payment of any Taxes or has
requested any extension of time within which to file or send any
Return, which Return has not since been filed or sent and which
Taxes have not been paid.
(7) No deficiencies exist for any Taxes or any penalties, interest or
assessments nor have any been proposed, asserted, or assessed
against Barefoot that are not adequately reserved for.
(8) There is no dispute or claim concerning any Tax liability of
Barefoot either (A) claimed or raised by any authority in writing
or (B) as to which Barefoot has knowledge based upon personal
contact with any agent of such authority.
(9) There is no pending audit, examination, or, to Barefoot's
knowledge, any investigation of any Return by any authority nor has
Barefoot received any notice of such audit, examination, or
investigation.
(10) Except as identified in Section 3.11 (a)(10) of the Disclosure
Schedule, Barefoot has not waived any statute of limitations in
respect of Taxes or granted any extension of the limitations
period applicable to any claim of Taxes.
(11) Barefoot is not subject to liability for Taxes of any person
(other than Barefoot or any other member of the affiliated group
of corporations that files a consolidated federal income tax
return, of which Barefoot 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
(12) Barefoot is not nor has it ever been a party to any tax sharing
agreement with any entity.
(13) To Barefoot's knowledge, no claim has ever been made by an
authority in a jurisdiction where Barefoot does not file Returns
that it is or may be subject to taxation by that jurisdiction.
15
(14) There are no liens on any of the assets of Barefoot that arose in
connection with any failure (or alleged failure) to pay any Taxes.
(15) Barefoot has withheld and paid over and 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.
(16) Barefoot does not expect any authority to assess any additional
Taxes for any period for which Returns have been filed except to
an extent consistent with Barefoot's past experience as reflected
in its publicly released financial statements.
(17) Barefoot has delivered to ServiceMaster correct and complete
copies of all Returns, examination reports, and statements of
deficiencies assessed against or agreed to by Barefoot.
(18) Barefoot 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.
(19) All material net operating losses, credits and other tax
attributes utilized by Barefoot during any taxable year ending on
or prior to the Closing were fully and properly available to
Barefoot under all applicable tax laws, regulations and
administrative interpretations thereof.
(b) Tax Characteristics of Barefoot.
(1) To Barefoot's knowledge, no stockholder of Barefoot who owns (A)
more than 5% of any class of Barefoot's stock that is regularly
traded on an established securities market, within the meaning of
Section 897(c)(3) of the Code, or (B) any amount of any other class
of Barefoot's stock is a "foreign person" (as that term is defined
in Section 1445(f)(3) of the Code).
(2) Barefoot is not a "consenting corporation" under Section 341(f) of
the Code.
(3) Barefoot has not entered into any compensatory agreement with
respect to the performance of services which payment thereunder
would result in a nondeductible expense to Barefoot pursuant to
Sections 162(m) or 280G of the Code or an excise tax to the
recipient of such payment pursuant to Section 4999 of the Code.
(4) Barefoot 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.
(5) To Barefoot's knowledge, Barefoot will not be required as a result
of any "closing agreement" described in Section 7121 of the Code
(or any corresponding provision of state, local or foreign income
Tax law), 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.
(6) Barefoot 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.
16
(7) Section 3.11(b)(7) of the Disclosure Schedule sets forth the
following information with respect to Barefoot as of March 31,
1996; (A) the amount of any net operating loss, net capital loss,
unused credits, unused foreign tax, or excess charitable
contribution; and (B) the amount of any deferred gain or loss
arising out of any deferred intercompany transaction.
(c) Definitions. For purposes of all of Section 3.11:
(1) The term "Barefoot" includes Barefoot and each subsidiary of
Barefoot.
(2) 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.
(3) 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.
3.12 Contracts. Each material Barefoot Agreement is valid, binding and
enforceable and in full force and effect, except where failure to be valid,
binding and enforceable and in full force and effect would not have a material
adverse effect on Barefoot and its subsidiaries taken as a whole, and there are
no defaults thereunder, except those defaults that would not have a material
adverse effect on Barefoot and its subsidiaries taken as a whole. Neither
Barefoot nor any subsidiary is a party to any agreement that expressly and
materially limits the ability of Barefoot or any subsidiary 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 except that Barefoot is subject to the
agreement restricting its ability to compete with Tru-Green in the Louisville
Kentucky area identified in Section 3.12 of the Disclosure Schedule.
3.13 Transactions with Affiliates. Except to the extent disclosed in Barefoot
SEC Documents filed prior to the date of this Agreement, since January 1, 1994
there have been no material transactions, agreements, arrangements or
understandings between Barefoot or its subsidiaries, on the one hand, and
Barefoot's affiliates (other than wholly-owned subsidiaries of Barefoot) 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.
3.14 Environmental Matters. Except as set forth in the Barefoot SEC
Documents:
(a) Barefoot and its subsidiaries are in compliance with all applicable
Environmental Laws (as defined below), except for any noncompliance
that would not, in the aggregate, have a material adverse effect on
Barefoot and its subsidiaries taken as a whole. Except as set forth in
Barefoot SEC Documents or as previously disclosed to ServiceMaster,
neither Barefoot nor any of its subsidiaries has received any
communication (written or oral), whether from a governmental authority,
citizens group, employee or otherwise, that alleges that Barefoot or
any of its subsidiaries is not in such compliance and, to Barefoot's
best knowledge, there are no circumstances that would prevent or
interfere with such compliance in the future and which would, in the
aggregate, have a material adverse effect on Barefoot and its
subsidiaries taken as a whole.
17
(b) Except as set forth in Barefoot SEC Documents, there is no
Environmental Claim (as defined below) pending or, to the best
knowledge of Barefoot, threatened against Barefoot or any of its
subsidiaries or, to Barefoot's best knowledge, against any person or
entity whose liability for any Environmental Claim Barefoot or any of
its subsidiaries has or may have retained or assumed either
contractually or by operation of law, except for any Environmental
Claim or Claims that would not, in the aggregate, have a material
adverse effect on Barefoot and its subsidiaries taken as a whole.
(c) Except as set forth in Barefoot SEC Documents, there are no past or
present actions, activities, circumstances conditions, events or
incidents, including, without limitation, the release, emission,
discharge, presence or disposal of any Material of Environmental
Concern (as defined below), that would form the basis of any
Environmental Claim against Barefoot or any of its subsidiaries or, to
Barefoot's best knowledge, against any person or entity whose liability
for any Environmental Claim Barefoot or any of its subsidiaries has or
may have retained or assumed either contractually or by operation of
law, except for any Environmental Claim or Claims that would not, in
the aggregate, have a material adverse effect on Barefoot and its
subsidiaries taken as a whole.
(d) For purposes of this Agreement, "Environmental Claim" means any claim,
action, or cause of action, of any person or entity alleging potential
liability (including, without limitation, potential liability for
investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or
penalties) arising out of, based on or resulting from (a) the presence,
or release into the environment, of any Material of Environmental
Concern at any location, whether or not owned or operated by Barefoot
or any of its subsidiaries or (b) any violation or alleged violation of
any Environmental Law.
