EXHIBIT 10.2
July 1, 2001




Mr. Charles W. Stair
[Home Address]


Dear Chuck:

         On behalf of The ServiceMaster  Company and its Board of Directors,  we
are writing to you to set forth the understanding  between ServiceMaster and you
regarding the terms of ServiceMaster's retention of your services.

         In  consideration  of the mutual  promises and agreements  contained in
this Agreement,  ServiceMaster and you agree, as of July 1, 2001 (the "Effective
Date"), as follows:

         1.  SERVICES.  On and after the  Effective  Date and until the date you
cease  service as a director  of  ServiceMaster,  you shall  provide  consulting
services to ServiceMaster and its  subsidiaries.  Such services shall be related
to the management of ServiceMaster and its subsidiaries.  Such services shall be
furnished in connection with your duties as a director of  ServiceMaster  and as
and when the Board of Directors,  Chairman,  or President and CEO may reasonably
request, subject to your reasonable availability and giving due consideration to
your other responsibilities.

         2.  COMPENSATION  FOR SERVICES.  In consideration of your providing the
services  described in paragraph 1,  ServiceMaster  shall  compensate you at the
same level and in the same manner as ServiceMaster  compensates  individuals for
service as non-employee directors of ServiceMaster,  commencing on the Effective
Date and  ending  on the date  services  pursuant  to  paragraph  1 cease or the
parties agree to terminate this Agreement.

         3. REIMBURSEMENT OF EXPENSES. ServiceMaster shall reimburse you for all
unreimbursed  expenses properly incurred by you in the course of the performance
of your duties pursuant to this Agreement.

         4. FEDERAL AND STATE  DEDUCTIONS.  ServiceMaster  shall deduct from the
amounts  payable by  ServiceMaster  pursuant to  paragraph  2, the amount of all
required federal and state withholding deductions.

         5.   INSURANCE BENEFITS.

         (a) Group Health,  Dental,  Life,  Accidental Death and  Dismemberment,
Short-Term  Disability  and  Long-Term  Disability  Insurance.  On and after the
Effective Date and until the later of the date of your death or Patricia Stair's
death,  ServiceMaster  shall



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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.

         (b)  Compensation  Plans. On and after the Effective Date, you shall be
eligible to 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.  On and after the  Effective  Date, as long as you are
providing  the  services  pursuant to  paragraph 1, and until the date you cease
service as a  director  of  ServiceMaster,  ServiceMaster  shall  provide to you
office space of size and character, and furnished in a manner, comparable to the
office space  provided to you  immediately  prior to the  Effective  Date.  Such
office space shall be located at the principal executive office of ServiceMaster
located in Downers Grove, Illinois.

         7. OTHER BENEFITS.

         (a)  Automobile.  On the Effective  Date,  you shall have the option to
purchase  your Company  automobile  in  accordance  with terms  offered to other
executives under  ServiceMaster's  Executive Company Vehicle Policy.  Should you
choose  not to  purchase  the  vehicle,  the  vehicle  should  be  turned  in at
ServiceMaster's Downers Grove headquarters.

         (b) Club Membership.  On the Effective Date,  ServiceMaster shall cease
to pay, or reimburse you for, the fees and annual dues of any club membership.

         8.  STOCK  OPTIONS.  As of the  Effective  Date,  options  to  purchase
ServiceMaster  common stock held by you shall  continue in  accordance  with its
terms. Your outstanding  options to purchase  ServiceMaster  common stock are as
follows:

                    No. of Options
  Grant Date    Outstanding at 5/21/01    Exercise Price     Expiration Date
  ----------    ----------------------    --------------     ---------------
   1/29/99              25,000               $18.0750            1/28/09
   4/27/01              15,000               $10.0200            4/26/08

         9.  NON-COMPETITION  COVENANT.  (a) On and after the Effective Date and
until  the  date  you  cease  service  as  a  director  of  ServiceMaster   (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.


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         (b) You further agree that during the  Noncompetition  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 9(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 9 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.

         (d) If, at any time of  enforcement  of this paragraph 9, 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.

         10.  CONFIDENTIALITY.  You  shall  not,  at any  time,  make  use of or
disclose,  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, 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.

         11. DEFENSE OF CLAIMS.  You shall cooperate with  ServiceMaster  in the
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.

         12. REMEDIES.  You acknowledge that ServiceMaster  would be irreparably
injured by a violation of paragraph 9 or paragraph 10 of this Agreement, and you
agree that ServiceMaster shall be entitled to an injunction restraining you from
any actual or threatened breach of paragraph 9 or paragraph 10 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


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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.

         13. NO OTHER  COMPENSATION.  You agree that all  compensation and other
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 a  Corporate  Officer  or other  employee  of  ServiceMaster.
Notwithstanding  the  foregoing,  this paragraph 13 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, your Salary Continuation
Agreement  dated  December 30, 1977  ("Salary  Continuation  Agreement")  or any
similar plan providing for the payment of deferred compensation.

         14.  SALARY  CONTINUATION  AGREEMENT.  Pursuant to  paragraph 1 of your
Salary  Continuation  Agreement,  ServiceMaster  shall pay you $500.00 per month
commencing on July 1, 2001, for a period of 180 consecutive months. In the event
of your death, payments will continue to your designated  beneficiary,  Patricia
Stair or her estate, until the expiration of the 180 month period.

         15. ARBITRATION.  Except as provided in paragraph 12 of this Agreement,
any 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 Downers  Grove,  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.

         16. SUCCESSORS;  BINDING  AGREEMENT.  This Agreement shall inure to the
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


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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.

         17. NOTICES. All notices and other communications required or permitted
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 Charles Stair, [home address], and
if to  ServiceMaster,  to The  ServiceMaster  Company,  One  ServiceMaster  Way,
Downers 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.

         18.  GOVERNING LAW;  VALIDITY.  The  interpretation,  construction  and
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.

         19. COUNTERPARTS.  This Agreement may be executed in counterparts, each
of which  shall be  deemed to be an  original  and all of which  together  shall
constitute one and the same instrument.

         20.  MODIFICATION  OR WAIVER.  No  provision of this  Agreement  may be
modified or waived  unless such  modification  or waiver is agreed to in writing
and signed by you and by the Chairman,  President and CEO, or any Executive Vice
President or Senior 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.

         21.  ENTIRE  AGREEMENT.  Except as  otherwise  specified  herein,  this
Agreement constitutes the entire agreement and understanding between the parties
with respect to the subject  matter hereof and supersedes and preempts 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.

         22.  NONALIENATION.  Benefits payable under this Agreement shall not be
subject in any manner to anticipation,  alienation, sale, transfer,  assignment,
pledge, encumbrance,

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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.

         23.  TERMINATION.  This Agreement may not be terminated except pursuant
to a writing signed by ServiceMaster and you.



         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/ C. WILLIAM POLLARD
    ----------------------
       C. William Pollard
       Chairman


CONFIRMED AND AGREED TO:


By:  /s/ CHARLES W. STAIR
     --------------------
       Charles W. Stair



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                                    SIGNATURE


    Pursuant to the requirements of the Securities Exchange Act of 1934, the
    Registrant has duly caused this report to be signed on its behalf by the
                     undersigned thereunto duly authorized.

                             Date: August 14, 2001


                            THE SERVICEMASTER COMPANY
                                  (Registrant)

                            By: /s/Steven C. Preston
               ---------------------------------------------------

                                Steven C. Preston
              Executive Vice President and Chief Financial Officer