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As filed with the Securities and Exchange Commission on March 24, 2014

Registration No. 333-            


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933



ServiceMaster Global Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  8741
(Primary Standard Industrial
Classification Code Number)
  20-8738320
(I.R.S. Employer
Identification Number)

860 Ridge Lake Boulevard
Memphis, Tennessee 38120
(901) 597-1400

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)



James T. Lucke, Esq.
Senior Vice President and General Counsel
ServiceMaster Global Holdings, Inc.
860 Ridge Lake Boulevard
Memphis, Tennessee 38120
(901) 597-1400
(Name, address, including zip code, and telephone number, including area code, of agent for service)



with copies to:

Peter J. Loughran, Esq.
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
(212) 909-6000

 

John C. Ericson, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
(212) 455-2000



Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after this registration statement becomes effective.

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:    o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

CALCULATION OF REGISTRATION FEE

       
 
Title of Each Class of Securities to be Registered
  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee

 

Common stock, par value $0.01 per share

  $100,000,000   $12,880

 

(1)
Estimated solely for the purpose of calculating the registration fee in accordance with Rule 457(o) of the Securities Act of 1933.

(2)
Includes shares of common stock subject to the underwriters' option to purchase additional shares.

          The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED MARCH 24, 2014

                    Shares

GRAPHIC

ServiceMaster Global Holdings, Inc.

Common Stock

        This is an initial public offering of shares of common stock of ServiceMaster Global Holdings, Inc. All of the            shares of common stock are being sold by us.

        Prior to this offering, there has been no public market for the common stock. We intend to apply to list our common stock on the          under the symbol "SERV".

        After the completion of this offering, we expect to be a "controlled company" within the meaning of the corporate governance standards of the          .

        We anticipate that the initial public offering price will be between $            and $            per share.

        Investing in our common stock involves risks. See "Risk Factors" beginning on page 20 of this prospectus.

       
 
 
  Per Share
  Total
 

Initial public offering price

  $               $            
 

Underwriting discounts and commissions(1)

  $               $            
 

Proceeds, before expenses, to us

  $               $            

 

(1)
We have agreed to reimburse the underwriters for certain FINRA-related expenses. In addition, upon completion of this offering, we will pay a fee for certain financial consulting services to a broker-dealer not part of the underwriting syndicate. The underwriters have agreed to reimburse us in an amount of $            for certain expenses of the offering. See "Underwriting."

        The underwriters also may purchase up to            additional shares from us at the initial offering price less the underwriting discounts and commissions within 30 days from the date of this prospectus.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the shares to purchasers on or about            , 2014.

Joint Book-Running Managers

J.P. Morgan   Credit Suisse   Goldman, Sachs & Co.   Morgan Stanley

Prospectus dated                        , 2014


TABLE OF CONTENTS

Prospectus Summary

    1  

Risk Factors

    20  

Forward-Looking Statements

    40  

Use of Proceeds

    42  

Dividend Policy

    43  

Capitalization

    44  

Dilution

    46  

Unaudited Pro Forma Consolidated Financial Statements

    48  

Selected Historical Financial Data

    53  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    55  

Business

    88  

Management

    102  

Executive Compensation

    108  

Certain Relationships and Related Party Transactions

    139  

Description of Certain Indebtedness

    142  

Security Ownership of Certain Beneficial Owners and Management

    149  

Description of Capital Stock

    153  

Shares Available for Future Sale

    159  

Material U.S. Federal Tax Considerations for Non-U.S. Holders

    161  

Underwriting

    165  

Validity of Common Stock

    170  

Experts

    170  

Where You Can Find More Information

    170  

Index to Financial Statements

    F-1  

        Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared. Neither we nor the underwriters take responsibility for, nor can provide any assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

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PROSPECTUS SUMMARY

        The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus, including the sections entitled "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Unaudited Pro Forma Consolidated Financial Statements" and our audited consolidated financial statements and the related notes to those statements, before making an investment decision.

        Unless the context otherwise requires, the terms "we," "our," "us" and "ServiceMaster," as used in this prospectus, refer to ServiceMaster Global Holdings, Inc. and its consolidated subsidiaries. The term "SvM" refers to The ServiceMaster Company, LLC, our indirect wholly-owned subsidiary.

        All operating and statistical data in this prospectus give effect to the TruGreen Spin-off (as defined below), unless the context otherwise requires. References to the Franchise Services Group refer to the combined historical results of the ServiceMaster Clean segment and the Merry Maids business which is currently included in the Other Operations and Headquarters segment. Beginning with the three months ended March 31, 2014, we expect to combine these operations in a new reporting segment titled Franchise Services Group.

Our Company

        ServiceMaster is a leading provider of essential residential and commercial services, operating through an extensive service network of more than 7,000 company-owned, franchised and licensed locations. Our mission is to simplify and improve the quality of our customers' lives by delivering services that help them protect and maintain their homes or businesses, typically their most highly valued assets. We have leading market positions across the majority of the markets we serve, as measured by customer-level revenue. Our portfolio of well-recognized brands includes Terminix (termite and pest control), American Home Shield (home warranties), ServiceMaster Restore (disaster restoration), ServiceMaster Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (furniture repair) and AmeriSpec (home inspections). We serve approximately five million residential and commercial customers through an employee base of approximately 13,000 company associates and a franchise network that independently employs an estimated 33,000 additional people.

        For the year ended December 31, 2013, on a pro forma basis for the TruGreen Spin-off, we had operating revenue, Adjusted EBITDA and income from continuing operations of $2,292.9 million, $449.9 million and $42.4 million, respectively. Terminix, our largest segment, represented approximately 57% of our 2013 operating revenue on a pro forma basis. For a reconciliation of Adjusted EBITDA to net income, see "—Summary Historical Consolidated Financial and Other Operating Data" and "—Summary Unaudited Pro Forma Financial Data."

        We believe that our customers understand the financial and reputational risks associated with inadequate maintenance of their homes or businesses and that our high-quality, professional services are low-cost expenditures when compared to the alternative of failing to perform essential maintenance. We strive to be the service provider of choice and believe our customers have recognized our value proposition, as evidenced by our long-standing customer relationships and the high rate at which our customers renew their contracts from year to year. In 2013, within our Terminix segment, customer retention rates for our termite and pest control businesses were 85% and 79%, respectively, and in our American Home Shield segment our retention rate was 73%.

        We have significant size and scale, which we believe give us a number of competitive advantages. Terminix is the largest termite and pest control business in the United States, as measured by customer-level revenue, and serves approximately 2.8 million residential customers across 47 states and the District of Columbia through approximately 285 company-owned and 100 franchised locations.

 

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Additionally, we estimate American Home Shield to be approximately four to five times larger than its nearest competitor, as measured by revenue. American Home Shield serves approximately 1.4 million residential customers across all 50 states and the District of Columbia through a network of approximately 10,000 pre-screened independent home service contractors. Our Franchise Services Group serves both residential and commercial customers across all 50 states and the District of Columbia through approximately 4,000 franchised and 75 company-owned locations. We believe our significant size and scale provide a competitive advantage in our purchasing power, route density, and marketing and operating efficiencies compared to smaller local and regional competitors. Our scale also facilitates the standardization of processes, shared learning and talent development across our entire organization.

        We believe our businesses are strategically positioned to benefit from a number of favorable demographic and secular trends. These trends include growth in population, household formation and new and existing home sales. In addition, we believe there is increasing demand for outsourced services, fueled by a trend toward "do-it-for-me" as a result of an aging population and shifts in household structure and behaviors, such as dual-income families and consumers with "on-the-go" lifestyles.

        The outsourced market for residential and commercial termite and pest control services in the United States was approximately $7 billion in 2012, according to Specialty Products Consultants, LLC. We estimate that there are approximately 17,000 U.S. termite and pest control companies, nearly all of which have fewer than 100 employees. We believe this represents an opportunity for large, scaled players, such as Terminix, to act as consolidators in the industry. We believe our Terminix business stands to benefit from a number of positive industry drivers, including increasing government and consumer focus on health and safety in both the home and the workplace.

        We estimate that the U.S. home warranty market had total revenue of approximately $1.8 billion in 2013. The home warranty market is characterized by low household penetration, which we estimate to be approximately 3-4%. We believe there is an opportunity for a reliable, scaled service provider with a national, pre-screened contractor network, such as American Home Shield, to increase market share and household penetration. Additionally, we believe that increasingly complex household systems and appliances may further highlight the value proposition of professional repair services, and accordingly, the coverage offered by a home warranty.

        We believe that the businesses in our Franchise Services Group hold leading market positions in large and fragmented markets and that our scale and national presence create competitive advantages for us and our franchisees in these markets.

Our Operating Segments

        Beginning with the reporting period for the three months ended March 31, 2014, our operations will be organized into three primary operating segments: Terminix, American Home Shield and the Franchise Services Group (which will include ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec). We spun off the TruGreen Business (as defined below) to our stockholders on January 14, 2014. The following charts show the percentage of our consolidated pro

 

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forma operating revenue and pro forma Adjusted EBITDA for each of our segments for the year ended December 31, 2013:


GRAPHIC
 
GRAPHIC

Terminix Segment Overview

        Terminix is the leading provider of termite and pest control services in the United States, with a market share of 20%, as measured by customer-level revenue. In addition, Terminix is the most recognized brand in the industry with approximately 1.5x the unaided brand awareness of our next-largest competitor, based on a study by Decision Analyst, Inc. Terminix specializes in protection against termite damage, rodents, insects and other pests, including cockroaches, spiders, wood-destroying ants, ticks, fleas and bed bugs. Our services include termite remediation, annual termite inspection and prevention treatments with damage claim guarantees, and periodic pest control services. Our recent new product introductions include mosquito control, crawlspace encapsulation and wildlife exclusion.

        For the year ended December 31, 2013, 56% of our Terminix operating revenue was generated from pest control services and 39% was generated from termite control services, with the remainder from distribution of pest control products. For the same period, approximately 80% of our Terminix operating revenue was generated from services provided to residential customers, with the remaining 20% from commercial customers. A significant portion of our Terminix revenue base is recurring, with 72% of 2013 operating revenue derived from services delivered through annual contracts. Additionally, in 2013, retention rates for termite and pest control customers with annual contracts were 85% and 79%, respectively.

        We believe that the strength of the Terminix brand, along with our history of providing a high level of consistent service, allows us to enjoy a competitive advantage in attracting, retaining and growing our customer base. We believe our investments in systems and processes, such as routing and scheduling optimization, robust reporting capabilities and mobile customer management solutions, enable us to deliver a higher level of customer service when compared to smaller regional and local competitors.

        Our focus on attracting and retaining customers begins with our associates in the field, who interact with our customers every day. Our associates bring a strong level of passion and commitment to the Terminix brand, as evidenced by the 15-year and 7-year average tenure of our branch managers and technicians, respectively. Our field organization is supported by dedicated customer service and call center personnel. Our culture of continuous improvement drives an intense focus on the quality of the services delivered, which we believe produces high levels of customer satisfaction and, ultimately, customer retention and referrals.

        The Terminix national branch structure includes approximately 285 company-owned and 100 franchised locations, which serve approximately 2.8 million residential customers in 47 states and the District of Columbia. In 2013, substantially all of Terminix operating revenue was generated in the United States, with less than 1% derived from international markets through subsidiaries, a joint venture and licensing arrangements. Franchise fees from Terminix franchisees represented less than 1% of Terminix operating revenue in 2013.

 

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        For the year ended December 31, 2013, Terminix recorded operating revenue of $1,309.5 million and Adjusted EBITDA of $318.9 million.

    Terminix Competitive Strengths

    #1 market position and #1 recognized brand in U.S. termite and pest control services

    Track record of high customer retention rates

    Passionate and committed associates focused on delivering superior customer service

    Expansive scale and deep market presence across a national footprint

    Effective multi-channel customer acquisition strategy

    History of innovation leadership and introducing new products and services

American Home Shield Segment Overview

        American Home Shield founded the home warranty industry in 1971 and remains the leading provider of home warranty plans for household systems and appliances in the United States, with approximately 42% market share, as measured by revenue. We estimate American Home Shield to be approximately four to five times larger than its nearest competitor, as measured by revenue. We believe that, as the market leader, American Home Shield can drive increasing use of home warranties given the low industry household penetration of approximately 3-4%.

        American Home Shield provides home warranty plans that cover the repair or replacement of up to 21 major household systems and appliances, including electrical, plumbing, central heating and air conditioning (HVAC) systems, water heaters, refrigerators, dishwashers and ovens/cook tops. Our warranty plans are generally structured as one-year contracts with annual renewal options and, as a result, a significant portion of our revenue base in this segment is recurring. In 2013, our retention rate was 73%. Of the home warranties written by American Home Shield in 2013, 69% were derived from existing contract renewals, while 18% and 13% were derived from sales made in conjunction with existing home resale transactions and direct-to-consumer sales, respectively.

        We have one of the largest contractor networks in the United States, comprised of approximately 10,000 independent home service contractors. We carefully screen our contractors and closely monitor their performance based on a number of criteria, including through feedback from customer satisfaction surveys. On an annual basis, our contractors respond to nearly three million service requests from approximately 1.4 million customers across all 50 states and the District of Columbia. Additionally, American Home Shield operates and takes service calls 24 hours a day, seven days a week. Furthermore, as a result of our large contractor network and sophisticated IT systems, approximately 90% of the time we successfully assign contractors to a job within 15 minutes or less.

        For the year ended December 31, 2013, American Home Shield recorded operating revenue of $740.1 million and Adjusted EBITDA of $170.9 million.

American Home Shield Competitive Strengths

    #1 market position in the industry with 42% market share, estimated to be four to five times the size of the next largest competitor

    Track record of high customer retention rates

    Large and pre-qualified national contractor network

    Strong partnerships with leading national residential real estate firms

 

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    Core competency around direct-to-consumer marketing and lead generation

Franchise Services Group Segment Overview

        ServiceMaster's Franchise Services Group consists of the ServiceMaster Restore (disaster restoration), ServiceMaster Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (furniture repair) and AmeriSpec (home inspection) businesses. Our businesses in this segment operate principally through franchisees. Approximately half of our operating revenue in this segment consists of ongoing monthly royalty fees based upon a percentage of our franchisees' customer-level revenue. We believe that each business holds a leading market position in its respective category and that our scale and national presence create competitive advantages for us in attracting and retaining franchisees. We are able to invest in best-in-class systems, training and process development, provide multiple levels of marketing support and direct new business leads to our franchisees through our relationships with major insurance carriers and national account customers. The depth of our franchisee support is evidenced by the long average tenure of our franchisees, many of whom have partnered with ServiceMaster for over 25 years.

        For the year ended December 31, 2013, the Franchise Services Group would have recorded operating revenue of $235.5 million (comprised of operating revenue of $150.9 million and $84.6 million from our ServiceMaster Clean segment and our Merry Maids business, respectively) and Adjusted EBITDA of $88.6 million (comprised of Adjusted EBITDA of $67.9 million and $20.7 million from our ServiceMaster Clean segment and our Merry Maids business, respectively).

Franchise Services Group Competitive Strengths

    Strong and trusted brands with leading market positions in their respective categories

    Attractive value proposition to franchisees

    Exceptional focus on customer service evidenced by strong net promoter scores, or "NPS"

    Infrastructure and scale supporting our ability to service national accounts

    National network and 24/7/365 service availability supports mission-critical nature of the ServiceMaster Restore business

    Long-standing and strong relationships with the majority of the top 20 insurance carriers

        Through December 31, 2013, we reported the Merry Maids business in our Other Operations and Headquarters segment and the ServiceMaster Restore, ServiceMaster Clean, Furniture Medic and AmeriSpec businesses in the ServiceMaster Clean segment. Beginning with the reporting period for the three months ended March 31, 2014, we expect to combine the Merry Maids business with our ServiceMaster Clean segment in a new reporting segment titled Franchise Services Group. For a discussion of and reconciliation with respect to our results to be reclassified, see "—Summary Unaudited Pro Forma Financial Data."

Our Market Opportunity

Overview of Termite and Pest Control Industry

        The outsourced market for residential and commercial termite and pest control services in the United States was approximately $7 billion in 2012, according to Specialty Products Consultants, LLC. We estimate that there are approximately 17,000 U.S. termite and pest control companies, nearly all of which have fewer than 100 employees.

