As filed with the Securities and Exchange Commission on June 23, 2003
Registration No. 333-_______
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
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The ServiceMaster Company
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-3858106
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
3250 Lacey Road, Suite 600
Downers Grove, Illinois 60515-1700
(630) 663-2000
(Address and Telephone Number of Principal Executive Offices)
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ServiceMaster 2003 Equity Incentive Plan
ServiceMaster Employee Share Purchase Plan International Trust
The ServiceMaster Company 2002 Directors Deferred Fees Plan
(Full Title of the Plan)
Jim L. Kaput
Senior Vice President and General Counsel
The ServiceMaster Company
3250 Lacey Road, Suite 600, Downers Grove, Illinois 60515-1700
(630) 663-2000
(Name, Address and Telephone Number, Including Area Code, of Agent For Service)
CALCULATION OF REGISTRATION FEE
================================ ====================== ======================= ====================== ======================
Proposed Maximum Proposed Maximum
Title of Each Class Amount to be Offering Price Aggregate Offering Amount of
of Securities to be Registered Registered Per Unit Price Registration Fee
-------------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Common Stock, par value $0.01
per share.................... 13,315,000 shares (1) $10.57 (2) $140,739,550 (2) $11,386
-------------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Preferred Stock Purchase
Rights....................... 13,315,000 rights (3) (3) (3) (3)
-------------------------------- ---------------------- ----------------------- ---------------------- ----------------------
Deferred Fee Obligations..... $2,000,000 (4) N/A (4) (4) $162
================================ ====================== ======================= ====================== ======================
(1) Of the Common Stock being registered hereunder, 13,300,000 shares relate to
the ServiceMaster 2003 Equity Incentive Plan and 15,000 shares relate to the
ServiceMaster Employee Share Purchase Plan International Trust.
(2) Estimated solely for the purpose of calculating the registration fee and,
pursuant to Rule 457(h) under the Securities Act of 1933, based upon the
average of the high and low prices of the Common Stock as reported in the
consolidated reporting system on June 16, 2003.
(3) The Preferred Stock Purchase Rights initially are attached to and trade with
the shares of Common Stock being registered hereby. Value attributable to
such Rights, if any, is reflected in the market price of the Common Stock.
(4) The Deferred Fee Obligations are unsecured obligations of The ServiceMaster
Company to make distributions in the future in accordance with the terms of
The ServiceMaster Company 2002 Directors Deferred Fee Plan. The amount of
Obligations registered hereunder includes an indeterminate number of shares
of Common Stock that may be issued in the future pursuant to the Plan, which
shares are in addition to the 13,315,000 shares of Common Stock being
registered hereunder.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents heretofore filed (File No. 1-14762) with the
Securities and Exchange Commission (the "Commission") by The ServiceMaster
Company ("ServiceMaster") are incorporated herein by reference:
1. Annual Report on Form 10-K for the year ended December 31,
2002;
2. Quarterly Report on Form 10-Q for the quarter ended March 31,
2003;
3. Quarterly Reports on Form 10-Q/A for the quarters ended
March 31, 2002, June 30, 2002 and September 30, 2002, each
filed with the Commission on May 14, 2003;
4. Current Report on Form 8-K filed with the Commission on March
17, 2003; and
5. The descriptions of the common stock, $.01 par value, of
ServiceMaster ("Common Stock") and the associated preferred
stock purchase rights ("Preferred Stock Purchase Rights") that
are contained in registration statements filed by
ServiceMaster with the Commission under Section 12 of the
Securities Exchange Act of 1934 (the "Exchange Act"),
including any subsequent amendment or any report filed for the
purpose of updating either description.
All documents filed by ServiceMaster with the Commission pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
registration statement and prior to the filing of a post-effective amendment to
this registration statement that indicates that all securities offered hereby
have been sold or that deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference into this registration statement and
to be a part hereof from the respective dates of filing of such documents (such
documents, and the documents enumerated above, being hereinafter referred to as
"incorporated documents"), it being understood that any documents filed by
ServiceMaster with the Commission pursuant to Item 9 or Item 12 of Form 8-K
shall not be deemed to be incorporated by reference into this registration
statement.
Any statement contained in an incorporated document shall be deemed to
be modified or superseded for purposes of this registration statement to the
extent that a statement contained herein or in any other subsequently filed
incorporated document modifies or supersedes such statement. Any such statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this registration statement.
Item 4. Description of Securities.
ServiceMaster 2002 Directors Deferred Fees Plan. The $2,000,000 of
deferred compensation obligations (the "Obligations") being registered under
this registration statement, which includes an indeterminate number of shares of
Common Stock in addition to the 13,315,000 shares of Common Stock also
registered hereunder, may be offered to non-employee directors of ServiceMaster
pursuant to The ServiceMaster Company 2002 Directors Deferred Fees Plan (the
"Deferred Fees Plan"). The Obligations are general unsecured obligations of
ServiceMaster to pay deferred compensation in the future in accordance with the
terms of the Deferred Fees Plan from the general assets of ServiceMaster. The
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Obligations, which are credited to a bookkeeping account, rank pari passu with
other unsecured and unsubordinated indebtedness of ServiceMaster from time to
time outstanding. While ServiceMaster has established a trust to hold assets
contributed under the Deferred Fees Plan, these assets remain subject to claims
of any unsecured creditor or holder of unsubordinated indebtedness of
ServiceMaster from time to time outstanding.
The amount of compensation deferred by each participant is determined
in accordance with such participant's deferral election and the provisions of
the Deferred Fees Plan. The Deferred Fees Plan provides for the investment of
each participant's deferral account in an interest bearing account or
ServiceMaster common stock equivalents. Interest bearing accounts will be
credited with interest at a rate established at the beginning of each year based
on the cost to ServiceMaster of issuing five-year maturity debt. Participants
cannot sell, assign, transfer, pledge or otherwise encumber Obligations. Upon
termination of service as a director, payment of that portion of a deferred
account invested in an interest bearing account will be paid in cash and payment
of that portion of a deferred account invested in ServiceMaster common stock
equivalents will be paid in Common Stock. The payment will be made in a single
lump sum or, at the election of the participant, in annual installments in
accordance with the terms of the Deferred Fees Plan.
ServiceMaster reserves the right to amend or terminate the Deferred
Fees Plan at any time, subject to any stockholder approval required by
applicable law, provided, that no amendment or termination may adversely affect
the rights of any participant with respect to amounts that have been credited to
such participant's account prior to the date of amendment or termination.
The Obligations are not convertible into any other security of
ServiceMaster. The Obligations will not have the benefit of a negative pledge or
any other affirmative or negative covenant of ServiceMaster.
Item 5. Interests of Named Experts and Counsel.
The legality of the securities being registered hereby has been
passed on by Jim L. Kaput, Esq., Senior Vice President and General Counsel of
ServiceMaster. Mr. Kaput may receive awards under the ServiceMaster 2003 Equity
Incentive Plan and also owns shares of Common Stock and options to purchase
shares of Common Stock.
Item 6. Indemnification of Directors and Officers.
ServiceMaster is incorporated under the laws of the State of Delaware.
Section 145 of the Delaware General Corporation Law allows for indemnification
of directors and officers of Delaware corporations against certain expenses,
judgments, fines and settlements in connection with litigation. ServiceMaster's
Amended and Restated Certificate of Incorporation provides for indemnification
of the directors and officers of ServiceMaster against certain liabilities. In
addition, Section 145 further authorizes a corporation to purchase and maintain
insurance on behalf of its directors and officers against certain liabilities.
