Document:

Exhibit 10.5

 

Form of Employee Stock Option Agreement

 

This Employee Stock Option Agreement, dated as of                   , 20    , between ServiceMaster Global Holdings, Inc., a Delaware corporation, and the employee whose name appears on the signature page hereof, is being entered into pursuant to the ServiceMaster Global Holdings, Inc. Stock Incentive Plan.  The meaning of capitalized terms may be found in Section 7.

 

The Company and the Employee hereby agree as follows:

 

Section 1.              Grant of Options.

 

(a)         Confirmation of Grant.  The Company hereby evidences and confirms, effective as of the date hereof, its grant to the Employee of Options to purchase the number of shares of Common Stock specified on the signature page hereof.  The Options are not intended to be incentive stock options under the Code.  This Agreement is entered into pursuant to, and the terms of the Options are subject to, the terms of the Plan.  If there is any inconsistency between this Agreement and the terms of the Plan, the terms of the Plan shall govern.

 

(b)        Option Price.  Each share covered by an Option shall have the Option Price specified on the signature page hereof.

 

Section 2.              Vesting and Exercisability.

 

(a)         Except as otherwise provided in Section 6(a) or Section 2(b) of this Agreement, the Options shall become vested in four equal annual installments on each of the first through fourth anniversaries of the Grant Date, subject to the continuous employment of the Employee with the Company until the applicable vesting date; provided that if the Employee’s employment with the Company is terminated in a Special Termination (i.e., by reason of the Employee’s death or Disability), any Options held by the Employee shall immediately vest as of the effective date of such Special Termination.

 

(b)        Discretionary Acceleration.  The Board, in its sole discretion, may accelerate the vesting or exercisability of all or a portion of the Options, at any time and from time to time.

 

 

(c)         Exercise.  Once vested in accordance with the provisions of this Agreement, the Options may be exercised at any time and from time to time prior to the date such Options terminate pursuant to Section 3.  Options may only be exercised with respect to whole shares and must be exercised in accordance with Section 4.

 

Section 3.              Termination of Options.

 

(a)         Normal Termination Date.  Unless earlier terminated pursuant to Section 3(b) or Section 6, the Options shall terminate on the tenth anniversary of the Grant Date (the “Normal Termination Date”), if not exercised prior to such date.

 

(b)        Early Termination.  If the Employee’s employment with the Company terminates for any reason, any Options held by the Employee that have not vested before the effective date of such termination of employment (determined without regard to any statutory or deemed or express contractual notice period) or that do not become vested on such date in accordance with Section 2 shall terminate immediately upon such termination of employment (determined without regard to any statutory or deemed or express contractual notice period) and, if the Employee’s employment is terminated for Cause, all Options (whether or not then vested or exercisable) shall automatically terminate immediately upon such termination.  All vested Options held by the Employee following the effective date of a termination of employment (the “Covered Options”) shall remain exercisable until the first to occur of (i) the three-month anniversary of the effective date of the Employee’s termination of employment (determined without regard to any deemed or express statutory or contractual notice period), (ii) the one-year anniversary in the case of a Special Termination or a retirement from active service on or after the Employee reaches normal retirement age, (iii) the Normal Termination Date or (iv) the cancellation of the Options pursuant to Section 6(a), and if not exercised within such period the Options shall automatically terminate upon the expiration of such period.

 

Section 4.              Manner of Exercise.

 

(a)         General.  Subject to such reasonable administrative regulations as the Board may adopt from time to time, the Employee may exercise vested Options by giving at least 15 business days’ prior written notice to the Secretary of the Company specifying the

 

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proposed date on which the Employee desires to exercise a vested Option (the “Exercise Date”), the number of whole shares with respect to which the Options are being exercised (the “Exercise Shares”) and the aggregate Option Price for such Exercise Shares (the “Exercise Price”); provided that following a Public Offering notice may be given within such lesser period as the Board may permit.  On or before any Exercise Date that occurs prior to a Public Offering, the Company and the Employee shall enter into a Subscription Agreement that contains repurchase rights, transfer and other restrictions on the Exercise Shares in the form then customarily used by the Company for such purpose.  Unless otherwise determined by the Board, and subject to such other terms, representations and warranties as may be provided for in the Subscription Agreement, (i) on or before the Exercise Date the Employee shall deliver to the Company full payment for the Exercise Shares in United States dollars in cash, or cash equivalents satisfactory to the Company, in an amount equal to the Exercise Price plus any required withholding taxes or other similar taxes, charges or fees and (ii) the Company shall register the issuance of the Exercise Shares on its records (or direct such issuance to be registered by the Company’s transfer agent).  The Company may require the Employee to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise, (ii) to determine whether registration is then required under the Securities Act or other applicable law or (iii) to comply with or satisfy the requirements of the Securities Act, applicable state or non-U.S. securities laws or any other law.

