EXHIBIT 4.2
This instrument constitutes part of a prospectus covering
securities that have been registered under the securities act of
1933.
SERVICEMASTER LIMITED PARTNERSHIP
1994 NON-EMPLOYEE DIRECTORS SHARE OPTION PLAN
_____________________
1. Purpose. The purpose of the ServiceMaster Limited
Partnership 1994 Non-Employee Directors Share Option Plan (the
"Plan") is to attract, retain and compensate highly-qualified
individuals who are not current employees of ServiceMaster Limited
Partnership ("ServiceMaster") or any affiliate thereof as members
of the Board of Directors of ServiceMaster Management Corporation
(the "Board of Directors") and to enable them to increase their
ownership and/or their right to ownership of ServiceMaster limited
partnership shares ("ServiceMaster Shares"). The Plan will be
beneficial to ServiceMaster and its shareholders in that it will
allow these Directors to have a greater personal financial stake in
ServiceMaster through the ownership of ServiceMaster Shares and
will underscore their common interest and identification with
shareholders to increase the value of ServiceMaster Shares.
2. Eligibility. All members of the Board of Directors who are
not current employees of ServiceMaster or any subsidiary or
affiliated company at the time of the award of an option ("Non-
Employee Directors") are eligible to participate in the Plan.
3. Shares Subject to the Plan. The total number of
ServiceMaster Shares for which options may be granted under the
Plan shall not exceed 250,000 (as adjusted as provided in Section
7 hereof). Shares issued pursuant to the exercise of options
granted under the Plan may be either authorized and previously
unissued shares, issued shares which have been repurchased by
ServiceMaster, or any combination thereof. If any option granted
under the Plan shall terminate, expire or (with the consent of the
optionee) is canceled without having been exercised in full, new
options may be granted with respect to such shares without again
being charged against the maximum share limitation set forth above.
4. Administration. (a) The Plan shall be administered by the
Non-Employee Directors Option Committee (the "Committee"), the
members of which shall be limited to persons who qualify as
independent members of the Board of Directors. The Committee may
consist of all of such persons or such lesser number as may be
selected by the independent members of the Board of Directors.
(b) The Committee may from time to time adopt rules for
carrying out the provisions and purposes of the Plan. The
interpretation and construction by the Committee of any of the
provisions of, and the determination of any questions arising
under, the Plan or any such rule or any agreement evidencing
options granted under the Plan shall be final, binding and
conclusive on all persons interested in the Plan.
(c) The Secretary of ServiceMaster Management Corporation is
authorized to implement the Plan in accordance with its terms and
to take such actions of a ministerial nature as are necessary to
effectuate the intent and purpose of the Plan.
(d) The validity, construction and effect of the Plan and any
rules relating to the Plan shall be determined in accordance with
the laws of the State of Delaware without regard to its conflicts
of law principles.
5. Awards of Options. Options to purchase 5,000
ServiceMaster Shares shall be offered to each Non-Employee Director
promptly after the Plan has been effected. Thereafter, options
shall be offered to Non-Employee Directors at such times and in
such amounts as shall be established by the Committee.
6. Consideration for Options. (a) There shall be required
from each Non-Employee Director to whom an option is offered under
this Plan, as consideration for the option and as a condition to
the receipt of the option, the payment in cash in the amount set
forth in paragraph (b) below. An option shall not be considered as
granted until such payment has been received by ServiceMaster. If
any prospective recipient does not make such payment at the time
established by the Committee for the delivery of option documents
to the prospective recipient, the grant of the option shall be
rescinded and the shares subject to such option shall again become
available for use under the Plan. The date established for the
delivery of option documents shall be in reasonably close proximity
to the date on which the option was offered.
(b) The consideration for the first options granted under
this Plan shall be $7,500 for each option ($1.50 per option share).
The Committee shall establish the amount of consideration for
options subsequently granted.
7. Terms and Conditions of Options. All options shall be
evidenced by option agreements which shall be in such form as the
Committee may from time to time approve and shall be executed on
behalf of ServiceMaster by the Chairman or the President of
ServiceMaster. Each option agreement shall be subject to the Plan
and, in addition to such other terms and conditions as the
Committee may deem desirable, shall provide in substance as
follows:
(a) Exercise Price. The exercise price per share for
which each option is exercisable shall be equal to 100% of the
fair market value of a ServiceMaster Share as of the date such
option is offered ("Fair Market Value"). Such Fair Market
Value shall be the closing sale price of the ServiceMaster
Shares on the trading day next preceding the date on which the
option is offered as reported on the New York Stock Exchange
Composite Tape. The exercise price shall be subject to
adjustment as provided in Section 7 hereof.
(b) Term of Options. The option shall expire 10 years
from the date of the grant but shall be subject to earlier
termination as hereinafter provided. If a Non-Employee
Director subsequently becomes an employee of the Company while
remaining a member of the Board of Directors, any options held
under the Plan by such person at the time of such commencement
of employment shall not be affected.
(c) Effect of Termination of Service as a Director. The
option shall be exercisable after the date of termination of
the optionee's service as a member of the Board of Directors
only in accordance with the following rules:
(1) Upon the death of the optionee, the option
shall become immediately exercisable in full. The option
may be exercised at any time within one year after death
by the optionee's executor or administrator or by the
distributee to whom such options may have been
transferred by will or by the laws of descent and
distribution.
