EXHIBIT 10.26
THE SERVICEMASTER COMPANY
STOCK APPRECIATION RIGHT AGREEMENT
______________, 2004
The ServiceMaster Company (the "Company") hereby grants to the
Holder as of __________________, 2004 (the "Grant Date"), pursuant to the
provisions of the ServiceMaster 2003 Equity Incentive Plan, (the "Plan") a
free-standing stock appreciation right ("SAR") with respect to the number of
shares of its common stock, $0.01 par value ("Stock") specified in the Term
Sheet at the Base Price per SAR 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. SAR Subject to Acceptance of Agreement. The SAR shall be null and void
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unless the Holder 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 SAR.
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2.1. Maximum Term of SAR. In no event may the SAR be exercised, in whole or
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in part, after the Expiration Date.
2.2. Exercise of SAR. (a) Except as otherwise provided by Section 2.2(b)
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and by Section 5.8 of the Plan, the SAR shall become exercisable in accordance
with the Exercise Schedule set forth in the Term Sheet.
(b) If the Holder's employment with the Company terminates by reason of
Disability or death, the SAR shall be immediately exercisable with respect to
all of the shares of Stock subject to the SAR on the effective date of the
Holder's termination of employment or date of death and may thereafter be
exercised by the Holder or the Holder'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 Holder's
termination of employment or date of death and (ii) the Expiration Date.
(c) If the Holder's employment with the Company terminates after a minimum
of fifteen years of employment (fifteen years need not be consecutive) with the
Company or a combined age and years of service totaling 65 ("Retirement"), the
SAR shall continue in accordance with its terms and, to the extent the SAR shall
be or become exercisable with respect to the shares of Stock subject to the SAR,
may thereafter be exercised by the Holder or the Holder's Legal Representative
until the Expiration Date.
(d) If the Holder's employment with the Company terminates for any reason
other than Disability, death or Retirement, the SAR shall be exercisable only to
the extent it is exercisable on the effective date of the Holder's termination
of employment and may thereafter be exercised by the Holder or the Holder's
Legal Representative until and including the earliest
to occur of (i) the date
which is six months after the effective date of the Holder's termination of
employment and (ii) the Expiration Date; provided that if the Holder's
employment is terminated for Gross Misconduct, the SAR shall terminate
automatically on the effective date of the Holder's termination of employment.
Gross Misconduct means the commission of any act of fraud, embezzlement or
dishonesty by the Holder, any unauthorized use or disclosure by the Holder of
confidential information or trade secrets of the Company or any Subsidiary, or
any other intentional misconduct by the Holder 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 Holder or any other individual in the employment of the Company
or any Subsidiary.
(e) If the Holder dies during the post-employment exercise period pursuant
to Section 2.2(b) following termination of employment by reason of Disability,
the SAR shall be exercisable only to the extent it is exercisable on the date of
death, and may thereafter be exercised by the Holder'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 Holder's termination of employment and
(ii) the Expiration Date.
(f) If the Holder dies following termination of employment by reason of
Retirement and prior to the Expiration Date, the SAR shall be exercisable only
to the extent it is exercisable on the date of death, and may thereafter be
exercised by the Holder'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 Holder 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, the SAR shall be
exercisable only to the extent it is exercisable on the date of death, and may
thereafter be exercised by the Holder'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 Holder's termination of employment and (ii) the
Expiration Date.
2.3. Method of Exercise. Subject to the limitations set forth in this
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Agreement, the SAR may be exercised by the Holder (1) by giving written notice
to the Company specifying the whole number of vested and exercisable shares of
Stock with respect to which the SAR is being exercised and (2) by executing such
documents as the Company may reasonably request.
2.4 Delivery of Certificates Representing Stock. Upon exercise of the SAR,
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in whole or in part, the Company shall (1) provide for the registration in
book-entry form in the Holder's name or (2) deliver to the Holder a stock
certificate representing a whole number of shares of Stock equal in value to the
excess of the Fair Market Value of one share of Stock as of the date of exercise
over the Base Price, multiplied by the number of shares of Stock as to which the
SAR is being exercised. The Company shall pay all original issue or transfer
taxes and all fees and expenses incident to such delivery, except as set
otherwise provided in Section 3.2.
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2.5. Termination of SAR and Forfeiture of SAR Gain. (a) Notwithstanding the
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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 SAR,
the Holder:
(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 Committee 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 SAR shall terminate automatically on the date the Holder engages in
such activity and the Holder shall pay the Company, within five business days of
receipt by the Holder of a written demand therefor, an amount in cash determined
by multiplying the number of shares of Stock as to which the SAR was exercised
within the one-year period described above by the difference between (i) the
Fair Market Value of a share of Stock on the date of such exercise and (ii) the
Base Price per SAR (without reduction for any shares of Stock withheld by the
Company pursuant to Section 3.2).
