Employment Agreement - ServiceMaster Co. and Jonathan P. Ward
THE SERVICEMASTER COMPANY
One ServiceMaster Way
Downers Grove, Illinois 60515
January 7, 2001
Mr. Jonathan P. Ward
425 East Woodlands
Lake Forest, Illinois 60045
Dear Jon:
It is my pleasure to extend to you an offer of employment with
The ServiceMaster Company (the "Company") upon the terms set forth in the
attached term sheet. This offer has been approved by a special committee of the
Board of Directors of the Company and will remain open for your acceptance until
5:00 p.m. (C.D.T.) January 9, 2001. Please signify your acceptance of such
employment by signing as indicated below. This letter agreement may be executed
in counterparts.
THE SERVICEMASTER COMPANY
/s/ C. WILLIAM POLLARD
----------------------
C. William Pollard
Chairman and CEO
ACCEPTED AND AGREED:
/s/ JONATHAN P. WARD
--------------------
Name: Jonathan P. Ward
Date: January 9, 2001
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Principal Terms For
Employment Of
Jonathan P. Ward ("Executive") By
The ServiceMaster Company ("Company")
1. Position: President and Chief Executive Officer reporting to the Board of
Directors. Executive will also be elected a director of the Company and
shall serve as a member of the Board's Executive Committee.
2. Term: Through December 31, 2002.
3. Annual Salary: $700,000 for 2001, subject to increase (but not decrease)
thereafter.
4. Bonuses:
(a) Annual performance bonus based upon the terms and conditions of the
Company's APC bonus plan, with target at 150% of annual salary. Unless
Executive's employment is terminated for Cause or Executive terminates
employment without Good Reason prior to the normal bonus payment date,
minimum bonus for 2001 will be at target.
(b) Additional bonuses as awarded in the discretion of the Board of Directors.
5. Long-Term Performance Award: The Company will grant the Executive 1000
participation units under the Company's 2001 Long-Term Performance Award
Plan for the performance period beginning January 1, 2001 ("Initial
Performance Units"). The Initial Performance Units will have a target value
of $701 per unit.
6. Group/Executive Benefits: Participation by Executive and his family, on
terms no less favorable to Executive than the terms offered to other senior
executives of the Company, in any group and/or executive life,
hospitalization or disability insurance plan, health program (with COBRA
equivalent premiums paid during any waiting period), profit sharing, 401(k)
and similar benefit plans (qualified, non-qualified and supplemental) or
other fringe benefits of the Company, including automobile allowance and
similar programs as in effect from time to time (collectively referred to
as the "Benefits").
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7. Equity-Based Incentive Compensation:
(a) Initial grant of ten-year options with respect to 1,630,000 shares to vest
(i) 380,000 shares on the commencement of Executive's employment with the
Company, and (ii) 250,000 shares on each of the first five anniversaries of
such commencement. The exercise price for the options will be equal to the
average closing NYSE price for the 5 trading days immediately preceding
Executivess.s commencement of employment with the Company.
(b) The Executive will purchase a ten-year Convertible Debenture on the date
his employment commences with a face value (the "Minimum Face Value") equal
to (i) 100,000 multiplied by (ii) the fair market value of a share of the
Company's common stock. The Minimum Face Value of such Convertible
Debenture shall be financed through a full recourse note executed by the
Executive. Interest on the principal balance of the note shall accrue at
the same rate as under the Convertible Debenture and shall be payable on
the same interest payment dates as under the Convertible Debenture.
(c) At the Executive's option pursuant to notice provided to the Company no
later than the six-month anniversary of the date on which his employment
commences, the face value of the Convertible Debenture may be increased to
an amount equal to (i) a multiple greater than 100,000 but not greater than
200,000 times (ii) the fair market value of a share of the Company's common
stock. Any face value amount above the Minimum Face Value shall be paid 50%
in cash by the Executive, with the remaining 50% financed through an
increase in the principal amount of the full recourse note executed by the
Executive. If the Company receives proper notice of the Executive's option
to increase the face value of the Convertible Debenture after the initial
issuance of the Convertible Debenture, then the Company and the Executive
shall issue, respectively, an additional Convertible Debenture for such
increased amount and an additional full recourse note for 50% of such
increased amount, in each case bearing terms identical to those contained
in the original corresponding instruments.
(d) Beginning in 2002, Executive will be eligible to receive future grants
under the Company's stock incentive programs consistent with performance
and competitive pay practices generally, with an annual target of 380,000
shares.
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(e) All equity based awards will fully vest upon a Change-in-Control (as
defined in the Company's 2000 Equity Incentive Plan).
8. Sign-On Loan: $500,000 loan to be dispersed within three business days of
the day the Executive commences employment with the Company (the "Executive
Loan"), to be due and payable upon the earlier of five years and
termination of Executive's employment for any reason. The Executive Loan
shall be full recourse and without interest.