 

(b)        Restrictions on Exercise.  Notwithstanding any other provision of this Agreement, the Options may not be exercised in whole or in part, and no certificates representing Exercise Shares shall be delivered, (i) (A) unless all requisite approvals and consents of any governmental authority of any kind shall have been secured, (B) unless the purchase of the Exercise Shares shall be exempt from registration under applicable U.S. federal and state securities laws, and applicable non-U.S. securities laws, or the Exercise Shares shall have been registered under such laws, and (C) unless all applicable U.S. federal, state and local and non-U.S. tax withholding requirements shall have been satisfied, or (ii) if such exercise would result in a violation of the terms or provisions of or a default or an event of default under, any guarantee, financing or security agreement entered into by the Company or any Subsidiary from time to time.  The Company shall use its commercially reasonable efforts

 

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to obtain any consents or approvals referred to in clause (i) (A) of the preceding sentence, but shall otherwise have no obligations to take any steps to prevent or remove any impediment to exercise described in such sentence.  Except where prohibited by applicable law, the Normal Termination Date of any Option that may not be exercised pursuant to this Section 4(b) shall be extended for a period of time equal to any period of time such Option may not exercised pursuant to this Section 4(b), such extension not to exceed ten years in the aggregate.

 

Section 5.              Employee’s Representations; Investment Intention.  The Employee represents and warrants that the Options have been, and any Exercise Shares will be, acquired by the Employee solely for the Employee’s own account for investment and not with a view to or for sale in connection with any distribution thereof.  The Employee represents and warrants that the Employee understands that none of the Exercise Shares may be transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered unless the provisions of the related  Subscription Agreement shall have been complied with or have expired.

 

Section 6.              Change in Control.

 

(a)         Vesting and Cancellation.  In the event of a Change in Control, all then-outstanding unvested Options shall automatically vest in full such that all Options outstanding under this Agreement shall, immediately prior to the effective date of the Change in Control, be fully vested and exercisable.  Except as otherwise provided in Section 6(b) and Section 6(c), upon the Change in Control, all Options then outstanding under this Agreement shall be canceled in exchange for a payment having a value equal to the excess, if any, of (i) the product of the Change in Control Price multiplied by the aggregate number of shares covered by all such Options immediately prior to the Change in Control over (ii) the aggregate Option Price for all such shares, to be paid as soon as reasonably practicable, but in no event later than 30 days following the Change in Control.

 

(b)        Alternative Award.  Notwithstanding Section 6(a), no cancellation, termination, or settlement or other payment shall occur with respect to any Option if the Board reasonably determines prior to the Change in Control that the Employee shall receive an Alternative Award meeting the requirements of the Plan; provided,

 

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however, that any such Alternative Award shall be fully vested at the time it is awarded to the Employee.

 

(c)         Limitation of Benefits.  If, whether as a result of accelerated vesting, the grant of an Alternative Award or otherwise, the Employee would receive any payment, deemed payment or other benefit as a result of the operation of Section 6(a) or Section 6(b) that, together with any other payment, deemed payment or other benefit the Employee may receive under any other plan, program, policy or arrangement, would constitute an “excess parachute payment” under Section 280G of the Code, then, notwithstanding anything in this Section 6 to the contrary, the payments, deemed payments or other benefits such Employee would otherwise receive under Section 6(a) or Section 6(b) shall be reduced to the extent necessary to eliminate any such excess parachute payment and such Employee shall have no further rights or claims with respect thereto.  If the preceding sentence would result in a reduction of the payments, deemed payments or other benefits the Employee would otherwise receive on an after-tax basis by more than 5 percent, the Company will use its commercially reasonable best efforts to seek the approval of the Company’s shareholders in the manner provided for in Section 280G(b)(5) of the Code and the regulations thereunder with respect to such reduced payments or other benefits (if the Company is eligible to do so), so that such payments would not be treated as “parachute payments” for these purposes (and therefore would cease to be subject to reduction pursuant to this Section 6(c)); provided, however, that if the Company seeks such approval on behalf of the Employee, the Company’s request for the approval of such payments to the Employee shall be submitted to the shareholders on a single slate with all other persons for whom such approval is being sought, and not individually.  This Section 6(c) shall cease to apply if the stock of the Company or any direct or indirect parent or subsidiary of the Company becomes readily tradable on an established securities market or otherwise within the meaning of 26 CFR 1.280G-1, Q/A-6.

 

Section 7.              Certain Definitions.  As used in this Agreement, capitalized terms that are not defined herein have the respective meanings given in the Plan, and the following additional terms shall have the following meanings:

 

“Agreement” means this Employee Stock Option Agreement, as amended from time to time in accordance with the terms hereof.

 

“Covered Options” has the meaning given in Section 3(b).

 

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“Determination Date” means the effective date of the Employee’s termination of employment.

 

“Employee” means the grantee of the Options whose name is set forth on the signature page of this Agreement; provided that for purposes of Section 4 and Section 8, following such person’s death “Employee” shall be deemed to include such person’s beneficiary or estate and following such Person’s Disability, “Employee” shall be deemed to include such person’s legal representative.

 

“Exercise Date” has the meaning given in Section 4(a).

 

“Exercise Price” has the meaning given in Section 4(a).

 

“Exercise Shares” has the meaning given in Section 4(a).

 

“Grant Date” means the date hereof, which is the date on which the Options are granted to the Employee.

 

“Normal Termination Date” has the meaning given in Section 3(a).

 

“Option” means the right granted to the Employee hereunder to purchase one share of Common Stock for a purchase price equal to the Option Price subject to the terms of this Agreement and the Plan.

 

“Option Price” means, with respect to each share of Common Stock covered by an Option, the purchase price specified in Section 1(b) for which the Employee may purchase such share of Common Stock upon exercise of an Option.

