Exhibit 10.1
EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of November 1, 2004
(the "Effective Date") by and between XXXXXXXX X. XXXX ("Executive") and THE
SERVICEMASTER COMPANY, a Delaware corporation ("ServiceMaster").
WHEREAS, Executive currently serves as Chief Executive Officer ("CEO") of
ServiceMaster and Chairman of its Board of Directors;
WHEREAS, ServiceMaster desires to continue to employ Executive and
Executive desires to continue to be employed by ServiceMaster; and
WHEREAS, ServiceMaster and Executive desire to set forth the terms and
conditions upon which Executive shall continue to be employed as CEO of
ServiceMaster.
NOW, THEREFORE, in consideration of the mutual covenants and obligations
contained herein, and intending to be legally bound, the parties, subject to the
terms and conditions set forth herein, agree as follows:
1. Defined Terms. Any capitalized terms which are not defined within this
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Agreement are defined in Exhibit A hereto attached.
2. Term. ServiceMaster shall continue to employ Executive as CEO, and
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Executive agrees to continue his employment with ServiceMaster as CEO for the
period commencing on the Effective Date and continuing through and including the
earlier of the effective date of Executive's termination of employment ("Date of
Termination"), the date of Executive's death, and May 6, 2012 (the "Term");
provided, however, that the Term shall automatically be extended by one year
effective May 7, 2012 and each May 7 thereafter until such date as either the
Company or Executive shall have terminated such automatic extension provision by
giving written notice to the other at least six months prior to the end of the
initial Term or any extension thereof.
3. Duties. During the Term, and subject to the powers, authorities and
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responsibilities vested in the Board of Directors of ServiceMaster (the "Board")
and committees of the Board, Executive shall have the authorities and
responsibilities consistent with his experience and training and position as
CEO, which duties shall be at least substantially equal in status and character
to such authorities and responsibilities of Executive on the Effective Date.
4. Obligations of ServiceMaster During the Term. ServiceMaster shall
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provide the following to Executive during the Term:
(a) Salary. ServiceMaster shall pay Executive an annual base salary
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("Base Salary") in an amount not less than $750,000, payable in accordance
with the payroll practices of ServiceMaster. If Executive's Base Salary is
increased during the Term, it may not thereafter be decreased without the
written consent of Executive.
(b) Annual Bonus. Executive shall be eligible to participate in
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ServiceMaster's annual bonus plan in respect of each fiscal year of
ServiceMaster on at least the same terms and conditions as other executive
officers of ServiceMaster;
provided, that Executive's target annual bonus shall be not less than
150% of Base Salary.
(c) Incentive Plans. Except as set forth in Section 4(b), Executive
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shall be eligible to participate in ServiceMaster's incentive plan or plans
on at least the same terms and conditions as other executive officers of
ServiceMaster; provided, that for so long as ServiceMaster maintains the
Corporate Performance Plan ("CPP"), Executive's target annual value for any
fiscal year shall not be less than $700,000 under the CPP (or awards of
equivalent value under any successor plan(s)).
(d) Compensation and Leadership Development Committee Approval.
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Notwithstanding Sections 4(a)-(c), but subject to the definition of Good
Reason as set forth in Exhibit A, Executive understands and agrees that the
Compensation and Leadership Development Committee of the Board ("CLDC") has
the authority and responsibility to approve Executive's Base Salary, target
annual bonus and all other compensation of Executive.
(e) Benefits. Executive shall be entitled to those employee benefits
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and perquisites which ServiceMaster from time to time generally makes
available to its executive officers ("Benefits") subject to the terms and
conditions of such benefit plans or programs. The Benefits shall include,
without limitation, medical insurance, dental insurance, life insurance,
accidental death and dismemberment insurance, vision insurance, disability
insurance, flexible spending or similar account, four weeks of paid annual
vacation and such other benefits, including company car and dues payable
for club memberships, as the Board or CLDC may determine from time to time.
In addition to the foregoing Benefits and subject to approval by the CLDC,
Executive may use the company plane for personal use in accordance with the
Policy Regarding Use of Company Aircraft. If Executive is employed on or
after May 6, 2012, he shall be deemed to have satisfied any and all age
and/or service requirements to receive retiree status under any employee
benefit or equity plan of ServiceMaster.