 

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        Termites are responsible for an estimated $5 billion in home damage in the United States annually, according to the National Pest Management Association's 2012 survey. The termite control industry provides treatment and inspection services to residential and commercial property owners for the remediation and prevention of termite infestations. We believe homeowners value quality and reliability over price in choosing professional termite control services, as the cost of most professional treatments is well below the potential cost of inaction or ineffective treatment. As a result, we believe the demand for termite remediation services is relatively insulated from changes in consumer spending. In addition to remediation services, the termite control industry offers periodic termite inspections and preventative treatments to residential and commercial property owners in areas with high termite activity, typically through annual contracts. These annual contracts may carry guarantees that protect the property owner against the cost of structural damage caused by a termite infestation. Termites can cause significant damage to a structure before becoming visible to the untrained eye, highlighting the value proposition of professional preventative termite services. As a result, the termite control industry experiences high renewal rates on annual preventative inspection and treatment contracts, and revenues from such contracts are generally stable and recurring.

        Pest infestations may damage a home or business while also carrying the risk of the spread of diseases. Moreover, for many commercial facilities, pest control is essential to regular operations and regulatory compliance (e.g., hotels, restaurants and healthcare facilities). As a result of these dynamics, the pest control industry experiences high rates of renewal for its pest inspection and treatment contracts. Pest control services are often delivered on a contracted basis through regularly scheduled service visits, which include an inspection of premises and application of pest control materials. According to the National Pest Management Association's 2012 survey, approximately 30% of U.S. households currently use a professional pest exterminator.

        Both termite and pest activity are affected by weather. Termite activity peaks during the annual springtime "swarm," the timing and intensity of which varies based on weather. Similarly, pest activity tends to accelerate in the spring months when warmer temperatures arrive in many U.S. regions. However, as a result of the high proportion of termite and pest control services which are contracted and recurring, as well as the high renewal rates for those services, the termite and pest control industry is relatively insulated from weather anomalies in any given year.

Overview of Home Warranty Industry

        We estimate that the U.S. home warranty market had total revenue of approximately $1.8 billion in 2013. The home warranty market is characterized by low household penetration, which we estimate to be approximately 3-4%. The home warranty industry offers plans that protect a homeowner against costly repairs or replacement of household systems and appliances. Typically having a one-year term, coverage varies based on a menu of plan options. The most commonly covered items include electrical, plumbing, central heating and air conditioning (HVAC) systems, water heaters, refrigerators, dishwashers and ovens/cook tops. The home warranty industry is characterized by a high level of customer interaction and service requirements. This combination of a high-touch/high-service business model and the peace of mind it delivers to the customer has led to high renewal rates in the home warranty industry.

        As consumer demand shifts towards more outsourced services, we believe that there is an opportunity for American Home Shield, a reliable, scaled service provider with a national, pre-screened contractor network, to increase market share and household penetration. Additionally, we believe that increasingly complex household systems and appliances may further highlight the value proposition of professional repair services and, accordingly, the coverage offered by a home warranty.

        One of the drivers of sales of new home warranties is the number of existing homes sold in the United States, since a home warranty is often recommended by a real estate sales professional or

 

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offered by the seller of a home in conjunction with a real estate resale transaction. According to the National Association of Realtors, existing home resales, as measured in units, increased by approximately 9% in 2013. Approximately 19% of the operating revenue of American Home Shield for the year ended December 31, 2013 was tied directly to existing home resale transactions.

Overview of Key Franchise Services Group Industries

        Disaster Restoration (ServiceMaster Restore).    We estimate that the U.S. disaster restoration market is approximately $39 billion, approximately two-thirds of which is related to residential customers and the remainder related to commercial customers. Most emergency response work results from emergency situations for residential and commercial customers, such as fires and flooding. Extreme weather events and natural disasters also provide demand for emergency response work. Critical factors in the selection of an emergency response firm are the firm's reputation, relationships with insurers, available resources, proper insurance and credentials, quality of service, timeliness and responsiveness. This market is highly fragmented, with two large players, including ServiceMaster Restore, and we believe there are opportunities for growth for scaled service providers.

        Janitorial (ServiceMaster Clean).    We estimate that the U.S. janitorial services market was approximately $50.5 billion in 2013. The market is highly fragmented with more than 825,000 companies competing in the janitorial space, a significant majority of which have five or fewer employees.

        Residential Cleaning (Merry Maids).    We estimate that the U.S. residential professional cleaning services market was approximately $3.7 billion in 2013. Competition in this market comes mainly from local, independently owned firms, and from a few national companies.

Our Competitive Strengths

        #1 Market Positions in Large, Fragmented and Growing Markets.    We are the leading provider of essential residential and commercial services in the majority of markets in which we operate. Our markets are generally large, growing and highly fragmented, and we believe we have significant advantages over smaller local and regional competitors. We have spent decades developing a reputation built on reliability and superior quality and service. As a result, we enjoy high unaided brand awareness and a reputation for high-quality customer service, which serve as key drivers of our customer acquisition efforts. Our nationwide presence also allows our brands to effectively serve both local residential customers and large national commercial accounts and to capitalize on lead generation sources that include large real estate agencies, financial institutions and insurance carriers. We believe our significant size and scale also provide a competitive advantage in our purchasing power, route density, and marketing and operating efficiencies compared to smaller local and regional competitors. Our scale also facilitates the standardization of processes, shared learning and talent development across our entire organization.

        Diverse Revenue Streams Across Customers and Geographies.    ServiceMaster is diversified in terms of customers and geographies, and our businesses served approximately five million customers in 2013. We operate in all 50 states and the District of Columbia. Our Terminix business, which accounted for 57% of our 2013 operating revenue, served approximately 2.8 million customers across a branch network of approximately 285 company-owned and 100 franchised locations. American Home Shield, which accounted for 32% of our 2013 operating revenue, responded to nearly three million service requests from approximately 1.4 million customers. Our diverse customer base and geographies help to mitigate the effect of adverse market conditions and other risks in any particular geography or customer segment we serve. We therefore believe that the size and scale of our company provide us with added protection from risk relative to our smaller local and regional competitors.

 

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        High-Value Service Offerings Resulting in High Retention and Recurring Revenues.    We believe our high annual customer retention demonstrates the highly valued nature of the services we offer and the high level of execution and customer service that we provide. In 2013, in our Terminix termite and pest control businesses, our customer retention rates were 85% and 79%, respectively, and in our American Home Shield segment, our retention rate was 73%. Many of our technicians have built long-standing, personal relationships with their customers. We believe these personal bonds, often forged over decades, help to drive customer loyalty and retention. As a result of our strong retention rates and long-standing customer relationships, we enjoy significant visibility and stability in our business, and these factors limit the effect of adverse economic cycles on our revenue base. We experienced these advantages during the most recent downturn, when we were able to grow operating revenue in each year from 2008 to 2013.

        Multi-Channel Marketing Approach Supported by Sophisticated Customer Analytic Modeling Capabilities.    Our multi-channel marketing approach focuses on building the value of our brands and generating revenue by understanding the decisions customers make at each stage in the purchase of residential and commercial services. The effectiveness of our marketing efforts is demonstrated by an increase in lead generation and online sales, as well as an improvement in close rates over the last few years. For example, in our direct-to-consumer channel at American Home Shield, new home warranty lead generation, marketing yield and close rates have benefited from increased spending on marketing as well as improved digital marketing. We have also been deploying increasingly sophisticated customer analytics models that allow us to more effectively segment our prospective customers and tailor campaigns towards them. In addition, we are seeing success with newer ways of reaching and marketing to consumers via content marketing, promotions and social media channels.

        Operational and Customer Service Excellence Driven by Superior People Development.    We are constantly focused on improving customer service. The customer experience is at the foundation of our business model, and we believe that each employee is an extension of ServiceMaster's reputation. We employ rigorous hiring and training practices and continuously analyze our operating metrics to identify potential improvements in service and productivity. Technicians in our Terminix branches exhibit low levels of turnover, with an average tenure of seven years, creating continuity in customer relationships and ensuring the development of best practices based on on-the-ground experience. We also provide our field personnel with access to sophisticated data management and mobility tools which enable them to drive efficiencies, improve customer service and ultimately grow our customer base and profitability.

        Resilient Financial Model with Track Record of Consistent Performance.    

    Solid revenue and Adjusted EBITDA growth through business cycles.  Our consolidated pro forma operating revenue and pro forma Adjusted EBITDA compound annual growth rates from 2009 through 2013 were 4% and 6%, respectively. We believe that our strong performance through the recent economic and housing downturns is attributable to the essential nature of our services, our strong value proposition and our management's focus on driving results.

    Solid margins with attractive operating leverage and productivity improvement initiatives.  Our business model enjoys inherent operating leverage stemming from route density and fixed investments in infrastructure and technology, among other factors. We have demonstrated our ability to expand our margins through a variety of initiatives, including metric-driven continuous improvement in our customer call centers, application of consistent process guidelines at the branch level, leveraging size and scale to improve the sourcing of labor and materials, and driving productivity in centralized services. We have also deployed mobility solutions and routing and scheduling systems across many of our businesses in order to enhance overall efficiency and reduce operating costs.

        Capital-Light Business Model with High Cash Flow Conversion.    Our business model is characterized by strong Adjusted EBITDA margins, negative working capital and limited capital expenditure

 

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requirements, which have allowed us to deliver consistent and high Cash Flow Conversion (as defined in "—Selected Historical Financial Data"), which averaged            % from 2009 through 2013. We intend to utilize a meaningful portion of our future cash flow to repay debt.

        Experienced Management Team.    We have assembled a management team of highly experienced leaders with significant industry expertise. Our senior leaders have track records of producing profitable growth in a wide variety of industries and economic conditions. We also believe that we have a deep bench of talent across each of our business units, including long-tenured individuals with significant expertise and knowledge of the businesses they operate. Our management team is highly focused on execution and driving growth and profitability across our company. Our compensation structure, including incentive compensation, is tied to key performance metrics and is designed to incentivize senior management to seek the long-term success of our business.

Our Strategy

        Grow Our Customer Base.    We are focused on the growth of our businesses through the introduction and delivery of high-value services to new and existing customers. With approximately five million customers today, we drive growth in recurring and new sales via three primary channels:

    Direct-to-consumer through our company-owned branches;

    Indirectly through partnerships with high-quality contractors in our home warranty business; and

    Through trusted service providers who are franchisees.

        To accelerate new customer growth, we make strategic investments in sales, marketing and advertising to drive new business leads, brand awareness and market penetration. In addition, we are executing multiple initiatives to improve customer satisfaction and service delivery, which we believe will lead to improved retention and growth in our customer base across our business segments.

        Introduce New Service Offerings.    We intend to continue to leverage our existing sales channels and local coverage to deliver additional value-added services to our customers. Our product development teams draw upon the experience of our technicians in the field, combined with in-house scientific expertise, to create innovative customer solutions for both our existing customer base and identified service/category adjacencies. We have a strong history of new product introductions, such as crawlspace encapsulation, mosquito control and wildlife exclusion at Terminix, that we believe will appeal to new potential customers as well as our existing customer base. As another example, in the second quarter of 2014, our ServiceMaster Restore and AmeriSpec teams intend to introduce InstaScope, a new, proprietary technology for instant mold detection and water categorization.

        Expand Our Geographic Markets.    Through detailed assessments of local economic conditions and demographics, we have identified target markets for expansion, both in existing markets, where we have capacity to increase our local market position, and in new markets, where we see opportunities. In addition to geographic expansion opportunities within the United States, we intend to grow our international presence through strategic franchise expansions and additional licensing agreements.

        Grow Our Commercial Business.    Our revenue from commercial customers comprised approximately 13% of our 2013 operating revenue. We believe we are well positioned to leverage our national coverage, brand strength and broad service offerings to target large multi-regional accounts. We believe these capabilities provide us with a meaningful competitive advantage, especially compared to smaller local and regional competitors. We recognize that many of these large accounts seek to outsource or reduce the number of vendors used for certain services, and, accordingly, we have reenergized our marketing approach in this channel. At Terminix, for example, we have hired a dedicated sales team to focus on the development of commercial sales. Our commercial expansion

 

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strategy targets industries with a demonstrated need for our services, including healthcare, manufacturing, warehouses, hotels and commercial real estate.

        Enhance Our Profitability.    We have and will continue to invest in initiatives designed to improve our margins and drive profitable growth. We have been able to increase productivity across our segments through actions such as continuous process improvement, targeted systems investments, sales force initiatives and technician mobility tools. We are also focusing on strategically leveraging the $1.4 billion that we have spent annually with our vendors to capitalize on purchasing power and achieve more favorable pricing and terms. In addition, we have rolled out tools and processes to centralize and systematize pricing decisions. These tools and processes enable us to optimize pricing at the geographic market and product level while creating a flexible and scalable pricing architecture that can grow with the business. We intend to leverage these investments as well as identify further opportunities to enhance profitability across our businesses.

        Pursue Selective Acquisitions.    Since 2008, we have completed nearly 200 acquisitions. We anticipate that the highly fragmented nature of our markets will continue to create opportunities for further consolidation. As we have in the past, we will continue to take advantage of tuck-in as well as strategic acquisition opportunities, particularly in underserved markets where we can enhance and expand our service capabilities. We seek to use acquisitions to cost-effectively grow our customer count and enter high-growth geographies. We may also pursue acquisitions as vehicles for strategic international expansion.

TruGreen Spin-Off

        On January 14, 2014, we completed a separation transaction, or the "TruGreen Spin-off," resulting in the spin-off of the assets and certain liabilities of the business that comprises the lawn, tree and shrub care services previously conducted by ServiceMaster primarily under the TruGreen brand name, or collectively, the "TruGreen Business," through a tax-free, pro rata dividend to our stockholders. As a result of the completion of the TruGreen Spin-off, New TruGreen operates the TruGreen Business as a private independent company. The TruGreen Business provided lawn, tree and shrub care services primarily under the TruGreen brand name. Beginning with the reporting period for the three months ended March 31, 2014, the TruGreen Business will be reported in discontinued operations.

Equity Sponsors and Organizational Structure

        In July 2007, SvM was acquired pursuant to a merger transaction, or the "2007 Merger," and, immediately following the completion of the 2007 Merger, all of our outstanding common stock was owned by investment funds managed by, or affiliated with, Clayton, Dubilier & Rice, LLC ("CD&R"), or the "CD&R Funds," Citigroup Private Equity LP, or "Citigroup," BAS Capital Funding Corporation, or "BAS," and JPMorgan Chase Funding Inc., or "JPMorgan." On September 30, 2010, Citigroup transferred the management responsibility for certain investment funds that owned shares of our common stock to StepStone Group LP, or "StepStone," and the investment funds managed by StepStone Group, the "StepStone Funds." As of December 22, 2011, we purchased from BAS 7.5 million shares of our common stock. On March 30, 2012, an affiliate of BAS sold 7.5 million shares of our common stock to Ridgemont Partners Secondary Fund I, L.P, or "Ridgemont." On July 24, 2012, BACSVM-A L.P., an affiliate of BAS, distributed 2.5 million shares of our common stock to Charlotte Investor IV, L.P., its sole limited partner, (together with the CD&R Funds, the StepStone Funds, JPMorgan, Citigroup Capital Partners II Employee Master Fund, L.P., an affiliate of Citigroup, and BACSVM-A, L.P., an affiliate of BAS, the "Equity Sponsors"). After giving effect to this offering, the CD&R Funds, the StepStone Funds and JPMorgan will beneficially own        %,        % and        %, respectively, of the shares of our outstanding common stock, and each of the other Equity Sponsors will beneficially own less than 5% of our outstanding common stock.

 

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        CD&R is a private equity firm composed of a combination of financial and operating executives pursuing an investment strategy predicated on building stronger, more profitable businesses. Since its founding in 1978, CD&R has managed the investment of more than $19 billion in 59 businesses with an aggregate transaction value of more than $90 billion. CD&R has a disciplined and clearly defined investment strategy with a special focus on multi-location services and distribution businesses.

        StepStone Group LP is a global private markets firm overseeing more than $60 billion of private capital allocations, including approximately $11 billion of assets under management. StepStone creates customized portfolios for investors using a highly disciplined research-focused approach that integrates fund, secondary, mezzanine and co-investments.

