Director Agreement - ServiceMaster Co. and C. William Pollard
January 1, 2004
Mr. C. William Pollard
1116 N. Stoddard Ave.
Wheaton, IL 60187
Dear Bill:
At your request and in connection with other considerations, we are
writing to you on behalf of The ServiceMaster Company and its Board of Directors
to set forth a restatement and amendment of your agreement dated March 21, 2002.
This Agreement reflects the matters approved by the Compensation and Leadership
Development Committee of ServiceMaster's Board of Directors on December 18, 2003
and supersedes your agreement dated March 21, 2002 in its entirety.
In consideration of the mutual promises and agreements contained in
this Agreement, ServiceMaster and you agree, as of January 1, 2004 (the
"Effective Date"), as follows:
1. Position and Services. (a) You shall be designated Chairman Emeritus
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of ServiceMaster, subject to your execution of this
Agreement.
(b) During the past 25 years, you have served as a senior officer, Chairman
of the Board and twice as Chief Executive Officer of ServiceMaster. As you have
now retired from these senior officer positions, you have agreed to provide
consulting services to ServiceMaster and its subsidiaries. Such services will be
related to operations, training and education, and shall be furnished as and
when the Board of Directors or the Chief Executive Officer or his designate may
reasonably request and subject to your reasonable availability giving due
consideration to your other responsibilities.
(c) It is understood and expected that in the normal course of rendering
such services, you will not receive information that would require you to assume
the obligations of an "insider". However, if you do receive such information,
you agree to abide by the ServiceMaster policy regarding "insiders", a copy of
which is attached hereto.
2. Payments and Benefits. In consideration of your past services to
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ServiceMaster and your agreement to abide by the other
terms and conditions herein including but not limited to paragraphs 10, 11, 13,
14 and 15 of this Agreement, ServiceMaster shall pay you in equal semi-monthly
installments in accordance with the payroll practices of ServiceMaster,
commencing on the Effective Date and ending on the earlier of (1) the last day
of the calendar month during which your death occurs or (2) the date on which
you and ServiceMaster agree to terminate this Agreement, the semi-monthly amount
of $8,333.34 and shall further provide you and your wife Judy the benefits and
other payments for the times and periods herein described.
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3. Reimbursement of Expenses. ServiceMaster shall reimburse you for all
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unreimbursed expenses properly incurred by you in the course of your provision
of consulting services under this Agreement.
4. Federal and State Deductions. ServiceMaster shall deduct from the
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amounts payable by ServiceMaster pursuant to paragraphs 2, 9 and 16 the amount
of all required federal and state withholding deductions.
5. Insurance Benefits.
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(a) Group Health, Dental, Life, Accidental Death and Dismemberment,
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Short-Term Disability and Long-Term Disability Insurance. On and after May 1,
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2002 and until the date of your death, ServiceMaster shall provide to you and
your dependents group health, dental, life, accidental death and dismemberment,
short-term disability and long-term disability insurance on the same terms as
such insurance is provided to active executive officers of ServiceMaster and
their dependents. For purposes of the foregoing sentence, your wife Judy shall
be deemed to be a dependent. If your wife Judy survives your death, until the
date of her death ServiceMaster shall provide to her the same insurance as
described in the first sentence of this paragraph 5(a).
(b) Compensation Plans. On and after May 1, 2002, you shall be eligible to
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participate in ServiceMaster's Employee Share Purchase Plan, Profit Sharing and
Retirement Plan and other ServiceMaster plans in accordance with the terms of
those plans.
6. Office Space and Secretary. On and after May 1, 2002 and until the
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earlier of (1) June 1, 2013 and (2) the date of your death, ServiceMaster shall
provide to you, for your exclusive use, office space of size and character, and
furnished in a manner, comparable to the office space provided to you
immediately prior to May 1, 2002. Such office space shall be located at a site
agreed upon by you and the Chairman and Chief Executive Officer of
ServiceMaster. ServiceMaster shall also make available to you, on a full-time
basis, at ServiceMaster's expense, the services of a secretary who is reasonably
acceptable to you. ServiceMaster shall pay, on a current basis, all rents and
other reasonable costs and expenses relating to the operation of such office and
all salary, benefits and other costs and expenses relating to such secretarial
service.
7. Other Benefits.
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(a) Automobile. On or after May 1, 2002 and until the date of your death,
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ServiceMaster shall provide you with the use of an automobile in accordance with
ServiceMaster's Executive Company Vehicle Policy. ServiceMaster shall reimburse
you for your expenses relating to the operation and maintenance of such vehicle
in accordance with such Policy.
(b) Club Membership. On and after May 1, 2002 and until the date of your
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death, ServiceMaster shall pay, or reimburse you for, the annual dues of one
club
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membership designated by you and approved by the Chairman and Chief
Executive Officer of ServiceMaster.