(e) For purposes of this Agreement, "Environmental Laws" means all federal,
state, local and foreign laws and regulations relating to pollution or
protection of human health or the environment (including, without
limitation, ambient air, surface water, ground water, land surface or
subsurface strats), including, without limitation, laws and regulations
relating to emissions, discharges, releases or threatened releases of
Materials of Environmental Concern, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Materials of Environmental Concern.
(f) For purposes of this Agreement, "Materials of Environmental Concern"
means chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products.
3.15 Year End Cash. Based on information known to Barefoot's management on
the date hereof, it is the expectation of Barefoot's management on the date
hereof that Barefoot will have at least $8 million in cash at December 31, 1996
and that this $8 million cash balance will be achieved without any special
actions (such as borrowings or extension of payables) outside of the normal
course or which would not have been taken other than to produce such result,
provided that Barefoot makes no representation or warranty that such
expectation will be achieved.
3.16 Opinion of Financial Advisor. Barefoot has received an opinion from
▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. ("Baird") with respect to the fairness to the
stockholders of Barefoot of the consideration to be received pursuant to the
Offer and the Merger.
3.17 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 Offer, or the
Merger or any similar transaction based upon arrangements made by or on behalf
of Barefoot, except for the arrangements between Barefoot and Baird, the terms
and provisions of which have been disclosed in writing to ServiceMaster by
Barefoot on or prior to the date hereof.
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ARTICLE 4.0
REPRESENTATIONS AND WARRANTIES OF SERVICEMASTER AND MERGERSUB
ServiceMaster and MergerSub represent and warrant to Barefoot as follows:
4.1 Organization. ServiceMaster is a limited partnership duly organized,
validly existing and in good standing under the laws of Delaware. MergerSub is
a corporation duly organized, validly existing and in good standing under the
laws of Delaware. Each of ServiceMaster and its subsidiaries has all requisite
partnership, 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 material adverse effect on
ServiceMaster and its subsidiaries taken as a whole. 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 have a material adverse effect on
ServiceMaster and its subsidiaries taken as a whole. MergerSub has not
heretofore conducted any business other than in connection with this Agreement
and the transactions contemplated hereby.
4.2 Capitalization. As of November 30, 1996, (i) approximately 144 million
ServiceMaster Shares are issued and outstanding, (ii) not more than 11 million
ServiceMaster Shares are reserved for option and employee benefit plans of
ServiceMaster, and (iii) the number of additional shares which ServiceMaster
may be required to issue as a result of convertible debt and other outstanding
rights (in addition to the rights cited in clause (ii)) does not exceed three
million shares. All of the outstanding ServiceMaster Shares are duly
authorized, validly issued, fully paid and non-assessable.
4.3 Partnership/Corporate Authorization; Validity of Agreement; Necessary
Action. Service-Master has full partnership power and authority and MergerSub
has 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 MergerSub of this Agreement and the
consummation by ServiceMaster and MergerSub of the transactions contemplated
hereby have been duly and validly authorized by their respective Boards of
Directors and no other partnership or corporate action or proceedings on the
part of ServiceMaster and MergerSub are necessary to authorize the execution
and delivery by ServiceMaster and MergerSub of this Agreement, and the
consummation by ServiceMaster and MergerSub of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by ServiceMaster
and MergerSub, and, assuming this Agreement constitutes a valid and binding
obligation of Barefoot, constitutes a valid and binding obligation of each of
ServiceMaster and MergerSub, enforceable against each of them in accordance
with their 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. ServiceMaster Shares to be issued pursuant
to the Offer will be duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. No vote of the holders of
ServiceMaster Shares is necessary for ServiceMaster to consummate the Offer or
for MergerSub to consummate the Merger.
4.4 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 DGCL, the
HSR Act, state blue sky laws and any applicable state takeover laws, neither
the execution, delivery or performance of this Agreement by ServiceMaster and
MergerSub nor
19
the consummation by ServiceMaster and MergerSub of the transactions
contemplated hereby nor compliance by ServiceMaster and MergerSub with any of
the provisions hereof will (i) conflict with or result in any breach of any
provision of the Partnership Agreement of ServiceMaster or the Certificate of
Incorporation or by-laws of MergerSub or any other subsidiary, (ii) 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 material adverse
effect on ServiceMaster and its subsidiaries taken as a whole or would not, or
would not be reasonably likely to, materially impair the ability of
ServiceMaster and MergerSub to consummate the Offer or the Merger or the other
transactions contemplated hereby), (iii) 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 or (iv) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to ServiceMaster, any of its
subsidiaries or any of their properties or assets, except in the case of
clauses (iii) and (iv) for violations, breaches or defaults which would not
have a material adverse effect on ServiceMaster and its subsidiaries taken as a
whole.
4.5 Opinion of Financial Advisor. ServiceMaster has received an opinion from
▇▇▇▇▇▇▇, Sachs & Co. ("▇▇▇▇▇▇▇, ▇▇▇▇▇") dated the date of this Agreement to the
effect that, as of such date, the consideration to be paid by ServiceMaster in
the Offer and the Merger is fair to ServiceMaster from a financial point of
view.
4.6 Financial Resources. ServiceMaster has sufficient financial resources to
enable ServiceMaster to make all cash payments for the Shares in the Offer and
the Merger.
4.7 SEC Reports and Financial Statements. ServiceMaster has filed with the
SEC and has heretofore made available to Barefoot true and complete copies of,
all forms, reports, schedules, statements and other documents required to be
filed by ServiceMaster since January 1, 1994 under the Exchange Act and the
Securities Act (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, the
ServiceMaster SEC Documents, including, without limitation, any financial
statements or 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 applicable
rules and regulations of the SEC thereunder. Each of the consolidated financial
statements included in the ServiceMaster SEC Documents comply in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been 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) and fairly present 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 and lack of footnote disclosures).
4.8 Absence of Certain Changes. Except as disclosed in the ServiceMaster SEC
Documents, since January 1, 1996, ServiceMaster and its subsidiaries have
conducted their respective businesses and operations in the ordinary course of
business consistent with past practice. Since September 30, 1996, there has not
occurred (i) any events, changes, or effects (including the incurrence of any
20
liabilities of any nature, whether or not accrued, contingent or otherwise)
having or, which would be reasonably likely to have, in the aggregate, a
material adverse effect on ServiceMaster and its subsidiaries taken as a whole;
(ii) any declaration, setting aside or payment of any distribution (whether in
cash, shares or property) with respect to the equity interests of ServiceMaster
other than regular quarterly cash distributions paid by ServiceMaster; or (iii)
any change by ServiceMaster or any of its subsidiaries in accounting principles
or methods. Since January 1, 1996 ServiceMaster and its subsidiaries have
conducted their respective businesses in the ordinary course consistent with
past practice.
4.9 No Undisclosed Liabilities. Except to the extent disclosed in the
ServiceMaster SEC Documents filed prior to the date of this Agreement and
except for liabilities and obligations incurred in the ordinary course of
business consistent with past practice, since January 1, 1996, 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, a material adverse effect on
ServiceMaster and its subsidiaries.