        The following chart illustrates our ownership and organizational structure, after giving effect to this offering:

GRAPHIC


(1)
Guarantor of SvM's senior secured revolving credit facility, or the "Revolving Credit Facility," and SvM's senior secured term loan facilities, or the "Term Facilities," and together with the Revolving Credit Facility, the "Credit Facilities." See "Description of Certain Indebtedness."

(2)
Borrower under the Credit Facilities and issuer of the 8% senior notes maturing in 2020, or the "February 2020 Notes," and the 7% senior notes maturing in 2020, or the "August 2020 Notes," and collectively with the February 2020 Notes, the "2020 Notes," and the Continuing Notes, as defined in "Description of Certain Indebtedness." See "Description of Certain Indebtedness."

(3)
SvM's subsidiary The Terminix International Company Limited Partnership is a co-borrower under the Revolving Credit Facility. Certain direct and indirect domestic subsidiaries of SvM guarantee the Credit Facilities and the 2020 Notes.

 

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Market and Industry Data

        This prospectus includes estimates regarding market and industry data and forecasts, which are based on publicly available information, industry publications and surveys, reports from government agencies, reports by market research firms and our own estimates based on our management's knowledge of, and experience in, the residential and commercial services industry and market segments in which we compete. Third-party industry publications and forecasts generally state that the information contained therein has been obtained from sources generally believed to be reliable. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the captions "Risk Factors," "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Service Marks, Trademarks and Trade Names

        We hold various service marks, trademarks and trade names, such as ServiceMaster, Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec, that we deem particularly important to the advertising activities conducted by each of our businesses. As of December 31, 2013, we had marks that were protected by registration (either by direct registration or by treaty) in the United States and approximately 90 other countries.

* * * * *

        Our corporate headquarters are located at 860 Ridge Lake Boulevard, Memphis, Tennessee, 38120. Our telephone number is (901) 597-1400.

 

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THE OFFERING

Common stock offered by us

            shares

Option to purchase additional shares of common stock

 

The underwriters have a 30-day option to purchase up to an additional          shares of common stock from us at the initial public offering price, less underwriting discounts and commissions.

Common stock to be outstanding after this offering

 

          shares (or          shares if the underwriters exercise in full their option to purchase additional shares)

Use of proceeds

 

We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and commissions and estimated offering expenses, will be approximately $          (or approximately $          if the underwriters exercise in full their option to purchase additional shares).

 

We intend to use the net proceeds of this offering to redeem up to 35% of each series of our outstanding 2020 Notes and to pay aggregate fees of $          million to certain of the Equity Sponsors in connection with the termination of our consulting agreements with each of them. We intend to use any remaining net proceeds to redeem an additional portion of the outstanding February 2020 Notes. See "Use of Proceeds."

Dividend policy

 

We do not currently anticipate paying dividends on our common stock for the foreseeable future. See "Dividend Policy."

Proposed trading symbol

 

"SERV"

Risk factors

 

See "Risk Factors" for a discussion of factors that you should consider carefully before deciding to invest in shares of our common stock.

        The number of shares of our common stock to be outstanding immediately following this offering is based on the number of our shares of common stock outstanding as of                    , 2014, and excludes:

    shares of common stock issuable upon exercise of options to purchase shares outstanding as of                     , 2014 at a weighted average exercise price of $          per share;

    shares of common stock issuable pursuant to restricted stock units and performance based restricted stock units as of                    , 2014; and

    shares of common stock reserved for future issuance following this offering under our equity plans.

        Unless otherwise indicated, all information in this prospectus:

    gives effect to the issuance of          shares of common stock in this offering;

    assumes no exercise by the underwriters of their option to purchase additional shares;

    assumes that the initial public offering price of our common stock will be $          per share (which is the midpoint of the price range set forth on the cover page of this prospectus); and

    gives effect to amendments to our amended and restated certificate of incorporation and amended and restated by-laws to be adopted prior to the completion of this offering.

 

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SUMMARY HISTORICAL
CONSOLIDATED FINANCIAL AND OTHER OPERATING DATA

        The following tables set forth summary historical consolidated financial and other operating data as of the dates and for the periods indicated. The summary historical consolidated financial and other operating data as of December 31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013 have been derived from our audited consolidated financial statements and related notes included in this prospectus. The summary historical consolidated balance sheet data as of December 31, 2011 has been derived from our audited consolidated financial statements and related notes not included in this prospectus. The summary historical financial and operating data are qualified in their entirety by, and should be read in conjunction with, our audited consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Selected Historical Financial Data" included in this prospectus.

 
  Year Ended December 31,  
(In thousands, except per share data)
  2013   2012   2011  

Operating Results:

                   

Operating Revenue

  $ 3,188,835   $ 3,193,281   $ 3,205,872  

Cost of services rendered and products sold

    1,906,054     1,861,669     1,813,706  

Selling and administrative expenses

    921,339     872,792     880,769  

Amortization expense

    55,532     65,298     91,352  

Goodwill and trade name impairment(1)

    673,253     908,873     36,700  

Restructuring charges(2)

    20,840     18,177     8,162  

Interest expense

    249,033     246,906     266,813  

Interest and net investment income

    (8,764 )   (7,876 )   (10,952 )

Loss on extinguishment of debt(3)

        55,554      
               

(Loss) Income from Continuing Operations before Income Taxes(1)(2)(3)

    (628,452 )   (828,112 )   119,322  

(Benefit) provision for income taxes

    (123,251 )   (114,595 )   46,594  

Equity in losses of joint venture

    (468 )   (226 )    
               

(Loss) Income from Continuing Operations(1)(2)(3)

    (505,669 )   (713,743 )   72,728  

Loss from discontinued operations, net of income taxes(4)

    (1,135 )   (200 )   (27,016 )
               

Net (Loss) Income(1)(2)(3)(4)

  $ (506,804 ) $ (713,943 ) $ 45,712  
               
               

Weighted average shares outstanding:

                   

Basic

    137,369     137,884     137,953  

Diluted

    137,369     137,884     138,462  

Basic and Diluted (Loss) Earnings Per Share—Continuing Operations

  $ (3.68 ) $ (5.18 ) $ 0.53  

Financial Position (as of period end):

                   

Total assets

  $ 5,905,291   $ 6,414,757   $ 7,156,206  

Cash and cash equivalents

    494,269     428,650     338,687  

Total long-term debt

    3,955,529     3,961,253     3,875,870  

Total shareholders' equity(1)(2)(3)(4)

    23,194     535,130     1,233,973  

Other Financial Data:

                   

Capital expenditures

  $ 60,404   $ 73,228   $ 96,540  

Adjusted EBITDA(5)

    475,989     571,234     610,475  

Ratio of total debt to Adjusted EBITDA(5)

    8.31     6.93     6.35  

Ratio of Adjusted EBITDA to interest expense(5)

    1.91     2.31     2.29  

(1)
We recorded pre-tax non-cash impairment charges of $673.3 million and $908.9 million in 2013 and 2012, respectively, to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name and $36.7 million in 2011 to reduce the carrying value of the TruGreen trade name. See Note 1 to our audited consolidated financial statements included in this prospectus for further details.

(2)
The 2013, 2012 and 2011 results include restructuring charges of $20.8 million, $18.2 million and $8.2 million, respectively, as described in Note 8 to our audited consolidated financial statements included in this prospectus.

 

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(3)
The 2012 results include a $55.6 million ($35.4 million, net of tax) loss on extinguishment of debt related to the redemption of the remaining $996.0 million aggregate principal amount of SvM's 10.75% senior notes maturing in 2015, or the "2015 Notes," and repayment of $276.3 million of outstanding borrowings under the Term Facilities.

(4)
In 2011, in conjunction with the decision to dispose of our commercial landscaping business, we recorded a pre-tax non-cash impairment charge of $34.2 million to reduce the carrying value of the commercial landscaping business's assets to their estimated fair value less cost to sell in accordance with applicable accounting standards. Upon completion of such sale in 2011 we recorded a pre-tax loss on sale of $6.2 million. These charges are classified within the financial statement caption "(loss) income from discontinued operations, net of income taxes."

(5)
We use Adjusted EBITDA to facilitate operating performance comparisons from period to period. Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, accounting principles generally accepted in the United States of America, or "GAAP." Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities or any other measures of our cash flow or liquidity. "Adjusted EBITDA" means net income (loss) before: income (loss) from discontinued operations, net of income taxes; provision (benefit) for income taxes; gain (loss) on extinguishment of debt; interest expense; depreciation and amortization expense; non-cash goodwill and trade name impairment; residual value guarantee charge; non-cash asset impairment; non-cash stock-based compensation expense; restructuring charges; management and consulting fees; non-cash effects attributable to the application of purchase accounting and other non-operating expenses.

We believe Adjusted EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest income and expense), taxation and the age and book depreciation of facilities and equipment (affecting relative depreciation expense), which may vary for different companies for reasons unrelated to operating performance. In addition, we exclude residual value guarantee charges that do not result in additional cash payments to exit the facility at the end of the lease term.

Adjusted EBITDA is not necessarily comparable to other similarly titled financial measures of other companies due to the potential inconsistencies in the methods of calculation.

Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations are:

    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

    Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

    Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes;

    Adjusted EBITDA does not reflect historical capital expenditures or future requirements for capital expenditures or contractual commitments;

    Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

    Other companies in our industries may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.

 

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    The following table sets forth Adjusted EBITDA for each of our segments and reconciles the total Adjusted EBITDA to Net (Loss) Income for the periods presented, which we consider to be the most directly comparable GAAP financial measure to Adjusted EBITDA:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Adjusted EBITDA:

                   

Terminix

  $ 318,903   $ 319,838   $ 299,485  

TruGreen

    25,999     152,813     209,031  

American Home Shield

    170,866     141,542     131,977  

ServiceMaster Clean

    67,942     61,041     64,018  

Other Operations and Headquarters

    (107,721 )   (104,000 )   (94,036 )
               

Total Adjusted EBITDA

  $ 475,989   $ 571,234   $ 610,475  
               
               

Depreciation and amortization expense

  $ (149,112 ) $ (146,242 ) $ (163,436 )

Non-cash goodwill and trade name impairment(a)

    (673,253 )   (908,873 )   (36,700 )

Non-cash asset impairment(b)

    (165 )   (8,732 )    

Non-cash stock-based compensation expense(c)

    (4,046 )   (7,119 )   (8,412 )

Restructuring charges(d)

    (20,840 )   (18,177 )   (8,162 )

Management and consulting fees(e)

    (7,250 )   (7,250 )   (7,500 )

Loss from discontinued operations, net of income taxes(f)            

    (1,135 )   (200 )   (27,016 )

Benefit (provision) for income taxes

    123,251     114,595     (46,594 )

Loss on extinguishment of debt(g)

        (55,554 )    

Interest expense

    (249,033 )   (246,906 )   (266,813 )

Non-cash credits attributable to purchase accounting

        16     81  

Other(h)

    (1,210 )   (735 )   (211 )
               

Net (Loss) Income

  $ (506,804 ) $ (713,943 ) $ 45,712  
               
               

(a)
Represents the non-cash goodwill and trade name impairments described in footnote (1) above. We exclude non-cash goodwill and trade name impairments from Adjusted EBITDA because we believe doing so is useful to investors in aiding period-to-period comparability.

(b)
For the year ended December 31, 2012, primarily represents a $3.3 million impairment of licensed intellectual property and a $1.2 million impairment of abandoned real estate at Terminix, and a $4.2 million impairment of certain internally developed software at Merry Maids recorded in 2012 for which there were no similar impairments recorded in 2013. We exclude non-cash asset impairments from Adjusted EBITDA because we believe doing so is useful to investors in aiding period-to-period comparability.

(c)
Represents the non-cash expense of our equity-based compensation. We exclude this expense from Adjusted EBITDA primarily because it is a non-cash expense and because it is not used by management to assess ongoing operational performance. We believe excluding this expense from Adjusted EBITDA is useful to investors in aiding period-to-period comparability.

(d)
Represents the restructuring charges described in footnote (2) above, which include restructuring charges related primarily to the impact of a branch optimization project at Terminix, a reorganization of field leadership and a restructuring of branch operations at TruGreen, a reorganization of leadership at American Home Shield and ServiceMaster Clean, the TruGreen Spin-off and an initiative to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters. Our centers of excellence are functions at our headquarters that provide company-wide administrative services for our operations. We exclude these restructuring charges from Adjusted EBITDA because we believe they do not reflect our ongoing operations and because we believe doing so is useful to investors in aiding period-to-period comparability.

(e)
Represents the amounts paid to certain of our Equity Sponsors under the consulting agreements described in "Certain Relationships and Related Party Transactions—Consulting Agreements." We exclude these amounts from Adjusted EBITDA primarily because they are not reflective of ongoing operating results and because they are not used by management to assess ongoing operational performance. In addition, we have excluded these amounts from Adjusted EBITDA because the consulting agreements will terminate in connection with the completion of this offering.

(f)
Represents our loss in connection with the disposition of our commercial landscaping business in 2011, including the non-cash impairment charge and the loss on sale described in footnote (4) above. We exclude these amounts from Adjusted EBITDA because these charges are not part of our ongoing operations and we believe doing so is useful to investors in aiding period-to-period comparability.

(g)
Represents the loss on extinguishment of debt described in footnote (3) above. We believe excluding this expense from Adjusted EBITDA is useful to investors in aiding period-to-period comparability.

(h)
Represents administrative expenses of ServiceMaster and interest expense of ServiceMaster related to a note payable due to SvM. Although we expect to incur similar expenses in the future, we exclude these expenses from the calculation of Adjusted EBITDA in order to present Adjusted EBITDA on a basis consistent with Adjusted EBITDA as previously reported by SvM, which is familiar to holders of SvM's indebtedness.

 

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SUMMARY UNAUDITED PRO FORMA
FINANCIAL DATA

        The summary unaudited pro forma consolidated statement of operations data for each of the three years in the period ended December 31, 2013 have been prepared to give effect to the TruGreen Spin-off, in the manner described under "Unaudited Pro Forma Consolidated Financial Statements" and the notes thereto, as if the TruGreen Spin-off occurred on January 1, 2011, and the pro forma unaudited balance sheet data has been prepared as if the TruGreen Spin-off occurred on December 31, 2013.

        The unaudited pro forma consolidated financial statements are presented for informational purposes only and do not purport to represent our financial condition or our results of operations had the TruGreen Spin-off occurred on or as of the dates noted above or to project the results for any future date or period. The unaudited pro forma consolidated financial statements have been prepared in accordance with Regulation S-X. The pro forma adjustments reflect adjustments required under GAAP and are based upon certain assumptions that we believe are reasonable. The unaudited pro forma consolidated financial statements should be read in conjunction with the information included under the headings "Unaudited Pro Forma Consolidated Financial Statements," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our audited consolidated financial statements and related notes included in this prospectus.

 
  Pro Forma  
 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Operating Results:(1)

                   

Operating Revenue

  $ 2,292,892   $ 2,214,200   $ 2,105,131  

Cost of services rendered and products sold

    1,219,656     1,195,890     1,124,487  

Selling and administrative expenses

    691,464     677,674     648,158  

Amortization expense

    50,923     58,523     83,455  

Restructuring charges

    6,080     14,936     7,047  

Interest expense

    247,126     245,143     265,957  

Interest and net investment income

    (8,130 )   (7,441 )   (10,968 )

Loss on extinguishment of debt

        55,554      
               

Income (Loss) from Continuing Operations before Income Taxes

    85,773     (26,079 )   (13,005 )

Provision (benefit) for income taxes

    42,937     (7,967 )   (5,693 )

Equity in losses of joint venture

    (468 )   (226 )    
               

Income (Loss) from Continuing Operations

  $ 42,368   $ (18,338 ) $ (7,312 )
               
               

Balance Sheet Data (as of period end):(2)

                   

Total assets

  $ 5,232,308              

Total property and equipment, net

    177,424              

Total long-term debt

    3,905,944              

Total stockholders' equity

    (333,548 )            

Other Financial Data:

   
 
   
 
   
 
 

Pro Forma Adjusted EBITDA(3)

  $ 449,932   $ 412,978   $ 396,894  

(1)
The unaudited pro forma financial data for the years ended December 31, 2013, 2012 and 2011 is adjusted for the results of operations of the TruGreen Business. The unaudited pro forma financial data for the year ended December 31, 2013 are also adjusted for the elimination of non-recurring costs of $17.0 million that were directly related to the TruGreen Spin-off. Tax effects were

 

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    calculated as the difference in our previously reported tax provision compared to the computation of our tax provision excluding the TruGreen Business.

