Stock Option Agreement - ServiceMaster Co. and Jonathan P. Ward
THE SERVICEMASTER COMPANY
STOCK OPTION AGREEMENT
January 9, 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
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extent it is 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 on or prior to December 31, 2002 by the
Optionee for Good Reason or by the Company for any reason other than for Cause,
the effective date of the Optionee's termination of employment shall, for
purposes of the Option, be deemed to be December 31, 2002 and, accordingly, the
Option shall be exercisable to the extent it is exercisable as of December 31,
2002 and may thereafter be exercised by the Optionee or the Optionee's Legal
Representative until and including June 30, 2003; provided further, that if the
Optionee's employment is terminated for Cause, the Option shall terminate
automatically on the effective date of the Optionee's termination of employment.
The term "Good Reason" and "Cause" shall have the respective meanings set forth
in the attached Appendix A.
(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 by exercised by the Optionee's Legal Representative or Permitted
Transferees, as the case may be, until the earlier to occur of (i) two years
after the effective date of the Optionee's termination of employment 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 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 by the Company for Cause,
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)
six months after the effective date of the Optionee's termination of employment
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 an irrevocable notice of exercise or (iv) a combination
of (i) and (ii), and (2) by executing such
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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, principal, agent, 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 be employed or perform services elsewhere 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 Optionee pursuant to Section 2.4(a) from any amounts payable
by the Company or any
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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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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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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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