4.10 Litigation; Compliance with Law.
(a) Except to the extent disclosed in the ServiceMaster SEC Documents filed
prior to the date of this Agreement, there is no suit, claim, action,
proceeding, review or investigation pending or, to the knowledge of
ServiceMaster, threatened against or affecting, ServiceMaster or any of
its subsidiaries which, individually or in the aggregate, is reasonably
likely to have a material adverse effect on ServiceMaster and its
subsidiaries taken as a whole, or would, or would be reasonably likely
to, materially impair the ability of ServiceMaster to consummate the
Offer or ServiceMaster and MergerSub to consummate the Merger or the
other transactions contemplated hereby.
(b) 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 (as defined in Section 3.11) except to the extent
that any such non-compliance would not have a material adverse effect
on ServiceMaster and its subsidiaries taken as a whole.
4.11 No Default. Except as disclosed in the ServiceMaster SEC Documents, the
business of ServiceMaster and each of its subsidiaries is not being conducted
in default or violation of any term, condition or provision of (a) its
respective partnership agreement, certificate of incorporation or by-laws or
similar organizational documents, or (b) agreements to which ServiceMaster and
its subsidiaries are parties, excluding from the foregoing clause (b), defaults
or violations that would not have a material adverse effect on ServiceMaster
and its subsidiaries taken as a whole or would not, or would not be reasonably
likely to, materially impair the ability of ServiceMaster or Barefoot to
consummate the Offer, the Merger or the other transactions contemplated hereby.
ARTICLE 5.0
COVENANTS
5.1 Interim Operations of Barefoot. Barefoot covenants and agrees that,
except (i) as expressly provided in this Agreement or the Merger Agreement,
(ii) with the prior written consent of ServiceMaster or (iii) as set forth on
Section 5.1 of the Disclosure Schedule, after the date hereof and prior to the
Closing Time:
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(a) the business of Barefoot and its subsidiaries, including, without
limitation, investment practices and policies, shall be conducted only
in the ordinary course of business consistent with past practice and,
each of Barefoot and its subsidiaries shall use all reasonable efforts
to preserve its business organization intact and maintain its existing
relations with material customers, suppliers, franchisees, employees,
creditors and business partners;
(b) Barefoot will not, directly or indirectly, split, combine or reclassify
the outstanding Barefoot Common Stock, or any outstanding capital stock
of any of the subsidiaries of Barefoot;
(c) neither Barefoot nor any of its subsidiaries shall: (i) amend its
certificate of incorporation or by-laws or similar organizational
documents; (ii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property with respect to its
capital stock other than dividends paid by Barefoot's wholly-owned
subsidiaries to Barefoot or its wholly-owned subsidiaries and other
than ordinary quarterly cash dividends by Barefoot not to exceed $0.05
per share per quarter and other than an expenditure of not more than an
additional $.01 per share to redeem outstanding stock purchase rights;
(iii) issue, sell, transfer, pledge, dispose of or encumber any
additional shares of, or securities convertible into or exchangeable
for, or options, warrants, calls, commitments or rights of any kind to
acquire, any shares of capital stock of any class of Barefoot or its
subsidiaries, other than issuances pursuant to exercise of Barefoot
Stock Options outstanding on the date hereof as disclosed in Section
1.6 hereof; (iv) transfer, lease, license, sell, mortgage, pledge,
dispose of, or encumber any assets that are in the aggregate material
to Barefoot and its subsidiaries taken as a whole other than sales of
investment assets in the ordinary course of business consistent with
past practice; or (v) redeem, purchase or otherwise acquire directly or
indirectly any of its capital stock;
(d) neither Barefoot nor any of its subsidiaries shall: (i) grant any
increase in the compensation payable or to become payable by Barefoot
or any of its subsidiaries to any officer or employee other than
scheduled annual increases in the ordinary course of business
consistent with past practice; (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
Barefoot, grant any severance or termination pay to any officer,
director or employee of Barefoot or any of its subsidiaries; (iv) make
any additional contributions to any grantor trust created by Barefoot
to provide funding for non-tax-qualified employee benefits or
compensation; or (v) provide any severance program to any subsidiary
which does not have a severance program as of the date of this
Agreement;
(e) neither Barefoot nor any of its subsidiaries shall modify, amend or
terminate any of the material Barefoot Agreements or waive, release or
assign any material rights or claims, except in the ordinary course of
business consistent with past practice;
(f) neither Barefoot 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
consistent with past practice;
(g) neither Barefoot nor any of its subsidiaries shall: (i) incur or assume
any debt except for borrowings under existing credit facilities and
except for vehicle financing in each case in the ordinary course of
business and in amounts consistent with past practice; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether
directly, contingently or otherwise) for the obligations of any other
person, except in the ordinary course of business
22
consistent with past practice; (iii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to
wholly owned subsidiaries of Barefoot or customary loans or advances to
employees in accordance with past practice and other than as to such
matters related to Barefoot's or any of its subsidiaries' investment
portfolios in the ordinary course of business consistent with past
practice); or (iv) enter into any material commitment (including, but
not limited to, any capital expenditure or purchase of assets) other
than in the ordinary course of business consistent with past practice;
(h) neither Barefoot nor any of its subsidiaries shall change any of the
accounting principles used by it unless required by GAAP;
(i) neither Barefoot nor any of its subsidiaries shall pay, discharge or
satisfy any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction of any such claims, liabilities
or obligations, (x) reflected or reserved against in, or contemplated
by, the consolidated financial statements (or the notes thereto) of
Barefoot and its consolidated subsidiaries, (y) incurred in the
ordinary course of business consistent with past practice or (z) which
are legally required to be paid, discharged or satisfied;
(j) subject to the rights of Barefoot to terminate this Agreement pursuant
to Section 6.1(c)(1) and the obligation of Barefoot to pay
ServiceMaster the fees and expenses required by Section 7.1(b) hereof,
neither Barefoot nor any of its subsidiaries will adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other material reorganization of
Barefoot or any of its subsidiaries or any agreement relating to a
Takeover Proposal (as defined in Section 5.5(c)) (other than the Offer
or the Merger) other than confidentiality agreements as provided in
Section 5.5(a);
(k) neither Barefoot nor any of its subsidiaries will engage in any
transaction with, or enter into any agreement, arrangement, or
understanding with, directly or indirectly, any of Barefoot's
affiliates, including, without limitation, any transactions,
agreements, arrangements or understandings with any affiliate or other
Person covered under Item 404 of Regulation S-K under the Securities
Act that would be required to be disclosed under such Item 404 other
than such transactions of the same general nature, scope and magnitude
as are disclosed in Barefoot SEC Documents;
(l) except upon the prior written consent of ServiceMaster, Barefoot shall
not make any Tax election; and
(m) neither Barefoot nor any of its subsidiaries will enter into an
agreement, contract, commitment or arrangement to do any of the
foregoing, or to authorize, recommend, propose or announce an intention
to do any of the foregoing.
5.2 Access to Information.
(a) Barefoot shall (and shall cause each of its subsidiaries to) afford to
the officers, employees, accountants, counsel, financing sources and
other representatives of ServiceMaster, reasonable access during the
period prior to the Closing Time, to all of its and its subsidiaries'
properties, books, contracts, commitments and records (including any
Tax Returns or other Tax related information pertaining to Barefoot and
its subsidiaries) and, during such period, Barefoot shall (and shall
cause each of its subsidiaries to) furnish promptly to ServiceMaster
(a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the
requirements of the federal securities laws and (b) all other
information concerning its business, properties and personnel as
23
ServiceMaster may reasonably request (including any Tax Returns or other
Tax related information pertaining to Barefoot and its subsidiaries).
