American Home Shield 2008 Annual Report Download - page 113

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 20. Stock-Based Compensation (Continued)
through the earliest of the expiration of their term or three months following termination of employment (one year in the case of death, disability or retirement
at normal retirement age).
Unless sooner terminated by the board of directors of Holdings, the Stock Incentive Plan will remain in effect until November 20, 2017.
On December 19, 2007, Holdings completed an equity offering to certain executive officers and key employees pursuant to the Stock Incentive Plan. The
shares sold and options granted to employees in connection with this equity offering are subject to and governed by the terms of the Stock Incentive Plan. In
connection with this offering, Holdings sold 1,416,870 shares of common stock at a purchase price of $10.00 per share and sold 576,668 deferred share units
("DSUs") at a purchase price of $10.00 per DSU. DSUs represent a right to receive a share of common stock in the future. Holdings also granted options to
purchase 3,937,076 additional shares of common stock at an exercise price of $10.00 per share in connection with this equity offering. In addition, Holdings
granted ServiceMaster's executive officers and key employees options to purchase an additional 5,332,125 shares of Holdings common stock at an exercise
price of $10.00 per share. These options are subject to and governed by the terms of the Stock Incentive Plan. The $10.00 per share purchase price and
exercise price was based on the determination by the board of directors of Holdings of the fair market value of the common stock of Holdings as of the
purchase/grant date.
In 2008, Holdings completed various equity offerings to certain executive officers and key employees pursuant to the Stock Incentive Plan. The shares
sold and options granted to employees in connection with these equity offerings are subject to and governed by the terms of the Stock Incentive Plan. In
connection with these offerings, Holdings sold a total of 240,700 shares of common stock at a purchase price of $10.00 per share. Holdings also granted
options to purchase 466,400 additional shares of common stock at an exercise price of $10.00 per share in connection with these equity offerings. In addition,
Holdings granted ServiceMaster's executive officers and key employees options to purchase an additional 427,500 shares of Holdings common stock at an
exercise price of $10.00 per share. These options are subject to and governed by the terms of the Stock Incentive Plan. The $10.00 per share purchase price
and exercise price was based on the determination by the board of directors of Holdings of the fair market value of the common stock of Holdings as of the
purchase/grant dates.
All options granted to date will vest in four equal annual installments, subject to an employee's continued employment. The four-year vesting period is
the requisite service period over which compensation cost will be recognized on a straight-line basis for all grants. The options will be accounted for as
equity-classified awards. The non-cash stock-based compensation expense associated with the Stock Incentive Plan is pushed down from Holdings and
recorded in the financial statements of ServiceMaster.
The value of each option award was estimated on the grant date using the Black-Scholes option valuation model that incorporates the assumptions noted
in the following table. For options granted in 2008, the expected volatilities were based on the historical and implied volatilities of the publicly traded stock of
a group of companies comparable to ServiceMaster. For options granted in the Successor period from July 25, 2007 to December 31, 2007, expected volatility
was based on actual historical experience of the Company's publicly traded stock prior to the Merger. The expected life represents the period of time that
options granted are expected to be outstanding and, for options granted in the Successor period from July 25, 2007 to December 31, 2007, was estimated
based on actual historical experience of the predecessor Company's stock options and expected future exercise and forfeiture activity related to the Company's
stock options. Due to the
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