Resignation of Jonathan P. Ward as Chairman and Chief Executive Officer

On May 15, 2006, ServiceMaster accepted the resignation of Jonathan P. Ward as Chairman and Chief Executive Officer and as a director of ServiceMaster effective on May 15, 2006. In connection with such acceptance, ServiceMaster agreed pursuant to a letter dated May 15, 2006 (the “Letter Agreement”) to allow Mr. Ward to continue his employment with ServiceMaster from May 15, 2006 until July 31, 2006 in a non-executive position to assist in the transition of his duties and responsibilities to the Interim Chairman and Chief Executive Officer to be appointed by the Board of Directors of ServiceMaster. During this transition period, Mr. Ward will continue to receive his current rate of base pay, participate in ServiceMaster’s standard employee benefit plans and have access to his current e-mail, cell phone and Blackberry services. ServiceMaster also agreed to reimburse Mr. Ward for outplacement and related services and for the reasonable legal fees which he incurs in connection with his termination of employment, in an aggregate amount not to exceed $100,000.

For purposes of (i) the Employment Agreement dated as of November 1, 2004 (the “Employment Agreement”) between Mr. Ward and ServiceMaster and (ii) the Restricted Stock Unit Award Agreement dated as of November 1, 2004 (the “RSU Agreement”) between Mr. Ward and ServiceMaster pursuant to which Mr. Ward had been granted 367,826 restricted stock units (“RSUs”), Mr. Ward’s termination of employment is being treated as a termination of employment by ServiceMaster without cause with a date of termination of July 31, 2006. Under the Employment Agreement, Mr. Ward will receive a lump sum cash payment equal to the sum of (1) his accrued salary through the date of termination, (2) $1,622,250, being two times his highest annual base salary during the term of the Employment Agreement, (3) $2,433,375, being two times his highest target annual bonus during the term of the Employment Agreement, and (4) reimbursement of expenses incurred by him in the performance of his duties, less applicable tax withholdings, and Mr. Ward will be entitled to continuation of medical insurance, dental insurance, accidental death and dismemberment insurance, vision insurance and disability insurance through the two-year anniversary of the termination date. Under the RSU Agreement, at the date of termination of July 31, 2006, 84,883 RSUs will vest (being 367,826 times a fraction, the numerator of which is 21 (the number of full and partial calendar months from the date of grant of the RSUs through the date of termination) and the numerator of which is 91. The remaining RSUs will be forfeited on the termination date.

Under the terms of ServiceMaster’s equity incentive plans, (i) all stock options and stock appreciation rights held by Mr. Ward on the termination date which are exercisable on the termination date will remain exercisable for a period of up to six months after the termination date, (ii) all unexercisable stock options and stock appreciation rights held by him will expire on the termination date and (iii) except to the extent described in the preceding paragraph, all shares of restricted stock and restricted stock units held by Mr. Ward on the termination date will be forfeited on the termination date.

A copy of the Letter Agreement is filed as Exhibit 10.1 to this Current Report on Form 8-K. A copy of the Employment Agreement is filed as Exhibit 10.1, and a copy of the RSU Agreement is filed as Exhibit 10.2, to ServiceMaster’s Current Report on Form 8-K dated November 3, 2004.

Appointment of J. Patrick Spainhour as Interim Chairman and Chief Executive Officer

On May 15, 2006, ServiceMaster entered into a letter agreement (the “Spainhour Agreement”) with J. Patrick Spainhour in connection with his appointment as Interim Chairman and Chief Executive Officer of ServiceMaster. Under the terms of the Spainhour Agreement, Mr. Spainhour’s employment by ServiceMaster commenced on May 16, 2006. Mr. Spainhour is entitled to a base salary at the annual rate of $800,000 and, with respect to his service in 2006, a guaranteed bonus equal to 150% of the salary paid to him for service in 2006. He is entitled to those employee benefits and perquisites which ServiceMaster generally makes available to its executive officers, except that he will not have a right to participate in ServiceMaster’s equity incentive plan in 2006 or the right to enter into a change in control severance agreement. He will be subject to non-competition and non-solicitation restrictions for a period of one year after he ceases being an employee of ServiceMaster.

A copy of the Spainhour Letter Agreement is filed as Exhibit 10.2 to this Current Report on Form 8-K.

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