ServiceMaster shall access such information in a manner reasonably
calculated not to cause any unnecessary disruption in the Company's
business. ServiceMaster will use such information only for purposes of
the Offer and the Merger and shall disclose such information only to the
extent ServiceMaster reasonably concludes such disclosure should be made
in connection with such purposes or for such other purposes as are
permitted by the Confidentiality Agreement dated November 11, 1996
between ServiceMaster and Barefoot.
(b) ServiceMaster shall afford Barefoot and its advisors such access to
information about ServiceMaster as Barefoot and its advisors reasonably
deem necessary for purposes of due diligence investigations relating to
the transactions contemplated by this Agreement and for disclosures to
Barefoot's stockholders relating to such transactions. Barefoot shall
not use or disclose any nonpublic information obtained from
ServiceMaster except for the purposes indicated in the preceding
sentence.
5.3 Consents and Approvals. Each of Barefoot, ServiceMaster and MergerSub
will take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to this Agreement and the
transactions contemplated hereby which actions shall include, without
limitation, furnishing all information in connection with approvals of or
filings with any Governmental Entity, including, without limitation, any
schedule, or reports required to be filed with the SEC, and will promptly
cooperate with and furnish information to each other in connection with any
such requirements imposed upon any of them or any of their subsidiaries in
connection with this Agreement and the transactions contemplated hereby. Each
of Barefoot, ServiceMaster and MergerSub will, and will cause its subsidiaries
to, take all reasonable actions necessary to obtain any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity or other
public or private third party, required to be obtained or made by
ServiceMaster, MergerSub, Barefoot or any of their subsidiaries in connection
with the Offer or the Merger or the taking of any action contemplated thereby
or by this Agreement.
5.4 Severance and Stay Protection Plan. At or before the Closing Time,
Barefoot shall adopt a severance and stay protection plan, the substantive
terms of which are set forth on Annex 2 hereof. From and after the Closing
Time, ServiceMaster and MergerSub shall honor such plan in accordance the terms
thereof. Except to the extent otherwise permitted by Barefoot's chief executive
officer or chief financial officer, ServiceMaster shall not communicate with
any employees of Barefoot or any Barefoot subsidiary about future employment
relationships or terms prior to the Closing.
5.5 No Solicitation.
(a) Barefoot (and its subsidiaries and affiliates) shall not, and Barefoot
(and its subsidiaries and affiliates) will use their best efforts to
ensure that their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents do not, directly or
indirectly: (i) initiate, solicit or encourage, or (except to the
extent permitted by clause (ii) below) take any action to facilitate
the making of, any offer or proposal which constitutes or is reasonably
likely to lead to any Takeover Proposal (as defined below) of Barefoot
or any subsidiary or an inquiry with respect thereto, or, (ii) in the
event of an unsolicited bona fide Takeover Proposal for Barefoot or any
subsidiary of Barefoot, engage in negotiations or discussions with, or
provide any information or data to, any corporation, partnership,
person or other entity or group (other than ServiceMaster or any of its
affiliates or representatives) ("Person") relating to any Takeover
Proposal; except in the case of clause (ii) above, to the extent that
Barefoot's Board of Directors reasonably concludes, after having
received the advice of outside legal counsel to Barefoot and the advice
of Barefoot's financial advisor, and after having had the opportunity
to discuss the Takeover Proposal with such person making
24
the Takeover Proposal (which discussions shall not be deemed to be a
violation of this Agreement) that such Takeover Proposal is reasonably
likely to result in consideration per Share in excess of the Offer
Consideration and the failure to engage in such negotiations or
discussions or provide such information is reasonably likely to result
in a breach of the Board of Directors' fiduciary duties under applicable
law; provided, however, that notwithstanding the foregoing, Barefoot's
Board of Directors may take, and disclose to Barefoot's stockholders a
position contemplated by Rules for 14d-9 and 14e-2 promulgated under the
Exchange Act with respect to any tender offer for shares of capital
stock of Barefoot. Prior to furnishing any information to any such
Person making a Takeover Proposal, Barefoot shall have obtained a
confidentiality agreement from such Person containing confidentiality
provisions substantially similar to the confidentiality provisions in
the Confidentiality Agreement. Barefoot shall notify ServiceMaster of
any such offers, proposals, inquiries or Takeover Proposals (including,
without limitation, the material terms and conditions thereof and the
identity of the Person making it), within 24 hours of the receipt
thereof, and shall provide ServiceMaster with a copy of any written
Takeover Proposal or amendments or supplements thereto, and shall
thereafter inform ServiceMaster on a reasonable basis of the status of
any discussions or negotiations with such a third party, and any
material changes to the terms and conditions of such Takeover Proposal,
and shall promptly give ServiceMaster a copy of any information
delivered to such Person which has not previously been reviewed by
ServiceMaster.
(b) Barefoot hereby represents and warrants to ServiceMaster that Barefoot,
its subsidiaries and affiliates, and their respective officers,
directors, employees, investment bankers, attorneys, accountants and
other agents, are not presently, and have not since November 1, 1996,
engaged in or participated in any discussions or negotiations
whatsoever with any person, entity or "group" (as that term is defined
in Section 13(d)(3) of the Exchange Act) with respect to any Takeover
Proposal relating to Barefoot.
(c) As used in this Agreement, "Takeover Proposal" shall mean any tender or
exchange offer involving the capital stock of Barefoot, any proposal
for a merger, consolidation or other business combination involving
Barefoot, any proposal or offer to acquire in any manner a substantial
equity interest in, or a substantial portion of the business or assets
of, Barefoot or any subsidiary of Barefoot, any proposal or offer with
respect to any recapitalization or restructuring with respect to
Barefoot or any subsidiary of Barefoot or any proposal or offer with
respect to any other transaction similar to any of the foregoing with
respect to Barefoot or any subsidiary of Barefoot other than pursuant
to the transactions to be effected pursuant to this Agreement.
5.6 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its diligent efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable, whether under applicable laws and
regulations or otherwise, or to remove any injunctions or other impediments or
delays, legal or otherwise, to consummate and make effective the Offer and the
Merger and the other transactions contemplated by this Agreement; provided
however, the foregoing shall not require any party to waive or modify any
condition or provision hereof.
5.7 Barefoot Franchises. As soon as practicable after the Closing Time
ServiceMaster shall make every effort to provide to each Barefoot franchisee
the option to do any of the following: (i) to sell such franchise to Barefoot
on terms and conditions as the franchisee and ServiceMaster may agree; (ii) to
continue to operate Barefoot franchise in accordance with existing agreements
between the franchisee and Barefoot (very likely to be in competition with
other affiliates of ServiceMaster engaged in the lawn care business); or (iii)
to terminate the existing agreement between the franchisee and Barefoot and to
operate its business independently without use of Barefoot trade names, service
marks or similar rights.
