EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of the 18th day
of April, 2002 (the "Effective Date") by and between XXXXXXX X. XXXXXX
("Executive") and THE SERVICEMASTER COMPANY, a Delaware corporation
("ServiceMaster").
WHEREAS, Executive currently serves as an Executive Vice President of
ServiceMaster;
WHEREAS, Executive has successfully assisted ServiceMaster with the
transfer of ServiceMaster Management Services, L.P. to ARAMARK Corporation;
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 retire ("Retirement") from ServiceMaster
on February 28, 2003 ("Retirement Date").
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
Agreement are defined in Exhibit A hereto attached.
2. TERM. ServiceMaster shall continue to employ Executive as Executive Vice
President, and Executive agrees to continue his employment with ServiceMaster as
Executive Vice President for the period commencing on the Effective Date and
continuing
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through and including February 28, 2003 (the "Term"). In the event a Change in
Control of ServiceMaster occurs on or prior to the Retirement Date, this
Agreement shall be terminated and will be superseded by the Change in Control
Severance Agreement dated as of October 31, 2001 between Executive and
ServiceMaster, as such agreement may be amended, modified or superseded from
time to time (the "Change in Control Agreement").
3. DUTIES. During the Term, Executive shall perform such duties for
ServiceMaster and its subsidiaries consistent with his experience and training
and position as Executive Vice President as the Board of Directors of
ServiceMaster (the "Board") or Chief Executive Officer of ServiceMaster shall
determine from time to time, which duties shall be at least substantially equal
in status, dignity and character to the duties of Executive on the Effective
Date.
4. OBLIGATIONS OF SERVICEMASTER DURING THE TERM. ServiceMaster shall
provide the following to Executive during the Term:
(a) SALARY. ServiceMaster shall pay Executive an annual base salary ("Base
Salary") of $525,000 through and including the Retirement Date, payable
in accordance with the payroll practices of ServiceMaster.
(b) BONUS AND LTPA. The Executive shall not be eligible to
participate in ServiceMaster's APC Plan or Long-Term Performance Award
Plan for the period beginning January 1, 2002.
(c) BENEFITS. Executive shall be entitled to those employee
benefits and perquisites which ServiceMaster from time to time
generally makes available to its executives ("Benefits") subject to the
terms and conditions of such benefit plans or programs. The Benefits
shall include, without limitation, dental insurance, life insurance,
disability insurance, four-weeks of paid annual vacation and such other
benefits as the Board, Compensation and Leadership Development
Committee of the Board or Chief Executive Officer of ServiceMaster may
determine from time to time. ServiceMaster shall also allow Executive
to make annual deferrals of salary either pursuant to a plan or
pursuant to special arrangements between ServiceMaster and Executive.
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(d) REIMBURSEMENT OF EXPENSES. Executive shall be reimbursed
for all reasonable expenses incurred by him in the performance of his
duties carrying out the terms of this Agreement.
5. TERMINATION. Executive's employment hereunder may be terminated on
or prior to the Retirement Date upon the occurrence of any one of the events
described in Section 5(a), (b), (c) or (d). Upon termination, Executive
shall be entitled only to such compensation and Benefits as described in this
Section 5.
(a) RETIREMENT. Upon Retirement on the Retirement Date,
ServiceMaster shall pay to Executive or to Executive's executors,
legal representatives or administrators (if Executive dies during the
Pay-Out Period (as defined below)), one hundred five (105) equal
semi-monthly installments of $30,000 for the period commencing on
March 1, 2003 and ending on July 15, 2007 (the "Pay-Out Period").
(b) TERMINATION WITHOUT CAUSE OR FOR GOOD REASON OR BY REASON OF
DISABILITY. In the event of termination of Executive's employment
hereunder prior to the Retirement Date by ServiceMaster without Cause,
by Executive for Good Reason or by reason of Disability, ServiceMaster
shall pay to Executive or to Executive's executors, legal
representatives or administrators (if Executive dies during the
Alternate Pay-out Period (as defined below)), an amount equal to
$3,150,000. This amount shall be paid in equal semi-monthly
installments for the period commencing on the effective date of such
termination and ending on July 15, 2007 (the "Alternate Pay-out
Period").
(c) TERMINATION FOR CAUSE OR WITHOUT GOOD REASON OR RETIREMENT.
