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Sample Business Contracts

Stock Option Agreement - ServiceMaster Co. and C. William Pollard

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                            THE SERVICEMASTER COMPANY


                             STOCK OPTION AGREEMENT

                                 March 16, 2001

                  The Company hereby grants to the Optionee as of the Grant
Date, pursuant to the provisions of the Plan, the Option to purchase the number
of Option Shares specified in the Term Sheet at the Exercise Price per share
upon and subject to the terms and conditions set forth below and in the Term
Sheet. References to employment shall also mean an agency or independent
contractor relationship and references to employment by the Company shall also
mean employment by a Subsidiary. Capitalized terms not defined herein shall have
the meanings specified in the Term Sheet or the Plan.

     1. Option Subject to Acceptance of Agreement.  The Option shall be null and
        -----------------------------------------
void unless the Optionee  shall accept this  Agreement by executing  one copy of
the related Term Sheet and returning an original execution copy to the Company.

     2. Time and Manner of Exercise of Option.
        -------------------------------------

     2.1.  Maximum Term of Option.  In no event may the Option be exercised,  in
           ----------------------
whole or in part, after the Expiration Date.

     2.2.  Exercise  of Option.  (a) Except as  otherwise  provided  by Sections
           -------------------
2.2(b) hereof and by Section 11 of the Plan, the Option shall become exercisable
in accordance with the Exercise Schedule set forth in the Term Sheet.

     (b) If the Optionee's  employment with the Company  terminates by reason of
Disability or death, the Option shall be immediately exercisable with respect to
all of the Option Shares on the effective date of the Optionee's  termination of
employment  or date of death and may  thereafter be exercised by the Optionee or
the Optionee's Legal  Representative or Permitted  Transferees,  as the case may
be, until and including the earliest to occur of (i) the date which is two years
after the effective date of the Optionee's  termination of employment or date of
death and (ii) the Expiration Date.

     (c) If the Optionee's  employment with the Company  terminates by reason of
retirement  on or after age 63 or after a minimum of fifteen years of employment
(fifteen years need not be  consecutive)  with the Company  ("Retirement"),  the
Option shall continue in accordance with its terms and, to the extent the Option
shall be or become exercisable with respect to the Option Shares, may thereafter
be exercised by the Optionee or the Optionee's  Legal  Representative  until the
Expiration Date.

     (d) If the Optionee's employment with the Company terminates for any reason
other than Disability, death or Retirement, the Option shall be exercisable only
to  the  extent  it is


<PAGE>

exercisable  on the  effective  date  of the  Optionee's
termination of employment and may thereafter be exercised by the Optionee or the
Optionee's Legal Representative until and including the earliest to occur of (i)
the  date  which  is six  months  after  the  effective  date of the  Optionee's
termination  of employment and (ii) the  Expiration  Date;  provided that if the
Optionee's  employment  is  terminated  for Gross  Misconduct,  the Option shall
terminate  automatically on the effective date of the Optionee's  termination of
employment.  Gross  Misconduct  means  the  commission  of  any  act  of  fraud,
embezzlement or dishonesty by the Optionee,  any  unauthorized use or disclosure
by the Optionee of  confidential  information or trade secrets of the Company or
any Subsidiary,  or any other intentional  misconduct by the Optionee  adversely
affecting the business or affairs of the Company or any Subsidiary in a material
manner. The foregoing  definition shall not be deemed to be inclusive of all the
acts or omissions  which the Company or any  Subsidiary  may consider as grounds
for the  dismissal or discharge of the Optionee or any other  individual  in the
employment of the Company or any Subsidiary.

     (e) If  the  Optionee  dies  during  the  post-employment  exercise  period
pursuant to Section  2.2(b)  following  termination  of  employment by reason of
Disability,  the Option shall continue in accordance  with its terms and, to the
extent the Option has not been exercised as of the date of death, the Option may
thereafter  be exercised by the  Optionee's  Legal  Representative  or Permitted
Transferees,  as the case may be,  until  the  earlier  to occur of (i) one year
after the date of death and (ii) the Expiration Date.

     (f) If the Optionee dies  following  termination of employment by reason of
Retirement  and prior to the  Expiration  Date, and to the extent the Option has
not been  exercised  as of the date of death,  the Option  shall be  immediately
exercisable  with  respect to all of the Option  Shares  and may  thereafter  be
exercised by the Optionee's Legal  Representative or Permitted  Transferees,  as
the case may be,  until the earliest to occur of (i) two years after the date of
death and (ii) the Expiration Date.