All of ServiceMaster's directors and officers are covered by insurance policies
maintained and held in effect by ServiceMaster against certain liabilities for
actions taken in such capacities, including liabilities under the Securities Act
of 1933.
Item 7. Exemption from Registration Claimed.
Not Applicable.
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Item 8. Exhibits.
Exhibit No. Description
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4.1 Amended and Restated Certificate of Incorporation of ServiceMaster, as filed with the Secretary of
State, State of Delaware, on November 6, 1997, is incorporated by reference to Exhibit 1 to
ServiceMaster's Current Report on Form 8-K, No. 2 dated February 26, 1998 (File No. 1-14762).
4.2 Bylaws of ServiceMaster, as amended through April 26, 2002, are incorporated by reference to
Exhibit 3(ii) to ServiceMaster's Quarterly Report on Form 10-Q for the quarter ended March 31,
2002 (File No. 1-14762).
4.3 Shareholder Rights Agreement between ServiceMaster and Harris Trust and Savings Bank, as rights
agent, as adopted on December 12, 1997, is incorporated by reference to Exhibit 3 to the Current
Report on Form 8-K filed by ServiceMaster Limited Partnership on December 23, 1997 (File No.
1-9378) (the "1997 8-K").
4.4 Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series
A, of ServiceMaster, is incorporated by reference to Exhibit 4 to the 1997 8-K.
4.5 The ServiceMaster Company 2002 Directors Deferred Fees Plan is incorporated by reference to
Exhibit 10.35 to ServiceMaster's Annual Report on Form 10-K
for the year ended December 31, 2002 (File No. 1-14762).
4.6* ServiceMaster 2003 Equity Incentive Plan.
4.7 ServiceMaster Employee Share Purchase Plan International Trust is incorporated by reference to
Exhibit 4.6 to ServiceMaster's Registration Statement on Form S-8 (File No. 333-53142), filed on
January 3, 2001.
5* Opinion of Counsel.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Counsel (included in Exhibit 5).
24* Powers of Attorney.
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* Filed herewith.
Item 9. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
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(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this section do
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not apply if the registration statement is on Form S-3, Form S-8, or Form F-3,
and the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
----
fide offering thereof.
----
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
---- ----
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Village of Downers Grove, State of Illinois, on
June 23, 2003.
THE SERVICEMASTER COMPANY
By: /s/ Jim L. Kaput
----------------
Jim L. Kaput
Senior Vice President and General Counsel
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Jonathan P. Ward Chairman and Chief Executive Officer and June 23, 2003
------------------------------------ Director
Jonathan P. Ward
/s/ Steven C. Preston Executive Vice President and Chief June 23, 2003
------------------------------------ Financial Officer (Principal Financial
Steven C. Preston Officer and Principal Accounting Officer)
* Director May 21, 2003
------------------------------------
Paul W. Berezny
------------------------------------ Director
John L. Carl
------------------------------------ Director
Brian Griffiths
* Director May 21, 2003
------------------------------------
Sidney E. Harris
* Director May 21, 2003
------------------------------------
Roberto R. Herencia
* Director May 21, 2003
------------------------------------
Herbert P. Hess
* Director May 21, 2003
------------------------------------
James D. McLennan
* Director May 21, 2003
------------------------------------
Dallen W. Peterson
------------------------------------ Director
Betty Jane Scheihing
* Director May 21, 2003
------------------------------------
Donald G. Soderquist
* Director May 21, 2003
------------------------------------
David K. Wessner
* The undersigned, by signing his name hereto, does sign and execute this
registration statement pursuant to the Powers of Attorney executed by certain of
the above-named officers and directors of The ServiceMaster Company.
By: /s/ Jim L. Kaput
------------------------------------------
Jim L. Kaput
Senior Vice President and General Counsel
EXHIBIT INDEX
Exhibit No. Description
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4.1 Amended and Restated Certificate of Incorporation of ServiceMaster, as filed with the Secretary of
State, State of Delaware, on November 6, 1997, is incorporated by reference to Exhibit 1 to
ServiceMaster's Current Report on Form 8-K, No. 2 dated February 26, 1998 (File No. 1-14762).
4.2 Bylaws of ServiceMaster, as amended through April 26, 2002, are incorporated by reference to
Exhibit 3(ii) to ServiceMaster's Quarterly Report on Form 10-Q for the quarter ended March 31,
2002 (File No. 1-14762).
4.3 Shareholder Rights Agreement between ServiceMaster and Harris Trust and Savings Bank, as rights
agent, as adopted on December 12, 1997, is incorporated by reference to Exhibit 3 to the Current
Report on Form 8-K filed by ServiceMaster Limited Partnership on December 23, 1997 (File No.
1-9378) (the "1997 8-K").
4.4 Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock, Series
A, of ServiceMaster, is incorporated by reference to Exhibit 4 to the 1997 8-K.
4.5 The ServiceMaster Company 2002 Directors Deferred Fees Plan is incorporated by reference to
Exhibit 10.35 to ServiceMaster's Annual Report on Form 10-K
for the year ended December 31, 2002 (File No. 1-14762).
4.6* ServiceMaster 2003 Equity Incentive Plan.
4.7 ServiceMaster Employee Share Purchase Plan International Trust is incorporated by reference to
Exhibit 4.6 to ServiceMaster's Registration Statement on Form S-8 (File No. 333-53142), filed on
January 3, 2001.
5* Opinion of Counsel.
23.1* Consent of Deloitte & Touche LLP.
23.2* Consent of Counsel (included in Exhibit 5).
24* Powers of Attorney.
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* Filed herewith.
EXHIBIT 4.6
ServiceMaster 2003 Equity Incentive Plan
I. Introduction
1.1 Purposes. The purposes of the ServiceMaster 2003 Equity Incentive Plan
--------
(the "Plan") of The ServiceMaster Company, a Delaware corporation (the
"Company"), are (i) to align the interests of the Company's stockholders and the
recipients of awards under this Plan by increasing the proprietary interest of
such recipients in the Company's growth and success, (ii) to advance the
interests of the Company by attracting and retaining officers and other
employees, consultants, independent contractors and agents and (iii) to motivate
such persons to act in the long-term best interests of the Company and its
stockholders.
1.2 Certain Definitions.
-------------------
"Agreement" shall mean the written agreement evidencing an award
---------
hereunder between the Company and the recipient of such award.
"Board" shall mean the Board of Directors of the Company.
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"Change in Control" shall have the meaning set forth in Section 5.8(b).
-----------------
"Code" shall mean the Internal Revenue Code of 1986, as amended.
----
"Committee" shall mean the Compensation and Leadership Development
---------
Committee of the Board or such other committee designated by the Board that
satisfies any then applicable requirements of the principal national stock
exchange on which the Common Stock is then traded to constitute a compensation
committee, and which consists of three or more members of the Board, each of
whom (i) may be a "Non-Employee Director" within the meaning of Rule 16b-3 under
the Exchange Act and (ii) may be an "outside director" within the meaning of
Section 162(m) of the Code.
"Common Stock" shall mean the common stock, $.01 par value, of the
------------
Company.
"Company" shall have the meaning set forth in Section 1.1.
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"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended.