In the event of termination of Executive's employment hereunder prior
to the Retirement Date by ServiceMaster for Cause or by Executive for
any reason other than Good Reason, Disability or Retirement on the
Retirement Date, ServiceMaster shall pay to Executive the amounts
determined under Section 5(e).
(d) DEATH. In the event of termination of Executive's employment
hereunder prior to the Retirement Date as a result of death,
ServiceMaster shall pay to Executive or to Executive's executors,
legal representatives or administrators the amounts determined under
Section 5(e).
(e) ACCRUED BASE SALARY, REIMBURSEMENT AND DEFERRED COMPENSATION.
In the event of termination of Executive's employment for any reason
(including by ServiceMaster without Cause or by Executive for Good
Reason, Disability or Retirement), ServiceMaster shall pay to
Executive accrued and unpaid Base Salary through and including the
effective date of such termination, reimbursement of Executive's
expenses pursuant to Section 4(d) and any compensation previously
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deferred by Executive (together with any interest and earnings
thereon) under the ServiceMaster Deferred Compensation Plan, in
accordance with Executive's election under such plan.
(f) EXISTING BENEFITS. Any amount paid 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.
Executive shall also receive the Benefits in accordance with the terms
and conditions of any then existing plan or program during the Pay-out
Period or Alternate Pay-Out Period.
(g) LTPA. In the event of termination of Executive's employment
hereunder for any reason, any amounts payable to Executive under
ServiceMaster's Long-Term Performance Award Plan shall be paid in
accordance with the terms and conditions of such plan; provided,
however, that in the event of termination of Executive's employment
hereunder by ServiceMaster without Cause, by Executive for Good Reason
or Retirement or as a result of death or Disability of Executive, then
to the extent Executive forfeits the excess, if any, of Executive's
bank balance on the effective date of such termination over any
administrative credit in such bank balance on the effective date of
such termination, ServiceMaster shall pay Executive an amount equal to
such excess.
(h) STOCK OPTIONS. Each option to purchase shares of
ServiceMaster's common stock held by Executive on the effective date
of Executive's termination of employment shall continue in accordance
with its terms; it being understood and agreed by the parties that,
notwithstanding the definitions of Retirement and Retirement Date as
set forth above, Executive's employment for purposes of any such
option (including, without limitation, the exercise of any such
option), shall be treated as continuing through and including the last
day of any Pay-out Period or Alternate Pay-Out Period and Executive
shall be deemed to have retired on the last day of any Pay-out Period
or Alternate Pay-Out Period.
(i) NO MITIGATION. ServiceMaster's obligation to make any
payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off,
counterclaim, recoupment, defense or other claim, right or action
which ServiceMaster may have against Executive or others. In no event
shall Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not Executive obtains other employment.
(j) DISPUTED AMOUNTS. If there shall be any dispute between
ServiceMaster and Executive in the event of any termination of
Executive's employment regarding whether such termination was for
Cause or Good Reason, then, unless and until there is a final,
nonappealable judgment by a court of competent jurisdiction declaring
that such termination was for Cause, that the
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determination by Executive of the existence of Good Reason was not
made in good faith, or that ServiceMaster is not otherwise obligated
to pay any amount or provide any Benefit to Executive and his legal
representatives or other beneficiaries, as the case may be, under
Section 5(b), ServiceMaster shall pay all amounts, and provide all
Benefits, to Executive and Executive's legal representatives or other
beneficiaries, as the case may be, that ServiceMaster would be
required to pay or provide pursuant to Section 5(b) as though such
termination were by ServiceMaster without Cause or by Executive with
Good Reason.
6. COVENANTS. Executive shall not do any of the following, directly
or indirectly, without the prior written consent of ServiceMaster:
(a) During the Term, and if ServiceMaster shall become
obligated to make the payments to Executive as set forth under Section
5(a) or (b), for a period co-terminous with the Pay-out Period or
Alternate Pay-Out Period, as applicable:
(1) 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 (whether as
owner, stockholder, partner, director, officer, employee,
principal, agent, consultant, independent contractor or
otherwise), in any geographic area in which ServiceMaster or
any subsidiary of ServiceMaster is then conducting business.
(2) Except in his capacity as an employee of
ServiceMaster, (1) induce or attempt to induce any employee of
ServiceMaster or any subsidiary of ServiceMaster to terminate
or abandon his or her employment for any purpose whatsoever,
or (2) in connection with any business to which Section
6(a)(1) applies, call on, service, solicit or otherwise do
business with any current or prospective commercial customer
of ServiceMaster or any subsidiary of ServiceMaster.