25
5.8 Publicity. So long as this Agreement is in effect, neither Barefoot nor
ServiceMaster nor their affiliates shall issue or cause the publication of any
press release or other public statement or announcement with respect to this
Agreement or the transactions contemplated hereby without prior consultation
with the other party, except as may be reasonably required by law, reasonably
necessary for compliance with the Securities Act or Exchange Act or by
obligations pursuant to any listing agreement with a national securities
exchange, and in such case shall use all reasonable efforts to consult with the
other party prior to such release or announcement being issued.
5.9 Notification of Certain Matters. Barefoot shall give prompt notice to
ServiceMaster and MergerSub, and ServiceMaster and MergerSub shall give prompt
notice to Barefoot, of (a) the occurrence, or non-occurrence of any event the
occurrence or non-occurrence of which would cause any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect at or prior to the Closing Date and (b) any material failure of
Barefoot, MergerSub or ServiceMaster, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 5.9 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
5.10 Directors' and Officers' Insurance and Indemnification. ServiceMaster
agrees that at all times after the Closing Time, it shall indemnify (and
advance expenses to) each person who is now, or has been at any time prior to
the date hereof, a director or officer of Barefoot or of any of Barefoot's
subsidiaries (individually an "Indemnified Party" and collectively the
"Indemnified Parties"), to the same extent and in the same manner as is now
provided in the respective charters or by-laws of Barefoot and such
subsidiaries or otherwise in effect on the date hereof, with respect to any
claim, liability, loss, damage, cost or expense (whenever asserted or claimed)
("Indemnified Liability") based in whole or in part on, or arising in whole or
in part out of, any matter existing or occurring at or prior to the Closing
Time. ServiceMaster shall, or shall cause Barefoot to, maintain in effect for
not less than six (6) years after the Closing the current policies of
directors' and officers' liability insurance maintained by Barefoot and its
subsidiaries on the date hereof with respect to matters existing or occurring
at or prior to the Closing Time (provided that ServiceMaster may substitute
therefor policies having at least the same coverage and containing terms and
conditions which are no less advantageous to the persons currently covered by
such policies and with carriers reasonably comparable to Barefoot's existing
carriers in terms of creditworthiness). The insurance required by the preceding
sentence shall be in an amount at any particular time equal to the greater of
(i) the amount of coverage provided by Barefoot's insurance on the date hereof
or (ii) the amount of coverage provided to ServiceMaster's own directors at the
particular time. Promptly after receipt by an Indemnified Party of notice of
the assertion (an "Assertion") of any claim or the commencement of any action
against him or her in respect to which indemnity or reimbursement may be sought
against ServiceMaster, Barefoot, the Surviving Corporation or a subsidiary of
Barefoot or the Surviving Corporation ("Indemnitors") hereunder, such
Indemnified Party shall notify any Indemnitor in writing of the Assertion, but
the failure to so notify any Indemnitor shall not relieve any Indemnitor of any
liability it may have to such Indemnified Party hereunder except where such
failure shall have materially prejudiced Indemnitor in defending against such
Assertion. No Indemnified Party shall settle any Assertion without the prior
written consent of ServiceMaster. The provisions of this Section 5.10 are
intended for the benefit of, and shall be enforceable by, the respective
Indemnified Parties.
5.11 Existing Stockholder Agreements and Registration Rights
Agreements. Barefoot will use its best efforts to terminate or cause to be
terminated, prior to the Closing Time, any stockholder agreements or
registration rights agreements with or among any of its security holders.
Barefoot will suspend all sales under any shelf registration statement at least
two business days prior to the Expiration Date and will cause any registration
rights agreement not to have any application to any securities of ServiceMaster
or its subsidiaries following the Closing Time.
26
5.12 Stock Exchange Listing. ServiceMaster shall cause ServiceMaster Shares
issued pursuant to the Offer to be approved for listing on the NYSE prior to
the Closing.
5.13 Resignations/Replacement of Directors and Officers. Barefoot shall cause
such officers and directors of Barefoot and its subsidiaries as ServiceMaster
may request to resign their positions as such at the Closing Time and/or shall
arrange for the election or appointment as officers and directors of Barefoot
and its subsidiaries, at the Closing Time, of the persons designated by
ServiceMaster. The instruments effecting the foregoing resignations,
appointments and/or elections to act are herein referred to as the "Director
and Officer Actions."
5.14 HSR. Each of Barefoot and ServiceMaster shall as soon as practicable,
file Notification and Report Forms under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") and shall use its best efforts to cooperate and
respond as promptly as practicable to all inquiries received from the FTC or
the Antitrust Division for additional information or documentation.
5.15 Material Consents. Between the date of this Agreement and the Closing
Date, Barefoot and ServiceMaster and each of their respective subsidiaries
shall in good faith use their reasonable best efforts to obtain all consents
and approvals of all lenders, lessors, franchisees, vendors, customers, and
other persons necessary to permit the Offer and the Merger and other
transactions contemplated by this Agreement to be consummated without violating
any loan agreement, lease or other material contract to which Barefoot,
ServiceMaster, or any of their respective subsidiaries is a party or by which
Barefoot, ServiceMaster, or any of their respective subsidiaries is bound.
5.16 Stock Purchase Rights. As of the date of this Agreement there are
outstanding a number of Stock Purchase Rights equal to the aggregate number of
Shares issued and outstanding, which rights are exercisable for shares of
Barefoot's Series A Junior Participating Preferred Stock pursuant to the terms
of the Rights Agreement dated as of April 11, 1995 between Barefoot and
National City Bank (the "Rights Agreement"). The Board of Directors of Barefoot
has taken such action, and will take such additional action, as is required to
prevent the Stock Purchase Rights from becoming exercisable by reason of this
Agreement, the Merger Agreement, the Offer or the Merger.
5.17 Reasonable Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to cooperate with each other and
to use its reasonable efforts to take, or cause to be taken, all actions and to
do, or cause to be done, in each case consistent with the fiduciary duties of
their respective Boards of Directors, all things necessary, proper or advisable
(i) under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement as soon as reasonably practicable,
including to obtain all necessary waivers, consents and approvals and to effect
all necessary registrations and filings and all actions necessary to comply
with and to permit the Offer and Merger to proceed under Section 1707.041 of
the Ohio Revised Code and (ii) to lift any injunction or other legal bar to the
Offer or the Merger as soon as reasonably practicable; provided, however, that
nothing in this Section or elsewhere in this Agreement shall require any party
hereto to incur any expense or make any commitment in connection with the
transactions contemplated hereby which in its reasonable judgement is not
warranted under the circumstances (including but not limited to any divestiture
of a significant asset or acceptance of any material restriction on the
operations of any party in order to obtain any waiver, consent or approval
required by this Agreement). The preceding proviso shall not limit Barefoot's
obligation under this paragraph with respect to any expense, commitment or
action which would only apply or become effective if the Offer is closed and
which shall be approved by ServiceMaster.
