American Home Shield 2010 Annual Report Download - page 131

Table of Contents
2011 Employment Agreement with New CEO
On February 22, 2011, ServiceMaster announced that Harry J. Mullany III, had been elected to serve as CEO of ServiceMaster, succeeding
Mr. Spainhour, effective March 31, 2011. Mr. Mullany's employment with ServiceMaster commenced on February 22, 2011 pursuant to an employment
agreement with Holdings, dated February 16, 2011. From February 22, 2011 through March 30, 2011, Mr. Mullany is serving in a transitional role to enable
the smooth transfer of executive responsibilities from Mr. Spainhour to Mr. Mullany. Under his employment agreement, Mr. Mullany will be paid an annual
base salary of no less than $1 million, and will have a target annual incentive bonus opportunity of 100 percent of his base salary. For 2011, his base salary
has been set at $1 million, prorated from February 22, 2011. Additionally, for the 2011 performance year, he will receive a minimum annual bonus of
$500,000 and a signing bonus of $1.75 million.
Mr. Mullany's employment agreement provides for severance of two times the sum of his base salary and his average annual bonus for the prior two
years, continuation of health and certain other benefits for two years, and a pro rata bonus for the year in which he is terminated if he is terminated by
Holdings without cause or resigns with good reason, as defined in the employment agreement. The severance would be paid in equal installments over a
period of 24 months, and is subject to Mr. Mullany's execution of a release of claims. In all cases of termination, Mr. Mullany is subject to noncompetition
and nonsolicitation provisions for two years following termination.
In connection with his commencement of employment, Mr. Mullany purchased $1.9 million of common stock of Holdings at a price of $11 per share. At
his discretion, Mr. Mullany may purchase up to an aggregate of $1.1 million of additional common stock of Holdings at its then-current fair market value over
the next two years. In connection with his initial and subsequent equity investments, Mr. Mullany will be (or, in the case of his initial investment, has been)
awarded RSUs and nonqualified stock options under the MSIP. He will receive (or, in the case of his initial investment, has received) RSUs worth half the
aggregate fair market value, as determined under the MSIP, of his initial and subsequent investments, and these RSUs will vest at a rate of one-third per year
on each of the first three anniversaries of their grant dates. Additionally, for each share of common stock he purchases in his initial and subsequent
investments, he will receive (or, in the case of his initial investment, has received) nonqualified stock options to purchase five shares at an exercise price equal
to the fair market value of a share of the common stock at the time of the option grant ("Matching Options"), which was $11 per share. The Matching Options
vest at a rate of one-fourth per year on each of the first four anniversaries of the grant date. Finally, for each ten Matching Options that Mr. Mullany is
awarded, he will also be awarded (or, in the case of his initial investment, has been awarded) one nonqualified stock option with an exercise price equal to the
fair market value of a share of common stock at the time of the option grant ("Superperformance Option"). These Superperformance Options will vest before
a public offering if the fair market value of the common stock as determined by the Board of Directors of Holdings is at least $25 per share, and after a public
offering if the closing price of the common stock on the principal exchange on which it is traded equals or exceeds $25 per share for 20 consecutive trading
days. Based on Mr. Mullany's initial equity investment, he acquired 172,727 shares of Holdings common stock and was granted 86,364 RSUs, 863,635
Matching Options, and 86,364 Superperformance Options.
Should Mr. Mullany's employment terminate for cause, all vested and unvested options will be canceled, along with all unvested RSUs. In the case of
Mr. Mullany's termination other than for cause and other than by reason of his death or disability, unvested options and RSUs will be canceled. Upon
termination by reason of death or disability, Mr. Mullany's unvested Matching Options will fully vest, and any unvested Superperformance Options will be
canceled. In addition, if the death or disability occurs prior to his RSUs having fully vested, a pro rata portion of the RSUs that would have vested in the year
of termination will vest. Mr. Mullany will retain the right to exercise any vested
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