(3) Nothing in this Section 6(a) shall prohibit
Executive from being (1) a stockholder in a mutual fund or a
diversified investment company or (2) a passive owner of not
more than one percent (1%) of the outstanding stock of any
class of a corporation, any securities of which are publicly
traded, so long as Executive has no active participation in
the business of such corporation.
(4) If, at any time of enforcement of this Section
6(a), a court or an arbitrator holds that the restrictions
stated herein are unreasonable under circumstances then
existing, the parties hereto agree that the maximum period,
scope or geographical area reasonable under such circumstances
shall be substituted for the stated period, scope or area and
that the court or
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arbitrator shall be allowed to revise the restrictions
contained herein to cover the maximum period, scope and area
permitted by law.
(b) Make use of or disclose, at any time, any (1) trade secret
or other confidential or secret information of ServiceMaster or any
subsidiary of ServiceMaster or (2) other technical, business,
proprietary or financial information of ServiceMaster or any subsidiary
of ServiceMaster not available to the public generally or to the
competitors of ServiceMaster or any subsidiary of ServiceMaster
("Confidential Information"), except to the extent that such
Confidential Information (x) becomes a matter of public record or is
published in a newspaper, magazine or other periodical available to the
general public, other than as a result of any act or omission of
Executive or (y) is required to be disclosed by any law, regulation or
order of any court or regulatory commission, department or agency.
(c) LITIGATION AND REGULATORY COOPERATION. During and after
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(c).
8. COVERED SERVICE. In accordance with Article Eleven of
ServiceMaster's Certificate of Incorporation (the "Charter"), the services
provided and to be provided by Executive under this Agreement shall be
deemed to be a "Covered Service" within the meaning of subsection 11.1.1 of
the Charter.
9. SUCCESSORS AND ASSIGNS. (a) This Agreement shall inure to the
benefit of and be enforceable by ServiceMaster and its successors and assigns
and by Executive and Executive's personal or legal representatives, executors,
administrators, successors, heirs,
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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.
(b) ServiceMaster agrees that concurrently with any merger, consolidation
or transfer of assets referred to in Section 9(a) that is not a Change in
Control of ServiceMaster, it shall cause any successor or transferee
unconditionally to assume, by written instrument delivered to Executive (or his
beneficiary or estate), all of the obligations of ServiceMaster hereunder.
Failure of ServiceMaster to obtain such assumption prior to or concurrently with
the effectiveness of any such merger, consolidation or transfer of assets shall
be a breach of this Agreement and shall entitle the Executive to the
compensation and Benefits from ServiceMaster in the same amount and on the same
terms as Executive would be entitled hereunder if Executive's employment were
terminated by ServiceMaster without Cause or by Executive for Good Reason.
10. NONDISPARAGEMENT. Except for any disclosures permitted under
Section 6(b) above, Executive and ServiceMaster agree, subject to any
obligations Executive and ServiceMaster may have under applicable law, that
Executive and ServiceMaster shall not make or cause to be made any statements or
representations that disparage, are inimical to, or damage the reputation of
Executive or ServiceMaster or any of its affiliates, subsidiaries, agents,
officers, directors or employees.
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11. NOTICE. All notices and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or five days after deposit in the United States mail,
postage prepaid, addressed (a) if to Executive, to Xxxxxxx X. Xxxxxx, 000 Xxxx
Xxxxx Xxxxxx, Xxxxxxxx, Xxxxxxxx 00000, and if to ServiceMaster, to The
ServiceMaster Company, 0000 Xxxxxxxxxxx Xxxx, Xxxxxxx Xxxxx, Xxxxxxxx 00000,
attention General Counsel, or (b) to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
12. ENTIRE AGREEMENT; AMENDMENTS. Except as otherwise specified herein,
this Agreement and Exhibit A 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, including the Agreement dated as of November 30, 2001
between ServiceMaster and Executive.
13. MODIFICATION OR WAIVER. No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by Executive and by the Chairman, Chief Executive Officer, President,
any Executive Vice President, Treasurer or General Counsel of ServiceMaster or
any successor under this Agreement. 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
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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.
14. GOVERNING LAW; VALIDITY. The interpretation, construction and
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.
15. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original and all of which together shall be
deemed to be one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed the day and year first written above.
