Exhibit 10.1


THE SERVICEMASTER COMPANY


2007
Long-Term Incentive Plan


Adopted March 15, 2007


Section 1: General


1.1   Establishment
of the Plan.   The
ServiceMaster Company, a Delaware corporation (the “Company”), hereby
establishes the 2007 Long-Term Incentive Plan as set forth herein (the “Plan”).


1.2   Effective
Date.   The Board approved the
Plan on March  15, 2007 (the “Effective Date”).  The Plan shall cover the three-year
performance period beginning on January 1, 2007 and ending on December 31, 2009
(the “Performance Period”).  The
Plan shall terminate as of December 31, 2009, unless terminated earlier by the
Board.  Termination of the Plan shall not
affect the terms or conditions of any award or the payment associated with any
Unit granted prior to termination of the Plan without the consent of the holder
of such Units.


1.3   Purpose.   The purpose of the Plan is to benefit
the Company and its shareholders by linking a substantial portion of the
compensation of key employees of the Company and its subsidiaries to the
achievement of performance targets established by the Committee or the Board
relating to Actual Pre-Tax Income and Actual Revenue.


1.4   Administration of the Plan. 
 Subject to the general authority
of the Board, the Plan shall be administered by the Committee or a successor
designated by the Board.  The Committee
shall, subject to the terms of the Plan, interpret the Plan and the application
thereof, and establish rules and regulations it deems necessary or desirable
for the administration of the Plan, including any award of Units under the
Plan.  All such interpretations, rules
and regulations shall be final, binding and conclusive absent manifest error.


Section 2: Definitions


2.1   Definitions.   Whenever used in the Plan, the
following terms shall have the meanings set forth below.


“Accounting Firm” means a registered public accounting firm within the meaning of the
Sarbanes-Oxley Act of 2002 and the regulations under such Act.


“Actual Pre-Tax Income” means the actual consolidated earnings before taxes of the Company and
its subsidiaries for the Performance Period as determined by GAAP and
consistently applied for all purposes of the Plan.  The calculation of Actual Pre-Tax Income
shall be determined by the Committee reasonably and in good faith, taking into
account any adjustments to Target Pre-Tax Income with a view towards
consistency of application and treatment.



 1
 









“Actual Revenue”
means the actual consolidated revenue of the Company and its subsidiaries for
the Performance Period as determined by GAAP and consistently applied for all
purposes of the Plan.  The calculation of
Actual Revenue shall be determined by the Committee reasonably and in good
faith, taking into account any adjustments to Target Revenue with a view
towards consistency of application and treatment.


“Actual Unit Payment” means the product of the Target Unit Payment times the percentage
payout determined on the basis of the attainment during the Performance Period
of the Target Pre-Tax Income and Target Revenue, as set forth in and calculated
consistent with Exhibit A.


“Affiliate”
means any business entity in which 50% or more of the equity interests are
owned, directly or indirectly, by the Company.


 “Board” means the Board of Directors of the Company.


 “Cause” means (1) a
material willful breach by a participant of his or her duties and
responsibilities (other than as a result of incapacity due to physical or
mental illness) which is not remedied within 30 days after receipt of written
notice from the Company or an Affiliate specifying such breach; (2) the
commission by a participant of a felony or misdemeanor involving any act of
fraud, embezzlement or dishonesty or any other intentional misconduct by the
participant that substantially and adversely affects the business affairs or
reputation of the Company or any Affiliate; or (3) any failure to cooperate
with any investigation or inquiry into a participant’s, the Company’s or any
Affiliate’s business practices, whether internal or external, including, but
not limited to a participant’s refusal to be deposed or to provide testimony at
any trial or inquiry.


“CEO” means
the Chief Executive Officer of the Company or other person serving as the
principal executive officer of the Company.


“Committee”
means the Compensation and Leadership Development Committee of the Board or any
successor thereto.


“Company” has
the meaning set forth in Section 1.1 and includes any successor entity.


“Disability”
means the absence from the employee’s duties with ServiceMaster or its
Affiliates on a full-time basis for at least 180 consecutive days as a result
of the employee’s incapacity due to physical or mental illness.


“Effective Date”
has the meaning set forth in Section 1.2.


“GAAP” means
United States generally accepted accounting principles.


“Percent of Target Payout” has the meaning set forth in Section 3.5.



 2
 









“Performance Period” has the meaning set forth in Section 1.2.


“Plan” has
the meaning set forth in Section 1.1.


“Plan Year”
means each of the three calendar years ending December 31, 2007, December 31,
2008 and December 31, 2009.