"Fair Market Value" shall mean the average of the high and low
-----------------
transaction prices of a share of Common Stock as reported in the New York Stock
Exchange Composite Transactions on the date as of which such value is being
determined or, if there shall be no reported transactions for such date, on the
next preceding date for which transactions were reported; provided, however,
-------- -------
that Fair Market Value may be determined by the Committee by whatever
means or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate.
"Free-Standing SAR" shall mean an SAR which is not granted in tandem
-----------------
with, or by reference to, an option, which entitles the holder thereof to
receive, upon exercise, shares of Common Stock (which may be Restricted Stock),
cash or a combination thereof with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of such SARs which are
exercised.
"Incentive Stock Option" shall mean an option to purchase shares of
----------------------
Common Stock that meets the requirements of Section 422 of the Code, or any
successor provision, which is intended by the Committee to constitute an
Incentive Stock Option.
"Incumbent Board" shall have the meaning set forth in Section
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5.8(b)(2).
"Non-Qualified Stock Option" shall mean an option to purchase shares of
--------------------------
Common Stock which is not an Incentive Stock Option.
"Outstanding Common Stock" shall have the meaning set forth in Section
------------------------
5.8(b)(1).
"Outstanding Voting Securities" shall have the meaning set forth in
-----------------------------
Section 5.8(b)(1).
"Performance Measures" shall mean the criteria and objectives,
--------------------
established by the Committee, which shall be satisfied or met (i) as a condition
to the grant or exercisability of all or a portion of an option or SAR, (ii) as
a condition to the grant of a Stock Award or (iii) during the applicable
Restriction Period or Performance Period as a condition to the holder's receipt,
in the case of a Restricted Stock Award, of the shares of Common Stock subject
to such award, or, in the case of a Performance Share Award, of the shares of
Common Stock subject to such award and/or of payment with respect to such award.
Such criteria and objectives shall include one or more of the following
objective corporate-wide or subsidiary, division, operating unit or individual
measures: earnings per share; earnings before interest, taxes, depreciation or
amortization (or any combination thereof); direct margin; expense reduction;
customer satisfaction survey results; employee satisfaction survey results;
employee retention; net income; operating income; revenues; profit margin; cash
flow(s); financial return ratios; return on equity; and strategic business
criteria, consisting of one or more objectives based on achieving specified
revenue, market penetration, or geographic business expansion goals, or cost
targets, or goals relating to acquisitions or divestitures. Each such goal may
be expressed on an absolute or relative basis and may include comparisons based
on current internal targets, the past performance of the Company (including the
performance of one or more subsidiaries, divisions, or operating units) or the
past or current performance of other companies (or a combination of such past
and current performance). In the case of earnings-based measures, performance
goals may include comparisons relating to capital (including, but limited to,
the cost of capital), shareholders' equity, shares outstanding, assets or net
assets, or any combination thereof. If the Committee desires that compensation
payable pursuant to any award subject to Performance Measures be "qualified
performance-based compensation" within the meaning of Section 162(m) of the
Code, the Performance Measures (i) shall be established by the Committee no
later than
the end of the first quarter of the Performance Period or Restriction
Period, as applicable (or such other time designated by the Internal Revenue
Service) and (ii) shall satisfy all other applicable requirements imposed under
Treasury Regulations promulgated under Section 162(m) of the Code, including the
requirement that such Performance Measures be stated in terms of an objective
formula or standard.
"Performance Period" shall mean any period designated by the Committee
------------------
during which the Performance Measures applicable to a Performance Share Award
shall be measured.
"Performance Share" shall mean a right, contingent upon the attainment
-----------------
of specified Performance Measures within a specified Performance Period, to
receive one share of Common Stock, which may be Restricted Stock, or in lieu of
all or a portion thereof, the Fair Market Value of such share of Common Stock in
cash.
"Performance Share Award" shall mean an award of Performance Shares
-----------------------
under this Plan.
"Person" shall have the meaning set forth in Section 5.8(b)(1).
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"Restricted Stock" shall mean shares of Common Stock which are subject
----------------
to a Restriction Period.
"Restricted Stock Award" shall mean an award of Restricted Stock under
----------------------
this Plan.
"Restriction Period" shall mean any period designated by the Committee
------------------
during which the Common Stock subject to a Restricted Stock Award may not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award.
"SAR" shall mean a stock appreciation right which may be a
---
Free-Standing SAR or a Tandem SAR.
"Stock Award" shall mean a Restricted Stock Award or an Unrestricted
-----------
Stock Award.
"Subsidiary" and "Subsidiaries" shall have the meanings set forth in
---------- ------------
Section 1.4.
"Tandem SAR" shall mean an SAR which is granted in tandem with, or by
----------
reference to, an option (including a Non-Qualified Stock Option granted prior to
the date of grant of the SAR), which entitles the holder thereof to receive,
upon exercise of such SAR and surrender for cancellation of all or a portion of
such option, shares of Common Stock (which may be Restricted Stock), cash or a
combination thereof with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of shares of Common Stock subject to
such option, or portion thereof, which is surrendered.
"Tax Date" shall have the meaning set forth in Section 5.5.
--------
"Ten Percent Holder" shall have the meaning set forth in Section
------------------
2.1(a).
"Unrestricted Stock" shall mean shares of Common Stock which are not
------------------
subject to a Restriction Period or Performance Measures.
"Unrestricted Stock Award" shall mean an award of Unrestricted Stock
------------------------
under this Plan.
1.3. Administration. This Plan shall be administered by the Committee. Any one
--------------
or a combination of the following awards may be made under this Plan to eligible
persons: (i) options to purchase shares of Common Stock in the form of Incentive
Stock Options or Non-Qualified Stock Options, (ii) SARs in the form of Tandem
SARs or Free-Standing SARs, (iii) Stock Awards in the form of Restricted Stock
or Unrestricted Stock and (iv) Performance Shares. The Committee shall, subject
to the terms of this Plan, select eligible persons for participation in this
Plan and determine the form, amount and timing of each award to such persons
and, if applicable, the number of shares of Common Stock, the number of SARs and
the number of Performance Shares subject to such an award, the exercise price or
base price associated with the award, the time and conditions of exercise or
settlement of the award and all other terms and conditions of the award,
including, without limitation, the form of the Agreement evidencing the award.
The Committee may, in its sole discretion and for any reason at any time,
subject to the requirements of Section 162(m) of the Code and regulations
thereunder in the case of an award intended to be qualified performance-based
compensation, take action such that (i) any or all outstanding options and SARs
shall become exercisable in part or in full, (ii) all or a portion of the
Restriction Period applicable to any outstanding Restricted Stock Award shall
lapse, (iii) all or a portion of the Performance Period applicable to any
outstanding Performance Share Award shall lapse and (iv) the Performance
Measures applicable to any outstanding award (if any) shall be deemed to be
satisfied at the maximum or any other level. The Committee shall, subject to the
terms of this Plan, interpret this Plan and the application thereof, establish
rules and regulations it deems necessary or desirable for the administration of
this Plan and may impose, incidental to the grant of an award, conditions with
respect to the award, such as limiting competitive employment or other
activities. All such interpretations, rules, regulations and conditions shall be
final, binding and conclusive.