 

“Plan” means the ServiceMaster Global Holdings, Inc. Stock Incentive Plan.

 

“Securities Act” means the United States Securities Act of 1933, as amended, or any successor statute, and the rules and regulations thereunder that are in effect at the time, and any reference to a particular section thereof shall include a reference to the corresponding section, if any, of such successor statute, and the rules and regulations.

 

Section 8.              Miscellaneous.

 

(a)         Withholding.  The Company or one of its Subsidiaries may require the Employee to remit to the Company an amount in cash sufficient to satisfy any applicable U.S. federal, state and local

 

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and non-U.S. tax withholding or other similar charges or fees that may arise in connection with the grant, vesting, exercise, settlement or purchase of the Options.

 

(b)        Authorization to Share Personal Data.  The Employee authorizes any Affiliate of the Company that employs the Employee or that otherwise has or lawfully obtains personal data relating to the Employee to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent appropriate in connection with this Agreement or the administration of the Plan.

 

(c)         No Rights as Stockholder; No Voting Rights.  The Employee shall have no rights as a stockholder of the Company with respect to any shares covered by the Options until the exercise of the Options and delivery of the shares.  Any shares delivered in respect of the Options shall be subject to the Subscription Agreement and the Employee shall have no voting rights with respect to such Shares until such time as specified in the Subscription Agreement.

 

(d)        No Right to Continued Employment. Nothing in this Agreement shall be deemed to confer on the Employee any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.

 

(e)         Non-Transferability of Options.  The Options may be exercised only by the Employee.  The Options are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than by will or by the laws of descent and distribution to the estate of the Employee upon the Employee’s death or with the Company’s consent.

 

(f)         Notices.  All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by certified or express mail, return receipt requested, postage prepaid, or by any recognized international equivalent of such delivery, to the Company or the Employee, as the case may be, at the following addresses or to such other address as

 

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the Company or the Employee, as the case may be, shall specify by notice to the other:

 

(i)        if to the Company, to it at:

 

ServiceMaster Global Holdings, Inc.
 c/o The ServiceMaster Company 
 860 Ridge Lake Boulevard
 Memphis, Tennessee 38120
  Attention: General Counsel
 Fax: (901) 597-8025

 

with copies (which shall not constitute notice) to the Persons listed in clause (iii) below);

 

(ii)       if to the Employee, to the Employee at his or her most recent address as shown on the books and records of the Company or Subsidiary employing the Employee;

 

(iii)      copies of any notice or other communication given under this Agreement shall also be given to:

 

Clayton, Dubilier & Rice, LLC
 375 Park Avenue, 18th Floor
 New York, New York 10152
  Attention:  David Wasserman
 Fax: (212) 893-7061

 

and

 

Debevoise & Plimpton LLP
 919 Third Avenue 
 New York, New York 10022

Attention:  John M. Allen
 Fax:  (212) 909-6836

 

All such notices and communications shall be deemed to have been received on the date of delivery if delivered personally or on the third business day after the mailing thereof.

 

(g)        Binding Effect; Benefits.  This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns.  Nothing in this Agreement, express or implied, is intended or shall be construed to

 

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give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

 

(h)        Waiver; Amendment.

 

(i)         Waiver.  Any party hereto or beneficiary hereof may by written notice to the other parties (A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and (C) waive or modify performance of any of the obligations of the other parties under this Agreement.  Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein.  The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.

 

(ii)        Amendment.  This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Employee and the Company.

 

(i)          Assignability.  Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Employee without the prior written consent of the other party.

 

(j)          Applicable Law.  This Agreement shall be governed by and construed in accordance with the law of the State of Delaware regardless of the application of rules of conflict of law that would apply the laws of any other jurisdiction.

 

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(k)         Waiver of Jury Trial.  Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby.  Each party (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this Section 8(k).

 

(l)          Section and Other Headings, etc.  The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

 

(m)        Counterparts.  This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date first above written.

 

 

	
 
    	
SERVICEMASTER GLOBAL HOLDINGS, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
THE EMPLOYEE:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Harry J. Mullany III
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
Address of the Employee:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
 
    
	
Total Number of Shares for the Purchase of Which   Options have been Granted
    	
Option Price 
    
	
 
    	
 
    
	
[·]   Shares
    	
$[·]
    

 

11Exhibit 10.6

 

AMENDED AND RESTATED
 SERVICEMASTER GLOBAL HOLDINGS, INC.
 STOCK INCENTIVE PLAN

 

Effective November 20, 2007
 Last Amended February 16, 2011

 

Article I
 Purpose

 

ServiceMaster Global Holdings, Inc. has established this stock incentive plan to foster and promote its long-term financial success.  Capitalized terms have the meaning given in Article XII.

 

Article II
 Powers of the Board

 

Section 2.1          Power to Grant Awards.  The Board shall select Employees to receive Awards.  The Board shall also determine from time to time whether Eligible Directors (or classes or categories of Eligible Directors) shall receive Director Share Awards.  The Board shall determine the terms of each Award, consistent with the Plan.

