This instrument constitutes part of a prospectus covering
securities that have been registered under the Securities Act
of 1933.
OPTION AGREEMENT
For Option Granted Under the
ServiceMaster 1997 Share Option Plan
ServiceMaster Limited Partnership, a Delaware limited
partnership (the "Company") and ~ (the "Optionee") hereby agree
as follows:
Part 1. Option Terms
1.1 Definitions. As used in this Agreement, the
following terms have the indicated meanings:
"Company" means ServiceMaster Limited Partnership, a
Delaware limited partnership.
"First Refusal Right" means the duty of the holder of
Shares issued pursuant to an Option to offer such Shares for
sale to the Company, and the correlative right of the Company
to purchase such Shares, under certain circumstances as set
forth in Section 7 of the Plan.
"Grant Date" means the date set forth in the Term Sheet as
the date on which the option which is the subject of this
agreement was granted.
"Plan" means the ServiceMaster 1997 Share Option Plan as
constituted on the Grant Date and, subject to the limitations
set forth in Section 10.1 of the Plan, as amended from time to
time thereafter.
"Shares" means the units of limited partner interest
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of the Company, or any successor organization
to the Company (as more fully set forth in the Plan).
"Term Sheet" means the document which is referenced to
and delivered concurrently with this Agreement and which sets
forth certain terms and conditions of the option granted
hereunder.
1.2 Grant. (a) The Company hereby grants to the Optionee
an option (the "Option") under the Plan which entitles the
Optionee to purchase from the Company the Shares which are
subject to the Option on the terms and subject to the
conditions specified in the Term Sheet, this Agreement and the
Plan.
(b) Various terms governing this option, including the
Grant Date, the consideration payable for the option, and the
exercise price under the option, are set forth in the Term
Sheet. The Term Sheet has been signed by the Company and must
be signed by the Optionee before the optionee may have any
rights under this agreement.
(c) Upon execution of the Term Sheet, the Optionee shall
immediately make a cash payment to the Company in the amount of
the Option Acquisition Price as specified in the Term Sheet.
1.3 Number of Shares Purchasable. Unless and until an
adjustment is made pursuant to Part 9 of the Plan, the number
of Shares which are subject to the Option is the number
specified in the Term Sheet.
1.4 Option Exercise Price. Unless and until an
adjustment is made pursuant to Part 9 of the Plan, the price at
which the Shares which may be purchased from the Company upon
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any exercise of this Option shall be the original exercise
price specified in the Term Sheet.
1.5 First Refusal Right; Legend. (a) Each Share issued
pursuant to an exercise of the option granted by this Agreement
shall be subject to the Company's First Refusal Right.
(b) All certificates for Shares issued pursuant to an
exercise of the option granted by this Agreement shall contain
a legend which refers to the First Refusal Right.
Part 2: Exercise
2.1 Time of Exercise. (a) During the period on the
Xxxxx Date and ending on the fifth anniversary of the Grant
Date, this Option may be exercised only in installments of 20%
each which mature, respectively, on the first, second, third,
fourth and fifth anniversaries of the Grant Date. Such
installments shall cumulate over the foregoing five-year
period. The foregoing limitation shall operate as shown in the
following schedule, provided, that in no event may this Option
be exercised in a manner or to an extent contrary to the
provisions of this Agreement or the Plan:
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Grant Date Cumulative
Anniversary Percent Per Cent
----------- ------- ----------
1st 20% 20%
2nd 20% 40%
3rd 20% 60%
4th 20% 80%
5th 20% 100%
(b) After the fifth anniversary of the Grant Date, this
Option may be exercised in whole or in part and at such time or
times as the person entitled to exercise the Option may desire
with respect to all Shares then available under this Option,
provided, that in no event may the Option be exercised after
the expiration date set forth in the Term Sheet or in a manner
or to an extent contrary to the provisions of this Agreement or
the Plan.
2.2 Manner of Exercise. (a) The person entitled to
exercise this Option may do so by giving the Company a written
notice (the "Exercise Notice") which shall --
(i) identify the Option;
(ii) specify the number of Shares with respect to
which the Option is then being exercised;
(iii)state the price at which the shares will be
purchased;
(iv) identify the Exercise Date which shall govern
such exercise; and
(v) state that the person signing the Exercise
agrees to purchase the Shares so specified at the
price and on the terms established in this Agreement
and the Plan;
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(vi) be signed by the person entitled to exercise the
Option.