(f) Deferred Compensation Plan. Executive may elect to defer Base
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Salary and earned annual bonus and/or other compensation in accordance with
ServiceMaster's deferred compensation plan.
(g) Reimbursement of Expenses. Executive shall be reimbursed for all
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proper and reasonable expenses incurred by Executive in the performance of
his duties hereunder in accordance with the policies of ServiceMaster. In
addition, ServiceMaster shall reimburse Executive for the reasonable
professional fees, up to $25,000, incurred by him in connection with the
negotiation and documentation of this Agreement.
5. Severance Benefits.
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(a) In the event that Executive's employment hereunder is terminated
during the period beginning on and including the Effective Date and ending
on or prior to the expiration of the Term by ServiceMaster without Cause or
by Executive for Good Reason, then ServiceMaster, subject to Executive's
execution of a release in the form of Exhibit B, shall pay to Executive
within 30 days after the Date of Termination, as compensation for services
rendered to ServiceMaster and its affiliated companies, a lump
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sum cash amount equal to the sum of subsections (1)-(4) below, subject to
any applicable payroll or other taxes required to be withheld and, in
addition, shall provide to Executive the benefits set forth under
subsection (5) below:
(1) Executive's full annual Base Salary through the Date of
Termination and annual bonus and CPP bonus earned with respect to the
fiscal year immediately prior to the fiscal year in which the Date of
Termination occurs, in each case to the extent not previously paid
(but after giving effect to any amounts that would be deferred
pursuant to the ServiceMaster deferred compensation plan); plus
(2) two (2) times Executive's highest annual Base Salary in
effect during the Term; plus
(3) two (2) times Executive's highest target annual bonus during
the Term; plus
(4) reimbursement of Executive's expenses pursuant to Section
4(g); plus
(5) continuation of medical insurance, dental insurance,
accidental death and dismemberment insurance, vision insurance and
disability insurance, if any, through and including the date that is
two years after the Date of Termination; provided, however, that in no
event shall the foregoing benefits continue after May 6, 2012, except
that, after the end of the continuation period described above,
Executive shall be entitled to continue coverage of such benefits
covered by Federal continuation coverage requirements (COBRA) for the
full COBRA period.
In the event Executive's employment hereunder is terminated on or
after Executive's fifty-sixth birthday (May 6, 2010), the amount
payable in accordance with subsections (2)-(3) shall be reduced by
multiplying such amount by a fraction, the numerator of which is the
number of days from but excluding May 6, 2010 to and including the
Date of Termination and the denominator of which is 730.
(b) In the event that Executive's employment hereunder is terminated
during the period beginning on and including the Effective Date and ending
on or prior to the expiration of the Term by ServiceMaster for Cause or by
Executive for any reason other than Good Reason, including by reason of
retirement, death or disability, then ServiceMaster shall pay to Executive
(or Executive's executors, legal representatives or administrators in the
event of Executive's death) within 30 days after the Date of Termination or
date of death, as compensation for services rendered to ServiceMaster and
its affiliated companies, a lump sum cash amount equal to the sum of
subsections (1)-(2) below, subject to any applicable payroll or other taxes
required to be withheld:
(1) Executive's full annual Base Salary through the Date of
Termination or date of death plus, in the event Executive's employment
is terminated by reason of death or disability, Executive's annual
bonus and CPP bonus earned with respect to the fiscal year immediately
prior to the fiscal year in
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which the Date of Termination occurs, in each case to the extent not
previously paid (but after giving effect to any amounts that would be
deferred pursuant to the ServiceMaster deferred compensation plan);
plus
(2) reimbursement of Executive's expenses pursuant to Section
4(g).
(c) Exclusive Severance. Subject to Section 7, any amount paid
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pursuant to Section 5(a) or (b) shall be paid in lieu of any other amount
of severance relating to salary or bonus continuation to be received by
Executive upon termination of employment of Executive under any severance
plan, policy or arrangement of ServiceMaster or its affiliated companies.
(d) Stock Options and Stock Appreciation Rights. Each option to
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purchase shares of ServiceMaster common stock or stock appreciation right
relating to ServiceMaster common stock held by Executive on the Date of
Termination or date of death shall continue in accordance with its terms;
provided, however, that upon any termination of Executive's employment on
or after May 6, 2010 (other than by the Company for Cause or "Gross
Misconduct" as defined in any stock option or stock appreciation right
agreement), Executive shall be deemed to have satisfied all age and service
requirements to receive retiree status with respect to such options and
stock appreciation rights.