To the extent permitted by applicable law, including, without limitation,
Section 157(c) of the General Corporation Law of the State of Delaware, the
Committee may delegate some or all of its power and authority hereunder to the
Board or the Chief Executive Officer or other executive officer of the Company
as the Committee deems appropriate; provided, however, that (i) the Committee
may not delegate its power and authority to the Board or the Chief Executive
Officer or other executive officer of the Company with regard to the grant of an
award to any person who is a "covered employee" within the meaning of Section
162(m) of the Code or who, in the Committee's judgment, is likely to be a
covered employee at any time during the period an award hereunder to such
employee would be outstanding and (ii) the Committee may not delegate its power
and authority to the Chief Executive Officer or other executive officer of the
Company with regard to the selection for participation in this Plan of an
officer or other person subject to Section 16 of the Exchange Act or decisions
concerning the timing, pricing or amount of an award to such an officer or other
person.
1.4. Eligibility. Participants in this Plan shall consist of such officers and
-----------
other employees, persons expected to become officer and other employees,
consultants, independent contractors and agents of the Company, its subsidiaries
from time to time (individually a "Subsidiary" and
----------
collectively the "Subsidiaries") as the Committee in its sole discretion may
------------
select from time to time. For purposes of this Plan, 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. The
Committee's selection of a person to participate in this Plan at any time shall
not require the Committee to select such person to participate in this Plan at
any other time.
1.5. Shares Available. Subject to adjustment as provided in Section 5.7,
----------------
10,000,000 shares of Common Stock shall be available under this Plan plus that
number of shares of Common Stock remaining available for awards under the
ServiceMaster 2000 Equity Incentive Plan (the "2000 Plan") on December 31, 2003
or, if earlier, the date that the 2000 Plan is terminated, reduced by the sum of
the aggregate number of shares of Common Stock which become subject to
outstanding options, outstanding Free-Standing SARs, outstanding Stock Awards
and outstanding Performance Shares. To the extent that shares of Common Stock
subject to an outstanding option (except to the extent shares of Common Stock
are issued or delivered by the Company in connection with the exercise of a
Tandem SAR), Free-Standing SAR, Stock Award or Performance Share are not issued
or delivered by reason of the expiration, termination, cancellation or
forfeiture of such award or by reason of the delivery or withholding of shares
of Common Stock to pay all or a portion of the exercise price of an award, if
any, or to satisfy all or a portion of the tax withholding obligations relating
to an award, then such shares of Common Stock shall again be available under
this Plan.
Shares of Common Stock shall be made available from authorized and
unissued shares of Common Stock, or authorized and issued shares of Common Stock
reacquired and held as treasury shares or otherwise or a combination thereof.
To the extent necessary for an award to be qualified performance-based
compensation under Section 162(m) of the Code and the regulations thereunder and
subject to adjustment as provided in Section 5.7, the maximum number of shares
of Common Stock with respect to all awards that may be granted during any
calendar year to any person shall be 1,250,000.
II. Stock Options and Stock Appreciation Rights
2.1. Stock Options. The Committee may, in its discretion, grant options to
-------------
purchase shares of Common Stock to such eligible persons as may be selected by
the Committee. Each option, or portion thereof, that is not an Incentive Stock
Option shall be a Non-Qualified Stock Option. An Incentive Stock Option may not
be granted to any person who is not an employee of the Company or any parent or
subsidiary (as defined in Section 424 of the Code). Each Incentive Stock Option
shall be granted within ten years of the date this Plan is adopted by the Board.
To the extent that the aggregate Fair Market Value (determined as of the date of
grant) of shares of Common Stock with respect to which options designated as
Incentive Stock Options are exercisable for the first time by a participant
during any calendar year (under this Plan or any other plan of the Company, or
any parent or subsidiary as defined in Section 424 of the Code) exceeds the
amount (currently $100,000) established by the Code, such options shall
constitute Non-Qualified Stock Options.
Options shall be subject to the following terms and conditions and
shall be subject to such additional terms and conditions, not inconsistent with
the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Purchase Price. The number of shares of Common
-----------------------------------
Stock subject to an option and the purchase price per share of Common Stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of Common Stock that may be
purchased upon exercise of an option shall not be less than 100% of the Fair
Market Value of a share of Common Stock on the date of grant of such option;
provided further, that if an Incentive Stock Option shall be granted to any
person who, at the time such option is granted, owns capital stock possessing
more than ten percent of the total combined voting power of all classes of
capital stock of the Company (or of any parent or subsidiary as defined in
Section 424 of the Code) (a "Ten Percent Holder"), the purchase price per share
of Common Stock shall not be less than the price (currently 110% of Fair Market
Value) required by the Code in order for the option to constitute an Incentive
Stock Option.
(b) Exercise Period and Exercisability. The period during which an
----------------------------------
option may be exercised shall be determined by the Committee; provided, however,
that no Incentive Stock Option shall be exercised later than ten years after its
date of grant; provided further, that if an Incentive Stock Option shall be
granted to a Ten Percent Holder, such option shall not be exercised later than
five years after its date of grant. The Committee may, in its discretion,
establish Performance Measures which shall be satisfied or met as a condition to
the grant of an option or to the exercisability of all or a portion of an
option. The Committee shall determine whether an option shall become exercisable
in installments and in part or in full at any time. An exercisable option, or
portion thereof, may be exercised only with respect to whole shares of Common
Stock.
(c) Method of Exercise. An option may be exercised (i) by giving
------------------
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and by accompanying such notice with payment therefor in
full (or by arranging for such payment to the Company's satisfaction) either (A)
in cash, (B) by delivery (either actual delivery or by attestation procedures
established by the Company) of shares having an aggregate Fair Market Value,
determined as of the date of exercise, equal to the aggregate purchase price
payable by reason of such exercise, (C) except as shall be prohibited by Section
402 of the Sarbanes-Oxley Act of 2002, in cash by a broker-dealer acceptable to
the Company to whom the optionee has submitted an irrevocable notice of exercise
or (D) a combination of (A) and (B), in each case to the extent set forth in the
Agreement relating to the option, (ii) if applicable, by surrendering to the
Company any Tandem SARs which are canceled by reason of the exercise of the
option and (iii) by executing such documents as the Company may reasonably
request. Any fraction of a share of Common Stock which would be required to pay
such purchase price shall be disregarded and the remaining amount due shall be
paid in cash by the optionee. No book-entry record or certificate representing
Common Stock shall be made or delivered, as the case may be, until the full
purchase price therefore and any withholding taxes thereon, as described in
Section 5.5, have been paid (or arrangement made for such payment to the
Company's satisfaction).
2.2. Stock Appreciation Rights. The Committee may, in its discretion, grant SARs
-------------------------
to such eligible persons as may be selected by the Committee. The Agreement
relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.
SARs shall be subject to the following terms and conditions and shall
be subject to such additional terms and conditions, not inconsistent with the
terms of this Plan, as the Committee shall deem advisable:
(a) Number of SARs and Base Price. The number of SARs subject to an
-----------------------------
award shall be determined by the Committee. Any Tandem SAR related to an
Incentive Stock Option shall be granted at the same time that such Incentive
Stock Option is granted. The base price of a Tandem SAR shall be the purchase
price per share of Common Stock of the related option. The base price of a
Free-Standing SAR shall be determined by the Committee; provided, however, that
such base price shall not be less than 100% of the Fair Market Value of a share
of Common Stock on the date of grant of such SAR.