8. Stock Options. As of April 24, 2001, each option to purchase
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ServiceMaster common stock held by you shall (1) to the extent not exercisable
on April 24, 2001, become fully exercisable at the exercise price set forth in
such option, and (2) expire at 5:00 p.m., Central time, on June 1, 2013. In the
event of your death prior to June 1, 2013, your executor, administrator or
similar person, or beneficiary pursuant to any beneficiary designation
procedures approved by ServiceMaster, shall have the right to exercise each such
option prior to the expiration of such option. In accordance with the foregoing,
ServiceMaster and you agree that, as of April 24, 2001, your options to purchase
ServiceMaster common stock are as follows:
No. of Options
Grant Date Outstanding at 3/1/02 Exercise Price Expiration Date
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10/03/96 168,750 10.7778 6/01/13
02/13/97 168,750 11.2222 6/01/13
02/16/98 112,500 18.2583 6/01/13
01/29/99 150,000 18.0750 6/01/13
12/10/99 300,000 11.5000 6/01/13
12/10/99 479,674 11.5000 6/01/13
05/04/00 3,605 13.8700 6/01/13
03/16/01 250,000 10.5200 6/01/13
Your options to purchase ServiceMaster common stock shall be modified only to
the extent set forth in this paragraph 8.
9. Change in Control. (a) In the event a Change in Control (as defined in
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the 2001 Directors Stock Plan) occurs while payments are being made pursuant to
paragraph 2, then ServiceMaster shall, within 30 days after the date of the
Change in Control, at ServiceMaster's expense, purchase from a reputable
insurance company satisfactory to you, a policy which guarantees, from and after
the date of the Change in Control, the full and continuing payment of all the
compensatory and other benefits set forth in this Agreement.
(b) If the cost of the income protection policy described in sub-paragraph
(a) exceeds the lump sum payment described in this sub-paragraph (b), then
ServiceMaster may elect to pay to you, within 30 days after the date of the
Change in Control: (i) a cash, lump sum amount that is the actuarial equivalent
of the aggregate amount payable pursuant to paragraph 2 had the Change in
Control not occurred; plus (ii) an additional cash, lump sum amount which is
equal to all federal and state income taxes which are attributable to such
clause (i) amount plus all federal and state income taxes which are attributable
to the payment made with respect to this clause (ii). For purposes of the clause
(i) payment, actuarial equivalency shall be determined using the 1983 Group
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Annuity Mortality Table and the annual rate of interest on 10-year U.S. Treasury
securities for the month preceding the month in which the Change in Control
occurs.
10. Non-Competition Covenant. (a) Subject to sub-paragraph (e), on and
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after the Effective Date and so long as you are being paid pursuant to paragraph
2 or 9 (the "Non-Competition Period"), you shall not in any manner, directly or
indirectly (whether as owner, stockholder, director, officer, employee,
principal, agent, consultant, independent contractor, partner or otherwise), in
any geographic area in which ServiceMaster or any subsidiary of 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;
provided, that this provision shall not prohibit you from having an ownership or
other interest, including as an officer or other employee, in a ServiceMaster
franchise.
(b) Subject to sub-paragraph (e), you further agree that during the
Non-Competition Period you shall not (i) in any manner, directly or indirectly,
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 (ii) in connection with any business to which paragraph 10(a)
applies, call on, service, solicit or otherwise do business with any current or
prospective customer of ServiceMaster or any subsidiary of ServiceMaster.
(c) Nothing in this paragraph 10 shall prohibit you from being (i) a
stockholder in a mutual fund or a diversified investment company or (ii) 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
you have no active participation in the business of such corporation. For
purposes of this sub-paragraph (c), FairWyn Investment Company LLC, an Illinois
limited liability company, shall be deemed to be a diversified investment
company.
(d) If, at any time of enforcement of this paragraph 10, 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
arbitrator shall be allowed to revise the restrictions contained herein to cover
the maximum period, scope and area permitted by law.
(e) Anything in the foregoing sub-paragraphs (a) through (d)
notwithstanding, if a Change in Control (as defined in the 2001 Directors Stock
Plan) occurs, the Non-Competition Period shall terminate and all of the
provisions of the foregoing sub-paragraphs (a) through (d) shall lapse and
become of no further force or effect.
11. Confidentiality. You shall not, at any time, make use of or disclose,
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directly or indirectly, any (i) trade secret or other confidential or secret
information of ServiceMaster or any subsidiary of ServiceMaster or (ii) other
technical, business,
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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 (a)
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 you or (b) is required to be disclosed by any law, regulation
or order of any court or regulatory commission, department or agency.
12. Covered Service. In accordance with Article Eleven of ServiceMaster's
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Certificate of Incorporation (the "Charter"), the services provided and to be
provided by you under this Agreement, shall be deemed to be a "Covered Service"
within the meaning of subsection 11.1.1 of the Charter and, to the extent any
services are not covered by any of subsection 11.1.1(a), (b) or (c) of the
Charter, this paragraph and the signature of the Chief Executive Officer on this
Agreement shall constitute a designation in writing as required by Article
Eleven of the Charter.
13. Defense of Claims. You shall cooperate with ServiceMaster in the
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defense of any claims that may be made against ServiceMaster, to the extent that
such claims may relate to services performed by you for ServiceMaster or its
subsidiaries. ServiceMaster shall reimburse you for all reasonable expenses in
connection therewith, including travel expenses.