27
ARTICLE 6.0
TERMINATION
6.1 Termination. Anything herein or elsewhere to the contrary
notwithstanding, this Agreement and the Merger Agreement may be terminated and
Offer and the Merger contemplated herein may be abandoned at any time prior to
the Closing:
(a) By the mutual consent of the Board of Directors of ServiceMaster and
the Board of Directors of Barefoot;
(b) By either of the Board of Directors of Barefoot or the Board of
Directors of ServiceMaster:
(1) if the Offer shall not have been commenced by February 15, 1997;
provided, however, that the right to terminate this Agreement under
this Section 6.1(b)(1) shall not be available to any party whose
failure to fulfill any obligation under this Agreement has been the
primary and but-for cause of the failure of the Offer to have been
commenced by February 15, 1997; or
(2) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or
other action the parties hereto shall use their diligent efforts to
lift), in each case permanently restraining, enjoining or otherwise
prohibiting the Offer or the Merger or any material aspect of Offer
or the Merger and such order, decree, ruling or other action shall
have become final and non-appealable;
(c) By the Board of Directors of Barefoot:
(1) if the Board of Directors of Barefoot shall have (A) withdrawn, or
modified or changed in a manner adverse to ServiceMaster its
approval or recommendation of this Agreement, the Offer or the
Merger as a result of a Takeover Proposal (other than the Offer or
the Merger), in order to approve a Takeover Proposal (other than
the Offer or the Merger), or to permit Barefoot to execute a
definitive agreement relating to a Takeover Proposal, and (B)
determined, after having received the advice of outside legal
counsel to Barefoot and the advice of Barefoot's financial advisor,
that such Takeover Proposal is for consideration per Share in
excess of the Offer Consideration and the failure to take such
action as set forth in the preceding clause (A) would result in a
breach of the Board of Directors' fiduciary duties under applicable
law; provided, however, that Barefoot shall have given
ServiceMaster forty-eight (48) hours advance notice of any
termination pursuant to this Section 6.1(c)(1) and that Barefoot
shall have paid ServiceMaster the fees and expenses required by
Section 7.1(b) hereof;
(2) if ServiceMaster or MergerSub breaches or fails in any material
respect to perform or comply with any of its material covenants and
agreements contained herein; provided, however, that if any such
breach is curable by the breaching party through the exercise of
the breaching party's diligent efforts and for so long as the
breaching party shall be so using diligent efforts to cure such
breach, Barefoot may not terminate this Agreement pursuant to this
Section 6.1(c)(2); or
(3) if ServiceMaster breaches any of its representations or warranties
and such breach (i) is reasonably likely to have a material adverse
effect upon ServiceMaster and its subsidiaries taken as a whole and
(ii) has not been incorporated into the prospectus provided to
Barefoot shareholders.
28
(d) By the Board of Directors of ServiceMaster:
(1) if Barefoot (x) breaches or fails in any material respect to
perform or comply with any of its material covenants and agreements
contained herein or (y) breaches its representations and warranties
in any material respect and such breach would have or would be
reasonably likely to have a material adverse effect on Barefoot and
its subsidiaries or create a situation in which any of the
conditions set forth in Annex 1 would not reasonably be expected to
be satisfied prior to Closing; provided, however, that if any such
breach is curable by Barefoot through the exercise of Barefoot's
diligent efforts and for so long as Barefoot shall be so using
diligent efforts to cure such breach, ServiceMaster may not
terminate this Agreement pursuant to this Section 6.1(d)(1); or
(2) if the Board of Directors of Barefoot shall have withdrawn, or
modified or changed in a manner adverse to ServiceMaster its
approval or recommendation of this Agreement, the Offer or the
Merger or shall have recommended a Takeover Proposal or other
business combination, or Barefoot shall have entered into an
agreement in principle (or similar agreement) or definitive
agreement providing for a Takeover Proposal or other business
combination with a person or entity other than ServiceMaster,
MergerSub or their subsidiaries (or the Board of Directors of
Barefoot resolves to do any of the foregoing by formal action); or
(3) by ServiceMaster if the Offer shall have expired or been terminated
without any Shares being purchased thereunder as a result of the
occurrence of any event that would result in the failure to satisfy
any of the conditions set forth in Annex 1; or
(4) as provided in Annex 3.
Such right of termination shall be exercised by written notice of termination
given by the terminating party to the other parties hereto in the manner
hereinafter provided.
6.2 Effect of Termination. If this Agreement is validly terminated by
Barefoot or ServiceMaster pursuant to Section 6.1, this Agreement and the
Merger Agreement will forthwith become null and void and there will be no
liability or obligation on the part of either Barefoot, ServiceMaster or
MergerSub (or any of their respective representatives or affiliates) in respect
of this Agreement or the Merger Agreement, except that this Section 6.2 and
Section 7.1 shall continue to apply after such termination. Without limiting by
implication the generality of the preceding sentence, ServiceMaster shall not
be obligated to continue the Offer after any termination of this Agreement
pursuant to any provision in Section 6.1. No termination of this Agreement or
the Merger Agreement shall impair or terminate the rights or obligations of
ServiceMaster or Barefoot under the Confidentiality Agreement to which they are
parties.
ARTICLE 7.0
MISCELLANEOUS
7.1 Fees and Expenses.
(a) Except as otherwise set forth in this Section 7.1, all costs and
expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby shall be paid by
the party incurring such expenses. All legal fees and accounting fees
incurred by Barefoot shall be based upon actual time spent on the
transactions contemplated by this Agreement and on hourly rates
consistent with past practices.
29
(b) In the event
(1) the Board of Directors of Barefoot shall terminate this Agreement
pursuant to subsection 6.1(c)(1) hereof, or
(2) the Board of Directors of ServiceMaster shall terminate this
Agreement pursuant to subsection 6.1(d)(2),
then Barefoot shall pay $9.3 million in cash to ServiceMaster.
(c) In the event ServiceMaster shall not consummate the offer and shall be
entitled to take such action because of the failure of any of the
conditions specified in clause (a), (b), (h), (k), or (l) in Annex 1 or
because rights to purchase Barefoot shares representing more than 1% of
Barefoot's outstanding common stock would remain outstanding after the
Closing then Barefoot shall pay $7 million in cash to ServiceMaster.
(d) In the event ServiceMaster shall be entitled payment under the
provisions of both 7.1(b) and Section 7.1(c), then the amount of the
payment owed by Barefoot to ServiceMaster shall be the amount specified
in Section 7.1(b) and ServiceMaster shall not have the right to obtain
any additional payment under Section 7.1(c).
(e) The payment specified under Section 7.1(b) or Section 7.1(c) shall be
due on the date (the "due date") upon which Barefoot shall receive
written request from ServiceMaster for such payment after the
occurrence of the event specified in such Section. If Barefoot shall
for any reason fail to make the payment specified under Section 7.1(b)
or Section 7.1(c) on its due date, then Barefoot shall pay
ServiceMaster on demand interest at 300 basis points in excess of the
prime rate (as reported in the Wall Street Journal) on the amount
remaining unpaid from that due date until such payment 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.
7.2 ServiceMaster Reincorporating Merger. Barefoot understands that: (i)
ServiceMaster's shareholders have previously approved a merger described in a
proxy statement/prospectus dated December 11, 1991 (the "Reincorporation Proxy
Statement") pursuant to which (i) ServiceMaster will be replaced as the parent
company for the ServiceMaster enterprise by ServiceMaster Incorporated of
Delaware ("ServiceMaster Incorporated") and each ServiceMaster partnership
share outstanding immediately prior to the merger will be converted into a
share of common stock issued by ServiceMaster Incorporated. Barefoot
understands that to the extent that Barefoot Stockholders acquire any
ServiceMaster Shares pursuant to the Offer that such ServiceMaster Shares shall
be subject to the pre-approval of the Reincorporating Merger by ServiceMaster's
shareholders pursuant to the Reincorporation Proxy Statement.