(e) Restricted Stock and Restricted Stock Units. Each restricted stock
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award and restricted stock unit award held by Executive shall be subject to
the terms and conditions of the applicable restricted stock award agreement
and restricted stock unit award agreement and corresponding ServiceMaster
plan, including, without limitation, the restriction periods, vesting
schedules and termination provisions.
(f) PSRP and ESPP. Executive's participation, if any, in the
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ServiceMaster Profit Sharing and Retirement Plan ("PSRP") and Employee
Stock Purchase Plan ("ESPP") shall end as the Date of Termination or date
of death, if applicable.
(g) Deferred Compensation Plan. Executive's participation, if any, in
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the ServiceMaster deferred compensation plan shall end as the Date of
Termination or date of death, if applicable. Any compensation previously
deferred by Executive (together with any interest and earnings thereon)
under the deferred compensation plan or any successor plan shall be paid or
distributed in accordance with the terms of the plan and Executive's
elections under the plan.
6. Covenants.
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(a) Non-Competition, Non-Solicitation and Confidentiality. From and
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after the Effective Date and through and including the date that is two
years after the Date of Termination, Executive shall not do any of the
following, directly or indirectly, without the prior written consent of
ServiceMaster:
(1) directly or indirectly (whether as owner, stockholder,
director, officer, employee, principal, agent, consultant, independent
contractor, partner or otherwise), in North America or any other
geographic area in which
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ServiceMaster is then conducting business, own, manage, operate,
control, participate in, perform services for, or otherwise carry on,
a business similar to or competitive with the business conducted by
ServiceMaster or any subsidiary of ServiceMaster; or
(2) directly or indirectly attempt to induce any employee of
ServiceMaster to terminate his or her employment with ServiceMaster or
any Subsidiary of ServiceMaster for any purpose whatsoever, or any
attempt directly or indirectly, in connection with any business to
which subsection (a)(1) applies, to solicit the trade or business of
any current or prospective customer, supplier or partner of
ServiceMaster or any subsidiary of ServiceMaster; or
(3) directly or indirectly (i) disclose or misuse of any
confidential information or trade secrets of ServiceMaster or a
subsidiary of ServiceMaster, or (ii) engage in any material activity
not known by the Board which could reasonably be foreseen as resulting
in a Change in Control.
Executive acknowledges and agrees that each stock option agreement, stock
appreciation right agreement, restricted stock unit award and restricted stock
award held by Executive contains covenants of Executive relating to competition
against ServiceMaster and its subsidiaries, confidentiality and non-solicitation
of employees and customers and similar obligations of Executive. Executive
agrees that such covenants are separate from this Agreement, shall continue in
accordance with their respective terms and shall survive the termination of this
Agreement.
(b) Litigation and Regulatory Cooperation. During and after
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Executive's employment, Executive shall cooperate fully with ServiceMaster
in the defense or prosecution of any claims or actions now in existence or
which may be brought in the future against or on behalf of ServiceMaster
that relate to events or occurrences that transpired while Executive was
employed by ServiceMaster. Executive's full cooperation in connection with
such claims or actions shall include, but not be limited to, being
available to meet with counsel to prepare for discovery or trial and to act
as a witness on behalf of ServiceMaster at mutually convenient times.
During and after Executive's employment, Executive also shall cooperate
fully with ServiceMaster in connection with any investigation or review of
any federal, state or local regulatory authority as any such investigation
or review relates to events or occurrences that transpired while Executive
was employed by ServiceMaster. ServiceMaster shall reimburse Executive for
any reasonable out-of-pocket expenses incurred in connection with
Executive's performance of obligations pursuant to this Section 6(b).
7. Effect of Change in Control Agreement. Executive and ServiceMaster are
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parties to a Change in Control Severance Agreement dated as of October 31, 2001
(the "CIC Agreement"). If, during the Term, (i) a Change in Control of
ServiceMaster occurs and (ii) the CIC Agreement is in effect on the date of the
Change in Control, this Agreement shall be terminated and superseded by the CIC
Agreement, as such agreement may be amended, modified or superseded from time to
time.
