American Home Shield 2011 Annual Report Download - page 152

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medical, prescription drug and life insurance for Mr. Spainhour and his dependents until his 65th birthday, May 2, 2015, with expenses shared in the same
proportion as prior to his retirement.
Mr. Spainhour's severance benefits were subject to his signing a general release and observing covenants not to compete, solicit nor disclose confidential
information.
Employment Agreement with Mr. Mullany
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 served in a transitional role to enable the
smooth transfer of executive responsibilities from Mr. Spainhour to Mr. Mullany. Under his employment agreement, Mr. Mullany receives an annual base
salary of $1 million, and a target annual incentive bonus opportunity of 100 percent of his base salary, each prorated for 2011 to reflect the period during
which he was employed by the Company in 2011. Additionally, for the 2011 performance year, Mr. Mullany was guaranteed a minimum annual bonus of
$500,000 and received a signing bonus of $1.75 million.
Mr. Mullany's employment agreement provides for severance benefits as described below under Potential Payments Upon Termination or Change in
Control.
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 elect to 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 common stock at the time of the option grant ("Matching Options"). 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 Superperformance Option with an exercise price equal to the fair market value of a share of
common stock at the time of the option grant. 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 options for up to 12 months following termination for death, disability, or
retirement, and for 90 days following termination for all other reasons (except for termination for cause).
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