9. Severance Benefits: In the event that the Executive's employment with the
Company is terminated on or prior to December 31, 2002 by the Executive for
Good Reason or by the Company for any reason other than for Cause,
Executive shall receive continued vesting of all equity awards through
December 31, 2002 (with stock options being exercisable in accordance with
stock options granted generally to executives of the Company, but the date
of termination of employment being deemed to be December 31, 2002), full
vesting of his deferred compensation benefit, and shall be entitled to
receive as severance benefits (a) the Executive's then-current annual
salary through December 31, 2002, (b) the 2001 bonus shall be payable in
accordance with Section 4(a) above, (c) a bonus in respect of 2002 shall be
payable to the Executive on the dates of payment to other executives of the
Company, but only to the extent earned (it being understood that the
Executive does not need to be employed by the Company on December 31, 2002
or on any date of payment in order for any such bonus to have been earned),
and (d) continuation of employee benefits and perquisites through December
31, 2002; provided, however, that if Executive's employment with the
Company is terminated on or prior to December 31, 2002 by the Company for
any reason other than for Cause, Executive shall be entitled to receive the
Executive's then-current annual salary for a period of 24 months beginning
on the date of such termination of employment. "Cause" and "Good Reason"
are defined in the attached Appendix A.
10. Use and Ownership of Proprietary Information: Executive acknowledges that
during Executive's period of employment by the Company, Executive has had
and will have access to proprietary information and materials owned by the
Company. Except to the extent authorized by the Company, Executive agrees
that Executive will not at any time, from and after the date of this
agreement, use, divulge, furnish or make accessible to any person,
enterprise, business or institution any confidential or proprietary
information of the Company. Confidential and proprietary information of the
Company includes (and Executive so acknowledges) information relating to
products, methods, processes, improvements, formulas, designs and methods
of distribution and/or manufacture of the Company which are
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not in the public domain; all manuals, materials, and information of the
Company marked oConfidentialo; the Companyss.s methods and formulas for
calculating costs; the customers of the Company (actual and potential); and the
business and marketing strategies of the Company. Executive acknowledges
that said confidential and proprietary information, whether in written or
other physical form (including computer materials), is the sole and
exclusive property of the Company and Executive agrees prior to termination
of employment to return to the Company all such confidential and
proprietary information and all copies thereof.
11. Restrictions on Employment and Other Activities after Termination:
(a) Executive acknowledges that his employment with the Company enables him to
develop specialized knowledge, goodwill, and valuable relationships with
the Companyss.s customers, which would be of great value to the Company's
competitors. Executive further acknowledges that in his position as a
corporate officer of the Company, Executive is in a unique relationship to
the Company wherein Executive is privy to the present operations of the
Company and its subsidiaries as well as the short and long range plans and
programs of the Company. Therefore, Executive agrees that during the term
of his employment, and for twenty four (24) months thereafter, he will not
directly or indirectly own, manage, operate, control, serve, be employed
by, participate in, or be connected in any way with any person, enterprise,
business or institution, whether a competitor or customer of the Company or
a subsidiary of the Company, which offers or performs services similar to
those performed by the Company or a subsidiary of the Company whether such
services are performed on a contract or other basis or whether such
services are licensed to be performed by others.
(b) Executive also agrees that for a period of eighteen months (18) after
termination of this agreement, Executive will not approach, counsel,
solicit, or attempt to induce any then present employee of the Company or
affiliate, or any subsidiary thereof, to terminate and/or leave such
employment.
12. Fees and Expenses: The Company will pay all reasonable professional fees
and related expenses incurred by Executive in connection with the
negotiation and preparation of these terms of employment.
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13. Successor; Coordination: The Company will be required to have any successor
to all or substantially all of its business and/or assets expressly assume
and agree to fulfill the terms of Executive's employment in the same manner
and to the same extent that the Company would be required to do so if no
such succession had taken place. These terms of employment shall supersede
any inconsistent terms of any Company plan, document, or award agreement.
* * * *
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Appendix A
Termination for "Cause" means: a termination by the Company, within one hundred
twenty (120) days of the Chairman of the Board becoming aware of the event,
resulting from Executive's (i) conviction (including a plea of guilty or nolo
contendere) of any felony of any kind (other than Limited Vicarious Liability or
a routine traffic infraction) or any other crime (whether it is a felony or not)
involving securities fraud or theft of substantial assets of the Company, (ii)
willful misconduct with regard to the Company, or gross neglect or dereliction
of duty resulting in either case in material economic harm to the Company or
significant damage to the Company's reputation; (iii) failure to follow in good
faith the reasonable lawful direction of the Board despite written instruction
to do so; or (iv) a violation of his statutory or common law duty of loyalty to
the Company. Limited Vicarious Liability, as used above, shall mean any
liability which is (x) based on acts of the Company for which Executive is
charged solely as a result of his offices with the Company and (y) provided that
(1) he was not directly involved in such acts and either had no prior knowledge
of such intended actions or promptly acted reasonably and in good faith to
attempt to prevent the acts causing such liability or (2) he did not have a
reasonable basis to believe that the law was being violated by such acts.
Notwithstanding 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 the Company'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.
"Good Reason" means: (i) diminution in Executive's titles, (ii) the assignment
of duties to Executive that are materially and adversely inconsistent with
Executive's positions, (iii) any material diminution in Executive's authority,
responsibility or reporting lines, including, but not limited to, maintaining
Executive's then positions in the Company and the Company becoming more than
fifty percent (50%) owned by another entity and Executive not having the same
titles, responsibilities and duties in the parent entity, (iv) reduction in
Executive's annual salary, (v) removal from, or failure to reelect Executive to,
the Board or the Executive Committee thereof, or (vi) a Change-in-Control (as
defined in the Company's 2000 Equity Incentive Plan). If Executive determines
that Good Reason exists, Executive must notify the Company 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 the Company
remedies such event within thirty (30) days following receipt of such notice,
the Executive may not terminate employment for Good Reason as a result of such
event.
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