(2)
The unaudited pro forma balance sheet data as of December 31, 2013 is adjusted for the assets, liabilities and equity of the TruGreen Business and the $35 million cash contribution to TruGreen Holding Corporation, or "New TruGreen."

(3)
The following table sets forth Pro Forma Adjusted EBITDA for each of our segments and reconciles the total Pro Forma Adjusted EBITDA to Net (Loss) Income for the periods presented, which we consider to be the most directly comparable GAAP financial measure to Pro Forma Adjusted EBITDA:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Pro Forma Adjusted EBITDA:

                   

Terminix

  $ 318,903   $ 319,838   $ 299,485  

American Home Shield

    170,866     141,542     131,977  

ServiceMaster Clean(a)

    67,942     61,041     64,018  

Other Operations and Headquarters(a)

    (107,779 )   (109,443 )   (98,586 )
               

Total Pro Forma Adjusted EBITDA

  $ 449,932   $ 412,978   $ 396,894  
               
               

Depreciation and amortization expense

  $ (98,750 ) $ (99,822 ) $ (120,816 )

Non-cash asset impairment

    (165 )   (8,732 )    

Non-cash stock-based compensation expense

    (4,046 )   (7,119 )   (8,412 )

Restructuring charges(b)

    (6,080 )   (14,936 )   (7,047 )

Management and consulting fees

    (7,250 )   (7,250 )   (7,500 )

Loss from discontinued operations, net of income taxes(c)

    (549,172 )   (695,605 )   53,024  

(Provision) benefit for income taxes

    (42,937 )   7,967     5,693  

Loss on extinguishment of debt

        (55,554 )    

Interest expense

    (247,126 )   (245,143 )   (265,957 )

Non-cash credits attributable to purchase accounting. 

        8     44  

Other

    (1,210 )   (735 )   (211 )
               

Net (Loss) Income

  $ (506,804 ) $ (713,943 ) $ 45,712  
               
               

(a)
Through December 31, 2013, we reported the Merry Maids business in our Other Operations and Headquarters segment and the ServiceMaster Restore, ServiceMaster Clean, Furniture Medic and Amerispec businesses in the ServiceMaster Clean segment. Beginning in 2014, we will combine the Merry Maids business with our previously reported ServiceMaster Clean

 

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    segment as the Franchise Services Group segment. This reclassification impacts our segment results as follows:

 
  Year Ended December 31, 2013  
(In thousands)
  As Reported   Reclassification   As Reclassified  

Pro Forma Operating Revenue:

                   

Terminix

  $ 1,309,469   $   $ 1,309,469  

American Home Shield

    740,062         740,062  

Franchise Services Group

        235,503     235,503  

ServiceMaster Clean

    150,929     (150,929 )    

Other Operations and Headquarters

    92,432     (84,574 )   7,858  
               

Total Pro Forma Operating Revenue

  $ 2,292,892   $   $ 2,292,892  
               
               

Pro Forma Adjusted EBITDA:

                   

Terminix

  $ 318,903   $   $ 318,903  

American Home Shield

    170,866         170,866  

Franchise Services Group

        88,624     88,624  

ServiceMaster Clean

    67,942     (67,942 )    

Other Operations and Headquarters

    (107,779 )   (20,682 )   (128,461 )
               

Total Pro Forma Adjusted EBITDA

  $ 449,932   $   $ 449,932  
               
               
(b)
Represents restructuring charges as described in Note 8 to our audited consolidated financial statements included in this prospectus as adjusted to eliminate the effect of a reorganization of field leadership and a restructuring of branch operations at TruGreen and other expenses directly related to the TruGreen Spin-Off. We exclude these restructuring charges from Pro Forma Adjusted EBITDA because we believe they do not reflect our ongoing operations and because we believe doing so is useful to investors in aiding period-to-period comparability.

(c)
Represents the non-cash impairment charge and loss on sale in connection with the disposition in 2011 of our commercial landscaping business, as described in Note 7 to our audited consolidated financial statements, as well as the results of the TruGreen Business, which beginning with the three months ended March 31, 2014, will be reported in discontinued operations. We exclude these amounts from Pro Forma Adjusted EBITDA because the commercial landscaping business is not, and the TruGreen Business will not be, part of our ongoing operations and we believe doing so is useful to investors in aiding period-to-period comparability.

 

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RISK FACTORS

        Investing in our common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this prospectus, including our audited consolidated financial statements and related notes appearing at the end of this prospectus, before making an investment decision. The risks described below are not the only ones facing us. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial position, results of operations or cash flows. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

Risks Related to Our Business and Our Industry

Weakening in general economic conditions, especially as they may affect home sales, unemployment or consumer confidence or spending levels, may adversely impact our business, financial position, results of operations and cash flows.

        A substantial portion of our results of operations is dependent upon spending by consumers. Deterioration in general economic conditions and consumer confidence, particularly in California, Texas and Florida, which collectively represented approximately one-third of our 2013 operating revenue in our Terminix and American Home Shield segments, could affect the demand for our services. Consumer spending and confidence tend to decline during times of declining economic conditions. A worsening of macroeconomic indicators, including weak home sales, higher home foreclosures, declining consumer confidence or rising unemployment rates, could adversely affect consumer spending levels, reduce the demand for our services and adversely impact our business, financial position, results of operations and cash flows. These factors could also negatively impact the timing or the ultimate collection of accounts receivable, which would adversely impact our business, financial position, results of operations and cash flows.

We may not successfully implement our business strategies, including achieving our growth objectives.

        We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames, the anticipated benefits of our various growth or other initiatives. Our various business strategies and initiatives, including growth of our customer base, introduction of new service offerings, geographic expansion, growth of our commercial business and enhancement of profitability, are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.

        In addition, we may incur certain costs to achieve efficiency improvements and growth in our business and we may not meet anticipated implementation timetables or stay within budgeted costs. As these efficiency improvement and growth initiatives are undertaken, we may not fully achieve our expected cost savings and efficiency improvements or growth rates, or these initiatives could adversely impact our customer retention or our operations. Also, our business strategies may change from time to time in light of our ability to implement our new business initiatives, competitive pressures, economic uncertainties or developments, or other factors.

We may be required to recognize additional impairment charges.

        We have significant amounts of goodwill and intangible assets, such as trade names, and have incurred impairment charges in 2013 and earlier periods with respect to goodwill and intangible assets. We have also incurred impairment charges in the past in connection with our disposition activities. In

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accordance with applicable accounting standards, goodwill and intangible assets that are not amortized are subject to assessment for impairment by applying a fair-value based test annually, or more frequently if there are indicators of impairment, including:

    significant adverse changes in the business climate, including economic or financial conditions;

    significant adverse changes in expected operating results;

    adverse actions or assessments by regulators;

    unanticipated competition;

    loss of key personnel; and

    a current expectation that it is more likely than not that a reporting unit or intangible asset will be sold or otherwise disposed of.

        In each of the past three years based on lower projected revenue and operating results for TruGreen, we recorded pre-tax non-cash impairment charges to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name, respectively, as a result of our interim or annual impairment testing of indefinite-lived intangible assets. These charges were $417.5 million and $255.8 million, respectively in 2013, and $790.2 million and $118.7 million, respectively, in 2012.

        As a result of the TruGreen Spin-off, we will be required to perform an interim impairment analysis as of January 14, 2014 on the TruGreen trade name. The assumptions used in this analysis will be based on the TruGreen Business as a standalone company, resulting in an expected impairment charge of approximately $140 million during the first quarter of 2014.

        In February 2014, American Home Shield ceased efforts to deploy a new operating system that had been intended to improve customer relationship management capabilities and enhance its operations. We expect to record an impairment charge of approximately $50 million in the first quarter of 2014 relating to this decision.

        Based upon future economic and financial market conditions, the operating performance of our reporting units and other factors, including those listed above, future impairment charges could be incurred. It is possible that such impairment, if required, could be material. Any future impairment charges that we are required to record could have a material adverse impact on our results of operations.

Adverse credit and financial market events and conditions could, among other things, impede access to or increase the cost of financing or cause our commercial and governmental customers to incur liquidity issues that could lead to some of our services not being purchased or being cancelled, or result in reduced operating revenue and lower Adjusted EBITDA, any of which could have an adverse impact on our business, financial position, results of operations and cash flows.

        Disruptions in credit or financial markets could, among other things, lead to impairment charges, make it more difficult for us to obtain, or increase our cost of obtaining, financing for our operations or investments or to refinance our indebtedness, cause our lenders to depart from prior credit industry practice and not give technical or other waivers under the Credit Facilities, to the extent we may seek them in the future, thereby causing SvM to be in default under one or more of the Credit Facilities. These disruptions also could cause our commercial customers to encounter liquidity issues that could lead to some of our services being cancelled or reduced, or that could result in an increase in the time it takes our customers to pay us, or that could lead to a decrease in pricing for our services and products, any of which could adversely affect our accounts receivable, among other things, and, in turn, increase our working capital needs. Volatile swings in the commercial real estate segment could also impact the demand for our services as landlords cut back on services provided to their tenants. In

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addition, adverse developments at federal, state and local levels associated with budget deficits resulting from economic conditions could result in federal, state and local governments decreasing their purchasing of our products or services and/or increasing taxes or other fees on businesses, including us, to generate more tax revenues, which could negatively impact spending by commercial customers and municipalities on our services.

Our market segments are highly competitive. Competition could reduce our share of the market segments served by us and adversely impact our reputation, business, financial position, results of operations and cash flows.

        We operate in highly competitive market segments. Changes in the source and intensity of competition in the market segments served by us impact the demand for our services and may also result in additional pricing pressures. The relatively low capital cost of entry into certain of our business categories has led to strong competitive market segments, including competition from smaller regional and local owner-operated companies. Regional and local competitors operating in a limited geographic area may have lower labor, benefits and overhead costs. The principal methods of competition in our businesses include name recognition, quality and speed of service, customer satisfaction, reputation and pricing. We may be unable to compete successfully against current or future competitors, and the competitive pressures that we face may result in reduced market segment share, reduced pricing or adversely impact our reputation, business, financial position, results of operations and cash flows.

Weather conditions and seasonality affect the demand for our services and our results of operations and cash flows.

        The demand for our services and our results of operations are affected by weather conditions, including, without limitation, potential impacts, if any, from climate change, known and unknown, and by the seasonal nature of our termite and pest control services, home inspection services, home warranties and disaster restoration services. Adverse weather conditions (e.g., cooler temperatures or droughts), whether created by climate change factors or otherwise, can impede the development of the termite swarm and lead to lower demand for our termite remediation services. Severe winter storms can also impact our home cleaning business if personnel cannot travel to service locations due to hazardous road conditions. In addition, extreme temperatures can lead to an increase in service requests related to household systems and appliances in our American Home Shield business, resulting in higher claim frequency and costs and lower profitability, thereby adversely impacting our business, financial position, results of operations and cash flows.

Increases in raw material prices, fuel prices and other operating costs could adversely impact our business, financial position, results of operations and cash flows.

        Our financial performance is affected by the level of our operating expenses, such as fuel, chemicals, refrigerants, appliances and equipment, parts, raw materials, wages and salaries, employee benefits, health care, vehicle maintenance, self-insurance costs and other insurance premiums as well as various regulatory compliance costs, all of which may be subject to inflationary pressures. In particular, our financial performance is adversely affected by increases in these operating costs. In recent years, fuel prices have fluctuated widely, and previous increases in fuel prices increased our costs of operating vehicles and equipment. We cannot predict what effect recent global events or any future Middle East or other crisis could have on fuel prices, but it is possible that such events could lead to higher fuel prices. With respect to fuel, our Terminix fleet, which consumes approximately 11 million gallons annually, has been negatively impacted by significant increases in fuel prices in the past and could be negatively impacted in the future. Although we hedge a significant portion of our fuel costs, we do not hedge all of those costs. In 2014, we expect to use approximately 11 million gallons of fuel. A ten percent change in fuel prices would result in a change of approximately $4.1 million in our 2014 fuel

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cost before considering the impact of fuel swap contracts. Although based upon Department of Energy fuel price forecasts, as well as the hedges we have executed to date for 2014, we have projected that fuel prices will not significantly increase our per gallon fuel costs for 2014 compared to 2013, those forecasts and projections may not prove correct. Fuel price increases can also result in increases in the cost of chemicals and other materials used in our business. We cannot predict the extent to which we may experience future increases in costs of fuel, chemicals, refrigerants, appliances and equipment, parts, raw materials, wages and salaries, employee benefits, health care, vehicle, self-insurance costs and other insurance premiums as well as various regulatory compliance costs and other operating costs. To the extent such costs increase, we may be prevented, in whole or in part, from passing these cost increases through to our existing and prospective customers, and the rates we pay to our subcontractors and suppliers may increase, any of which could have a material adverse impact on our business, financial position, results of operations and cash flows.

We may not be able to attract and retain qualified key executives or transition smoothly to new leadership, which could adversely impact us and our businesses and inhibit our ability to operate and grow successfully.

        The execution of our business strategy and our financial performance will continue to depend in significant part on our executive management team and other key management personnel and the smooth transition of new senior leadership. We have recently enhanced our senior management team, including through the hiring of Robert J. Gillette as Chief Executive Officer, or "CEO," and Alan J. M. Haughie as Chief Financial Officer, or "CFO." Any inability to attract in a timely manner other qualified key executives, retain our leadership team and recruit other important personnel could have a material adverse impact on our business, financial position, results of operations and cash flows.

Our franchisees and third-party distributors and vendors could take actions that could harm our business.

        For the year ended December 31, 2013, $138.8 million of our consolidated operating revenue was received in the form of franchise revenues. Accordingly, our financial results are dependent in part upon the operational and financial success of our franchisees. Our franchisees, third-party distributors and vendors are contractually obligated to operate their businesses in accordance with the standards set forth in our agreements with them. Each franchising brand also provides training and support to franchisees. However, franchisees, third-party distributors and vendors are independent third parties that we do not control, and who own, operate and oversee the daily operations of their businesses. As a result, the ultimate success of any franchise operation rests with the franchisee. If franchisees do not successfully operate their businesses in a manner consistent with required standards, royalty payments to us will be adversely affected and our brands' image and reputation could be harmed, which in turn could adversely impact our business, financial position, results of operations and cash flows. Similarly, if third-party distributors and vendors do not successfully operate their businesses in a manner consistent with required laws, standards and regulations, we could be subject to claims from regulators or legal claims for the actions or omissions of such third-party distributors and vendors. In addition, our relationship with our franchisees, third-party distributors and vendors could become strained (including resulting in litigation) as we impose new standards or assert more rigorous enforcement practices of the existing required standards. These strains in our relationships or claims could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

Disruptions or failures in our information technology systems could create liability for us or limit our ability to effectively monitor, operate and control our operations and adversely impact our reputation, business, financial position, results of operations and cash flows.

        Our information technology systems facilitate our ability to monitor, operate and control our operations. Changes or modifications to our information technology systems could cause disruption to our operations or cause challenges with respect to our compliance with laws, regulations or other

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applicable standards. As the development and implementation of our information technology systems (including our operating systems) evolve, we may elect to modify, replace or abandon certain technology initiatives, which could result in write-downs. For example, in February 2014, American Home Shield ceased efforts to deploy a new operating system that had been intended to improve customer relationship management capabilities and enhance its operations. We expect to record an impairment charge of approximately $50 million in the first quarter of 2014 relating to this decision.

        Any disruption in, capacity limitations, instability or failure to operate as expected of, our information technology systems, could, depending on the magnitude of the problem, adversely impact our business, financial position, results of operations and cash flows, including by limiting our capacity to monitor, operate and control our operations effectively. Failures of our information technology systems could also lead to violations of privacy laws, regulations, trade guidelines or practices related to our customers and associates. If our disaster recovery plans do not work as anticipated, or if the third-party vendors to which we have outsourced certain information technology, contact center or other services fail to fulfill their obligations to us, our operations may be adversely impacted, and any of these circumstances could adversely impact our reputation, business, financial position, results of operations and cash flows.

Changes in the services we deliver or the products we use could impact our reputation, business, financial position, results of operations and cash flows and our future plans.

