Common use of Procedure for Exercising the Option Clause in Contracts

Procedure for Exercising the Option. (a) If WMUS contemplates exercising the Option (in whole or in part), WMUS and SMLP shall proceed as follows: (i) WMUS shall notify SMLP, in writing, that WMUS proposes to exercise the Option for the number of ServiceMaster Shares set forth in such notice subject to the satisfaction of the conditions set forth in this Section 1.4 (the "Preliminary Exercise Notice"). (ii) Within ten business days after the receipt of the Preliminary Exercise Notice, SMLP shall provide WMUS with: (1) a copy of SMLP's most recently filed Annual Report on Form 10-K, (2) copies of each Quarterly Report on Form 10-Q filed by SMLP since the date of item (1), (3) copies of each Report on Form 8-K filed by SMLP since the date of item (1), (4) a copy of SMLP's most recent annual report to shareholders (5) a copy of each quarterly statement to shareholders as sent since the date of such annual report and (6) a certificate of SMLP containing the representations set forth in paragraph (b) below (the "Review Materials"). (iii) WMUS shall have five business days after the receipt of the Review Materials to review the Review Materials (the "Review Period"). During the Review Period, representatives of SMLP shall remain reasonably available to respond to any reasonable inquiries WMUS may make with respect to the Review Materials or with respect to the business and condition of SMLP. If WMUS fails to act prior to the end of the Review Period, WMUS shall have no liability and WMUS's rights with respect to the Option shall not be prejudiced in any way. (iv) Prior to the close of the Review Period, WMUS shall notify SMLP, in writing, whether WMUS will proceed to exercise the Option in accordance with the Preliminary Exercise Notice (subject to satisfaction of the conditions to closing as set forth below) or whether WMUS has determined not to exercise the Option at this time (the "Final Exercise Notice"). If, in the Final Exercise Notice, WMUS elects to exercise the Option, the parties shall proceed to a closing of the transaction as provided in paragraphs (d) and (e) below. If WMUS elects not to exercise the Option in accordance with the Preliminary Exercise Notice, WMUS's rights with respect to the Option shall not be prejudiced in any way. (b) The representations referred to in item (ii) of paragraph (a) shall be the following: (i) if the representations are made prior to the Reincorporating Merger (as defined in Section 4 hereof), SMLP is duly organized, validly existing and is in good standing as a limited partnership in the state of its organization; and if the representations are made after the Reincorporating Merger, SMI (as defined in Section 4 hereof), is duly organized, validly existing and is in good standing as a corporation in the state of its organization; (ii) the issuance of the ServiceMaster Shares issuable in response to WMUS's exercise of the Option does not contravene: (A) any provision in SMLP's certificate of limited partnership or SMLP's agreement of limited partnership if SMLP is then a limited partnership or any provision in SMLP's certificate of incorporation or bylaws if SMLP is then a corporation; (B) any agreement to which SMLP is a party; or (C) any provision of any law or regulation; (iii) the ServiceMaster Shares issuable in response to WMUS's exercise of the Option will, upon issuance, have been duly authorized by SMLP's governing authority; (iv) the ServiceMaster Shares as issued in response to WMUS's exercise of the Option will be free and clear of all liens, claims, encumbrances and restrictions (except for securities laws restrictions described in paragraph (c) below and the restrictions under the Relationship Agreement between WMX, WMUS, SMLP and SMI dated as of the date hereof, as amended from time to time, the "Relationship Agreement"); (v) Upon payment of the Exercise Price for the ServiceMaster Shares issued in response to WMUS's exercise of the Option, such ServiceMaster Shares will be fully paid and non-assessable; (vi) The financial statements of SMLP which have been included in its Annual Report on Form 10-K and SMLP's Quarterly Reports on Form 10-Q delivered to WMUS in connection with the Preliminary Exercise Notice were prepared in accordance with generally accepted accounting principles applied on a consistent basis and present fairly the financial condition and results of operations of SMLP for the dates and as of the periods stated therein except that the financial statements included in SMLP's Quarterly Reports on Form 10-Q omit footnotes and condense information as permitted by the rules applicable to the preparation of 10-Q reports and are subject to adjustments to be made in the course of the preparation of SMLP's annual financial statements; (vii) SMLP is not aware of any fact or set of facts or trend or known uncertainty which has materially and adversely affected or may reasonably be expected to materially and adversely affect SMLP's business, financial condition or results of operations (whether actual or prospective) which are not disclosed in the Review Materials or by information either publicly disclosed by SMLP or otherwise communicated in writing by SMLP to a senior officer of WMX; and (viii) a statement of the capitalization of SMLP as at the date of the Preliminary Exercise Notice which shall include a listing of all options, warrants or other rights to acquire equity interests in SMLP which are then outstanding. (c) WMUS acknowledges that the ServiceMaster Shares to be issued by SMLP in response to the Preliminary Exercise Notice and the Final Exercise Notice will not be registered securities under state or federal securities laws and that the certificate(s) representing such ServiceMaster Shares will have a legend to such effect. WMUS will deliver a certificate to SMLP at the Option Closing (hereinafter defined) to the effect that WMUS is acquiring such ServiceMaster Shares for investment and not with a view to the distribution or resale, except in compliance with federal and state securities laws. (d) If WMUS elects to exercise the Option as set forth above, the closing of the transaction (the "Option Closing") shall occur within ten business days after the Final Exercise Notice has been received by SMLP.