(b) Exercise Period and Exercisability. The Agreement relating to an
----------------------------------
award of SARs shall specify whether such award may be settled in shares of
Common Stock (including shares of Restricted Stock) or cash or a combination
thereof. The period for the exercise of an SAR shall be determined by the
Committee; provided, however, that no Tandem SAR shall be exercised later than
-------- -------
the expiration, cancellation, forfeiture or other termination of the related
option. The Committee may, in its discretion, establish Performance Measures
which shall be satisfied or met as a condition to the grant of an SAR or to the
exercisability of all or a portion of an SAR. The Committee shall determine
whether an SAR may be exercised in installments and in part or in full at any
time. An exercisable SAR, or portion thereof, may be exercised, in the case of a
Tandem SAR, only with respect to whole shares of Common Stock and, in the case
of a Free-Standing SAR, only with respect to a whole number of SARs. If an SAR
is exercised for shares of Restricted Stock, a book-entry record shall be made
or a certificate or certificates representing such Restricted Stock shall be
issued in accordance with Section 3.2(c) and the holder of such Restricted Stock
shall have such rights of a stockholder of the Company as determined pursuant to
Section 3.2(d). Prior to the exercise of an SAR for shares of Common Stock,
including Restricted Stock, the holder of such SAR shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject to
such SAR.
(c) Method of Exercise. A Tandem SAR may be exercised (i) by giving
------------------
written notice to the Company specifying the number of whole SARs which are
being exercised, (ii) by surrendering to the Company any options which are
canceled by reason of the exercise of the Tandem SAR and (iii) by executing such
documents as the Company may reasonably request. A Free-Standing SAR may be
exercised (i) by giving written notice to the Company specifying the whole
number of SARs which are being exercised and (ii) by executing such documents as
the Company may reasonably request.
2.3. Termination of Employment or Service. Subject to the requirements of the
------------------------------------
Code, all of the terms relating to the exercise, cancellation or other
disposition of an option or SAR upon a termination of employment with or service
to the Company of the holder of such option or SAR, as the case may be, whether
by reason of disability, retirement, death or any other reason, shall be
determined by the Committee.
III. Stock Awards
3.1. Stock Awards. The Committee may, in its discretion, grant Stock Awards to
------------
such eligible persons as may be selected by the Committee. Subject to adjustment
as provided in Section 5.7, the aggregate number of shares of Common Stock
available under this Plan pursuant to all Stock Awards shall not exceed
3,500,000. The Agreement relating to a Stock Award shall specify whether the
Stock Award is a Restricted Stock Award or an Unrestricted Stock Award.
3.2. Terms of Stock Awards. Stock Awards shall be subject to the following terms
---------------------
and conditions and shall be subject to such additional terms and conditions, not
inconsistent with the terms of this Plan, as the Committee shall deem advisable:
(a) Number of Shares and Other Terms. The number of shares of Common
--------------------------------
Stock subject to a Restricted Stock Award or Unrestricted Stock Award and the
Performance Measures (if any) and Restriction Period applicable to a Restricted
Stock Award shall be determined by the Committee. Unrestricted Stock Awards
shall not be subject to any Performance Measures or Restriction Periods.
(b) Vesting and Forfeiture. The Agreement relating to a Restricted
----------------------
Stock Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if specified Performance
Measures are satisfied or met during the specified Restriction Period or (ii) if
the holder of such award remains continuously in the employment of or service to
the Company during the specified Restriction Period and for the forfeiture of
all or a portion of the shares of Common Stock subject to such award (x) if
specified Performance Measures are not satisfied or met during the specified
Restriction Period or (y) if the holder of such award does not remain
continuously in the employment of or service to the Company during the specified
Restriction Period.
(c) Share Certificates. During the Restriction Period, (x) the Company
------------------
may elect to hold the shares of Common Stock subject to the Restricted Stock
Award in book-entry form or (y) a certificate or certificates representing a
Restricted Stock Award may be registered in the holder's name or a nominee name
at the discretion of the Company and may bear a legend, in addition to any
legend which may be required pursuant to Section 5.6, indicating that the
ownership of the shares of Common Stock represented by such certificate is
subject to the restrictions, terms and conditions of this Plan and the Agreement
relating to the Restricted Stock Award. All certificates registered in the
holder's name shall be deposited with the Company, together with stock powers or
other instruments of assignment (including a power of attorney), each endorsed
in blank with a guarantee of signature if deemed necessary or appropriate by the
Company, which would permit transfer to the Company of all or a portion of the
shares of Common Stock subject to the Restricted Stock Award in the event such
award is forfeited in whole or in part. Upon termination of any applicable
Restriction Period (and the satisfaction or attainment of applicable Performance
Measures), or upon the grant of an Unrestricted Stock Award, in each case
subject to the Company's right to require payment of any taxes in accordance
with Section 5.5, the Company shall either (x) provide for the registration in
book-entry form, in the name of the holder of such award, of the requisite
number of shares of
Common Stock or (y) cause a certificate or certificates evidencing ownership of
the requisite number of shares of Common Stock to be delivered to the holder of
such award.
(d) Rights with Respect to Restricted Stock Awards. Unless otherwise
----------------------------------------------
set forth in the Agreement relating to a Restricted Stock Award, and subject to
the terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a stockholder of the Company, including, but not
limited to, voting rights, the right to receive dividends and the right to
participate in any capital adjustment applicable to all holders of Common Stock;
provided, however, that a distribution with respect to shares of Common Stock,
other than a regular cash dividend, shall be deposited with the Company and
shall be subject to the same restrictions as the shares of Common Stock with
respect to which such distribution was made.
3.3. Termination of Employment or Service. All of the terms relating to the
------------------------------------
satisfaction of Performance Measures and the termination of the Restriction
Period relating to a Restricted Stock Award, or any forfeiture and cancellation
of such award upon a termination of employment with or service to the Company of
the holder of such award, whether by reason of disability, retirement, death or
any other reason, shall be determined by the Committee.
IV. Performance Share Awards
4.1. Performance Share Awards. The Committee may, in its discretion, grant
------------------------
Performance Share Awards to such eligible persons as may be selected by the
Committee.
4.2. Terms of Performance Share Awards. Performance Share Awards shall be
---------------------------------
subject to the following terms and conditions and shall be subject to such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem advisable:
(a) Number of Performance Shares and Performance Measures. The number
-----------------------------------------------------
of Performance Shares subject to a Performance Share Award and the Performance
Measures and Performance Period applicable to such award shall be determined by
the Committee.
(b) Vesting and Forfeiture. The Agreement relating to a Performance
----------------------
Share Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
award, if specified Performance Measures are satisfied or met during the
specified Performance Period, and for the forfeiture of all or a portion of such
award, if specified Performance Measures are not satisfied or met during the
specified Performance Period.
(c) Settlement of Vested Performance Share Awards. The Agreement
---------------------------------------------
relating to a Performance Share Award (i) shall specify whether such award may
be settled in shares of Common Stock (including shares of Restricted Stock) or
cash or a combination thereof and (ii) may specify whether the holder thereof
shall be entitled to receive, on a current or deferred basis, dividend
equivalents, and, if determined by the Committee, interest on or the deemed
reinvestment of any deferred dividend equivalents, with respect to the number of
shares of Common Stock subject to such award. If a Performance Share Award is
settled in shares of Restricted Stock, a book-entry record shall be made or a
certificate or certificates representing such Restricted Stock shall be issued
in accordance with Section 3.2(c) and the holder of such Restricted Stock shall
have such rights of a stockholder of the Company as determined pursuant
to Section 3.2(d). Prior to the settlement of a Performance Share Award in
shares of Common Stock, including Restricted Stock, the holder of such award
shall have no rights as a stockholder of the Company with respect to the shares
of Common Stock subject to such award.