7.3 Amendment and Modification. This Agreement may not be amended except by
an instrument in writing approved by the parties to this Agreement and signed
on behalf of each of the parties hereto.
7.4 Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
consummation of the Merger.
7.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (which is
confirmed) or sent by an overnight courier
30
service, such as Federal Express, to the parties at the following addresses (or
at such other address for a party as shall be specified by like notice):
(a) if to ServiceMaster or MergerSub, to:
ServiceMaster Limited Partnership ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: Chief Financial Officer Fax: 630
▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Fax: ▇▇▇ ▇▇▇-▇▇▇▇
(b) if to Barefoot, to:
Barefoot Inc. ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Fax: ▇▇▇ ▇▇▇-▇▇▇▇
with a copy to:
Vorys, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇▇ Fax: ▇▇▇ ▇▇▇-▇▇▇▇
Either party may change the address to which notices and other communications
hereunder are to be delivered by giving the other party notice in the manner
herein set forth.
7.6 Interpretation. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Agreement they shall be deemed to be followed by the words "without
limitation". The phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested by the party to
whom such information is to be made available. The phrases "the date of this
Agreement", "the date hereof", and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the date written in the first
paragraph of this Agreement. As used in this Agreement, the term "affiliate(s)"
shall have the meaning set forth in Rule 12b-2 of the Exchange Act.
7.7 Counterparts. This Agreement may be executed in two or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when two or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
7.8 Entire Agreement; No Third Party Beneficiaries; Rights of Ownership. This
Agreement, the Merger Agreement and the Confidentiality Agreement (including
the exhibits hereto and the documents
31
and the instruments referred to herein and therein): (a) constitute the entire
agreement and supersede all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof, and (b)
except as provided in Section 5.10 are not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder.
7.9 Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
the terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or
invalidated.
7.10 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior written consent of the
other parties, except that ServiceMaster may assign, in its sole discretion,
any or all of its rights, interests and obligations hereunder to ServiceMaster
or to any direct or indirect wholly owned subsidiary of ServiceMaster;
provided, however, that no such assignment shall relieve ServiceMaster from any
of its obligations hereunder. Subject to the preceding sentence, this Agreement
will be binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
7.11 No Strict Construction. No rule of strict construction, rule resolving
ambiguities against the person who drafted the provision giving rise to such
ambiguities, or other such rule of interpretation shall be applied against any
party with respect to this Agreement.
7.12 Specific Performance. Each party to this Agreement shall have the right
to enforce each obligation of the other party under this Agreement by specific
performance or by injunctive relief.
7.13 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without giving effect to the
principles of conflicts of law thereof.
* * * *
IN WITNESS WHEREOF, ServiceMaster, MergerSub and Barefoot have caused this
Agreement to be signed by their respective officers thereunto duly authorized
as of the date first written above.
SERVICEMASTER LIMITED PARTNERSHIP
By ServiceMaster Management
Corporation
Managing General Partner
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By: _____________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ___________________________
President and Chief
Executive Officer
Title: __________________________
SERVICEMASTER ACQUISITION
CORPORATION
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
By: _________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: _______________________________
President
Title: ______________________________
BAREFOOT INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
By: _________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: _______________________________
Chief Executive Officer
Title: ______________________________
32
ANNEX 1 TO THE ACQUISITION AGREEMENT
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Agreement or the Offer, and except
as expressly limited below, ServiceMaster shall not be required to purchase any
Shares tendered, if, prior to the time of purchase of any such Shares, any of
the following events (each, an "Event") shall have occurred, (each of
paragraphs (a) through (n) providing a separate and independent condition to
ServiceMaster's obligations pursuant to the Agreement and the Offer):
(a) fewer than the Minimum Number of all outstanding Shares are validly
tendered and not withdrawn prior to 12:00 midnight, New York City Time
on the Expiration Date;
(b) except as contemplated by the provisions of this Agreement Barefoot or
any subsidiary of Barefoot shall have authorized or recommended, or
shall have announced an intention to authorize or, recommend, or shall
have entered into an agreement in principle with respect to, any
merger, consolidation or business combination, any acquisition of a
material amount of assets or securities, any disposition of a material
amount of assets or securities or any material change in its
capitalization or any release or relinquishment of any material
contract rights not in the ordinary course of business;
(c) an injunction or other order shall have been entered and remain in
effect in any action or proceeding before any court or governmental
agency or other regulatory or administrative agency or commission,
domestic or foreign, based upon any provision of the Offer (i) making
the acceptance for payment of, or purchase or payment for, the Shares
pursuant to the Offer or the Merger illegal, or resulting in a material
delay in the ability of ServiceMaster to accept for payment or pay for
some or all of the Shares, (ii) imposing material limitations on the
ability of ServiceMaster effectively to acquire or hold or to exercise
full rights of ownership of the Shares acquired by it, including, but
not limited to, the right to vote the Shares purchased by it on all
matters properly presented to the stockholders of Barefoot, (iii)
imposing material limitations on the ability of either ServiceMaster
(so long as such injunction or other order is related to the Offer or
the Merger) or Barefoot to continue effectively all or any material
portion of its respective business as heretofore conducted or to
continue to own or operate effectively all or any material portion of
its respective assets as heretofore owned or operated or (iv) to the
effect that the Offer or the Merger is violative of any applicable law;
(d) there shall have been any law, statute, rule or regulation, domestic or
foreign, promulgated or proposed after the date hereof that, directly
or indirectly, results or may be reasonably anticipated to result in
any of the consequences referred to in paragraph (c) above (other than
any state law, statute, rule or regulation whose applicability can be
avoided by not extending the Offer to residents of such state provided
that in the aggregate not more than 2% of the outstanding Shares on the
date of the Closing shall be owned of record by residents of any such
state);
(e) there shall have occurred (i) any general suspension of, or limitation
on prices for, trading in securities on the New York Stock Exchange or
in the over-the-counter market, (ii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the
United States, (iii) the commencement of war involving the United
States, or (iv) any limitation not in existence as of the date of the
Agreement by any governmental authority, or any other event not in
existence as of the date of the Agreement, which will materially limit
the extension of credit by banks or other lending institutions in the
United States;
33
(f) the representations and warranties of Barefoot contained herein shall
not be true and correct at and as of the time of each purchase under
the Offer as if made at and as of such time except for matters which,
individually or in the aggregate, do not and will not have a material
adverse effect on the business, operation or financial condition of
Barefoot and its subsidiaries taken as a whole and the ability of
Barefoot to perform its obligations under the Merger Agreement;
(g) all material terms, agreements and conditions of the Agreement and the
Merger Agreement to be complied with or performed or fulfilled by
Barefoot at or prior to any purchase pursuant to the Offer shall not
have been complied with, performed and fulfilled in all material
respects;
(h) Barefoot's Board of Directors shall have modified or amended in any
respect its recommendation of the Offer and the Merger to the
stockholders of Barefoot in any manner not approved by ServiceMaster or
shall have resolved to do so by formal action;
(i) Barefoot and ServiceMaster shall have reached an agreement that the
Offer shall be terminated;
(j) any waiting period (and any extension thereof) applicable to the
consummation of the Offer under the HSR Act shall not have expired or
been terminated;
(k) the rights under the Rights Agreement shall not have been redeemed or
made inapplicable to the Offer, the separation of outstanding Stock
Purchase Rights from the Shares shall have occurred, or the Stock
Purchase Rights shall have become exercisable;
(l) any director of Barefoot or its subsidiaries (as requested by
ServiceMaster) shall have failed to resign effective as of the
consummation of the Offer;
(m) the conditions precedent specified in Section 1.6 or 1.8 of the
Acquisition Agreement shall not be satisfied; or
(n) a stop order suspending effectiveness of the Registration Statement
shall have been issued or a proceeding for that purpose shall have been
initiated or threatened by the SEC;
which in the reasonable judgment of ServiceMaster, in any such case and
regardless of the circumstances (including any action or inaction by
ServiceMaster or any of its affiliates) giving rise to any such condition,
makes it inadvisable to proceed with the Offer or with such acceptance for
payment or payment for the Shares.