A form of Exercise Notice which will be deemed satisfactory by
the Company is attached to this Agreement as Exhibit A.
2.3 Exercise Date. (a) This Option shall be deemed to
have been exercised on the date (the "Exercise Date") on which
the Exercise Notice, completed as required by Section 2.2 (or
completed in such other form or manner as the Company's
Secretary or the Committee shall approve), is delivered to the
office of the Secretary of the Company or at such other place
as may have been designated by the Secretary or the Committee
at the time of such exercise as a place to which notices of
exercise of options granted under the Plan may be delivered.
(b) Delivery of the Exercise Notice may be made by
personal delivery or by United States mail.
2.4 Manner of Payment. The price which is payable for
the Shares to be purchased upon the exercise of any option
granted under this Plan shall be paid to the Company in full
and in cash by the Optionee at the time of the delivery of the
Exercise Notice.
2.5 Termination of Option. (a) The Option shall
terminate on whichever of the following dates occurs first: (i)
the Expiration Date as specified in the Term Sheet or (ii) any
other date established under any of the provisions of the Plan
as the date after which the option may not be exercised. The
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applicable date under this Section 2.5(a) is hereinafter
referred to as the "Termination Date".
(b) The Option may not be exercised after its Termination
Date. Thus, the Option does not convey any right to purchase
any Shares which Optionee (or other holder of the Option) has
not agreed to purchase in an Exercise Notice delivered to the
Company on or prior to the Termination Date in accordance with
the requirements of the preceding sections of this Part 2.
Part 3: The Plan Terms
3.1 Plan Terms Control. The Option has been granted
under the Plan as constituted at the Grant Date. The terms of
the Plan as constituted at the Grant Date are incorporated into
this Agreement by reference and shall control the rights and
obligations of the Company and the Optionee under this
Agreement.
3.2 Effect of Subsequent Changes in the Plan. No change in
the Plan which shall be made after the Grant Date shall
adversely affect the rights of the Optionee under this
Agreement unless the Optionee shall have agreed in writing to
such change. No change in the Plan after the Grant Date shall
inure to the benefit of the Optionee except to the extent
expressly permitted by the Committee.
Part 4. Call Right.
4.1 The Company's Call Right. (a) If the Optionee
terminates his or her employment with the Company or any
subsidiary of the Company and within five years after the date
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of such termination of employment the Optionee becomes employed
by an organization and the Optionee's responsibilities with
that organization place the Optionee in competition with any
one or more of the businesses then being conducted by the
Company or any subsidiary of the Company, the Company shall
have the right (the "Call Right") to purchase Shares from the
Optionee in a number equal to the number of the Shares which
the Optionee had purchased within five years prior to the
initial competitive activity by the Optionee. The amount
payable by the Company for the Shares to be delivered by the
Optionee pursuant to this
Section 4.1 shall be the Optionee's Investment (as defined in
paragraph (b) below) in the Shares purchased under the Option.
If and to the extent that the Optionee can not deliver the
Shares which were purchased under the Option because the
Optionee has previously disposed of all or some of such Shares,
then the Optionee agrees to obtain substitute Shares in the
number needed to comply with the Optionee's delivery obligation
under this Section 4.1 by purchasing Shares in the market or by
any other lawful means, and the Optionee shall deliver such
substitute Shares to the Company.
(b) As used in this Section 4.1, the term "Optionee's
Investment" means, as to each Share purchased under the Option,
the sum of the Option Acquisition Price Per Share and the
Exercise Price Per Share, each as shown in the Term Sheet. The
figure representing the Optionee's Investment shall be
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appropriately adjusted in the event of Capital Changes as
provided in Section 5.1.
(c) The judgement of the Committee as to whether, for
purposes of applying Section 4.1(a), the Optionee is in
competition with the Company and/or any of its business units
shall be conclusive and binding, unless the Optionee can show
by clear and convincing evidence that no such competition has
occurred.
4.2 Call Right Exercise Period. The Call Right may be
exercised by the Company at any time on or prior to the date
(the "Call Deadline") which occurs three months after the
Committee has first actually become aware that the Optionee has
become employed by another organization and, as an employee of
such organization, become engaged in activities which place the
Optionee in competition with the Company as described in
Section 4.1.