4.3. Termination of Employment or Service. All of the terms relating to the
------------------------------------
satisfaction of Performance Measures and the termination of the Performance
Period relating to a Performance Share Award, or any forfeiture and cancellation
of such award upon a termination of employment with or service to the Company of
the holder of such award, whether by reason of disability, retirement, death or
any other reason, shall be determined by the Committee.
IV. General
5.1. Effective Date and Term of Plan. This Plan shall be submitted to the
-------------------------------
stockholders of the Company for approval at the 2003 annual meeting of
stockholders and, if approved by the affirmative vote of a majority of the
shares of Common Stock present in person or represented by proxy at such
meeting, shall become effective on the date of such approval. This Plan shall
terminate as of December 31, 2008, unless terminated earlier by the Board.
Termination of this Plan shall not affect the terms or conditions of any award
granted prior to termination. In the event that this Plan is not approved by the
stockholders of the Company, this Plan shall be null and void.
5.2. Amendments. The Board may amend this Plan as it shall deem advisable,
----------
subject to any requirement of stockholder approval required by applicable law,
rule or regulation, including Section 162(m) and Section 422 of the Code;
provided, however, that no amendment shall be made without stockholder approval
-------- -------
if such amendment would (a) increase the maximum number of shares of Common
Stock available under this Plan (subject to Section 5.7), (b) effect any change
inconsistent with Section 422 of the Code or (c) extend the term of this Plan.
No amendment may impair the rights of a holder of an outstanding award without
the consent of such holder.
5.3. Agreement. No award shall be valid until an Agreement is executed by the
---------
Company and the recipient of such award and, upon execution by each party and
delivery of the executed Agreement to the Company, such award shall be effective
as of the effective date set forth in the Agreement.
5.4. Non-Transferability of Awards. Unless otherwise specified in the Agreement
-----------------------------
relating to an award, no award shall be transferable other than by will, the
laws of descent and distribution or pursuant to beneficiary designation
procedures approved by the Company. Except to the extent permitted by the
foregoing sentence or the Agreement relating to an award, each award may be
exercised or settled during the holder's lifetime only by the holder or the
holder's legal representative or similar person. Except to the extent permitted
by the second preceding sentence or the Agreement relating to an award, no award
may 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 any such
award, such award and all rights thereunder shall immediately become null and
void.
5.5 Tax Withholding. The Company shall have the right to require, prior to the
---------------
issuance or delivery of any shares of Common Stock or the payment of any cash
pursuant to an award made hereunder, payment by the holder of such award of any
Federal, state, local or other taxes which may be required to be withheld or
paid in connection with such award. An Agreement may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the "Tax Date"), or withhold an amount of cash which would otherwise be
payable to a holder, in the amount necessary to satisfy any such obligation or
(ii) the holder may satisfy any such obligation by any of the following means:
(A) a cash payment to the Company, (B) delivery (either actual delivery or by
attestation procedures established by the Company) to the Company of shares
having an aggregate Fair Market Value, determined as of the Tax Date, equal to
the amount necessary to satisfy any such obligation, (C) authorizing the Company
to withhold whole shares of Common Stock which would otherwise be delivered
having an aggregate Fair Market Value, determined as of the Tax Date, or
withhold an amount of cash which would otherwise be payable to a holder, equal
to the amount necessary to satisfy any such obligation, (D) in the case of the
exercise of an option, a cash payment by a broker-dealer acceptable to the
Company to whom the optionee has submitted an irrevocable notice of exercise,
except as prohibited by Section 402 of the Sarbanes-Oxley Act of 2002, or (E)
any combination of (A), (B) and (C), in each case to the extent set forth in the
Agreement relating to the award. Any fraction of a share of Common Stock which
would be required to satisfy such an obligation shall be disregarded and the
remaining amount due shall be paid in cash by the holder.
5.6 Restrictions on Shares. Each award made hereunder shall be subject to the
----------------------
requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of Common Stock subject to such
award 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 exercise or settlement
of such award or the delivery of shares thereunder, such award shall not be
exercised or settled and such shares shall not be delivered unless such listing,
registration, qualification, consent, approval or other action shall have been
effected or obtained, free of any conditions not acceptable to the Company. The
Company may require that certificates evidencing shares of Common Stock
delivered pursuant to any award made hereunder bear a legend indicating that the
sale, transfer or other disposition thereof by the holder is prohibited except
in compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
5.7 Adjustment. In the event of any stock split, stock dividend,
----------
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 available under this Plan, the
maximum number of securities available for Stock Awards and Performance Share
Awards, the number and class of securities subject to each outstanding option
and the purchase price per security, the maximum number of securities with
respect to which options or SARs or a combination thereof, or Stock Awards or
Performance Share Awards, may be granted during any calendar year to any person,
the terms of each outstanding SAR, the number and class of securities subject to
each outstanding Stock Award or Performance Share Award, and the terms of each
outstanding Restricted Stock Award or Performance Share Award shall be
appropriately
adjusted by the Committee, such adjustments to be made in the case
of outstanding options and SARs without an increase in the aggregate purchase
price or base price. The decision of the Committee regarding any such adjustment
shall be final, binding and conclusive. If any such adjustment would result in a
fractional security being (a) available under this Plan, such fractional
security shall be disregarded, or (b) subject to an award under this Plan, the
Company shall pay the holder of such award, in connection with the first
vesting, exercise or settlement of such award in whole or in part occurring
after such adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to the nearest hundredth) by (ii) the excess,
if any, of (A) the Fair Market Value on the vesting, exercise or settlement date
over (B) the exercise or base price, if any, of such award.
5.8 Change in Control.
-----------------
(a) (1) Notwithstanding any provision in this Plan or any Agreement, in
the event of a Change in Control pursuant to Section (b)(3) or (4) below in
connection with which holders of Common Stock may receive consideration
consisting solely of shares of common stock that are registered under Section 12
of the Exchange Act (and disregarding the payment of cash in lieu of fractional
shares), (i) all outstanding options and SARs shall immediately become
exercisable in full, (ii) the Restriction Period applicable to any outstanding
Restricted Stock Award shall lapse, (iii) the Performance Period applicable to
any outstanding Performance Share shall lapse, (iv) the Performance Measures
applicable to any outstanding award shall be deemed to be satisfied at the
maximum level and (v) there shall be substituted for each share of Common Stock
available under this Plan, whether or not then subject to an outstanding award,
the number and class of shares into which each outstanding share of Common Stock
shall be converted pursuant to such Change in Control. In the event of any such
substitution, the purchase price per share in the case of an option and the base
price in the case of an SAR shall be appropriately adjusted by the Committee
(whose determination shall be final, binding and conclusive), such adjustments
to be made in the case of outstanding options and SARs without an increase in
the aggregate purchase price or base price.