14. Remedies. You acknowledge that ServiceMaster would be irreparably
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injured by a violation of paragraph 10 or paragraph 11 of this Agreement, and
you agree that ServiceMaster shall be entitled to an injunction restraining you
from any actual or threatened breach of paragraph 10 or paragraph 11 of this
Agreement or to any other appropriate equitable remedy without any bond or other
security being required. If you shall be the prevailing party in case of any
dispute or disagreement arising out of or connected with any provision of this
Agreement, you shall be entitled to recover your reasonable attorneys' and all
reasonable expenses incurred in connection with any related proceeding (whether
in court or occurring pursuant to arbitration) including, without limitation,
any and all charges which may be made for the cost of arbitration and the fees
of any arbitrators, together with interest at the statutory rate from the date
on which such obligation shall have arisen.
15. No Other Compensation. You agree that all compensation and other
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benefits payable by ServiceMaster under this Agreement shall be in lieu of any
and all compensation otherwise payable to you for service on and after the
Effective Date as Chairman Emeritus or other employee of ServiceMaster.
Notwithstanding the foregoing, this paragraph 15 shall not affect any amounts
payable to you or your estate on or after the Effective Date pursuant to the
exercise of any option or under the terms of ServiceMaster's 401(k) and Deferred
Compensation Plans, Long-Term Performance Award Plan or any similar plan
providing for the payment of deferred compensation.
16. Continuation Payments. Pursuant to a previous agreement and in addition
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to all other payments hereunder, ServiceMaster shall pay you $1,200.00 per month
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commencing in May 2002, for a period of 180 consecutive months. In the event of
your death, payments will continue to your designated beneficiary, Judy Pollard
or her estate, until the expiration of the 180 month period.
17. Disability. In the event that you are disabled or suffer from any
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mental or physical condition which impairs or prevents you from providing all or
some of the services contemplated hereunder, ServiceMaster shall nonetheless
continue to pay you all of the amounts and to provide you all of the benefits
which are set forth in this Agreement.
18. Arbitration. Except as provided in paragraph 14 of this Agreement, any
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dispute or controversy between ServiceMaster and you, whether arising out of or
relating to this Agreement, the breach of this Agreement, or otherwise, shall be
settled by arbitration in Chicago, Illinois, administered by the American
Arbitration Association, with any such dispute or controversy arising under this
Agreement being so administered in accordance with its Commercial Rules then in
effect, and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. The arbitrator shall have the authority
to award any remedy or relief that a court of competent jurisdiction could order
or grant, including, without limitation, the issuance of an injunction. However,
either party may, without inconsistency with this arbitration provision, apply
to any court having jurisdiction over such dispute or controversy and seek
interim provisional, injunctive or other equitable relief until the arbitration
award is rendered or the controversy is otherwise resolved. Except as necessary
in court proceedings to enforce this arbitration provision or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of ServiceMaster and you. ServiceMaster and you
acknowledge that this Agreement evidences a transaction involving interstate
commerce. Notwithstanding any choice of law provision included in this
Agreement, the United States Federal Arbitration Act shall govern the
interpretation and enforcement of this arbitration provision.
19. Successors; Binding Agreement. This Agreement shall inure to the
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benefit of and be enforceable by ServiceMaster and its successors and assigns
and by you and by your 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.
20. Notices. All notices and other communications required or permitted
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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 (1) if to you, to C. William Pollard, 1116 N.
Stoddard Ave., Wheaton, IL 60187, and if to ServiceMaster, to The ServiceMaster
Company, 3250 Lacey Road, Suite 600, Downers
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Grove, IL 60515, attention General
Counsel, or (2) 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.
21. 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 unenforceability 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.
22. 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
constitute one and the same instrument.
23. 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 you and by the Chairman and Chief Executive Officer, President and Chief
Operating Officer or any Executive Vice President of ServiceMaster. 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 you or
ServiceMaster to insist upon strict compliance with any provision of this
Agreement or to assert any right which you 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.
24. Entire Agreement. Except as otherwise specified herein, this Agreement
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and your stock option agreements referred to in paragraph 8 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.
25. Nonalienation. Benefits payable under this Agreement shall not be
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subject in any manner to anticipation, alienation, sale, transfer, assignment,
pledge, encumbrance, charge, garnishment, execution or levy of any kind, either
voluntary or involuntary, prior to actually being received by you, your estate
or a beneficiary, as applicable, and any such attempt to dispose of any right to
benefits payable hereunder shall be void.
26. Termination. This Agreement may not be terminated except pursuant to a
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writing signed by ServiceMaster and you.
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If you are in agreement with this letter, please sign each of the two
copies and return one copy to my attention.
Very truly yours,
THE SERVICEMASTER COMPANY
By: /s/ David K. Wessner
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David K. Wessner
Chairman of the Compensation and Leadership
Development Committee of the Board of Directors
By: /s/ Jonathan P. Ward
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Jonathan P. Ward
Chairman and Chief Executive Officer
CONFIRMED AND AGREED TO:
By: /s/ C. William Pollard
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C. William Pollard