The foregoing conditions are for the benefit of ServiceMaster and may be
asserted by ServiceMaster regardless of the circumstances giving rise to any
such condition and, subject to the terms and conditions of the Acquisition
Agreement, may be waived by ServiceMaster, in whole or in part, at any time and
from time to time, in the sole discretion of ServiceMaster. The failure by
ServiceMaster at any time to exercise any of the foregoing rights will not be
deemed a waiver of any other right and each right will be deemed an ongoing
right which may be asserted at any time and from time to time. Notwithstanding
the fact that ServiceMaster reserves the right to assert the occurrence of a
condition following acceptance for payment but prior to payment in order to
delay or cancel its obligation to pay for properly tendered Shares,
ServiceMaster will either promptly pay for such Shares or promptly return such
Shares.
Each term which is defined in the Acquisition Agreement has the same meaning
whenever it is used in this Annex 1 as the meaning it is given in the
Acquisition Agreement.
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ANNEX 2 TO THE ACQUISITION AGREEMENT
SEVERANCE AND STAY PAY BENEFITS
The severance and stay protection plan benefits as adopted by Barefoot shall be
as follows:
▇. ▇▇▇▇▇▇▇▇▇: one week of compensation for each year of service with
Barefoot, provided that the employee leaves in good standing.
B. Stay pay: additional compensation of four, six or eight weeks, as
applicable, to employees who are scheduled to remain for extended
periods to assist with the transaction. The specific amount of stay pay
for an employee shall be determined by the employee's position. These
benefits may be modified based on individual circumstances and/or
critical value.
C. Vacation: vested vacation shall be paid in addition to items A and B.
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ANNEX 3 TO THE ACQUISITION AGREEMENT
COMPLETION OF DUE DILIGENCE
1. ServiceMaster shall have the right to continue its due diligence
investigation of Barefoot after the date hereof. Such investigation may include
(but is not limited to) on-site inspections and environmental audits of any and
all branch facilities and access to branch records; access to Barefoot branch
and key home office personnel; access to legal counsel for review of pending or
threatened litigation (if any); review of accounting and financial records
(including all detail profit and cost center statements for 1995 and 1996 and
detailed balance sheets); and review of outstanding contractual commitments in
excess of $10,000 (including chemical and supply purchases, capital
expenditures, software development, franchise sales, direct mail and other
advertising expenditures).
2. Subject to paragraphs 3 and 4, ServiceMaster shall have the right to
terminate this Agreement at any time on or before December 31, 1996 if the due
diligence investigation conducted pursuant to paragraph 1 discloses any one or
more of the following conditions:
(a) Unreserved environmental exposures (whether or not Superfund-related)
at sites of current or former Barefoot facilities or unreserved
exposures attributable to other activities of Barefoot (for example,
improper chemical disposal activities);
(b) Other unrecorded or understated liabilities or overstated assets;
(c) Material differences between the customer base (after allowing for
normal year end cancellations) as reflected in branch records compared
to the reported revenue base of Barefoot.
3. Notwithstanding the disclosure of facts of a nature described in items
(a), (b) and/or (c) in paragraph 2, such facts shall give ServiceMaster the
right to terminate this Agreement only if--
In the case of Item (a) and Item (b) (taken together), the probable loss
exposure, net of recorded reserves, and the extent of the under recording
of liabilities and the overstatement of assets is, in ServiceMaster's
reasonable judgment, likely to exceed $2,000,000 in total. The basis for
such reasonable judgment shall be set forth in a written statement which
shall be submitted to Barefoot on or before December 19, 1996 and which
shall set forth the amount of the expected loss, under recording and/or
overstatement, as the case may be, and the reasons why such matters are
expected to be of such magnitude.
In the case of Item (c), differences between the customer base as reflected
in branch records and Barefoot's reported revenue base will be considered
"material" only if the difference would have an aggregate adverse impact on
the annual pre-tax profits of Barefoot of more than $1,000,000. The details
of such adverse impact shall be set forth in a written statement which
shall be submitted to Barefoot on or before December 19, 1996.
4. If ServiceMaster submits one or more statements to Barefoot pursuant to
paragraph 3, Barefoot shall have five business days to respond to such
statement(s) before ServiceMaster's right to terminate this Agreement shall
become final. During such period, senior executives of ServiceMaster and
Barefoot shall mutually review such statements with a view to determining the
correctness thereof and whether the basis or bases for ServiceMaster's
termination right under this Annex 3 in fact exists. If, by the end of such
period, ServiceMaster is not in good faith satisfied that such basis or bases
do not in fact exist, then ServiceMaster shall have the right to terminate this
Agreement without any obligation to commence the Offering and without liability
of any kind to Barefoot, provided that such right of termination shall expire
and shall not be exercisable unless ServiceMaster shall provide Barefoot with
written notice of ServiceMaster's exercise of such right on or before December
31, 1996.
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ANNEX 4 TO THE ACQUISITION AGREEMENT
BAREFOOT BOARD RESOLUTIONS APPROVING THE OFFER AND THE MERGER
BOARD OF DIRECTORS OF BAREFOOT INC.
RESOLVED, that the Transactions, as reflected in the Acquisition Agreement
and the Merger Agreement, are deemed, in the opinion of this Board of
Directors, to be in the best interests of the Corporation and its stockholders
and to be fair to the stockholders of the Corporation; and that the Board of
Directors does hereby recommend that the stockholders of the Corporation accept
the Offer, tender their shares of common stock of the Corporation pursuant to
the Offer and, if required by applicable law, approve, adopt and accept the
Merger Agreement; provided, however, that the Board's determination that the
Transactions are in the best interests of the Corporation's stockholders and
are fair to the stockholders of the Corporation, and its recommendation that
the stockholders of the Corporation accept the Offer and tender their shares of
common stock of the Corporation pursuant to the Offer are based on and subject
to the assumptions and limitations regarding the ServiceMaster Share price
contained in the opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ & Co. Incorporated dated December
4, 1996;
37