(2) Notwithstanding any provision in this Plan or any Agreement to the
contrary, in the event of a Change in Control pursuant to Section (b)(1) or (2)
below, or in the event of a Change in Control pursuant to Section (b)(3) or (4)
below as to which (a) (1) above does not apply, each outstanding award shall be
surrendered to the Company by the holder thereof, and each such award shall
immediately be canceled by the Company, and the holder shall receive, within ten
days of the occurrence of a Change in Control, a cash payment from the Company
in an amount equal to (i) in the case of an option, the number of shares of
Common Stock then subject to such option, multiplied by the excess, if any, of
the greater of (A) the highest per share price offered to stockholders of the
Company in any transaction whereby the Change in Control takes place or (B) the
Fair Market Value of a share of Common Stock on the date of occurrence of the
Change in Control, over the purchase price per share of Common Stock subject to
the option, (ii) in the case of a Free-Standing SAR, the number of shares of
Common Stock then subject to such SAR, multiplied by the excess, if any, of the
greater of (A) the highest price per share of Common Stock offered to
stockholders of the Company in any transaction whereby the Change in Control
takes place or (B) the Fair Market Value of a share of Common Stock on the date
of occurrence of the Change in Control, over the base price of the SAR, (iii) in
the case of a Restricted Stock Award or Performance Share Award, the number of
shares of Common Stock
or the number of Performance Shares, as the case may be,
then subject to such award, multiplied by the greater of (A) the highest per
share price offered to stockholders of the Company in any transaction whereby
the Change in Control takes place or (B) the Fair Market Value of a share of
Common Stock on the date of occurrence of the Change in Control. In the event of
such a Change in Control, each Tandem SAR shall be surrendered by the holder
thereof and shall be canceled simultaneously with the cancellation of the
related option. The Company may, but is not required to, cooperate with any
person who is subject to Section 16 of the Exchange Act to assure that any cash
payment in accordance with the foregoing to such person is made in compliance
with Section 16 and the rules and regulations thereunder.
(b) "Change in Control" shall mean:
-----------------
(1) the acquisition by any individual, entity or group (a "Person"),
------
including any "person" within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act, of beneficial ownership within the meaning of Rule 13d-3
promulgated under the Exchange Act, of 25% or more of either (i) the then
outstanding shares of common stock of the Company (the "Outstanding Common
------------------
Stock") or (ii) the combined voting power of the then outstanding securities of
-----
the Company entitled to vote generally in the election of directors (the
"Outstanding Voting Securities"); excluding, however, the following: (A) any
----------------------------- --------- -------
acquisition directly from the Company (excluding any acquisition resulting from
the exercise of an exercise, conversion or exchange privilege unless the
security being so exercised, converted or exchanged was acquired directly from
the Company), (B) any acquisition by the Company, (C) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with clauses (i), (ii) and
(iii) of subsection (3) of this Section 5.8(b); provided further, that for
-------- -------
purposes of clause (B), if any Person (other than the Company or any employee
benefit plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company) shall become the beneficial owner of 25%
or more of the Outstanding Common Stock or 25% or more of the Outstanding Voting
Securities by reason of an acquisition by the Company, and such Person shall,
after such acquisition by the Company, become the beneficial owner of any
additional shares of the Outstanding Common Stock or any additional Outstanding
Voting Securities and such beneficial ownership is publicly announced, such
additional beneficial ownership shall constitute a Change in Control;
(2) individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
--------- -----
such Board; provided that any individual who becomes a director of the Company
--------
subsequent to the date hereof whose election, or nomination for election by the
Company's stockholders, was approved by the vote of at least two-thirds of the
directors then comprising the Incumbent Board shall be deemed a member of the
Incumbent Board; and provided further, that any individual who was initially
-------- -------
elected as a director of the Company as a result of an actual or threatened
solicitation by a Person other than the Board for the purpose of opposing a
solicitation by any other Person with respect to the election or removal of
directors, or any other actual or threatened solicitation of proxies or consents
by or on behalf of any Person other than the Board shall not be deemed a member
of the Incumbent Board;
(3) the consummation of a reorganization, merger or consolidation or
sale or other disposition of all or substantially all of the assets of the
Company (a "Corporate Transaction"); excluding, however, a Corporate Transaction
--------- ----------- --------- -------
pursuant to which (i) all or substantially all of the individuals or entities
who are the beneficial owners, respectively, of the Outstanding Common Stock and
the Outstanding Voting Securities immediately prior to such Corporate
Transaction will beneficially own, directly or indirectly, more than 60% of,
respectively, the outstanding shares of common stock, and the combined voting
power of the outstanding securities entitled to vote generally in the election
of directors, as the case may be, of the entity resulting from such Corporate
Transaction (including, without limitation, an entity which as a result of such
transaction owns the Company or all or substantially all of the Company's assets
either directly or indirectly) in substantially the same proportions relative to
each other as their ownership, immediately prior to such Corporate Transaction,
of the Outstanding Common Stock and the Outstanding Voting Securities, as the
case may be, (ii) no Person (other than: the Company; any employee benefit plan
(or related trust) sponsored or maintained by the Company or any entity
controlled by the Company; and any Person which beneficially owned, immediately
prior to such Corporate Transaction, directly or indirectly, 25% or more of the
Outstanding Common Stock or the Outstanding Voting Securities, as the case may
be) will beneficially own, directly or indirectly, 25% or more of, respectively,
the outstanding shares of common stock of the entity resulting from such
Corporate Transaction or the combined voting power of the outstanding securities
of such corporation entitled to vote generally in the election of directors and
(iii) individuals who were members of the Incumbent Board will constitute at
least a majority of the members of the board of directors (or similar body) of
the entity resulting from such Corporate Transaction; or
(4) the consummation of a plan of complete liquidation or dissolution
of the Company.
5.9. No Right of Participation or Employment. No person shall have any right to
---------------------------------------
participate in this Plan. Neither this Plan nor any award made hereunder shall
confer upon any person any right to continued employment by the Company, any
Subsidiary or any affiliate of the Company or affect in any manner the right of
the Company, any Subsidiary or any affiliate of the Company to terminate the
employment of any person at any time without liability hereunder.
5.10. Rights as Stockholder. No person shall have any right as a stockholder of
---------------------
the Company with respect to any shares of Common Stock or other equity security
of the Company which is subject to an award hereunder unless and until such
person becomes a stockholder of record with respect to such shares of Common
Stock or equity security.
5.11. Designation of Beneficiary. If permitted by the Company, a holder of an
--------------------------
award may file with the Committee a written designation of one or more persons
as such holder's beneficiary or beneficiaries (both primary and contingent) in
the event of the holder's death. To the extent an outstanding option or SAR
granted hereunder is exercisable, such beneficiary or beneficiaries shall be
entitled to exercise such option or SAR.
Each beneficiary designation shall become effective only when filed in
writing with the Committee during the holder's lifetime on a form prescribed by
the Committee. The spouse of a married holder domiciled in a community property
jurisdiction shall join in any designation of a
beneficiary other than such spouse. The filing with the Committee of a new
beneficiary designation shall cancel all previously filed beneficiary
designations.
If a holder fails to designate a beneficiary, or if all designated
beneficiaries of a holder predecease the holder, then each outstanding option
and SAR hereunder held by such holder, to the extent exercisable, may be
exercised by such holder's executor, administrator, legal representative or
similar person.
5.12. Governing Law. This Plan, each award hereunder and the related Agreement,
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and all determinations made and actions taken pursuant thereto, to the extent
not otherwise governed by the Code or 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 laws.
5.13. Foreign Employees. Without amending this Plan, the Committee may grant
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awards to eligible persons who are subject to the laws of foreign countries or
jurisdictions on such terms and conditions different from those specified in
this Plan as may in the judgment of the Committee be necessary or desirable to
foster and promote achievement of the purposes of this Plan and, in furtherance
of such purposes the Committee may make such modifications, amendments,
procedures, subplans and the like as may be necessary or advisable to comply
with provisions of laws of other countries or jurisdictions in which the Company
or its Subsidiaries operate or have employees.