        Our financial performance is affected by changes in the services and products we offer our customers. For example, Terminix has been developing new products relating to mosquito control and wildlife exclusion. In addition, in the second quarter of 2014, our ServiceMaster Restore and AmeriSpec teams intend to introduce InstaScope, a new, proprietary technology for instant mold detection and water categorization. There can be no assurance that our new strategies or product offerings will succeed in increasing operating revenue and growing profitability. An unsuccessful execution of new strategies, including the rollout or adjustment of our new services or products or sales and marketing plans, could cause us to re-evaluate or change our business strategies and could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows and our future plans.

If we fail to protect the security of personal information about our customers, we could be subject to interruption of our business operations, private litigation, reputational damage and costly penalties.

        We rely on, among other things, commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential customer information, such as payment card and personal information. The systems currently used for transmission and approval of payment card transactions, and the technology utilized in payment cards themselves, all of which can put payment card data at risk, are central to meeting standards set by the payment card industry, or "PCI." We continue to evaluate and modify our systems and protocols for PCI compliance purposes, and such PCI standards may change from time to time. Activities by third parties, advances in computer and software capabilities and encryption technology, new tools and discoveries and other events or developments may facilitate or result in a compromise or breach of our systems. Any compromises, breaches or errors in applications related to our systems or failures to comply with standards set by the PCI could cause damage to our reputation and interruptions in our operations, including our customers' ability to pay for our services and products by credit card or their willingness to purchase our services and products and could result in a violation of applicable laws, regulations, orders, industry standards or agreements and subject us to costs, penalties and liabilities which could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

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We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.

        Our ability to compete effectively depends in part on our rights to service marks, trademarks, trade names and other intellectual property rights we own or license, particularly our registered brand names, ServiceMaster, Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. We have not sought to register or protect every one of our marks either in the United States or in every country in which they are or may be used. Furthermore, because of the differences in foreign trademark, patent and other intellectual property or proprietary rights laws, we may not receive the same protection in other countries as we would in the United States. If we are unable to protect our proprietary information and brand names, we could suffer a material adverse impact on our reputation, business, financial position, results of operations and cash flows. Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products, services or activities infringe their intellectual property rights.

Future acquisitions or other strategic transactions could impact our reputation, business, financial position, results of operations and cash flows.

        We may pursue strategic transactions in the future, which could involve acquisitions or dispositions of businesses or assets. Any future strategic transaction could involve integration or implementation challenges, business disruption or other risks, or change our business profile significantly. Any inability on our part to consolidate and manage growth from acquired businesses or successfully implement other strategic transactions could have an adverse impact on our reputation, business, financial position, results of operations and cash flows. Any acquisition that we make may not provide us with the benefits that were anticipated when entering into such acquisition. The process of integrating an acquired business may create unforeseen difficulties and expenses, including the diversion of resources needed to integrate new businesses, technologies, products, personnel or systems; the inability to retain associates, customers and suppliers; the assumption of actual or contingent liabilities (including those relating to the environment); failure to effectively and timely adopt and adhere to our internal control processes and other policies; write-offs or impairment charges relating to goodwill and other intangible assets; unanticipated liabilities relating to acquired businesses; and potential expense associated with litigation with sellers of such businesses. Any future disposition transactions could also impact our business and may subject us to various risks, including failure to obtain appropriate value for the disposed businesses, post-closing claims being levied against us and disruption to our other businesses during the sale process or thereafter.

Laws and government regulations applicable to our businesses could increase our legal and regulatory expenses, and impact our business, financial position, results of operations and cash flows.

        Our businesses are subject to significant international, federal, state, provincial and local laws and regulations. These laws and regulations include laws relating to consumer protection, wage and hour requirements, franchising, the employment of immigrants, labor relations, permitting and licensing, building code requirements, workers' safety, the environment, insurance and home warranties, employee benefits, marketing (including, without limitation, telemarketing) and advertising, the application and use of pesticides and other chemicals. In particular, we anticipate that various international, federal, state, provincial and local governing bodies may propose additional legislation and regulation that may be detrimental to our business or may substantially increase our operating costs, including proposed legislation, such as the Employee Free Choice Act, the Paycheck Fairness Act and the Arbitration Fairness Act; environmental regulations related to chemical use, climate change, equipment efficiency standards, refrigerant production and use and other environmental matters; other consumer protection laws or regulations; health care coverage; or "do-not-knock," "do-not-mail,"

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"do-not-leave" or other marketing regulations. It is difficult to predict the future impact of the broad and expanding legislative and regulatory requirements affecting our businesses and changes to such requirements may adversely affect our business, financial position, results of operations and cash flows. In addition, if we were to fail to comply with any applicable law or regulation, we could be subject to substantial fines or damages, be involved in litigation, suffer losses to our reputation or suffer the loss of licenses or incur penalties that may affect how our business is operated, which, in turn, could have a material adverse impact on our business, financial position, results of operations and cash flows.

Public perceptions that the products we use and the services we deliver are not environmentally friendly or safe may adversely impact the demand for our services.

        In providing our services, we use, among other things, pesticides and other chemicals. Public perception that the products we use and the services we deliver are not environmentally friendly or safe or are harmful to humans or animals, whether justified or not, or our improper application of these chemicals, could reduce demand for our services, increase regulation or government restrictions or actions, result in fines or penalties, impair our reputation, involve us in litigation, damage our brand names and otherwise have a material adverse impact on our business, financial position, results of operations and cash flows.

Compliance with, or violation of, environmental, health and safety laws and regulations, including laws pertaining to the use of pesticides could result in significant costs that adversely impact our reputation, business, financial position, results of operations and cash flows.

        International, federal, state, provincial and local laws and regulations relating to environmental, health and safety matters affect us in several ways. In the United States, products containing pesticides generally must be registered with the U.S. Environmental Protection Agency, or the "EPA," and similar state agencies before they can be sold or applied. The failure to obtain or the cancellation of any such registration, or the withdrawal from the market place of such pesticides, could have an adverse effect on our business, the severity of which would depend on the products involved, whether other products could be substituted and whether our competitors were similarly affected. The pesticides we use are manufactured by independent third parties and are evaluated by the EPA as part of its ongoing exposure risk assessment. The EPA may decide that a pesticide we use will be limited or will not be re-registered for use in the United States. We cannot predict the outcome or the severity of the effect of the EPA's continuing evaluations.

        In addition, the use of certain pesticide products is regulated by various international, federal, state, provincial and local environmental and public health agencies. Although we strive to comply with such regulations and have processes in place designed to achieve compliance, given our dispersed locations, distributed operations and numerous associates, we may be unable to prevent violations of these or other regulations from occurring. Even if we are able to comply with all such regulations and obtain all necessary registrations and licenses, the pesticides or other products we apply or use, or the manner in which we apply or use them, could be alleged to cause injury to the environment, to people or to animals, or such products could be banned in certain circumstances. The regulations may also apply to third-party vendors who are hired to repair or remediate property and who may fail to comply with environmental laws, health and safety regulations and subject us to risk of legal exposure. The costs of compliance, non-compliance, remediation, combating unfavorable public perceptions or defending products liability lawsuits could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

        International, federal, state, provincial and local agencies regulate the disposal, handling and storage of waste, discharges from our facilities and the investigation and clean-up of contaminated sites. We could incur significant costs, including investigation and clean-up costs, fines, penalties and civil or criminal sanctions and claims by third parties for property damage and personal injury, as a result of

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violations of, or liabilities under, these laws and regulations. In addition, potentially significant expenditures could be required to comply with environmental, health and safety laws and regulations, including requirements that may be adopted or imposed in the future.

We are subject to various restrictive covenants that could adversely impact our business, financial position, results of operations and cash flows.

        From time to time, we enter into noncompetition agreements or other restrictive covenants (e.g., exclusivity, take or pay and non-solicitation), including in connection with business dispositions or strategic contracts, that restrict us from entering into lines of business or operating in certain geographic areas into which we may desire to expand our business. We also are subject to various non-solicitation and no-hire covenants that may restrict our ability to solicit potential customers or associates. If we do not comply with such restrictive covenants, or if a dispute arises regarding the scope and interpretation thereof, litigation could ensue, which could have an adverse impact on our business, financial position, results of operations and cash flows. Further, to the extent that such restrictive covenants prevent us from taking advantage of business opportunities, our business, financial position, results of operations and cash flows may be adversely impacted.

Our business process outsourcing initiatives have increased our reliance on third-party contractors and may expose our business to harm upon the termination or disruption of our third-party contractor relationships.

        Our strategy to increase profitability, in part, by reducing our costs of operations includes the implementation of certain business process outsourcing initiatives. Any disruption, termination or substandard performance of these outsourced services, including possible breaches by third-party vendors of their agreements with us, could adversely affect our brands, reputation, customer relationships, financial position, results of operations and cash flows. Also, to the extent a third-party outsourcing provider relationship is terminated, there is a risk that we may not be able to enter into a similar agreement with an alternate provider in a timely manner or on terms that we consider favorable, and even if we find an alternate provider, or choose to insource such services, there are significant risks associated with any transitioning activities. In addition, to the extent we decide to terminate outsourcing services and insource such services, there is a risk that we may not have the capabilities to perform these services internally, resulting in a disruption to our business, which could adversely impact our reputation, business, financial position, results of operations and cash flows. We could incur costs, including personnel and equipment costs, to insource previously outsourced services like these, and these costs could adversely affect our results of operations and cash flows.

        In addition, when a third-party provider relationship is terminated, there is a risk of disputes or litigation and that we may not be able to enter into a similar agreement with an alternate provider in a timely manner or on terms that we consider favorable, and even if we find an alternate provider, there are significant risks associated with any transitioning activities.

Our future success depends on our ability to attract, retain and maintain positive relations with trained workers and third-party contractors.

        Our future success and financial performance depend substantially on our ability to attract, train and retain workers, attract and retain third-party contractors and ensure third-party contractor compliance with our policies and standards. Our ability to conduct our operations is in part impacted by our ability to increase our labor force, including on a seasonal basis, which may be adversely impacted by a number of factors. In the event of a labor shortage, we could experience difficulty in delivering our services in a high-quality or timely manner and could be forced to increase wages in order to attract and retain associates, which would result in higher operating costs and reduced profitability. New election rules by the National Labor Relations Board, including "expedited elections" and restrictions on appeals, could lead to increased organizing activities at our subsidiaries or franchisees. If these labor organizing activities were successful, it could further increase labor costs, decrease operating efficiency and productivity in the future, or otherwise disrupt or negatively impact our operations. In addition, potential competition from key associates who leave ServiceMaster could impact our ability to maintain our market segment share in certain geographic areas.

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Risks Related to Our Substantial Indebtedness

We have substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect our financial health and our ability to obtain financing in the future, react to changes in our business and satisfy our obligations.

        As of December 31, 2013, on an as adjusted basis to give effect to this offering and the use of the net proceeds therefrom, we would have had $             million of total long-term consolidated indebtedness outstanding. In anticipation of the TruGreen Spin-off, on November 27, 2013, SvM entered into Amendment No. 3, or the "2013 Revolver Amendment," to the credit agreement governing SvM's Revolving Credit Facility, or the "Revolving Credit Agreement." Pursuant to the 2013 Revolver Amendment, SvM has, effective on January 14, 2014 upon completion of the TruGreen Spin-off, $241.7 million of available borrowing capacity under the Revolving Credit Agreement through July 23, 2014 and $182.7 million from July 24, 2014 through January 31, 2017. As of December 31, 2013 and January 14, 2014, there were no outstanding borrowings under SvM's Revolving Credit Facility. In addition, we are able to incur additional indebtedness in the future, subject to the limitations contained in the agreements governing our indebtedness. Our substantial indebtedness could have important consequences to you. Because of our substantial indebtedness:

    our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing is limited;

    our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future;

    a large portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes;

    we are exposed to the risk of increased interest rates because a portion of our borrowings, including under the Credit Facilities, and certain floating rate operating and capital leases are at variable rates of interest;

    it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such indebtedness;

    we may be more vulnerable to general adverse economic and industry conditions;

    we may be at a competitive disadvantage compared to our competitors with proportionately less indebtedness or with comparable indebtedness on more favorable terms and, as a result, they may be better positioned to withstand economic downturns;

    our ability to refinance indebtedness may be limited or the associated costs may increase;

    our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited; and

    we may be prevented from carrying out capital spending and restructurings that are necessary or important to our growth strategy and efforts to improve operating margins of our businesses.

Increases in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability.

        A significant portion of our outstanding indebtedness, including indebtedness under the Credit Facilities, bears interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our indebtedness and could materially reduce our profitability and cash flows. As of December 31, 2013, each one percentage point change in interest rates would result in an

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approximately $22 million change in the annual interest expense on our Term Loan Facility. Assuming all revolving loans were fully drawn as of December 31, 2013, each one percentage point change in interest rates would result in an approximately $3.2 million change in annual interest expense on our Revolving Credit Facility. The impact of increases in interest rates could be more significant for us than it would be for some other companies because of our substantial indebtedness.

A lowering or withdrawal of the ratings, outlook or watch assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.

        Our indebtedness currently has a non-investment grade rating, and any rating, outlook or watch assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency's judgment, current or future circumstances relating to the basis of the rating, outlook, or watch such as adverse changes to our business, so warrant. Any future lowering of our ratings, outlook or watch likely would make it more difficult or more expensive for us to obtain additional debt financing.

The agreements and instruments governing our indebtedness contain restrictions and limitations that could significantly impact our ability to operate our business.

        The Credit Facilities and the indenture governing our 2020 Notes contain covenants that, among other things, restrict the ability of SvM and its subsidiaries to:

    incur additional indebtedness (including guarantees of other indebtedness);

    pay dividends to ServiceMaster, redeem stock, or make other restricted payments, including investments and, in the case of the Revolving Credit Facility, make acquisitions;

    prepay, repurchase or amend the terms of certain outstanding indebtedness;

    enter into certain types of transactions with affiliates;

    transfer or sell assets;

    create liens;

    merge, consolidate or sell all or substantially all of our assets; and

    enter into agreements restricting dividends or other distributions by subsidiaries to SvM.

        The restrictions in the indenture governing the 2020 Notes, the Credit Facilities and the instruments governing SvM's other indebtedness may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility. We may be unable to refinance our indebtedness, at maturity or otherwise, on terms acceptable to us, or at all.

        The ability of SvM to comply with the covenants and restrictions contained in the Credit Facilities, the indenture governing the 2020 Notes, and the instruments governing our other indebtedness may be affected by economic, financial and industry conditions beyond our control including credit or capital market disruptions. The breach of any of these covenants or restrictions could result in a default that would permit the applicable lenders or noteholders, as the case may be, to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. If we are unable to repay indebtedness, lenders having secured obligations, such as the lenders under the Credit Facilities, could proceed against the collateral securing the indebtedness. In any such case, we may be unable to borrow under the Credit Facilities and may not be able to repay the amounts due under the Credit Facilities or our other outstanding indebtedness. This could have serious consequences to our financial position and results of operations and could cause us to become bankrupt or insolvent.

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Our ability to generate the significant amount of cash needed to pay interest and principal on our indebtedness and our ability to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors beyond our control.

        ServiceMaster and SvM are each holding companies, and as such they have no independent operations or material assets other than ownership of equity interests in their respective subsidiaries. ServiceMaster and SvM each depend on their respective subsidiaries to distribute funds to them so that they may pay obligations and expenses, including satisfying obligations with respect to indebtedness. Our ability to make scheduled payments on, or to refinance our obligations under, our indebtedness depends on the financial and operating performance of our subsidiaries, and their ability to make distributions and dividends to us, which, in turn, depends on their results of operations, cash flows, cash requirements, financial position and general business conditions and any legal and regulatory restrictions on the payment of dividends to which they may be subject, many of which may be beyond our control.

        There are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. If we cannot receive sufficient distributions from our subsidiaries, we may not be able to meet our obligations to fund general corporate expenses or service our debt obligations. These restrictions are related to regulatory requirements at American Home Shield and to a subsidiary borrowing arrangement at The ServiceMaster Acceptance Company Limited Partnership, or "SMAC." The payment of ordinary and extraordinary dividends by our home warranty and similar subsidiaries (through which we conduct our American Home Shield business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain such subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can pay to us. As of December 31, 2013, the total net assets subject to these third-party restrictions was $160.2 million. Such limitations will be in effect through the end of 2014, and similar limitations are expected to be in effect in 2015.