 

Section 2.2          Administration.  The Board shall be responsible for the administration of the Plan.  The Board may prescribe, amend and rescind rules and regulations relating to the administration of the Plan, provide for conditions and assurances it deems necessary or advisable to protect the interests of the Company and make all other determinations necessary or advisable for the administration and interpretation of the Plan.  Any authority exercised by the Board under the Plan shall be exercised by the Board in its sole discretion.  Determinations, interpretations or other actions made or taken by the Board under the Plan shall be final, binding and conclusive for all purposes and upon all persons.

 

Section 2.3          Delegation by the Board.  All of the powers, duties and responsibilities of the Board specified in this Plan may be exercised and performed by any duly constituted committee thereof to the extent authorized by the Board to exercise and perform such powers, duties and responsibilities, and any

 

 

determination, interpretation or other action taken by such committee shall have the same effect hereunder as if made or taken by the Board.

 

Article III
 Shares Subject to Plan

 

Section 3.1          Number.  The maximum number of shares of Common Stock that may be issued under the Plan or be subject to Awards may not exceed 14,595,000* shares.  The shares of Common Stock to be delivered under the Plan may consist, in whole or in part, of authorized but unissued Common Stock that are not reserved for any other purpose.

 

Section 3.2          Canceled, Terminated or Forfeited Awards.  If any Award or portion thereof is for any reason forfeited, canceled or otherwise terminated without exercise, the Common Stock subject to such Award or portion thereof shall again be available for grant under the Plan.

 

Section 3.3          Adjustment in Capitalization.  If and to the extent necessary or appropriate to reflect any Common Stock dividend, extraordinary dividend, stock split or share combination or any recapitalization, merger, consolidation, exchange of shares, spin-off liquidation or dissolution of the Company or other similar transaction affecting the Common Stock, the Board shall proportionately adjust the number of shares of Common Stock available for issuance under the Plan and the number, class, exercise price or other terms of any outstanding Award and/or make other provisions with respect to the holder or holders of an outstanding Award.

 

Article IV
 Stock Purchase or Grant

 

Section 4.1          Awards and Administration.  The Board may offer and sell or otherwise grant Common Stock to Participants at such time or times and subject to such conditions as it shall determine, the terms of which shall be set forth in a Subscription Agreement.

 

* Amended as of February 16, 2011.  Prior figure was 13,845,000.

 

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Section 4.2          Minimum Purchase Price.  Unless otherwise determined by the Board, the purchase price for any Common Stock to be offered and sold pursuant to this Article IV shall not be less than the Fair Market Value on the Grant Date.

 

Section 4.3          Payment.  Unless otherwise determined by the Board, the purchase price with respect to any Common Stock offered and sold pursuant to this Article IV shall be paid in cash or other readily available funds simultaneously with the closing of the purchase of such Common Stock.

 

Article V
 Terms of Options

 

Section 5.1          Grant of Options.  The Board may grant Options to Participants at such time or times as it shall determine.  Options granted pursuant to the Plan will not be “incentive stock options” as defined in the Code.  Each Option granted to a Participant shall be evidenced by an Option Agreement that shall specify the number of shares of Common Stock that may be purchased pursuant to such Option, the exercise price at which shares of Common Stock may be purchased pursuant to such Option, the duration of such Option (not to exceed the tenth anniversary of the Grant Date), and such other terms as the Board shall determine.

 

Section 5.2          Exercise Price.  The exercise price per share of Common Stock to be purchased upon exercise of an Option shall not be less than the Fair Market Value on the Grant Date.

 

Section 5.3          Vesting and Exercise of Options.  Options shall become vested or exercisable in accordance with the vesting schedule or upon the attainment of such performance criteria as shall be specified by the Board on or before the Grant Date.  The Board may accelerate the vesting or exercisability of any Option, all Options or any class of Options at any time and from time to time.

 

Section 5.4          Payment.  The Board shall establish procedures governing the exercise of Options, which procedures shall generally require that prior written notice of exercise be given and that the exercise price (together with any required withholding taxes or other similar taxes, charges or fees) be paid in full in cash, cash equivalents or other readily available funds at the time of exercise.  Notwithstanding the foregoing, on such terms as the Board may establish from time to time following a Public Offering (i) the Board may permit a Participant to tender any Common Stock such Participant has owned for at least six months and

 

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one day for all or a portion of the applicable exercise price or minimum required withholding taxes, and (ii) the Board may authorize the Company to establish a broker-assisted exercise program.  In connection with any Option exercise, the Company may require the Participant to furnish or execute such other documents as it shall reasonably deem necessary to (a) evidence such exercise, (b) determine whether registration is then required under the U.S. federal securities laws or similar non-U.S. laws, or (c) comply with or satisfy the requirements of the U.S. federal securities laws, applicable state or non-U.S. securities laws or any other law.  As a condition to the exercise of any Option before a Public Offering, a Participant shall enter into a Subscription Agreement.

 

Article VI
 Termination of Employment

 

Section 6.1          Expiration of Options Following Termination of Employment.  Unless otherwise determined by the Board on or before the Grant Date, if a Participant’s employment with the Company terminates, such Participant’s Options shall be treated as follows:

 

(a)           any unvested Options shall terminate effective as of such termination of employment (determined without regard to any statutory or deemed or express contractual notice period); provided that if the Employee’s employment with the Company is terminated in a Special Termination (i.e., by reason of the Employee’s death or Disability), any unvested Options held by the Employee that by their terms would vest solely based on continued employment shall immediately vest as of the effective date of such Special Termination;

 

(b)           except in the case of a termination for Cause, vested Options shall remain exercisable through the earliest of (i) the normal expiration date, (ii) the three-month anniversary of the effective date of the Participant’s termination of employment (determined without regard to any statutory or deemed or express contractual notice period), (iii) the one-year anniversary in the case of a Special Termination or a retirement at normal retirement age or later), and (iv) any cancellation pursuant to Section 7.1; and

 

(c)           in the case of a termination for Cause, any and all Options held by such Participant (whether or not then vested or exercisable) shall terminate immediately upon such termination of employment.