     (g) If the Optionee dies during post-employment  exercise period determined
pursuant to Section  2.2(d)  following  termination of employment for any reason
other than  Disability,  Retirement or Gross  Misconduct,  and to the extent the
Option has not been exercised as of the date of death, the Option may thereafter
be exercised by the Optionee's Legal Representative or Permitted Transferees, as
the case may be,  until the earliest to occur of (i) three months after the date
of death and (ii) the Expiration Date.

     2.3.  Method of  Exercise.  Subject  to the  limitations  set forth in this
           -------------------
Agreement,  the Option may be exercised  by the  Optionee (1) by giving  written
notice to the  Company  specifying  the  number  of whole  shares of Stock to be
purchased and accompanied by payment  therefor in full (or arrangement  made for
such payment to the Company's satisfaction) either (i) in cash, (ii) by delivery
(either actual delivery or by attestation procedures established by the Company)
of  previously  owned whole  shares of Stock (which the Optionee has held for at
least six months  prior to the  delivery  of such  shares or which the  Optionee
purchased  on the open market and in each case for which the  Optionee  has good
title,  free and clear of all liens and  encumbrances)  having an aggregate Fair
Market  Value,  determined  as of the date of exercise,  equal to the  aggregate
purchase price payable pursuant to the Option by reason of such exercise,  (iii)
in cash by a  broker-dealer  acceptable  to the Company to whom the Optionee has
submitted

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<PAGE>

an  irrevocable  notice of exercise or (iv) a  combination  of (i) and
(ii), and (2) by executing such documents as the Company may reasonably request.
The Company shall have sole discretion to disapprove of an election  pursuant to
any of clauses  (ii) - (iv).  Any  fraction  of a share of Stock  which would be
required to pay such purchase  price shall be rounded down and the Optionee will
be required to pay the  fractional  share  portion to the next whole  share.  No
certificate  representing  a share of Stock  shall be  delivered  until the full
purchase price therefor has been paid.

     2.4   Termination   of  Option  and   Forfeiture   of  Option   Gain.   (a)
           --------------------------------------------------------------
Notwithstanding  the Term Sheet or any  provision of this  Agreement,  if at any
time prior to the date that is one year after the date of exercise of all or any
portion of the Option, the Optionee:

                  (1) directly or indirectly (whether as owner, stockholder,
         director, officer, employee, principal, agent, consultant, independent
         contractor, partner or otherwise), in North America or any other
         geographic area in which the Company is then conducting business, owns,
         manages, operates, controls, participates in, performs services for, or
         otherwise carries on, a business similar to or competitive with the
         business conducted by the Company or any Subsidiary; or

                  (2) directly or indirectly attempts to induce any employee of
         the Company to terminate or abandon his or her employment for any
         purpose whatsoever or any attempt directly or indirectly to solicit the
         trade or business of any current or prospective customer, supplier or
         partner of the Company; or

                  (3) directly or indirectly engages in any activity which is
         contrary, inimical or harmful to the interests of the Company,
         including but not limited to (i) violations of Company policies (ii)
         disclosure or misuse of any confidential information or trade secrets
         of the Company or a Subsidiary (iii) participation in any activity not
         approved by the Board or Chairman which could reasonably be foreseen as
         contributing to or resulting in a Change in Control of the Company and
         (iv) conduct related to employment for which either criminal or civil
         penalties may be sought;

then the Option shall terminate automatically on the date the Optionee engages
in such activity and the Optionee shall pay the Company, within five business
days of receipt by the Optionee of a written demand therefor, an amount in cash
determined by multiplying the number of shares of Stock purchased pursuant to
each exercise of the Option within the one-year period described above (without
reduction for any shares of Stock delivered by the Optionee or withheld by the
Company pursuant to Section 2.3 or Section 3.2) by the difference between (i)
the Fair Market Value of a share of Stock on the date of such exercise and (ii)
the Exercise Price per share of Stock.

                  (b) The Optionee may be released from the Optionee's
obligations under Section 2.4(a) only if and to the extent the Committee
determines in its sole discretion that such a release is in the best interests
of the Company.

                  (c) The Optionee agrees that by executing this Agreement the
Optionee authorizes the Company and its Subsidiaries to deduct any amount or
amounts owed by the

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<PAGE>

Optionee pursuant to Section 2.4(a) from any amounts payable
by the Company or any Subsidiary to the Optionee, including, without limitation,
any amount payable to the Optionee as salary, wages, vacation pay or bonus. This
right of setoff shall not be an exclusive remedy and the Company's or a
Subsidiary's election not to exercise this right of setoff with respect to any
amount payable to the Optionee shall not constitute a waiver of this right of
setoff with respect to any other amount payable to the Optionee or any other
remedy.