        We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness. If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek to obtain additional equity capital or restructure our indebtedness. In the future, our cash flow and capital resources may not be sufficient for payments of interest on and principal of our indebtedness, and such alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

        The $2.2 billion of outstanding borrowings under the Term Facilities have a maturity date of January 31, 2017. The Revolving Credit Facility is also scheduled to mature on January 31, 2017. The February 2020 Notes will mature on February 15, 2020, and the August 2020 Notes will mature on August 15, 2020. We may be unable to refinance any of our indebtedness or obtain additional financing, particularly because of our high levels of indebtedness. Market disruptions, such as those experienced in 2008 and 2009, as well as our significant indebtedness levels, may increase our cost of borrowing or adversely affect our ability to refinance our obligations as they become due. If we are unable to refinance our indebtedness or access additional credit, or if short-term or long-term borrowing costs dramatically increase, our ability to finance current operations and meet our short-term and long-term obligations could be adversely affected.

        If our subsidiary, SvM, cannot make scheduled payments on its indebtedness, it will be in default, holders of the 2020 Notes could declare all outstanding principal and interest to be due and payable, the lenders under the Credit Facilities could terminate their commitments to loan money, the secured lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.

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Risks Related to Our Common Stock and This Offering

ServiceMaster is a holding company with no operations of its own, and it depends on its subsidiaries for cash to fund all of its operations and expenses, including to make future dividend payments, if any.

        ServiceMaster's operations are conducted entirely through our subsidiaries, and our ability to generate cash to fund our operations and expenses, to pay dividends or to meet debt service obligations is highly dependent on the earnings and the receipt of funds from our subsidiaries through dividends or intercompany loans. Deterioration in the financial condition, earnings or cash flow of SvM and its subsidiaries for any reason could limit or impair their ability to pay such distributions. Additionally, to the extent that ServiceMaster needs funds, and its subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of our financing arrangements, or are otherwise unable to provide such funds, it could materially adversely affect our business, financial condition, results of operations or prospects.

        For example, there are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. If we cannot receive sufficient distributions from our subsidiaries, we may not be able to meet our obligations to fund general corporate expenses or service our debt obligations. These restrictions are related to regulatory requirements at American Home Shield and to a subsidiary borrowing arrangement at SMAC. The payment of ordinary and extraordinary dividends by our home warranty and similar subsidiaries (through which we conduct our American Home Shield business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain such subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can pay to us. As of December 31, 2013, the total net assets subject to these third-party restrictions was $160.2 million. Such limitations will be in effect through the end of 2014, and similar limitations are expected to be in effect in 2015.

        Further, the terms of the indenture governing the 2020 Notes and the agreements governing the Credit Facilities significantly restrict the ability of our subsidiaries to pay dividends, make loans or otherwise transfer assets to ServiceMaster. Furthermore, our subsidiaries are permitted under the terms of the Credit Facilities and other indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to us. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock.

        We do not currently expect to declare or pay dividends on our common stock for the foreseeable future. Payments of dividends, if any, will be at the sole discretion of our board of directors after taking into account various factors, including general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications of the payment of dividends by us to our stockholders or by our subsidiaries (including SvM) to us, and such other factors as our board of directors may deem relevant. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock. To the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds available to us for the payment of dividends.

Our common stock has no prior public market and the market price of our common stock may be volatile and could decline after this offering.

        Prior to this offering, there has been no public market for our common stock, and an active market for our common stock may not develop or be sustained after this offering. We will negotiate the initial public offering price per share with the representatives of the underwriters and, therefore, that price may not be indicative of the market price of our common stock after this offering. In the absence

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of an active public trading market, you may not be able to liquidate your investment in our common stock. In addition, the market price of our common stock may fluctuate significantly. Among the factors that could affect our stock price are:

    industry or general market conditions;

    domestic and international economic factors unrelated to our performance;

    changes in our customers' preferences;

    new regulatory pronouncements and changes in regulatory guidelines;

    lawsuits, enforcement actions and other claims by third parties or governmental authorities;

    actual or anticipated fluctuations in our quarterly operating results;

    changes in securities analysts' estimates of our financial performance or lack of research coverage and reports by industry analysts;

    action by institutional stockholders or other large stockholders (including the Equity Sponsors), including future sales of our common stock;

    failure to meet any guidance given by us or any change in any guidance given by us, or changes by us in our guidance practices;

    announcements by us of significant impairment charges;

    speculation in the press or investment community;

    investor perception of us and our industry;

    changes in market valuations or earnings of similar companies;

    announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships;

    war, terrorist acts and epidemic disease;

    any future sales of our common stock or other securities; and

    additions or departures of key personnel.

        In particular, we cannot assure you that you will be able to resell your shares at or above the initial public offering price. The stock markets have experienced extreme volatility in recent years that has been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a company's securities, class action litigation has often been instituted against the affected company. Any litigation of this type brought against us could result in substantial costs and a diversion of our management's attention and resources, which would harm our business, operating results and financial condition.

Future sales of shares by existing stockholders could cause our stock price to decline.

        Sales of substantial amounts of our common stock in the public market following this offering, or the perception that these sales could occur, could cause the market price of our common stock to decline. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

        Based on shares outstanding as of                    , 2014, upon completion of this offering, we will have                outstanding shares of common stock (or                outstanding shares of common stock, assuming exercise in full of the underwriters' option to purchase additional shares). All of the shares

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sold pursuant to this offering will be immediately tradeable without restriction under the Securities Act of 1933, as amended, or the "Securities Act," except for any shares held by "affiliates," as that term is defined in Rule 144 under the Securities Act, or "Rule 144."

        The remaining            shares of common stock as of                    , 2014 will be restricted securities within the meaning of Rule 144 under the Securities Act, but will be eligible for resale subject to applicable volume, means of sale, holding period and other limitations of Rule 144 under the Securities Act or pursuant to an exception from registration under Rule 701 under the Securities Act, subject to the lock-up agreements entered into by us, our executive officers and directors, and stockholders currently representing substantially all of the outstanding shares of our common stock.

        Upon completion of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register the shares of common stock to be issued under our equity compensation plans and, as a result, all shares of common stock acquired upon exercise of stock options granted under our plans will also be freely tradable under the Securities Act, subject to the terms of the lock-up agreements, unless purchased by our affiliates. As of                    , 2014, there were stock options outstanding to purchase a total of            shares of our common stock and there were            shares of our common stock subject to restricted stock units. In addition,                          shares of our common stock are reserved for future issuances under our 2014 omnibus incentive plan.

        In connection with this offering, we, our executive officers and directors, and stockholders currently representing substantially all of the outstanding shares of our common stock will sign lock-up agreements under which, subject to certain exceptions, they will agree not to sell, transfer or dispose of or hedge, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock for a period of 180 days after the date of this prospectus, subject to possible extension under certain circumstances, except with the prior written consent of                        the "Lock-Up Release Parties." See "Underwriting." Following the expiration of this 180-day lock-up period,                          shares of our common stock will be eligible for future sale, subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act or pursuant to an exception from registration under Rule 701 under the Securities Act. See "Shares Available for Future Sale" for a discussion of the shares of common stock that may be sold into the public market in the future. In addition, our significant stockholders may distribute shares that they hold to their investors who themselves may then sell into the public market following the expiration of the lock-up period. Such sales may not be subject to the volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act. As resale restrictions end, the market price of our common stock could decline if the holders of those shares sell them or are perceived by the market as intending to sell them. Furthermore, stockholders currently representing substantially all of the outstanding shares of our common stock will have the right to require us to register shares of common stock for resale in some circumstances.

        In the future, we may issue additional shares of common stock or other equity or debt securities convertible into or exercisable or exchangeable for shares of our common stock in connection with a financing, acquisition, litigation settlement or employee arrangement or otherwise. Any of these issuances could result in substantial dilution to our existing stockholders and could cause the trading price of our common stock to decline.

If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.

        The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage for our common stock. If there is no research coverage of our common stock, the trading price for our common stock may be negatively impacted. In the event we obtain

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research coverage for our common stock, if one or more of the analysts downgrades our stock or publishes misleading or unfavorable research about our business, our stock price would likely decline. If one or more of the analysts ceases coverage of our common stock or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline.

A few significant stockholders will have significant influence over us and may not always exercise their influence in a way that benefits our public stockholders.

        Following the completion of this offering, the CD&R Funds and the StepStone Funds will own approximately        % and         %, respectively, of the outstanding shares of our common stock assuming that the underwriters do not exercise their option to purchase additional shares. Prior to the completion of this offering, we and the Equity Sponsors will enter into an amendment to our existing stockholders agreement, or the "amended stockholders agreement," pursuant to which the CD&R Funds and the StepStone Funds will agree to vote in favor of one another's designees to our board of directors, among other matters. As a result, the CD&R Funds and the StepStone Funds will exercise significant influence over all matters requiring stockholder approval for the foreseeable future, including approval of significant corporate transactions, which may reduce the market price of our common stock.

        As long as the CD&R Funds and the StepStone Funds continue to own at least 50% of our outstanding common stock, the CD&R Funds and the StepStone Funds generally will be able to determine the outcome of corporate actions requiring stockholder approval, including the election of the members of our board of directors, the approval of significant corporate transactions such as mergers and the sale of substantially all of our assets. Even after the CD&R Funds and the StepStone Funds reduce their beneficial ownership below 50% of our outstanding common stock, they will likely still be able to assert significant influence over our board of directors and certain corporate actions. Following the consummation of this offering, the CD&R Funds and the StepStone Funds will have the right to designate for nomination for election a majority of our directors.

        Because the CD&R Funds' and the StepStone Funds' interests may differ from your interests, actions the CD&R Funds and the StepStone Funds take as our controlling stockholders or as significant stockholders may not be favorable to you. For example, the concentration of ownership held by the CD&R Funds and the StepStone Funds could delay, defer or prevent a change of control of us or impede a merger, takeover or other business combination which another stockholder may otherwise view favorably. Other potential conflicts could arise, for example, over matters such as employee retention or recruiting, or our dividend policy.

Under our amended and restated certificate of incorporation, the CD&R Funds and the StepStone Funds and their respective affiliates and, in some circumstances, any of our directors and officers who is also a director, officer, employee, member or partner of the CD&R Funds and the StepStone Funds and their respective affiliates, have no obligation to offer us corporate opportunities.

        The policies relating to corporate opportunities and transactions with the CD&R Funds and the StepStone Funds to be set forth in our second amended and restated certificate of incorporation, or "amended and restated certificate of incorporation," address potential conflicts of interest between ServiceMaster, on the one hand, and the CD&R Funds and the StepStone Funds and their respective officers, directors, employees, members or partners who are directors or officers of our company, on the other hand. In accordance with those policies, the CD&R Funds and the StepStone Funds may pursue corporate opportunities, including acquisition opportunities that may be complementary to our business, without offering those opportunities to us. By becoming a stockholder in ServiceMaster, you will be deemed to have notice of and have consented to these provisions of our amended and restated certificate of incorporation. Although these provisions are designed to resolve conflicts between us and

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the CD&R Funds and the StepStone Funds and their respective affiliates fairly, conflicts may not be so resolved.

Future offerings of debt or equity securities which would rank senior to our common stock may adversely affect the market price of our common stock.

        If, in the future, we decide to issue debt or equity securities that rank senior to our common stock, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us.

Fulfilling our obligations incident to being a public company, including with respect to the requirements of and related rules under the Sarbanes-Oxley Act of 2002, will be expensive and time-consuming, and any delays or difficulties in satisfying these obligations could have a material adverse effect on our future results of operations and our stock price.

        Following this offering, we will be subject to the reporting and corporate governance requirements, under the listing standards of the             and the Sarbanes-Oxley Act of 2002, that apply to issuers of listed equity, which will impose certain new compliance costs and obligations upon us. The changes necessitated by publicly listing our equity will require a significant commitment of additional resources and management oversight which will increase our operating costs. Other expenses associated with being a public company include increases in auditing, accounting and legal fees and expenses, investor relations expenses, increased directors' fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses. As a public company, we will be required, among other things, to define and expand the roles and the duties of our board of directors and its committees and institute more comprehensive compliance and investor relations functions. Failure to comply with the Sarbanes-Oxley Act of 2002 could potentially subject us to sanctions or investigations by the Securities and Exchange Commission, or "SEC," the            , or other regulatory authorities.

Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated by-laws could discourage, delay or prevent a change of control of our company and may affect the trading price of our common stock.

        Our amended and restated certificate of incorporation and amended and restated by-laws include a number of provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. For example, prior to the completion of this offering, our amended and restated certificate of incorporation and amended and restated by-laws will collectively:

    authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to thwart a takeover attempt;

    establish a classified board of directors, as a result of which our board of directors will be divided into three classes, with members of each class serving staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting;

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    limit the ability of stockholders to remove directors if the CD&R Funds and the StepStone Funds cease to own at least 40% of the outstanding shares of our common stock;

    provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office;

    prohibit stockholders from calling special meetings of stockholders if the CD&R Funds and the StepStone Funds cease to own at least 40% of the outstanding shares of our common stock;

    prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders, if the CD&R Funds and the StepStone Funds cease to own at least 40% of the outstanding shares of our common stock;

    establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders; and

    require the approval of holders of at least 662/3% of the outstanding shares of our common stock to amend our amended and restated by-laws and certain provisions of our amended and restated certificate of incorporation if the CD&R Funds and the StepStone Funds cease to own at least 40% of the outstanding shares of our common stock.

        These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed as discouraging takeover attempts in the future.

        Our amended and restated certificate of incorporation and amended and restated by-laws may also make it difficult for stockholders to replace or remove our management. Furthermore, the existence of the foregoing provisions, as well as the significant amount of common stock that the CD&R Funds and the StepStone Funds will own following this offering, could limit the price that investors might be willing to pay in the future for shares of our common stock. These provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our stockholders.

We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

        We do not intend to declare and pay dividends on our common stock for the foreseeable future. We currently intend to use our future earnings, if any, to repay debt, to fund our growth, to develop our business, for working capital needs and general corporate purposes. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares. In addition, ServiceMaster's operations are conducted almost entirely through our subsidiaries. As such, to the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds available to ServiceMaster for the payment of dividends. Further, the indenture governing the 2020 Notes and the agreements governing the Credit Facilities significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us. In addition, the payment of ordinary and extraordinary dividends by our subsidiaries that are regulated as insurance, home service, or similar companies is subject to applicable state law limitations, and Delaware law may impose additional requirements that may restrict our ability to pay dividends to holders of our common stock.

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We expect to be a "controlled company" within the meaning of the            rules and, as a result, we will qualify for, and currently intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

        After completion of this offering, the CD&R Funds and the StepStone Funds will control a majority of the voting power of our outstanding common stock. Accordingly, we expect to qualify as a "controlled company" within the meaning of the            corporate governance standards. Under the            rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain            corporate governance standards, including:

    the requirement that a majority of the board of directors consist of independent directors;

    the requirement that our nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities;

    the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities; and

    the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

        Following this offering, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors, our nominating and corporate governance committee and compensation committee will not consist entirely of independent directors and such committees may not be subject to annual performance evaluations. Consequently, you will not have the same protections afforded to stockholders of companies that are subject to all of the            corporate governance rules and requirements. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us.

        Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the General Corporation Law of the State of Delaware, or the "DGCL," or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum. The choice of forum provision in our amended and restated certificate of incorporation may limit our stockholders' ability to obtain a favorable judicial forum for disputes with us.

Investors purchasing common stock in this offering will experience immediate and substantial dilution as a result of this offering and future equity issuances.

        The initial public offering price per share will significantly exceed the net tangible book value per share of our common stock outstanding. As a result, investors purchasing common stock in this offering will experience immediate substantial dilution of $      a share, based on an initial public offering price of $      . This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares. Investors purchasing shares of

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common stock in this offering will contribute approximately      % of the total amount of equity invested in our company, but will own only approximately      % of our total common stock immediately following the completion of this offering. In addition, we have issued options to acquire common stock at prices significantly below the initial public offering price. To the extent outstanding options are ultimately exercised, there will be further dilution to investors in this offering. In addition, if the underwriters exercise their option to purchase additional shares, or if we issue additional equity securities in the future, investors purchasing common stock in this offering will experience additional dilution.