 

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Section 6.2          Certain Rights upon Termination of Employment Prior to a Public Offering.  Each Subscription Agreement shall provide that the Company and one or more of the Investors shall have successive rights prior to a Public Offering to purchase all or any portion of a Participant’s Common Stock upon any termination of employment (determined without regard to any statutory or deemed or express contractual notice period), at such time and at a purchase price per share equal to the Fair Market Value as of the date specified in the Subscription Agreement (or, if the Participant’s employment termination qualifies as a termination for Cause, for a purchase price per share equal to the lesser of (i) the Fair Market Value as of the date specified in the Subscription Agreement and (ii) such Participant’s per share purchase price).  The Board may provide in a Subscription Agreement that following a Participant’s Special Termination, retirement at or after normal retirement age or termination of employment by the Company without Cause in each case prior to a Public Offering, such Participant may require the Company to repurchase all (but not less than all) of such Participant’s Common Stock (but excluding any shares acquired on exercise of an Option), at such time and at a purchase price per share equal to the Fair Market Value as of the date specified in the Subscription Agreement, subject to the Company having the ability to do so under the terms of its financing agreements.

 

Article VII
 Change in Control

 

Section 7.1          Accelerated Vesting and Payment.  Except as otherwise provided in this Article VII, and unless otherwise provided in the Award Agreement, upon a Change in Control, (a) each Award that by its terms would otherwise vest based solely on continued employment shall vest in full in connection with such Change in Control and each other Award shall, to the extent it has not or will not by its terms vest before or in connection with such Change in Control, be canceled, and (b) the holder of any vested Award (including any Award that vests in connection with such Change in Control) shall be entitled to receive, in complete satisfaction of such Award, a payment in cash or readily marketable securities in an amount or with a value equal to the number of shares of Common Stock covered by such vested Award times the excess, if any, of the Change in Control Price over any applicable exercise price or reference price, if any, for such Award.

 

Section 7.2          Alternative Award.  No cancellation, acceleration or other payment shall occur with respect to any Award or class or type of Award if the Board reasonably determines in good faith, prior to the occurrence of a Change in

 

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Control, that such Award shall be honored or assumed, or new rights substituted therefor following the Change in Control (such honored, assumed or substituted award, an “Alternative Award”); provided that any Alternative Award must:

 

(a)           give the Participant who held such Award rights and entitlements substantially equivalent to or better than the rights and terms applicable under such Award, including, but not limited to, an identical or better exercise and vesting schedule, identical or better timing and methods of payment and, if the Alternative Award or the securities underlying it are not publicly-traded, identical or better rights following a termination of employment to require the Company or the acquiror in such Change in Control to repurchase the Alternative Award or securities underlying such Alternative Award; and

 

(b)           have terms such that if, within two years following a Change in Control, a Participant’s employment is involuntarily or constructively terminated (other than for Cause), such Alternative Award shall immediately vest in full and such Participant shall receive a cash payment equal to the excess (if any) of the fair market value of the stock subject to the Alternative Award on the date of surrender over the price that such Participant would be required to pay to exercise such Alternative Award or shall have an immediate right to exercise such Alternative Award and receive shares that are then publicly traded.

 

Section 7.3          Limitation of Benefits.  If, whether as a result of accelerated vesting, the grant of an Alternative Award or otherwise, a Participant would receive any payment, deemed payment or other benefit as a result of the operation of Section 7.1 or Section 7.2 that, together with any other payment, deemed payment or other benefit a Participant may receive under any other plan, program, policy or arrangement, would constitute an “excess parachute payment” under section 280G of the Code, then, notwithstanding anything in this Plan to the contrary, the payments, deemed payments or other benefits such Participant would otherwise receive under Section 7.1 or Section 7.2 shall be reduced to the extent necessary to eliminate any such excess parachute payment and such Participant shall have no further rights or claims with respect thereto.  If the preceding sentence would result in a reduction of the payments, deemed payments or other benefits a Participant would otherwise receive in more than an immaterial amount, the Company will use its commercially reasonable best efforts to seek the approval of the Company’s shareholders in the manner provided for in section 280G(b)(5) of the Code and the regulations thereunder with respect to such reduced payments or other benefits (if the Company is eligible to do so), so that such payments would not be treated as “parachute payments” for these purposes (and therefore

 

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would cease to be subject to reduction pursuant to this Section 7.3), and, if seeking such approval, the Company shall submit all Participants for whom such approval is sought as a single slate to the shareholders and not individually.  This Section 7.3 shall cease to apply if the stock of the Company or any direct or indirect parent or subsidiary of the Company becomes readily tradable on an established securities market or otherwise within the meaning of 26 CFR 1.280G-1, Q/A-6.