THE SERVICEMASTER COMPANY
By: /S/ XXXXXXXX X. XXXX
----------------------------------------
Name: Xxxxxxxx X. Xxxx
Title: President and Chief Executive Officer
/S/ XXXXXXX X. XXXXXX
----------------------------------------
XXXXXXX X. XXXXXX
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A-3
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 30 days after receipt of written notice
from ServiceMaster specifying such breach; or
(2) the commission by Executive on or after May 1,
1997 of a felony or misdemeanor involving any act of fraud,
embezzlement or dishonesty or any other intentional misconduct by
Executive not known by ServiceMaster as of the Effective Date that
materially and adversely affects the business affairs or reputation of
ServiceMaster or an affiliated company.
(b) "CHANGE IN CONTROL" shall have the meaning set forth in
the Change in Control Agreement; provided, however, that in the event
such definition shall be modified or revised in the Change in Control
Agreement, then the definition of Change in Control for purposes of
this Agreement shall be so modified or revised and; provided, further,
that in the event the Change in Control Agreement shall be terminated,
then the definition of Change in Control contained in the Change in
Control Agreement on the date of termination of the Change in Control
Agreement shall apply for purposes of this Agreement.
(c) "DISABILITY" means Executive's absence from Executive's
duties with ServiceMaster or its affiliated companies on a full-time
basis for at least 180 consecutive days as a result of Executive's
incapacity due to physical or mental illness.
(d) "GOOD REASON" means, without Executive's express
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, duties or responsibilities
with ServiceMaster, (ii) an adverse change in Executive's reporting
responsibilities, titles or offices with ServiceMaster, or (iii) any
removal or involuntary termination of Executive from ServiceMaster,
otherwise than as expressly permitted by this Agreement or any failure
to re-elect Executive to any position with ServiceMaster held by the
Executive;
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(2) a reduction in Executive's rate of annual
base salary as in effect on the Effective Date or as the same may be
increased from time to time thereafter;
(3) any requirement of ServiceMaster that Executive
be based more than 40 miles from 0000 Xxxxxxxxxxx Xxxx, Xxxxxxx Xxxxx,
Xxxxxxxx or, if prior to a Change in Control and in the event
ServiceMaster changes its principal executive office during 2002, 40
miles from the location of such principal executive office;
(4) the failure of ServiceMaster to (i) continue in
effect any employee benefit plan or compensation plan in which
Executive is participating, unless Executive is permitted to
participate in other plans providing Executive with substantially
comparable benefits, or the taking of any action by ServiceMaster which
would materially and adversely affect Executive's participation in or
materially reduce Executive's benefits under any such plan, (ii)
provide Executive and Executive's dependents welfare benefits
(including, without limitation, prescription, dental, disability,
salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs) substantially comparable
to the plans, practices, programs and policies of ServiceMaster and its
affiliated companies in effect for Executive on the Effective Date or,
if more favorable to Executive, as in effect generally at any time
thereafter with respect to other peer executives of ServiceMaster and
its affiliated companies, (iii) provide fringe benefits substantially
comparable to the plans, practices, programs and policies of
ServiceMaster and its affiliated companies in effect for Executive on
the Effective Date or, if more favorable to Executive, as in effect
generally at any time thereafter with respect to other peer executives
of ServiceMaster and its affiliated companies, (iv) provide an office,
together with personal secretarial and other assistance, substantially
comparable to the most favorable of the foregoing provided to Executive
by ServiceMaster on the Effective Date or, if more favorable to
Executive, as provided generally at any time thereafter with respect to
other peer executives of ServiceMaster and its affiliated companies,
(v) provide Executive with four weeks paid vacation or, if more
favorable to Executive, as in effect generally at any time hereafter
with respect to other peer executives of ServiceMaster and its
affiliated companies, or (vi) reimburse Executive promptly for all
reasonable employment expenses incurred by Executive in accordance with
the most favorable policies, practices and procedures of ServiceMaster
and its affiliated companies in effect for Executive on the Effective
Date or, if more favorable to Executive, as in effect generally at any
time thereafter with respect to other peer executives of ServiceMaster
and its affiliated companies; or
(5) the failure of ServiceMaster to obtain the
assumption agreement from any successor as contemplated in Section 9
above.
For purposes of this Agreement, an isolated, insubstantial and
inadvertent action taken in good faith and which is remedied by
ServiceMaster after receipt of notice thereof given by Executive shall
not constitute Good Reason.
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