Risks Related to the TruGreen Spin-off

If the TruGreen Spin-off were ultimately determined to be a taxable transaction for U.S. federal income tax purposes, then we could be subject to significant tax liability.

        In connection with the TruGreen Spin-off we received an opinion of tax counsel with respect to the tax-free nature of the TruGreen Spin-off to ServiceMaster, TruGreen and ServiceMaster's stockholders under Section 355 and related provisions of the Internal Revenue Code of 1986, as amended, or the "Code." The opinion relied on an Internal Revenue Service, or "IRS," private letter ruling as to matters covered by the ruling. The tax opinion was based on, among other things, certain assumptions and representations as to factual matters made by us, which, if incorrect or inaccurate in any material respect, would jeopardize the conclusions reached by tax counsel in its opinion. The opinion is not binding on the IRS or the courts, and the IRS or the courts may not agree with the opinion. If the TruGreen Spin-off were ultimately determined not to be tax-free, we could be liable for the U.S. federal income taxes imposed as a result of the transaction. Furthermore, events subsequent to the TruGreen Spin-off could cause us to recognize a taxable gain in connection therewith. In addition, as is customary with tax-free spin-off transactions, we and the Equity Sponsors are limited in our ability to pursue certain strategic transactions with respect to SvM.

Federal and state fraudulent transfer laws and Delaware corporate law may permit a court to void the TruGreen Spin-off, which would adversely affect our financial condition and our results of operations.

        In connection with the TruGreen Spin-off, we undertook several corporate restructuring transactions which, along with the contributions and distributions to be made as part of the spin-off, may be subject to challenge under federal and state fraudulent conveyance and transfer laws as well as under Delaware corporate law.

        Under applicable laws, any transaction, contribution or distribution completed as part of the spin-off could be voided as a fraudulent transfer or conveyance if, among other things, the transferor received less than reasonably equivalent value or fair consideration in return and was insolvent or rendered insolvent by reason of the transfer.

        We cannot be certain as to the standards a court would use to determine whether or not any entity involved in the spin-off was insolvent at the relevant time. In general, however, a court would look at various facts and circumstances related to the entity in question, including evaluation of whether or not:

    the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets;

    the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

    it could not pay its debts as they became due.

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        If a court were to find that any transaction, contribution or distribution involved in the spin-off was a fraudulent transfer or conveyance, the court could void the transaction, contribution or distribution. In addition, the spin-off could also be voided if a court were to find that the spin-off was not a legal dividend under Delaware corporate law. The resulting complications, costs and expenses of either finding could materially adversely affect our business, financial condition and results of operations.

Our directors and officers may have actual or potential conflicts of interest because of their equity ownership in New TruGreen.

        Our directors and officers may own shares of New TruGreen's common stock or be affiliated with certain equity owners of New TruGreen. This ownership may create, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for us and New TruGreen. In connection with the TruGreen Spin-off, we entered into a transition services agreement with New TruGreen under which we will provide a range of support services to New TruGreen for a limited period of time. Potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between us and New TruGreen regarding the terms of the transition services agreement or other agreements governing the TruGreen Spin-off and the relationship thereafter between the companies.

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FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements and cautionary statements. Some of the forward-looking statements can be identified by the use of forward-looking terms such as "believes," "expects," "may," "will," "shall," "should," "would," "could," "seeks," "aims," "projects," "is optimistic," "intends," "plans," "estimates," "anticipates" or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this prospectus and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position; results of operations; cash flows; prospects; commodities trends; growth strategies or expectations; customer retention; an impairment charge of approximately $50 million at American Home Shield and an approximate $140 million TruGreen trade name impairment charge; the continuation of acquisitions, including the integration of any acquired company and risks relating to any such acquired company; fuel prices; estimates of future amortization expense for intangible assets; attraction and retention of key personnel; the impact of fuel swaps; the valuation of marketable securities; estimates of accruals for self-insured claims related to workers' compensation, auto and general liability risks; estimates of accruals for home warranty claims; estimates of future payments under operating and capital leases; the outcome (by judgment or settlement) and costs of legal or administrative proceedings, including, without limitation, collective, representative or class action litigation; and the impact of prevailing economic conditions.

        Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and cash flows, and the development of the market segments in which we operate, are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. Additional factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

    weakening general economic conditions, especially as they may affect home sales, unemployment and consumer confidence or spending levels;

    our ability to successfully implement our business strategies;

    our recognition of future impairment charges;

    adverse credit and financial markets impeding access, increasing financing costs or causing our customers to incur liquidity issues leading to some of our services not being purchased or cancelled;

    increases in prices for fuel and raw materials;

    changes in the source and intensity of competition in our market segments;

    adverse weather conditions;

    our ability to attract and retain key personnel, including our ability to attract, retain and maintain positive relations with trained workers and third-party contractors;

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    our franchisees and third-party distributors and vendors taking actions that harm our business;

    disruptions or failures in our information technology systems and our failure to protect the security of personal information about our customers;

    changes in our services or products;

    our ability to protect our intellectual property and other material proprietary rights;

    negative reputational and financial impacts resulting from future acquisitions or strategic transactions;

    laws and governmental regulations increasing our legal and regulatory expenses;

    compliance with, or violation of, environmental, health and safety laws and regulations;

    increases in interest rates increasing the cost of servicing our substantial indebtedness;

    increased borrowing costs due to lowering or withdrawal of the ratings, outlook or watch assigned to our debt securities;

    restrictions contained in our debt agreements;

    our ability to refinance all or a portion of our indebtedness or obtain additional financing; and

    other factors described in this prospectus and from time to time in documents that we file with the SEC.

        You should read this prospectus completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this prospectus are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this prospectus, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise.

        Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.

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USE OF PROCEEDS

        Based upon an assumed initial public offering price of $        per share, we estimate that we will receive net proceeds from this offering of approximately $         million (or approximately $ million if the underwriters exercise in full their option to purchase additional shares), after deducting estimated underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us of $         million.

        We intend to use the net proceeds of this offering to redeem $         million in principal amount of the February 2020 Notes at 108% of the principal amount thereof, plus accrued and unpaid interest (estimated to be approximately $         million); redeem $         million in principal amount of the August 2020 Notes at 107% of the principal amount thereof, plus accrued and unpaid interest (estimated to be approximately $         million); and pay certain of the Equity Sponsors aggregate fees of $         million in connection with the termination of our consulting agreements with each of them upon the consummation of this offering. See "Certain Relationships and Related Party Transactions—Consulting Agreements." We intend to use the remainder of the net proceeds, if any, to redeem an additional portion of the outstanding February 2020 Notes at a redemption price equal to 100% of the principal amount thereof plus a specified "make-whole premium" equal to approximately        % of the principal amount thereof and accrued and unpaid interest. The February 2020 Notes mature on February 15, 2020 and bear annual interest at a rate of 8.00%. The August 2020 Notes mature on August 15, 2020 and bear annual interest at a rate of 7.00%.

        A $1.00 increase or decrease in the assumed initial public offering price of $        per share would increase or decrease the net proceeds to us from this offering by $        assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commission and estimated offering expenses payable by us. An increase or decrease of                        shares in the number of shares offered by us would increase or decrease the net proceeds to us by $         million, assuming no change in the assumed initial public offering price of $        per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing.

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DIVIDEND POLICY

        We do not intend to declare or pay dividends on our common stock for the foreseeable future. We currently intend to use our future earnings, if any, to repay debt, to fund our growth, to develop our business, for working capital needs and general corporate purposes. Our ability to pay dividends to holders of our common stock is significantly limited as a practical matter by the Credit Facilities and the indenture governing the 2020 Notes, insofar as we may seek to pay dividends out of funds made available to us by SvM or its subsidiaries, because SvM's debt instruments directly or indirectly restrict SvM's ability to pay dividends or make loans to us. Any future determination to pay dividends on our common stock is subject to the discretion of our board of directors and will depend upon various factors, including our results of operations, financial condition, liquidity requirements, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by applicable law, general business conditions and other factors that our board of directors may deem relevant. See "Description of Certain Indebtedness" for a description of restrictions on our ability to pay dividends under our debt instruments.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our consolidated capitalization as of December 31, 2013 on:

    an actual basis; and

    an as adjusted basis, after giving effect to our sale of          shares of common stock in this offering at an assumed initial public offering price of $          per share, and the application of the net proceeds therefrom as described in "Use of Proceeds."

        You should read the following table in conjunction with the sections entitled "Use of Proceeds," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes appearing in this prospectus.

 
  As of December 31, 2013  
(In thousands)
  Actual   As Adjusted(1)  

Cash and cash equivalents(2)

  $ 494,269   $    
           
           

Long-term debt:

             

Term Loan Facilities(3)

  $ 2,188,879   $    

Revolving Credit Facility(4)

           

February 2020 Notes(5)

    602,446        

August 2020 Notes

    750,000        

Continuing Notes(6)

    292,948        

Vehicle capital leases(7)

    72,445        

Other long-term debt(8)

    48,811        

Less current portion

    (51,399 )      
           

Total long-term debt

  $ 3,904,130   $    

Total shareholders' equity

    23,194        
           

Total capitalization

  $ 3,927,324   $    
           
           

(1)
Each $1.00 increase or decrease in the assumed initial public offering price of $          per share would increase or decrease, as applicable, our long-term debt, additional paid-in capital and stockholders' equity by $           million, assuming that the number of shares offered by us as set forth on the cover page of this prospectus remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses.

    The foregoing table does not reflect the TruGreen Spin-off which was completed on January 14, 2014. In addition, the foregoing table does not reflect stock options or restricted stock units outstanding under our stock incentive plans or stock options or restricted stock units to be granted after this offering. As of          , 2014, there were          stock options outstanding with an average exercise price of $          per share and          restricted stock units outstanding.

(2)
Our cash and cash equivalents and short- and long-term marketable securities totaled $642.9 million as of December 31, 2013. As of December 31, 2013, the total net assets subject to third-party restrictions was $160.2 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Limitations on Distributions and Dividends by Subsidiaries" for our discussion of restricted net assets.

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(3)
Includes $990.7 million of Tranche B loans and $1,198.2 million of Tranche C loans. Presented net of $9.6 million in unamortized original issue discount paid as part of the 2013 Term Loan Facility Amendment.

(4)
As of January 14, 2014, after giving effect to the TruGreen Spin-off, we had available borrowing capacity under the Revolving Credit Facility of $241.7 million.

(5)
Includes $2.4 million in unamortized premium received on the sale of $100.0 million aggregate principal amount of such notes.

(6)
Amount shown is net of discounts related to the application of purchase accounting in the 2007 Merger. The Continuing Notes, as defined in "Description of Certain Indebtedness," have an aggregate principal amount outstanding of $357.1 million.

(7)
SvM has entered into a fleet management services agreement, or the "Fleet Agreement," which, among other things, allows SvM to obtain fleet vehicles through a leasing program. All leases under the Fleet Agreement are capital leases for accounting purposes. The lease rental payments include an interest component calculated using a variable rate based on one-month LIBOR plus other contractual adjustments and a borrowing margin totaling 2.45%.

(8)
Our other long-term debt includes (i) capital leases and (ii) certain other indebtedness.

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DILUTION

        If you invest in our common stock in this offering, your ownership interest in us will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock immediately after this offering. Dilution results from the fact that the per share offering price of the common stock exceeds the book value per share attributable to the shares of common stock held by existing stockholders.

        Our net tangible book value as of            , 2014 was $      . Net tangible book value per share before the offering has been determined by dividing net tangible book value (total book value of tangible assets less total liabilities) by the number of shares of common stock outstanding as of            , 2014.

        After giving effect to the sale of shares of our common stock sold by us in this offering at an assumed initial public offering price of $            per share (the mid-point of the price range set forth on the cover page of this prospectus) and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our adjusted net tangible book value as of            , 2014 would have been $             million, or $            per share. This represents an immediate increase in net tangible book value per share of $            to the existing stockholders and an immediate and substantial dilution in net tangible book value per share of $            to new investors who purchase shares in this offering. The following table illustrates this per share dilution to new investors:

 
   
  Per Share  

Assumed initial public offering price per share

        $    

Net tangible book value per share as of                , 2014

        $    

Increase in net tangible book value per share attributable to new investors in this offering

        $    
             

Adjusted net tangible book value per share after this offering

        $    
             

Dilution of net tangible book value per share to new investors

        $    
             
             

        If the underwriters exercise in full their option to purchase additional shares, the adjusted tangible book value per share after giving effect to the offering would be $             per share. This represents an immediate increase in adjusted net tangible book value of $    per share to the existing stockholders and an immediate and substantial dilution in adjusted net tangible book value of $            per share to new investors.

        A $1.00 increase or decrease in the assumed initial public offering price of $            per share (the mid-point of the price range set forth on the cover page of this prospectus) would increase or decrease total consideration paid by new investors and total consideration paid by all stockholders by $             million, assuming that the number of shares offered by us set forth on the front cover of this prospectus remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of            shares in the number of shares offered by us would increase or decrease the total consideration paid to us by new investors and total consideration paid to us by all stockholders by $             million, assuming an initial public offering price of $            per share (the mid-point of the price range set forth on the cover page of this prospectus) remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

        The following table summarizes, as of            , 2014, the total number of shares of common stock purchased from us, the total consideration paid to us and the average price per share paid by the

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existing stockholders and by new investors purchasing shares in this offering (amounts in thousands, except percentages and per share data):

 
  Shares
Purchased
  Total
Consideration
   
 
 
  Average
Price
Per Share
 
 
  Number   Percent   Amount   Percent  

Existing stockholders

            % $         % $    

New investors

                               
                       

Total

          100 % $       100 % $    
                       
                       

        The foregoing table does not reflect stock options or restricted stock units outstanding under our stock incentive plans or stock options or restricted stock units to be granted after this offering. As of            , 2014, there were            stock options outstanding with an average exercise price of $            per share and            restricted stock units outstanding.

        To the extent that any of these stock options are exercised or any of these restricted stock units are settled into shares of common stock, there may be further dilution to new investors. See "Executive Compensation" and Note 17 to our audited consolidated financial statements included in this prospectus.

        In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.

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UNAUDITED PRO FORMA CONSOLIDATED
FINANCIAL STATEMENTS

Overview

        On January 14, 2014, we completed the TruGreen Spin-off, resulting in the spin-off of the TruGreen Business through a tax-free, pro rata dividend to our stockholders. As a result of the completion of the TruGreen Spin-off, New TruGreen operates the TruGreen Business as a private independent company.

Basis of Presentation

        The unaudited pro forma consolidated statements of operations for the years ended December 31, 2013, 2012 and 2011 and the unaudited pro forma consolidated statement of financial position as of December 31, 2013 give effect to the TruGreen Spin-off and have been derived from the audited consolidated financial statements and notes thereto included in this prospectus. The unaudited pro forma consolidated financial statements are based upon available information and assumptions that we believe are reasonable.

        The unaudited pro forma consolidated financial statements are provided for informational purposes only and do not purport to project our future financial position or operating results. In accordance with pro forma rules, the pro forma unaudited consolidated statements of operations have been prepared as if the TruGreen Spin-off occurred on January 1, 2011, and the pro forma unaudited consolidated statement of financial position has been prepared as if the TruGreen Spin-off occurred on December 31, 2013. The unaudited pro forma consolidated financial statements, including the notes thereto, should be read in conjunction with our audited consolidated financial statements and notes thereto included in this prospectus.

        The unaudited pro forma consolidated financial statements give pro forma effect to the following:

    the elimination of the TruGreen segment;

    the removal of non-recurring TruGreen Spin-off costs of $17.0 million; and

    a $35 million cash contribution from SvM to New TruGreen, or collectively, the "Pro Forma Adjustments."

        SvM historically incurred the cost of certain corporate-level activities which it performed on behalf of the TruGreen Business. Such corporate costs include: accounting and finance, legal, human resources, information technology, insurance, operations, real estate, tax services and other costs. These costs will be transitioned to New TruGreen through a combination of (1) immediate transfers of certain activities to New TruGreen and (2) payments to SvM by New TruGreen under transition services agreements. We expect an approximate $25 million reduction in annual costs associated with the transition of these activities to New TruGreen. The adjustments presented in these unaudited pro forma consolidated financial statements do not include the impact of these reduced costs.