     3. Additional Terms and Conditions of Option.
        -----------------------------------------

     3.1. Nontransferability of Option. The Option may not be transferred by the
          ----------------------------
Optionee other than (i) by will or the laws of descent and  distribution or (ii)
pursuant to beneficiary  designation procedures approved by the Company.  Except
to the  extent  permitted  by the  foregoing  sentence,  during  the  Optionee's
lifetime the Option is exercisable  only by the Optionee or the Optionee's Legal
Representative.  Except to the extent permitted by the foregoing, the Option may
not  be  sold,  transferred,  assigned,  pledged,  hypothecated,  encumbered  or
otherwise  disposed of (whether by operation of law or  otherwise) or be subject
to  execution,  attachment  or  similar  process.  Upon any  attempt to so sell,
transfer,  assign,  pledge,  hypothecate,  encumber or otherwise  dispose of the
Option,  the Option and all rights hereunder shall  immediately  become null and
void.

     3.2.  Withholding  Taxes.  (a) As a condition  precedent to the delivery of
           ------------------
Stock upon  exercise of the Option,  the  Optionee  shall,  upon  request by the
Company,  pay to the Company in addition  to the  purchase  price of the shares,
such  amount  of cash as the  Company  may be  required,  under  all  applicable
federal, state, local or other laws or regulations,  to withhold and pay over as
income or other  withholding taxes (the "Required Tax Payments") with respect to
such exercise of the Option.  If the Optionee shall fail to advance the Required
Tax Payments after request by the Company,  the Company may, in its  discretion,
deduct any Required Tax Payments from any amount then or  thereafter  payable by
the Company to the Optionee.

     (b) The Optionee may elect to satisfy his or her  obligation to advance the
Required Tax Payments by any of the following  means:  (1) a cash payment to the
Company  pursuant to Section 3.2(a),  (2) delivery (either actual delivery or by
attestation  procedures established by the Company) to the Company of previously
owned whole shares of Stock (which the Optionee has held for at least six months
prior to the delivery of such shares or which the Optionee purchased on the open
market and in each case for which the Optionee has good title, free and clear of
all liens and encumbrances) having an aggregate Fair Market Value, determined as
of the date the  obligation  to withhold or pay taxes first arises in connection
with the Option  (the "Tax  Date"),  equal to the  Required  Tax  Payments,  (3)
authorizing  the Company to withhold whole shares of Stock which would otherwise
be  delivered to the Optionee  upon  exercise of the Option  having an aggregate
Fair Market  Value,  determined  as of the Tax Date,  equal to the  Required Tax
Payments,  (4) a cash payment by a  broker-dealer  acceptable  to the Company to
whom the Optionee has  submitted  an  irrevocable  notice of exercise or (5) any
combination  of (1),  (2) and (3).  The Company  shall have sole  discretion  to
disapprove of an election  pursuant to any of clauses  (2)-(5).  No  certificate
representing a share of Stock shall be delivered until the Required Tax Payments
have been satisfied in full.

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<PAGE>

     3.3.  Adjustment.  In the event of any change in the  capitalization of the
           ----------
Company (such as a stock split) or a corporate  transaction (such as any merger,
consolidation,  separation, including a spin-off, or other distribution of stock
or  property  of  the  Company),   any  reorganization   (whether  or  not  such
reorganization  comes within the  definition  of such term in Section 368 of the
Code) or any  partial or complete  liquidation  of the  Company,  the number and
class of  securities  subject to the Option and the purchase  price per security
shall be  appropriately  adjusted  by the  Committee  without an increase in the
aggregate  purchase  price.  The decision of the  Committee  regarding  any such
adjustment shall be final, binding and conclusive.

     3.4. Compliance with Applicable Law. The Option is subject to the condition
          ------------------------------
that if the listing,  registration or qualification of the shares subject to the
Option upon any securities exchange or under any law, or the consent or approval
of any  governmental  body,  or the taking of any other  action is  necessary or
desirable as a condition of, or in connection  with, the purchase or delivery of
shares hereunder,  the Option may not be exercised,  in whole or in part, unless
such listing, registration,  qualification,  consent or approval shall have been
effected or obtained,  free of any conditions not acceptable to the Company. The
Company agrees to use  reasonable  efforts to effect or obtain any such listing,
registration, qualification, consent or approval.