“Target Pre-Tax Income” means the target consolidated earnings before taxes of the Company and
its subsidiaries for the Performance Period as determined by GAAP and
consistently applied for all purposes of the Plan, as set forth in Exhibit
A, with the following adjustments: (1) extraordinary or unusual items, in
particular those of a non-recurring nature, including acquisitions of lines of
business that differ substantially from the businesses of the Company as of the
Effective Date, divestitures of subsidiaries or businesses where the pre-tax
income of that subsidiary or business constitutes a part of the Target Pre-Tax
Income prior to divestiture, changes in accounting principles which shall be
consistently applied for all purposes of the Plan, and restructuring and
impairment charges, which shall result in a positive or negative adjustment, as
appropriate, to the Target Pre-Tax Income for the Performance Period; and (2)
interest and investment income and expense shall be included; provided that if
the Company’s capital structure should significantly change as a result of a
stock split, stock dividend, recapitalization, reorganization, merger,
consolidation, combination, exchange or repurchase 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,
appropriate adjustments shall be made to Target Pre-Tax Income to reflect the
effects of such change or event. 
Notwithstanding the foregoing, acquisitions of businesses and assets
within a similar line of business, and increased interest expense resulting
from such acquisitions, including tuck-in acquisitions, shall not result in an
adjustment. Any adjustment to the Target Pre-Tax Income for the Performance
Period shall be determined by the Committee reasonably and in good faith.


“Target Revenue”
means the target consolidated revenue of the Company and its subsidiaries for
the Performance Period as determined by GAAP and consistently applied for all
purposes of the Plan, as set forth in Exhibit A, with the following
adjustments: extraordinary or unusual items, in particular those of a
non-recurring nature, including acquisitions of lines of business that differ substantially
from the businesses of the Company as of the Effective Date, divestitures of
subsidiaries or businesses where the revenue of that subsidiary or business
constitutes a part of the Target Revenue prior to divestiture, changes in
accounting principles which shall be consistently applied for all purposes of
the Plan, and restructuring and impairment charges, which shall result in a
positive or negative adjustment, as appropriate, to the Target Revenue for the
Performance Period.  Notwithstanding the
foregoing, acquisitions of businesses and assets within a similar line of
business, including tuck-in acquisitions, shall not result in an adjustment.
Any adjustment to the Target Revenue for the Performance Period shall be
determined by the Committee reasonably and in good faith.


“Target Total Payment” means $11,000,000, the target total incentive compensation 



 3
 









payment
to participants in the Plan.


“Target Unit Payment” means the $100, the Target Total Payment divided by 110,000.


“Units” has
the meaning set forth in Section 3.2.


Section 3: Participants, Plan Calculations, Termination of Employment
and Withholding Taxes


3.1   Participants.   The participation of the CEO in the
Plan shall be subject to the approval of the Board.  Subject to the authority of the Board, the
participation of executive officers of the Company in the Plan shall be subject
to the approval of the Committee. 
Subject to the authority of the Board and the Committee, the CEO shall
determine all other participants in the Plan.


3.2   Units.   Participation in the Plan shall be determined
on the basis of participation units (“Units”). For this purpose, up to
110,000 Units shall be allocated among the designated participants.   If and to the extent that there are at any
time less than 110,000 total Units allocated to participants, the difference
between 110,000 and the number of Units which are allocated to participants
shall be deemed to be allocated to the Company. 
Each award of Units shall be evidenced by a Unit Award Agreement
substantially in the form attached as Exhibit B.


3.3   Calculations under the Plan.   Not later than the 75th day
after the end of each Plan Year, the Chief Financial Officer of the Company or
other officer performing similar duties shall prepare (or cause to be prepared
under the Chief Financial Officer’s direction) a document setting forth in
reasonable detail the following calculations: 
(1) an estimate of the Actual Pre-Tax Income for the Performance Period
based on performance through such Plan Year, (2) an estimate of the Actual
Revenue for the Performance Period based on performance through such Plan Year,
and (3) in the case of the Plan Year ending December 31, 2009, the Actual
Pre-Tax Income, the Actual Revenue and the Actual Unit Payment, if any, earned as
of the end of the Performance Period. 
Any such calculations shall be reviewed by an Accounting Firm.  The Accounting Firm shall indicate in writing
its agreement and any disagreement with any of the calculations prepared by the
Chief Financial Officer.  Any such
disagreements shall be resolved by the Accounting Firm and the Chief Financial
Officer, which resolution shall be final, binding and conclusive absent
manifest error.


3.4   Payouts. 
 If the Actual Pre-Tax Income for the
Performance Period exceeds 90% of the Target Pre-Tax Income for the Performance
Period and the Actual Revenue for the Performance Period exceeds 90% of the
Target Revenue for the Performance Period, then the Actual Unit Payment shall
be paid in cash per Unit to each participant then holding an outstanding Unit
(except as set forth and in accordance with Section 3.5).  Any such payment shall be made not later than
March 15, 2010.