4.3 Exercise of Call Right. The Company's Call Right
shall be exercised by delivery by the Company of a written
notice of
such exercise to the Optionee at the most recent address for
the Optionee as shown on the records of the Company.
4.4 Consummation of the Company's Purchase. Within five
business days after the Company has exercised its Call Right
pursuant to Section 4.3, the Optionee shall deliver to the
Company: (i) certificate(s) representing Shares in the number
required to be delivered under Section 4.1; (ii) transfer
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instruments reasonably satisfactory to the Company to vest
immediately in the Company absolute ownership of such Shares
free of any adverse interest of any kind; and (iii) such
evidence and assurances as the Company shall reasonably request
to establish the power of the Optionee to convey ownership of
such Shares and the person(s) entitled to receive payment for
such Shares. Upon receipt of all the items deliverable under
the preceding sentence, the Company shall pay the purchase
price for such Shares as established pursuant to Section 4.1.
If the Optionee does not deliver the Shares at the time
required under the preceding sentence, the Company shall have
the right to obtain payment from the Optionee for an amount
equal to the difference between the greater of the market price
at the time the Call Right is exercised or the time the payment
is made and the Optionee's Investment plus interest from
exercise of the Call Right at the prime rate plus two
percentage points and collection costs.
4.5 Call Right Lapse. If the Company fails to exercise
its Call Right on or prior to the Call Deadline, then
immediately after the Call Deadline the Optionee shall be
relieved of any further obligation to deliver any Shares under
this Part 4.
Part 5. General Provisions
5.1 Capital Changes. The Committee shall have the right
to determine the effect of each Capital Change upon the
parties' respective rights and obligations under this
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Agreement, including but not limited to (i) the nature and
quantity of property purchasable by the Company under Part 4
after giving effect to such Capital Change and (ii) the price
payable by the Company for such property upon exercise by the
Company of rights granted in Part 4.
5.2 Securities Law Compliance. The Optionee shall not
offer, sell or otherwise dispose of any of the Shares acquired
by reason of any exercise of the Option in any manner which
would violate the Securities Act of 1933 or any other state or
federal law or require the Company to make any fling or take
any action to avoid such a violation.
5.3 Terms Defined in the Plan. Every term which is
defined or given a special meaning in the Plan has the same
meaning whenever it is used in this Agreement.
5.4 Binding Agreement. (a) Each party acknowledges that
it is intended that the other party may rely on the rights
granted by this Agreement and that this Agreement is supported
by adequate consideration and is binding on each party in
accordance with its terms.
(b) This Agreement shall also be binding upon and inure to
the benefit of any successor of the Company.
5.5 Complete Agreement. This Agreement, the Term Sheet
and the Plan together contain the complete agreement of the
parties relating to the Option. The rights and obligations of
the parties evidenced by this Agreement, the Term Sheet and the
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Plan supersede any prior understandings, agreements or
representations by or between the parties which may have
related to such subject matter in any way.
5.6 Amendments and Waivers. The provisions of this
Agreement may be amended, and a person may take any action
which is prohibited herein or omit to perform any action
required to be performed by such person, only if such
amendment, act or omission has been approved in writing by the
parties to the Agreement. No course of dealing or any delay in
exercising any rights hereunder
shall operate as a waive of any rights of any person under this
Agreement. A waiver upon any one occasion shall not be
construed as a bar or waiver of any right or remedy on any
future occasion.
5.7 Counterparts. This Agreement and the Term Sheet may
be
executed in one or more counterparts, each of which shall be an
original but all of which together shall constitute one and the
same instrument.
5.8 Notices. Any notice to the Company required or
permitted by the terms of this Agreement shall not be deemed to
have been given unless is it in writing and shall be deemed to
have been given at (but not before) the time it has been
delivered in writing to the office of the Secretary of the
Company or to such other place as the Company may designate in
writing from time to time.
5.9 Captions. The captions used in this Agreement are
for
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convenience only, do not constitute a part of this Agreement,
and shall not be deemed to limit, characterize, or in any way
affect any provision of this Agreement.
5.10 Execution. The parties have executed the Term Sheet
to
evidence their intention to be bound by every provision of this
Agreement.
-o0o-
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