 

Article VIII
 Deferred Share Units and Restricted Stock Units

 

Section 8.1          Deferred Share Units.  The Board may provide for the grant of Deferred Share Units to Participants at such time or times and subject to such conditions as it shall determine.  No shares of Common Stock will be issued at the time an award of Deferred Share Units is made and the Company shall not be required to set aside a fund for the payment of any such award.

 

Section 8.2             Restricted Stock Units. The Board may provide for the grant of Restricted Stock Units to Participants at such time or times and subject to such conditions as it shall determine, but which shall (unless the Board determines otherwise) be subject to vesting based on continued service, satisfaction of performance conditions or other vesting conditions determined by the Board. No shares of Common Stock will be issued at the time an award of Restricted Stock Units is made and the Company shall not be required to set aside a fund for the payment of any such award.

 

Article IX
 Director Share Awards

 

Director Share Awards may have such terms as the Board shall determine from time to time, and may be granted as part of the retainer or other fees payable to an Eligible Director or as part of an arrangement that permits the deferral of payment of such fees, on a mandatory or elective basis, into the right to receive Common Stock and distributions thereon in the future (or a cash payment measured by reference to the value thereof).

 

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Article X
 Authority to Vary Terms or Establish Local Jurisdiction Plans

 

The Board may vary the terms of Awards to be granted under the Plan, or establish sub-plans under this Plan to authorize the grant of awards that have additional or different terms or features from those otherwise provided for in the Plan, if and to the extent the Board determines necessary or appropriate to permit the grant of awards that are best suited to further the purposes of the Plan and to comply with applicable securities laws in a particular jurisdiction or provide terms appropriately suited for Employees in such jurisdiction in light of the tax laws of such jurisdiction while being as consistent as otherwise possible with the terms of Awards under the Plan; provided that this Article X shall not be deemed to authorize any increase in the number of Common Stock available for issuance under the Plan set forth in Section 3.1.

 

Article XI
 Amendment, Modification, and Termination of the Plan

 

The Board may terminate or suspend the Plan at any time, and may amend or modify the Plan from time to time.  No amendment, modification, termination or suspension of the Plan shall in any manner adversely affect any Award theretofore granted under the Plan without the consent of the Participant holding such Award or the consent of a majority of Participants holding similar Awards (such majority to be determined based on the number of shares covered by such Awards).  Shareholder approval of any such amendment, modification, termination or suspension shall be obtained to the extent mandated by applicable law, or if otherwise deemed appropriate by the Board.

 

Article XII
 Definitions

 

Section 12.1        Definitions.  Whenever used herein, the following terms shall have the respective meanings set forth below:

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control 

 

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with such first Person; provided that a director, member of management or other Employee of the Company or any of its Subsidiaries shall not be deemed to be an Affiliate of the Investors.  For these purposes, “control” (including the terms “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person by reason of ownership of voting securities, by contract or otherwise.

 

“Alternative Award” has the meaning given in Section 7.2.

 

“Award” means an Option, a Deferred Share Unit, a Restricted Stock Unit, a Director Share Award or an offer and sale or grant of Common Stock pursuant to Article IV, in each case granted pursuant to the terms of the Plan.

 

“Award Agreement” means a Subscription Agreement, an Option Agreement or any other agreement evidencing an Award.

 

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

 

“Cause” means, unless otherwise provided in the Award Agreement, any of the following:  (i) the Participant’s commission of a crime involving fraud, theft, false statements or other similar acts or commission of any crime that is a felony (or a comparable classification in a jurisdiction that does not use these terms); (ii) the Participant’s willful and material or grossly negligent failure to perform his or her material employment-related duties for the Company and its Subsidiaries; (iii) the Participant’s material violation of any material Company policy as in effect from time to time; (iv) the Participant’s engaging in any willful act or making any public statement that impairs, impugns, denigrates, disparages or negatively reflects upon the name, reputation or business interests of the Company or its Subsidiaries; (v) the Participant’s material breach of any Award Agreement, employment agreement, or noncompetition, nondisclosure or nonsolicitation agreement to which the Participant is a party or by which the Participant is bound or (vi) the Participant’s engaging in any wrongful conduct injurious or detrimental to the Company or its any of its Subsidiaries. The determination as to whether “Cause” has occurred shall be made by the Board, which shall have the authority to waive the

 

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consequences under the Plan of the existence or occurrence of any of the events, acts or omissions constituting “Cause.”  A termination for Cause shall be deemed to include a determination following a Participant’s termination of employment for any reason if the circumstances existing prior to such termination would have entitled the Company or one of its Subsidiaries to have terminated such Participant’s employment for Cause.

 

“CD&R Investors” means, collectively, (i) Clayton, Dubilier & Rice Fund VII, L.P., (ii) Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P., (iii) CDR SVM Co-Investor L.P., (iv) CD&R Parallel Fund VII, L.P., and (v) CDR SVM Co-Investor No. 2 L.P.