(2) If the optionee's service as a director
terminates for any reason other than death, the option
may be exercised by the optionee to the extent vested
within six months after such termination of service. If
the optionee should die within such six-month period, the
option may be exercised at any time within one year after
such death by the optionee's executor or administrator or
by the distributee to whom such options may have been
transferred by will or by the laws of descent and
distribution.
The foregoing provisions shall not extend the period during
which the option may be exercised beyond the date it expires
by its terms.
(d) Exercise Procedure. The option shall be exercisable
only by giving ServiceMaster a written notice of exercise,
accompanied by full payment of the exercise price either (i)
in cash or (ii) in ServiceMaster Shares having a then fair
market value equal to the exercise price or (iii) a
combination of cash and ServiceMaster Shares which in the
aggregate are equal in value to the exercise price. At the
discretion of the Committee, the option agreement may provide
that ServiceMaster Shares may be issued in the name of the
optionee and another person jointly with the right of
survivorship.
(e) Nontransferability. The option shall not be
transferable by the optionee except that the following
transfers may be made: (i) transfers by will or by the laws of
descent and distribution, and (ii) transfers to organizations
which qualify as charitable organizations under section
501(c)(3) of the Internal Revenue Code of 1986, as amended.
During the lifetime of the optionee, the option may be
exercised only by the optionee or by such optionee's legal
representative or by an authorized representative of a
charitable organization to which the option has been duly
transferred.
(f) Withholding of Taxes. It shall be a condition to
the obligation of ServiceMaster to issue ServiceMaster Shares
upon the exercise of the option that the optionee pay to
ServiceMaster, upon its demand, such amount, if any, as may be
requested by ServiceMaster for the purpose of satisfying its
liability to withhold federal, state or local income or other
taxes incurred by reason of the exercise of the option. Such
payment may be made by reducing the number of ServiceMaster
Shares which would otherwise be issued by the number of shares
which, at their then current value, covers ServiceMaster's
withholding obligation. If the amount requested is not paid,
ServiceMaster may refuse to issue ServiceMaster Shares upon
the exercise of the option.
8. Adjustment Upon Changes in ServiceMaster Shares; Stock of
ServiceMaster Incorporated of Delaware. (a) The Board of Directors
shall make or provide for such adjustments in the option price and
in the number or kind of shares or other securities covered by
outstanding options as the Board of Directors in its sole
discretion, exercised in good faith, shall determine is equitably
required to prevent dilution or enlargement of rights of optionees
that would otherwise result from (i) any share dividend, share
split, combination of shares, issuance of rights or warrants to
purchase shares, recapitalization or other changes in the capital
structure of ServiceMaster; (ii) any merger, consolidation,
reorganization or partial or complete liquidation, or (iii) any
other transaction or event having an effect similar to any of the
foregoing. The determination of the Board of Directors as to what
adjustments shall be made, and the extent thereof, shall be final,
binding and conclusive.
(b) Anything in the foregoing to the contrary
notwithstanding, at the time when the Reincorporating Merger as
approved by the shareholders of ServiceMaster in January 1991
becomes effective, each outstanding option for ServiceMaster Shares
shall, without further action by the Board of Directors or the
Committee, become an option for a like number of shares of common
stock of ServiceMaster Incorporated of Delaware; and each option
which is thereafter granted under the Plan shall be an option for
shares of common stock of ServiceMaster Incorporated of Delaware.
All references in this Plan to "ServiceMaster Shares" shall
thereafter be deemed to mean references to shares of common stock
of ServiceMaster Incorporated of Delaware and all references in
this Plan to the "Board of Directors" shall thereafter be deemed to
mean references to the Board of Directors of ServiceMaster
Incorporated of Delaware.
9. Fractional Shares. No fractional shares shall be issued
pursuant to any option granted hereunder. Any fractional share
resulting from an adjustment pursuant to Section 7 shall be
eliminated.
10. Government Regulations. The Plan, the grant and the
exercise of options hereunder, and ServiceMaster's obligation and
deliver ServiceMaster Shares pursuant to any such exercise, shall
be subject to all applicable federal and state laws, rules,
regulations.
11. Term of the Plan. The Plan shall become effective on the
date of its approval by the Board of Directors. The period during
which grants of options may be made under the Plan shall terminate
on December 31, 2004, unless the Plan is terminated earlier by the
Board of Directors.
12. Amendment, Suspension or Termination of the Plan. (a)
The Board of Directors at any time and from time to time may amend
or suspend the Plan, and the Board of Directors may at any time
terminate the Plan, provided, however, that without the written
consent of the optionee, no amendment, suspension or termination of
the Plan shall adversely affect any option previously granted under
the Plan (but it shall be conclusively presumed that any adjustment
or change as provided in Section 7 does not adversely affect any
such right).
(b) Termination of the Plan, whether by lapse of time or
action by the Board of Directors pursuant to paragraph 12, shall
not affect outstanding options which have been granted prior to
such termination, and all unexpired options shall continue in full
force and effect after the termination of the Plan except as they
shall lapse by their own terms. The terms of the Plan shall
continue to apply to such options.
13. No Right to Continue as Director. Neither this Plan
nor the granting of an option hereunder nor any other action taken
with respect to this Plan shall constitute or be evidence of any
agreement or understanding, express or implied, that a director has
a right to continue as a member of the Board of Directors for any
period of time, or at any particular rate of compensation.
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