8. Successors and Assigns. This Agreement shall inure to the benefit of and
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be enforceable by ServiceMaster and its successors and assigns and by Executive
and Executive's
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personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. This Agreement shall not be
terminated by any merger or consolidation of ServiceMaster whereby
ServiceMaster is or is not the surviving or resulting corporation or as a result
of any transfer of all or substantially all of the assets of ServiceMaster. In
the event of any such merger, consolidation or transfer of assets, the
provisions of this Agreement shall be binding upon the surviving or resulting
corporation or the person or entity to which such assets are transferred.
9. Notice. All notices and other communications required or permitted under
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this Agreement (including the notice required by the definition of Good Reason
as set forth in Exhibit A) shall be in writing, shall be given by personal
delivery, overnight delivery by an established courier service, or by certified
mail, return receipt required, and shall be deemed to have been duly given when
delivered, addressed (a) if to Executive, to Xxxxxxxx X. Xxxx, 000 Xxxx
Xxxxxxxx, Xxxx Xxxxxx, Xxxxxxxx 00000, and if to ServiceMaster, to The
ServiceMaster Company, 0000 Xxxxx Xxxx, Xxxxx 000, Xxxxxxx Xxxxx, Xxxxxxxx
00000, attention General Counsel or Corporate Secretary, or (b) to such other
address as either party may have furnished to the other in writing in accordance
herewith.
10. Entire Agreement; Amendments. Except as otherwise specified herein,
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this Agreement and the Exhibits constitute the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersede and preempt any prior understandings, agreements or representations by
or between the parties, written or oral, which may have related in any manner to
the subject matter hereof.
11. Modification or Waiver. No provision of this Agreement may be modified
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or waived unless such modification or waiver is agreed to in writing and signed
by Executive and a member of the Board. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. Failure by Executive or
ServiceMaster to insist upon strict compliance with any provision of this
Agreement or to assert any right which Executive or ServiceMaster may have
hereunder shall not be deemed to be a waiver of such provision or right or any
other provision or right of this Agreement.
12. Governing Document. In the event of any conflict between the terms of
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this Agreement and the terms of any plan, program or policy of ServiceMaster,
the terms that are the most beneficial to Executive shall control as to such
plan, program or policy.
13. Governing Law; Validity. The interpretation, construction and
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performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Illinois without regard to the
principle of conflicts of laws. The invalidity or enforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any of the other provisions of this Agreement, which other provisions shall
remain in full force and effect.
14. Counterparts. This Agreement may be executed in counterparts, each of
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which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed the day and year first written above.
THE SERVICEMASTER COMPANY
By:/s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: Member of the Board of Directors
/s/ Xxxxxxxx X. Xxxx
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XXXXXXXX X. XXXX
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Exhibit A
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
(a) "Cause" means:
(1) a material breach by Executive of his duties and
responsibilities (other than as a result of incapacity due to physical
or mental illness) which is demonstrably willful and deliberate on
Executive's part, which is committed in bad faith or without
reasonable belief that such breach is in the best interests of
ServiceMaster and which is not remedied within thirty (30) days after
receipt of written notice from ServiceMaster specifying such breach;
or
(2) the commission by Executive of a felony or misdemeanor
involving any act of fraud, embezzlement or dishonesty or any other
intentional misconduct by Executive that substantially and adversely
affects the business affairs or reputation of ServiceMaster or an
affiliated company.
Not withstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause unless he has (i) had ten (10) days' written notice setting
forth the reasons for ServiceMaster's intention to terminate for Cause, (ii) had
an opportunity to be heard before the Board, and (iii) received a notice of
termination from the Board stating that in the opinion of a majority of the full
Board that Executive is guilty of conduct of a type set forth above and
specifying the particulars thereof.
(b) "Change in Control" shall have the meaning set forth in the CIC
Agreement; provided, that in the event such definition shall be modified or
revised in the CIC Agreement, then the definition of Change in Control for
purposes of this Agreement shall be so modified or revised.