5.14. No Repricing of Awards. Notwithstanding anything in this Plan to the
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contrary and subject to Section 5.7, the exercise price or base price, as the
case may be, of any award granted hereunder shall not be reduced after the date
of grant of such award, and no award granted hereunder shall be canceled for the
purpose of regranting a new award at a lower exercise price or base price, as
the case may be, without the affirmative vote of a majority of the shares of
Common Stock present in person or represented by proxy at a meeting in which the
reduction of such exercise price or base price, or the cancellation and
regranting of an award, as the case may be, is considered for approval.
EXHIBIT 5
June 23, 2003
The ServiceMaster Company
3250 Lacey Road, Suite 600
Downers Grove, Illinois 60515-1700
Re: 13,315,000 shares of Common Stock, $.01 par value
13,315,000 Preferred Stock Purchase Rights
$2,000,000 of The ServiceMaster Company 2002 Directors Deferred
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Fee Plan Obligations
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Ladies and Gentlemen:
I am General Counsel for The ServiceMaster Company, a Delaware
corporation ("ServiceMaster"), and have acted as counsel for ServiceMaster in
connection with the preparation and filing of a Registration Statement on Form
S-8 (the "Registration Statement") with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the "Securities
Act"), relating to the registration of 13,315,000 shares of common stock, $.01
par value (the "Registered Common Stock"), together with 13,315,000 Preferred
Stock Purchase Rights of ServiceMaster (the "Registered Rights") associated
therewith, to be issued under the ServiceMaster 2003 Equity Incentive Plan (the
"Equity Incentive Plan"), the ServiceMaster Employee Share Purchase Plan
International Trust (the "Share Purchase Plan") and The ServiceMaster Company
2002 Directors Deferred Fees Plan (the "Deferred Fees Plan" and, together with
the Equity Incentive Plan and the Share Purchase Plan, the "Plans") and
$2,000,000 of deferred compensation obligations (the "Registered Obligations")
to be issued under the Deferred Fees Plan. The terms of the Registered Rights
are set forth in the Shareholder Rights Agreement, dated as of December 15, 1997
(the "Rights Agreement"), between ServiceMaster and Harris Trust and Savings
Bank, as Rights Agent.
I am familiar with the Plans, the Rights Agreement and the Registration
Statement. I have also examined originals, or copies of originals certified or
otherwise identified to my satisfaction, of ServiceMaster's corporate records. I
have examined such questions of law and have satisfied myself to such matters of
fact as I have deemed relevant and necessary as a basis for the opinions
expressed herein. I have assumed the authenticity of all documents submitted to
me as originals, the genuineness of all signatures, the legal capacity of all
natural persons and the conformity with the original documents of any copies
thereof submitted to me for my examination.
Based upon the foregoing, I am of the opinion that:
1. ServiceMaster is duly incorporated and validly existing under the
laws of the State of Delaware.
2. Each share of Registered Common Stock which is newly issued pursuant
to any of the Plans will be legally issued, fully paid and non-assessable when
(i) the Registration Statement shall have become effective under the Securities
Act; (ii) ServiceMaster's Board of Directors or a duly authorized committee
thereof shall have authorized the issuance of such share for the consideration
provided in the applicable Plan; and (iii) a certificate representing such share
shall have been duly executed, countersigned and registered and duly delivered
against the receipt by ServiceMaster of the consideration provided in the
applicable Plan.
3. The Registered Right associated with each share of Registered Common
Stock referred to in paragraph 2 will be validly issued when (i) such Registered
Right shall have been duly issued in accordance with the terms of the Rights
Agreement and (ii) such associated share shall have been duly issued and paid
for in paragraph 2.
4. Each of the Registered Obligations will be a validly issued and
binding obligation of ServiceMaster when (i) the Registration Statement shall
have become effective under the Securities Act; and (ii) such Registered
Obligation shall have been duly issued in accordance with the terms of the
Deferred Fees Plan.
This opinion letter is limited to the General Corporation Law of the
State of Delaware and the federal laws of the United States of America. I
express no opinion as to the application of the securities or blue sky laws of
the various states or the District of Columbia to the issuance or sale of shares
of Registered Common Stock or the Registered Rights.
I hereby consent to the filing of this opinion letter as an exhibit to
the Registration Statement. In giving such consent, I do not thereby admit that
I am within the category of persons whose consent is required by Section 7 of
the Securities Act or the related rules and regulations promulgated by the
Commission.
Very truly yours,
/s/ Jim L. Kaput
----------------------
Jim L. Kaput
Senior Vice President and
General Counsel
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
The ServiceMaster Company on Form S-8 of our reports dated March 26, 2003 (which
report on the financial statements expresses an unqualified opinion and includes
explanatory paragraphs relating to the restatement of the Company's financial
statements and adoption of Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets), appearing in and incorporated by
reference in the Annual Report on Form 10-K of The ServiceMaster Company for the
year ended December 31, 2002.
/s/ Deloitte & Touche LLP
Chicago, Illinois
June 23, 2003
EXHIBIT 24
POWER OF ATTORNEY
I hereby appoint each of Jonathan P. Ward, Steven C. Preston or Jim L.
Kaput or any other person occupying the office of Chairman, Chief Executive
Officer, Chief Financial Officer or General Counsel with The ServiceMaster
Company ("ServiceMaster") at the time any action hereby authorized shall be
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taken to act as my attorney-in-fact and agent for all purposes specified in this
Power of Attorney. I hereby authorize each person identified by name or office
in the preceding sentence (each of whom is herein called my "authorized
----------
representative") acting alone to sign and file on my behalf in all capacities I
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may at any time have with ServiceMaster (including but not limited to the
position of director or any officer position) the Registration Statement
prepared under the Securities Act of 1933 identified in this Power of Attorney
and any amendment to any such Registration Statement. I hereby authorize each
authorized representative in my name and on my behalf to execute every document
and take every other action which such authorized representative deems necessary
or desirable in connection with the Registration Statement identified in this
Power of Attorney and any sale of securities or other transaction accomplished
by means of any such Registration Statement.
This Power of Attorney applies to a Registration Statement on Form S-8
that registers (1) common stock and preferred stock purchase rights to be
offered and sold pursuant to the ServiceMaster 2003 Equity Incentive Plan and
the ServiceMaster Employee Share Purchase Plan International Trust and (2)
deferred fee obligations to be offered and sold pursuant to The ServiceMaster
Company 2002 Directors Deferred Fees Plan.
This instrument shall remain in effect until the earlier to occur of
(i) my cessation of service as a director or officer of ServiceMaster and (ii)
my giving written notice to ServiceMaster's Chairman, Chief Executive Officer,
Chief Financial Officer or General Counsel of my election to revoke this
instrument. No such revocation shall be effective to revoke the authority for
any action taken pursuant to this Power of Attorney prior to such cessation of
service or delivery of such revocation.
The law of the State of Illinois shall govern this instrument.
Dated: May 21, 2003
/s/ Paul W. Berezny /s/ James D. McLennan
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Paul W. Berezny James D. McLennan
/s/ Dallen W. Peterson
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John L. Carl Dallen W. Peterson
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Brian Griffiths Betty Jane Scheihing
/s/ Sidney E. Harris /s/ Donald G. Soderquist
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Sidney E. Harris Donald G. Soderquist
/s/ Roberto R. Herencia /s/ David K. Wessner
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Roberto R. Herencia David K. Wessner
/s/ Herbert P. Hess
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Herbert P. Hess