     3.5. Delivery of Certificates. Upon the exercise of the Option, in whole or
          ------------------------
in  part,  the  Company  shall  deliver  or cause  to be  delivered  one or more
certificates  representing the number of shares  purchased  against full payment
therefor.  The Company  shall pay all original  issue or transfer  taxes and all
fees and expenses  incident to such  delivery,  except as otherwise  provided in
Section 3.2.

     3.6.  Option  Confers No Rights as  Shareholder.  The Optionee shall not be
           -----------------------------------------
entitled to any  privileges of ownership with respect to shares of Stock subject
to the Option unless and until  purchased and delivered upon the exercise of the
Option,  in whole or in part,  and the Optionee  becomes a shareholder of record
with respect to such delivered shares;  and the Optionee shall not be considered
a  shareholder  of the Company  with respect to any such shares not so purchased
and delivered.

     3.7.  Option Confers No Rights to Continued  Employment.  In no event shall
           -------------------------------------------------
the granting of the Option or its  acceptance  by the Optionee give or be deemed
to give the Optionee any right to  continued  employment  by or service with the
Company or any affiliate of the Company.

     3.8. Decisions of Board or Committee. The Board or the Committee shall have
          -------------------------------
the right to resolve all questions which may arise in connection with the Option
or its exercise. Any interpretation, determination or other action made or taken
by the Board or the  Committee  regarding  the Plan or this  Agreement  shall be
final, binding and conclusive.

     3.9. Company to Reserve Shares. The Company shall at all times prior to the
          -------------------------
expiration or termination of the Option  reserve and keep  available,  either in
its treasury or out of its  authorized  but unissued  shares of Stock,  the full
number of shares subject to the Option from time to time.


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<PAGE>

     3.10.  Agreement  Subject  to the Plan.  This  Agreement  is subject to the
            -------------------------------
provisions of the Plan, and shall be interpreted  in accordance  therewith.  The
Optionee hereby acknowledges receipt of a copy of the Plan.

     4. Miscellaneous Provisions.
        ------------------------

     4.1.  Designation  as  Nonqualified  Stock  Option.  The  Option  is hereby
           --------------------------------------------
designated as not  constituting  an "incentive  stock option"  within meaning of
section  422 of the  Code;  this  Agreement  shall be  interpreted  and  treated
consistently with such designation.

     4.2.  Meaning of  Certain  Terms.  (a) As used  herein,  employment  by the
           --------------------------
Company  shall  include  employment  by a  corporation  which  is a  "subsidiary
corporation" of the Company, as such term is defined in section 424 of the Code.
References in this Agreement to sections of the Code shall be deemed to refer to
any successor section of the Code or any successor internal revenue law.

     (b) As used  herein,  the term  "Legal  Representative"  shall  include  an
executor,  administrator,  legal representative,  guardian or similar person and
the term "Permitted  Transferee"  shall include any transferee (i) pursuant to a
transfer  permitted under Section 6.7 of the Plan and Section 3.1 hereof or (ii)
designated  pursuant  to  beneficiary  designation  procedures  approved  by the
Company.

     4.3.  Successors.  This  Agreement  shall be binding  upon and inure to the
           ----------
benefit of any  successor or successors of the Company and any person or persons
who shall,  upon the death of the  Optionee,  acquire  any rights  hereunder  in
accordance with this Agreement or the Plan.

     4.4. Notices. All notices, requests or other communications provided for in
          -------
this Agreement shall be made, if to the Company,  to the Corporate  Secretary at
The ServiceMaster  Company,  One ServiceMaster Way, Downers Grove, IL 60515, and
if to the  Optionee,  to the address of the Optionee  contained in the Company's
records.  All  notices,  requests or other  communications  provided for in this
Agreement  shall be made in writing  either  (a) by  personal  delivery,  (b) by
facsimile  with  confirmation  of receipt,  (c) by mailing in the United  States
mails to the last known address of the party  entitled  thereto,  (d) by express
courier service or (e) electronic mail delivery system.  The notice,  request or
other communication shall be deemed to be received upon personal delivery,  upon
confirmation  of receipt of facsimile  transmission or upon receipt by the party
entitled  thereto if by United States mail,  express  courier  service or return
receipt of electronic mail delivery system; provided, however, that if a notice,
request  or other  communication  sent to the  Company  is not  received  during
regular business hours, it shall be deemed to be received on the next succeeding
business day of the Company.

     4.5. Governing Law. This Agreement,  the Option and all determinations made
          -------------
and actions taken pursuant hereto and thereto, to the extent not governed by the
laws of the  United  States,  shall  be  governed  by the  laws of the  State of
Delaware  and  construed  in  accordance  therewith  without  giving  effect  to
principles of conflicts of law.



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