(c) "Good Reason" means, without Executive's written consent, the
occurrence of any of the following events:
(1) any of (i) the reduction in any material respect in
Executive's position(s), authorities or responsibilities with
ServiceMaster, (ii) an adverse change in Executive's reporting
relationships, or (iii) any failure to re-elect Executive to serve as
CEO of ServiceMaster; provided, however that "Good Reason" shall not
occur if the Board elects a non-executive Chairman, so long as
Executive remains a member of the Board and continues to report to the
Board;
(2) a reduction in Executive's Base Salary or target annual
bonus, each as in effect on the Effective Date or as the same may be
increased from time to time thereafter;
(3) the failure of ServiceMaster to (i) provide Executive and
Executive's dependents Benefits substantially comparable to the plans,
practices, programs and policies of ServiceMaster and its subsidiaries
in effect for
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Executive on the Effective Date, (ii) provide fringe
benefits substantially comparable to the plans, practices, programs
and policies of ServiceMaster and its subsidiaries in effect for
Executive on the Effective Date, (iii) provide an office, together
with secretarial and other assistance, substantially comparable to
that provided to Executive by ServiceMaster on the Effective Date, or
(iv) provide Executive with four weeks annual paid vacation.
If Executive determines that Good Reason exists, Executive must notify
ServiceMaster in writing, within one hundred eighty (180) days following
Executive's knowledge of the first event which Executive determines constitutes
Good Reason, or such event shall not constitute Good Reason under the terms of
Executive's employment. If ServiceMaster remedies such event within thirty (30)
days following receipt of such notice, Executive may not terminate employment
for Good Reason as a result of such event.
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Exhibit B
GENERAL RELEASE
1. Executive, on behalf of himself and anyone claiming through him,
including, but not limited to, his past, present and future spouses, family
members, relatives, agents, attorneys, representatives, heirs, executors and
administrators, and the predecessors, successors and assigns of each of them,
hereby releases and agrees not to xxx ServiceMaster or any of its divisions,
subsidiaries, affiliates or other related entities (whether or not such entities
are wholly owned), any of the past, present or future directors, officers,
employees and agents, and the predecessors, successors and assigns of each of
them (hereinafter jointly referred to as the "ServiceMaster Released Parties"),
with respect to any and all claims both known and unknown to Executive which
Executive now has, has ever had, or may in the future have, against any of the
ServiceMaster Released Parties for or related in any way to anything occurring
from the beginning of time up to and including the date hereof, including,
without limiting the generality of the foregoing, any and all claims so known
which in any way result from, arise out of, or relate to, Executive's employment
by ServiceMaster or the termination of such employment, including, but not
limited to, any and all claims that could have been asserted by Executive or on
his behalf against any of the ServiceMaster Released Parties in any federal,
state or local court, commission, department or agency; provided, however, that
nothing contained in this Section 1 shall apply to, or release any of the
ServiceMaster Released Parties from, any obligation contained in the Agreement
or any obligation under any benefit plan or arrangement of ServiceMaster not
referred to in the Agreement which entitles Executive to the receipt of any
benefit.
2. ServiceMaster, on behalf of itself and each of its divisions,
subsidiaries, affiliates or other related entities (whether or not such entities
are wholly owned) and its past, present and future directors, officers,
employees and agents, and the predecessors, successors and assigns of each of
them, hereby releases and agrees not to xxx Executive or anyone claiming through
him including, but not limited to, his past, present and future spouses, family
members, agents, attorneys, representatives, heirs, executors and
administrators, or the predecessors, successors and assigns of each of them
(hereinafter jointly referred to as the "Executive Released Parties"), with
respect to any and all claims both known and unknown to ServiceMaster which
ServiceMaster now has, has ever had, or may in the future have, against any of
Executive Released Parties for or related in any way to anything occurring from
the beginning of time up to and including the date hereof. Without limiting the
generality of the foregoing, this general release shall apply to any and all
claims both known and unknown which in any way result from, arise out of, or
relate to, Executive's employment by ServiceMaster or his service as an officer
or director of ServiceMaster or the termination of such employment or service,
including, but not limited to, any and all claims that could have been asserted
by ServiceMaster or on its
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behalf against any of Executive Released Parties in any federal, state or local
court, commission, department or agency.
THE SERVICEMASTER COMPANY
By:/s/ Xxxxx X. Xxxxxxx
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Name:Xxxxx X. Xxxxxxx
Title: Member of the Board of Directors
/s/ Xxxxxxxx X. Xxxx
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XXXXXXXX X. XXXX
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