 

“Change in Control” means the first to occur of the following events after the Effective Date:

 

(i)  the acquisition by any person, entity or “group” (as defined in Section 13(d) of the Securities Exchange Act of 1934, as amended) of beneficial ownership of 50% or more of the combined voting power of the Company’s then outstanding voting securities, other than any such acquisition by the Company, any of its Subsidiaries, any employee benefit plan of the Company or any of its Subsidiaries, or by the Investors, or any Affiliates of any of the foregoing;

 

(ii)  the merger, consolidation or other similar transaction involving the Company, as a result of which persons who were stockholders of the Company immediately prior to such merger, consolidation, or other similar transaction do not, immediately thereafter, own, directly or indirectly, more than 50% of the combined voting power entitled to vote generally in the election of directors of the merged or consolidated company;

 

(iii)  within any 24-month period, the persons who were directors of the Company at the beginning of

 

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such period (the “Incumbent Directors”) shall cease to constitute at least a majority of the Board, provided that any director elected or nominated for election to the Board by any Investor or a majority of the Incumbent Directors then still in office shall be deemed to be an Incumbent Director for purposes of this clause (iii); or

 

(iv)  the sale, transfer or other disposition of all or substantially all of the assets of the Company to one or more persons or entities that are not, immediately prior to such sale, transfer or other disposition, Affiliates of the Company.

 

Notwithstanding the foregoing, a Public Offering shall not constitute a Change in Control.

 

“Change in Control Price” means the price per share of Common Stock offered in conjunction with any transaction resulting in a Change in Control.  If any part of the offered price is payable other than in cash, the Change in Control price shall be determined in good faith by the Board as constituted immediately prior to the Change in Control.

 

“Code” means the United States Internal Revenue Code of 1986, as amended, and any successor thereto.

 

“Common Stock” means the common stock, par value U.S. $.01 per share, of the Company.

 

“Company” means ServiceMaster Global Holdings, Inc., a Delaware corporation, and any successor thereto, and, for purposes of determining the status of a Participant’s employment with the “Company” shall include the Company’s Subsidiaries.

 

“Deferred Share Unit” means the right granted pursuant to the Plan to receive a share of Common Stock and distributions thereon in the future.

 

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“Director Share Award” means an award pursuant to Article IX to an Eligible Director of Common Stock, an Option or similar Award, a right to receive Common Stock or a payment measured by reference thereto and distributions thereon.

 

“Disability” means, unless otherwise provided in an Award Agreement, a Participant’s long-term disability within the meaning of the long-term disability insurance plan or program of the Company or any Subsidiary then covering the Participant, or in the absence of such a plan or program, as determined by the Board.  The Board’s reasoned and good faith judgment of Disability shall be final and shall be based on such competent medical evidence as shall be presented to it by the Participant or by any physician or group of physicians or other competent medical expert employed by the Participant or the Company to advise the Board.

 

“Effective Date” has the meaning given in Section 13.10.

 

“Eligible Director” means a member of the Board other than an employee or officer of the Company or any of its Subsidiaries.

 

“Employee” means any executive, officer or other employee of the Company or any Subsidiary.

 

“Fair Market Value” means, as of any date of determination prior to a Public Offering, the per share fair market value on such date of a share of Common Stock as determined in good faith by the Board.  In making a determination of Fair Market Value, the Board shall give due consideration to such factors as it deems appropriate, including, but not limited to, the earnings and other financial and operating information of the Company in recent periods, the potential value of the Company as a whole, the future prospects of the Company and the industries in which it competes, the history and management of the Company, the general condition of the securities markets, the fair market value of securities of companies engaged in businesses similar to those of the Company, and any recent valuation of the Common Stock that shall have been performed by an independent valuation firm (although nothing herein shall obligate the Board to obtain any such independent valuation).  The determination of Fair Market Value will not give effect to any restrictions on transfer of the Common Stock or

 

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take into account any control premium, but shall be determined taking into account the fact that such shares would represent a minority interest in the Company and are illiquid.  Following a Public Offering, “Fair Market Value” shall mean, as of any date of determination, the mid-point between the high and the low trading prices for such date per share of Common Stock as reported on the principal stock exchange on which the shares of Common Stock are then listed.

 

“Grant Date” means, with respect to any Award, the date as of which such Award is granted pursuant to the Plan.

 

“Investor” means any of (i) BAS Capital Funding Corporation, BACSVM-A, L.P. and Bank of America Capital Investors V, L.P., (ii) Citigroup Capital Partners II 2007 Citigroup Investment, L.P., Citigroup Capital Partners II Employee Master Fund, L.P., Citigroup Capital Partners II Onshore, L.P., Citigroup Capital Partners II Cayman Holdings, L.P. and CPE Co-Investment (ServiceMaster) LLC, (iii) the CD&R Investors, (iv) J.P. Morgan Ventures Corporation, (vi) any Affiliate of any of the foregoing that acquires shares of Common Stock, and (vii) any successor in interest to any thereof.

 

“Option” means the right granted pursuant to the Plan to purchase one share of Common Stock.

 

“Option Agreement” means an agreement between the Company and a Participant embodying the terms of any Options granted pursuant to the Plan and in the form approved by the Board from time to time for such purpose.

 

“Participant” means any Employee or Eligible Director who is granted an Award.

 

“Person” means any natural person, firm, partnership, limited liability company, association, corporation, company, trust, business trust, governmental authority or other entity.

 

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“Plan” means this ServiceMaster Global Holdings, Inc. Stock Incentive Plan.

 

“Public Offering” means the first day as of which (i) sales of Common Stock are made to the public in the United States pursuant to an underwritten public offering of the Common Stock, (ii) Common Stock is otherwise listed for trading on a nationally recognized securities exchange, or (iii) the Board has determined that shares of the Common Stock otherwise have become publicly-traded for this purpose.