 4
 









3.5   Effect of Termination of
Employment.   In
the event of the termination of employment of a participant for any reason
prior to December 31, 2007, any Units allocated to such participant shall be
cancelled as of the effective date of such participant’s termination of
employment (unless otherwise determined by the CEO), and such participant shall
not have any right to receive any cash in lieu of any such Units.


In the event of the termination of employment of a
participant on or after January 1, 2008 by the Company or any subsidiary
without Cause or by reason of the participant’s death or Disability, any Units
allocated to such participant shall be cancelled as of the effective date of
such participant’s termination of employment (unless otherwise determined by
the CEO), and such participant shall have the right to receive, in lieu of any
such Units, an amount in cash per Unit equal to the product of (1) the Percent
of Target Payout, multiplied by (2) the Target Unit Payment, multiplied by (3)
a fraction, the numerator of which is the number of days from and including
January 1, 2007 through and including the effective date of the participant’s
termination of employment, and the denominator of which is 1,096.  For purposes of the preceding calculation,
the Percent of Target Payout shall be determined by calculating the ratio of
(i) accumulated actual pre-tax income against accumulated target pre-tax income
under the Plan (taking into account any adjustments from time to time made in
accordance with the Plan) from January 1, 2007 through the last day of the
calendar month immediately preceding the effective date of the participant’s
termination of employment and (ii) accumulated actual revenue against
accumulated target revenue under the Plan (taking into account any adjustments
from time to time made in accordance with the Plan) through the last day of the
calendar month immediately preceding the effective date of the participant’s
termination of employment, with each such ratio then being applied to and in
accordance with Exhibit A to determine the Percent of Target
Payout.  The determination of accumulated
actual pre-tax income and accumulated actual revenue shall be derived from the
most recent audited financial statements of the Company and the unaudited
financial statements of the Company for any interim period.  The Chief Financial Officer of the Company or
other officer performing similar duties shall prepare (or cause to be prepared
under the Chief Financial Officer’s direction) a document setting forth in
reasonable detail the calculation of any payment pursuant to this
paragraph.  Any such calculations shall
be final, binding and conclusive absent manifest error.  Any payment pursuant to this paragraph shall
be made within 60 days after the effective date of the participant’s
termination of employment.


In the event of the termination of employment of a
participant on or after January 1, 2008 for any reason other than as set forth
herein, any Units allocated to such participant shall be cancelled as of the
effective date of such participant’s termination of employment (unless
otherwise determined by the CEO), and such participant shall not have any right
to receive any cash in lieu of any such Units.


3.6   Termination or Cancellation of Units.   The termination or cancellation of any Units
previously allocated to a participant shall not result in an increase in the
amount of any other participant’s Units or percentage interest in the Plan.
Units which are terminated or canceled shall be deemed to be assigned to the
Company.



 5
 









3.7   Withholding Taxes.   The
Company shall have the right to reduce each payment made under the Plan by the
amount which the Company is required to withhold from payments made under the
Plan in respect of Federal, state, local or other taxes.


Section 4: General Provisions


4.1   Binding
Effect.   This Plan and any Unit Award Agreement
shall be binding upon and inure to the benefit of any successor or successors
of the Company and any person or persons who shall, upon the death of the
holder of any Units, acquire any rights hereunder in accordance with this Plan
or any Unit Award Agreement.  All obligations
of the Company under this Plan and any Unit Award Agreement shall be binding on
any successor to the Company, whether the existence of such successor is the
result of a direct or indirect merger, consolidation, purchase of all or
substantially all of the business and/or assets of the Company or otherwise.


4.2.   Amendment.   The Board may amend this Plan at any time
and from time to time, in whole or in part, provided that no such amendment
shall adversely affect the terms or conditions of any award or the payment
associated with any Unit granted prior to termination of the Plan without the
consent of the holder of such Units.


4.3   No Right of Participation or Employment.   No
person shall have any right to participate in the Plan.  Neither the Plan nor any award made hereunder
shall confer upon any person any right to continued employment by the Company
and its Affiliates or affect in any manner the right of the Company and its
Affiliates to terminate the employment of any person at any time without
liability hereunder.


4.4   Severability.   If any provision of the Plan shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Plan, and the Plan shall be construed
and enforced as if the illegal or invalid provision had never been set forth
herein.


4.5   Governing Law.  The Plan and all agreements hereunder, including
any Unit Award Agreement, and all determinations made and actions taken
pursuant thereto, to the extent not otherwise 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 laws.


4.6   Designation of
Beneficiaries.   If permitted by the Company, a participant may
file with the Committee a written designation of one or more persons as such
participant’s beneficiary or beneficiaries (both primary and contingent) in the
event of the participant’s death or disability. 
Such beneficiary or beneficiaries shall be entitled to receive the
participant’s award(s) in the event of the participant’s death or
disability.  Each beneficiary designation
shall become effective only when filed in writing with the Committee during the
participant’s lifetime on a form prescribed by the Committee.


 



 6