(b) The Holder may be released from the Holder's obligations
under Section 2.5(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 Holder agrees that by executing this Agreement the
Holder authorizes the Company and its Subsidiaries to deduct any amount or
amounts owed by the Holder pursuant to Section 2.5(a) from any amounts payable
by the Company or any Subsidiary to the Holder, including, without limitation,
any amount payable to the Holder 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 Holder shall not constitute a waiver of this right of
setoff with respect to any other amount payable to the Holder or any other
remedy.
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3. Additional Terms and Conditions of SAR.
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3.1. Nontransferability of SAR. The SAR may not be transferred by the
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Holder 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 Holder's lifetime
the SAR is exercisable only by the Holder or the Holder's Legal Representative.
Except to the extent permitted by the foregoing, the SAR 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 SAR, the SAR and all
rights hereunder shall immediately become null and void.
3.2. Withholding Taxes. As a condition precedent to the delivery of Stock
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upon exercise of the SAR, the Company shall withhold whole shares of Stock which
would otherwise be delivered to the Holder upon exercise of the SAR having an
aggregate Fair Market Value, determined as of the date the obligation to
withhold taxes first arises in connection with the SAR, equal to all applicable
federal, state, local or other laws and regulations ("Required Tax Payments").
No registration in book-entry form of a share of Stock shall be made and no
certificate representing a share of Stock shall be delivered until the Required
Tax Payments have been satisfied in full.
3.3. Adjustment. In the event of any stock split, stock dividend,
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recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event, or any distribution to holders of Common Stock other than a regular cash
dividend, the number and class of securities subject to the SAR and the Base
Price per SAR shall be appropriately adjusted by the Committee, such adjustments
to be made without an increase in the aggregate Base Price. The decision of the
Committee regarding any such adjustment shall be final, binding and conclusive.
3.4. Compliance with Applicable Law. The SAR is subject to the condition
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that if the listing, registration or qualification of the shares subject to the
SAR 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 SAR 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. SAR Confers No Rights as Shareholder. The SAR shall not be entitled to
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any privileges of ownership with respect to shares of Stock subject to the SAR
unless and until purchased and delivered upon the exercise of the SAR, in whole
or in part, and the Holder becomes a shareholder of record with respect to such
delivered shares; and the Holder shall not be considered a shareholder of the
Company with respect to any such shares not so purchased and delivered.
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3.6. SAR Confers No Rights to Continued Employment. In no event shall the
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granting of the SAR or its acceptance by the Holder give or be deemed to give
the Holder any right to continued employment by or service with the Company or
any affiliate of the Company.
3.7. Decisions of Board or a Committee of the Board. The Board or the
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Committee shall have the right to resolve all questions which may arise in
connection with the SAR 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.
3.8. Company to Reserve Shares. The Company shall at all times prior to the
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expiration or termination of the SAR 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 SAR from time to time.
3.9. Agreement Subject to the Plan. This Agreement is subject to the
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provisions of the Plan, and shall be interpreted in accordance therewith. The
Holder hereby acknowledges receipt of a copy of the Plan.
4. Miscellaneous Provisions.
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4.1. Meaning of Certain Terms. (a) As used herein, the term "Disability"
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shall mean Holder's absence from Holder's duties with the Company or its
affiliated companies on a full-time basis for at least 180 consecutive days as a
result of Holder's incapacity due to physical or mental illness.
(b) 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.
(c) 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 5.6 of the Plan and Section 3.1
hereof or (ii) designated pursuant to beneficiary designation procedures
approved by the Company.
4.2. Modification, Waiver and Invalidity. The parties may modify this
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Agreement only by written instrument signed by each of the parties hereto.
Failure by either party to enforce a provision of this Agreement shall not
constitute a waiver of that or any provision of this Agreement. The invalidity
or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.
4.3. Successors. This Agreement shall be binding upon and inure to the
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benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of the Holder, acquire any rights hereunder in
accordance with this Agreement or the Plan.
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4.4. Notices. All notices, requests or other communications provided for in
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this Agreement shall be made, if to the Company, to the Corporate Secretary at
The ServiceMaster Company, 0000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxx Xxxxx, XX 00000,
and if to the Holder, to the address of the Holder 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, 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 SAR and all determinations made and
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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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