 

“Restricted Stock Unit” means the right granted pursuant to the Plan to receive a share of Common Stock and distributions thereon in the future, subject to the satisfaction of vesting or other conditions related thereto.

 

“Special Termination” means a termination by reason of the Participant’s death or Disability.

 

“Subscription Agreement” means a stock subscription agreement between the Company and a Participant embodying the terms of any stock purchase made pursuant to the Plan and in the form approved by the Board from time to time for such purpose.

 

“Subsidiary” means any corporation, limited liability company or other entity, a majority of whose outstanding voting securities is owned, directly or indirectly, by the Company.

 

Section 12.2        Gender and Number.  Except when otherwise indicated by the context, words in the masculine gender used in the Plan shall include the feminine gender, the singular shall include the plural, and the plural shall include the singular.

 

Article XIII
 Miscellaneous Provisions

 

Section 13.1        Nontransferability of Awards.  Except as otherwise provided herein or as the Board may permit on such terms as it shall determine, no Awards

 

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granted under the Plan may be sold, transferred, pledged, assigned, hedged, encumbered or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution.  All rights with respect to Awards granted to a Participant under the Plan shall be exercisable during the Participant’s lifetime by such Participant only (or, in the event of the Participant’s Disability, such Participant’s legal representative).  Following a Participant’s death, all rights with respect to Awards that were outstanding at the time of such Participant’s death and have not terminated shall be exercised by his designated beneficiary or by his estate in the absence of a designated beneficiary.

 

Section 13.2        Tax Withholding.  The Company or the Subsidiary employing a Participant shall have the power to withhold up to the minimum statutory requirement, or to require such Participant to remit to the Company or such Subsidiary, an amount sufficient to satisfy all U.S. federal, state, local and any non-U.S. withholding tax or other governmental tax, charge or fee requirements in respect of any Award granted under the Plan.

 

Section 13.3        Beneficiary Designation.  Pursuant to such rules and procedures as the Board may from time to time establish, a Participant may name a beneficiary or beneficiaries (who may be named contingently or successively) by whom any right under the Plan is to be exercised in case of such Participant’s death.  Each designation will revoke all prior designations by the same Participant, shall be in a form reasonably prescribed by the Board, and will be effective only when filed by the Participant in writing with the Board during his lifetime.

 

Section 13.4        No Guarantee of Employment or Participation.  Nothing in the Plan or in any agreement granted hereunder shall interfere with or limit in any way the right of the Company or any Subsidiary to terminate any Participant’s employment or retention at any time, or confer upon any Participant any right to continue in the employ or retention of the Company or any Subsidiary.  No Employee or Eligible Director shall have a right to be selected as a Participant or, having been so selected, to receive any Awards.

 

Section 13.5        No Limitation on Compensation; No Impact on Benefits.  Nothing in the Plan shall be construed to limit the right of the Company or any Subsidiary to establish other plans or to pay compensation to its Employees or Eligible Directors, in cash or property, in a manner that is not expressly authorized under the Plan.  Except as may otherwise be specifically and unequivocally stated under any employee benefit plan, policy or program, no amount payable in respect of any Award shall be treated as compensation for purposes of calculating a Participant’s rights under any such plan, policy or program.  The selection of an

 

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Employee as a Participant shall neither entitle such Employee to, nor disqualify such Employee from, participation in any other award or incentive plan.

 

Section 13.6        No Voting Rights.  Except as otherwise required by law, no Participant holding any Awards granted under the Plan shall have any right in respect of such Awards to vote on any matter submitted to the Company’s stockholders until such time as the shares of Common Stock underlying such Awards have been issued, and then, subject to the voting restrictions contained in the Subscription Agreement.

 

Section 13.7        Requirements of Law.  The granting of Awards and the issuance of shares of Common Stock pursuant to the Plan shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.  No Awards shall be granted under the Plan, and no Common Stock shall be issued under the Plan, if such grant or issuance would result in a violation of applicable law, including U.S. federal securities laws and any applicable state or non-U.S. securities laws.

 

Section 13.8        Freedom of Action.  Nothing in the Plan or any Award Agreement evidencing an Award shall be construed as limiting or preventing the Company or any Subsidiary from taking any action that it deems appropriate or in its best interest (as determined in its sole and absolute discretion) and no Participant (or person claiming by or through a Participant) shall have any right relating to the diminishment in the value of any Award as a result of any such action.

 

Section 13.9           Unfunded Plan; Plan Not Subject to ERISA.  The Plan is an unfunded plan and Participants shall have the status of unsecured creditors of the Company.  The Plan is not intended to be subject to the Employee Retirement Income and Security Act of 1974, as amended.

 

Section 13.10      Term of Plan.  The Plan shall be effective as of November 20, 2007, (the “Effective Date”) and shall continue in effect, unless sooner terminated pursuant to Article XI, until the tenth anniversary of such date.  The provisions of the Plan shall continue thereafter to govern all outstanding Awards.

 

Section 13.11      Governing Law.  The Plan, and all agreements hereunder, shall be governed by and construed in accordance with the law of the State of Delaware regardless of the application of rules of conflict of law that would apply the laws of any other jurisdiction.

 

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