        The unaudited pro forma adjustments are based upon available information and certain assumptions that our management believes are reasonable under the circumstances. The unaudited pro forma consolidated financial statements are presented for informational purposes only and do not purport to represent what the results of operations or financial condition would have been had the TruGreen Spin-off actually occurred on the dates indicated, nor do they purport to project the results of operations or financial condition for any future period or as of any future date. The unaudited pro forma consolidated financial statements should be read in conjunction with "Risk Factors," "Selected Historical Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations," and our audited consolidated financial statements and related notes included in this prospectus.

        Assumptions underlying the Pro Forma Adjustments are described in the accompanying notes, which should be read in conjunction with the unaudited pro forma consolidated financial statements.

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SERVICEMASTER GLOBAL HOLDINGS, INC.
Unaudited Pro Forma Consolidated Statement of Financial Position
(In thousands)

 
  As of December 31, 2013  
 
  As Reported   Adjustments(A)   Pro Forma  

Assets:

                   

Current Assets:

                   

Cash and cash equivalents

  $ 494,269   $ 47,538   $ 446,731  

Marketable securities

    27,060         27,060  

Receivables, net

    421,346     27,709     393,637  

Inventories

    56,323     16,908     39,415  

Prepaid expenses and other assets

    64,234     13,358     50,876  

Deferred customer acquisition costs

    39,130     8,637     30,493  

Deferred taxes

    111,073     4,532     106,541  
               

Total Current Assets

    1,213,435     118,682     1,094,753  
               

Property and Equipment:

                   

At cost

    732,426     351,524     380,902  

Less: accumulated depreciation

    (374,315 )   (170,837 )   (203,478 )
               

Net Property and Equipment

    358,111     180,687     177,424  
               

Other Assets:

                   

Goodwill

    2,018,340         2,018,340  

Intangible assets, primarily trade names, service marks and trademarks, net

    2,075,706     355,154     1,720,552  

Notes receivable

    22,499     8     22,491  

Long-term marketable securities

    121,572         121,572  

Other assets

    55,072     18,452     36,620  

Debt issuance costs

    40,556         40,556  
               

Total Assets

  $ 5,905,291   $ 672,983   $ 5,232,308  
               
               

Liabilities and Shareholders' Equity (Deficit):

                   

Current Liabilities:

                   

Accounts payable

  $ 111,466   $ 19,440   $ 92,026  

Accrued liabilities:

                   

Payroll and related expenses

    75,571     5,624     69,947  

Self-insured claims and related expenses

    80,257     7,812     72,445  

Accrued interest payable

    51,118         51,118  

Other

    61,728     5,445     56,283  

Deferred revenue

    539,338     91,175     448,163  

Liabilities of discontinued operations

    1,320         1,320  

Current portion of long-term debt

    51,399     12,449     38,950  
               

Total Current Liabilities

    972,197     141,945     830,252  
               

Long-Term Debt

    3,904,130     37,136     3,866,994  

Other Long-Term Liabilities:

                   

Deferred taxes

    834,325     121,880     712,445  

Other long-term obligations, primarily self-insured claims

    171,445     15,280     156,165  
               

Total Other Long-Term Liabilities

    1,005,770     137,160     868,610  
               

Commitments and Contingencies

                   

Shareholders' Equity (Deficit):

                   

Common stock $0.01 par value, authorized 2,000,000,000 shares; issued 148,373,291 shares at December 31, 2013

    1,486         1,486  

Additional paid-in capital

    1,522,779         1,522,779  

Retained (deficit) earnings

    (1,389,791 )   353,848     (1,743,639 )

Accumulated other comprehensive income

    6,611     2,894     3,717  

Less common stock held in treasury

    (117,891 )       (117,891 )
               

Total Shareholders' Equity (Deficit)

    23,194     356,742     (333,548 )
               

Total Liabilities and Shareholders' Equity (Deficit)

  $ 5,905,291   $ 672,983   $ 5,232,308  
               
               

Note A: Adjustments reflect the assets, liabilities and equity of the TruGreen Business and the $35 million cash contribution to New TruGreen.

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SERVICEMASTER GLOBAL HOLDINGS, INC.
Unaudited Pro Forma Consolidated Statement of Operations
(In thousands)

 
  Year Ended December 31, 2013  
 
  As Reported   Adjustments(A)   Pro Forma  

Operating Revenue

  $ 3,188,835   $ 895,943   $ 2,292,892  

Cost of services rendered and products sold

    1,906,054     686,398     1,219,656  

Selling and administrative expenses

    921,339     229,875     691,464  

Amortization expense

    55,532     4,609     50,923  

Goodwill and trade name impairment

    673,253     673,253      

Restructuring charges

    20,840     14,760     6,080  

Interest expense

    249,033     1,907     247,126  

Interest and net investment income

    (8,764 )   (634 )   (8,130 )
               

(Loss) Income from Continuing Operations before Income Taxes

    (628,452 )   (714,225 )   85,773  

(Benefit) provision for income taxes

    (123,251 )   (166,188 )   42,937  

Equity in losses of joint venture

    (468 )       (468 )
               

(Loss) Income from Continuing Operations

  $ (505,669 ) $ (548,037 ) $ 42,368  
               
               

Note A: Adjustments reflect results of operations of the TruGreen Business and the elimination of non-recurring costs of $17.0 million, which were directly related to the TruGreen Spin-off. The pro forma tax effect is the difference in our consolidated tax provision as calculated with and without the TruGreen Business.

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SERVICEMASTER GLOBAL HOLDINGS, INC.
Unaudited Pro Forma Consolidated Statement of Operations
(In thousands)

 
  Year Ended December 31, 2012  
 
  As Reported   Adjustments(A)   Pro Forma  

Operating Revenue

  $ 3,193,281   $ 979,081   $ 2,214,200  

Cost of services rendered and products sold

    1,861,669     665,779     1,195,890  

Selling and administrative expenses

    872,792     195,118     677,674  

Amortization expense

    65,298     6,775     58,523  

Goodwill and trade name impairment

    908,873     908,873      

Restructuring charges

    18,177     3,241     14,936  

Interest expense

    246,906     1,763     245,143  

Interest and net investment income

    (7,876 )   (435 )   (7,441 )

Loss on extinguishment of debt

    55,554         55,554  
               

Loss from Continuing Operations before Income Taxes

    (828,112 )   (802,033 )   (26,079 )

Benefit for income taxes

    (114,595 )   (106,628 )   (7,967 )

Equity in losses of joint venture

    (226 )       (226 )
               

Loss from Continuing Operations

  $ (713,743 ) $ (695,405 ) $ (18,338 )
               
               

Note A: Adjustments reflect results of operations of the TruGreen Business. The pro forma tax effect is the difference in our consolidated tax provision as calculated with and without the TruGreen Business.

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SERVICEMASTER GLOBAL HOLDINGS, INC.
Unaudited Pro Forma Consolidated Statement of Operations
(In thousands)

 
  Year Ended December 31, 2011  
 
  As Reported   Adjustments(A)   Pro Forma  

Operating Revenue

  $ 3,205,872   $ 1,100,741   $ 2,105,131  

Cost of services rendered and products sold

    1,813,706     689,219     1,124,487  

Selling and administrative expenses

    880,769     232,611     648,158  

Amortization expense

    91,352     7,897     83,455  

Goodwill and trade name impairment

    36,700     36,700      

Restructuring charges

    8,162     1,115     7,047  

Interest expense

    266,813     856     265,957  

Interest and net investment income

    (10,952 )   16     (10,968 )
               

Income (Loss) from Continuing Operations before Income Taxes

    119,322     132,327     (13,005 )

Provision (benefit) for income taxes

    46,594     52,287     (5,693 )
               

Income (Loss) from Continuing Operations

  $ 72,728   $ 80,040   $ (7,312 )
               
               

Note A: Adjustments reflect results of operations of the TruGreen Business. The pro forma tax effect is the difference in our consolidated tax provision as calculated with and without the TruGreen Business.

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SELECTED HISTORICAL FINANCIAL DATA

        The following tables set forth selected historical financial data as of the dates and for the periods indicated. The selected historical financial data as of December 31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013 set forth below are derived from our audited consolidated financial statements and related notes included in this prospectus. Except as described in footnote 3 below, the selected historical financial data as of December 31, 2011, 2010 and 2009 and for the years ended December 31, 2010 and 2009 are derived from our audited consolidated financial statements and related notes not included in this prospectus. The selected historical financial data are qualified in their entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes included in this prospectus.

 
  Year Ended Dec. 31,  
(In thousands, except per share data)
  2013   2012   2011   2010   2009  

Operating Results:

                               

Operating Revenue

  $ 3,188,835   $ 3,193,281   $ 3,205,872   $ 3,127,394   $ 2,977,885  

Cost of services rendered and products sold

    1,906,054     1,861,669     1,813,706     1,777,304     1,691,251  

Selling and administrative expenses

    921,339     872,792     880,769     895,950     830,747  

Goodwill and trade name impairment(1)

    673,253     908,873     36,700         26,600  

Interest expense

    249,033     246,906     266,813     280,461     292,962  

(Loss) Income from Continuing Operations(1)(2)

    (505,669 )   (713,743 )   72,728     22,130     14,584  

Cash dividends per share

  $   $   $   $   $  

Weighted average shares outstanding:(3)

                               

Basic

    137,369     137,884     137,953     137,846     137,794  

Diluted

    137,369     137,884     138,462     137,855     137,794  

Basic and Diluted (Loss) Earnings Per Share—Continuing Operations(3)          

  $ (3.68 ) $ (5.18 ) $ 0.53   $ 0.16   $ 0.11  

Financial Position (as of period end):

                               

Total assets

  $ 5,905,291   $ 6,414,757   $ 7,156,206   $ 7,105,804   $ 7,150,718  

Total long-term debt

    3,955,529     3,961,253     3,875,870     3,883,487     3,909,944  

Total shareholders' equity(1)(2)

    23,194     535,130     1,233,973     1,245,814     1,240,451  

Other Financial Data:

                               

Adjusted EBITDA(4)

  $ 475,989   $ 571,234   $ 610,475   $ 551,052   $ 539,497  

Adjusted EBITDA Margin(5)

    14.9%     17.9%     19.0%     17.6%     18.1%  

Cash Flow Conversion(6)

                               

(1)
We recorded pre-tax non-cash impairment charges of $673.3 million and $908.9 million in 2013 and 2012, respectively, to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name and $36.7 million in 2011 to reduce the carrying value of the TruGreen trade name. See Note 1 to our audited consolidated financial statements included in this prospectus for further details.

In 2009, we recorded a pre-tax non-cash impairment charge of $26.6 million to reduce the carrying value of trade names as a result of our annual impairment testing of goodwill and indefinite-lived intangible assets. There were no similar impairment charges included in continuing operations in 2010.

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(2)
The 2013, 2012 and 2011 results include restructuring charges of $20.8 million, $18.2 million and $8.2 million, respectively, as described in Note 8 to our audited consolidated financial statements included in this prospectus.

The 2010 and 2009 results include restructuring charges of $11.4 million and $26.7 million, respectively. For 2010 and 2009, these charges included lease termination and severance costs related to a branch optimization project at Terminix; consulting, lease termination, severance and other costs related to the reorganization of field leadership and of restructuring of branch operations at TruGreen; reserve adjustments, severance, employee retention, consulting and other costs associated with previous restructuring initiatives; severance, employee retention, legal fees and other costs associated with the 2007 Merger; and, for 2009, transition fees, employee retention and severance costs and consulting and other costs related to the information technology outsourcing initiative.

The 2012 results include a $55.6 million ($35.4 million, net of tax) loss on extinguishment of debt related to the redemption of the remaining $996.0 million aggregate principal amount of the 2015 Notes and repayment of $276.3 million of outstanding borrowings under the Term Facilities.

The 2009 results include a $52.3 million ($33.6 million, net of tax) gain on extinguishment of debt related to the completion of open market purchases of $100.0 million in face value of the 2015 Notes.

(3)
The number of weighted average shares outstanding and earnings per share calculations for the years ended December 31, 2010 and 2009 are unaudited.

(4)
For our definition of Adjusted EBITDA, see "Prospectus Summary—Summary Historical Consolidated Financial and Other Operating Data."

The following table reconciles Adjusted EBITDA to Net (Loss) Income for the periods presented, which we consider to be the most directly comparable GAAP financial measure to Adjusted EBITDA. For information on certain of the adjustments set forth in the table, see "Prospectus Summary—Summary Historical Consolidated Financial and Other Operating Data."

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011   2010   2009  

Adjusted EBITDA. 

  $ 475,989   $ 571,234   $ 610,475   $ 551,052   $ 539,497  

Depreciation and amortization expense

    (149,112 )   (146,242 )   (163,436 )   (196,625 )   (214,792 )

Non-cash goodwill and trade name impairment

    (673,253 )   (908,873 )   (36,700 )   ——     (26,600 )

Residual value guarantee charge

                (10,449 )   (5,461 )

Non-cash asset impairment

    (165 )   (8,732 )            

Non-cash stock-based compensation expense

    (4,046 )   (7,119 )   (8,412 )   (9,352 )   (8,097 )

Restructuring charges

    (20,840 )   (18,177 )   (8,162 )   (11,448 )   (26,682 )

Management and consulting fees

    (7,250 )   (7,250 )   (7,500 )   (7,500 )   (7,500 )

Loss (income) from discontinued operations, net of income taxes

    (1,135 )   (200 )   (27,016 )   (31,998 )   7,353  

Benefit (provision) for income taxes

    123,251     114,595     (46,594 )   (13,501 )   4,282  

Loss on extinguishment of debt

        (55,554 )           52,340  

Interest expense

    (249,033 )   (246,906 )   (266,813 )   (280,461 )   (292,962 )

Non-cash credits attributable to purchase accounting

        16     81     372     548  

Other

    (1,210 )   (735 )   (211 )   42     11  
                       

Net (Loss) Income

  $ (506,804 ) $ (713,943 ) $ 45,712   $ (9,868 ) $ 21,937  
                       
                       
(5)
Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of operating revenue.

(6)
Cash Flow Conversion is defined as Adjusted EBITDA less capital expenditures and changes in working capital as a percentage of Adjusted EBITDA for the applicable period.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The following information should be read in conjunction with "Selected Historical Financial Data," "Summary Historical Consolidated Financial and Other Operating Data" and our audited consolidated financial statements and related notes included in this prospectus. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this prospectus, particularly in "Risk Factors" and "Forward-Looking Statements."

Overview

        Our core services include termite and pest control, home warranties, disaster restoration, janitorial, residential cleaning, furniture repair and home inspection under the following leading brands: Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. Our operations for the historical periods presented in this prospectus are organized into five principal reportable segments:    Terminix, American Home Shield, ServiceMaster Clean, Other Operations and Headquarters, and TruGreen. The TruGreen Business, through which we provided lawn care services during the periods presented, is currently reported in continuing operations. Beginning with the reporting period for the three months ended March 31, 2014, the TruGreen Business will be reported in discontinued operations, and the ServiceMaster Clean segment will be combined with our Merry Maids business into a new Franchise Services Group reportable segment.

Key Business Metrics

        We focus on a variety of indicators and key operating and financial metrics to monitor the financial condition and performance of the continuing operations of our businesses. These metrics include:

    customer retention rates,

    customer counts growth,

    operating revenue,

    operating expenses,

    Adjusted EBITDA,

    net (loss) income, and

    earnings per share.

        To the extent applicable, these measures are evaluated with and without impairment, restructuring and other charges that management believes are not indicative of the earnings capabilities of our businesses. We also focus on measures designed to optimize cash flow, including the management of working capital and capital expenditures.

        Customer Retention Rates and Customer Counts Growth.    We report our customer retention rates and growth in customer counts for our two largest revenue generating businesses in order to track the performance of those businesses. Customer counts represent our recurring customer base and include customers with active contracts for recurring services. At Terminix, these services are primarily delivered on an annual, quarterly or monthly frequency. Retention rates are calculated as the ratio of ending customer counts to the sum of beginning customer counts, new sales and acquired accounts for the applicable period. These measures are presented on a rolling, twelve-month basis in order to avoid seasonal anomalies.

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        Operating Revenue.    Our operating revenue results are primarily a function of the volume and pricing of the services and products provided to our customers by our businesses as well as the mix of services and products provided across our businesses. The volume of our operating revenue in Terminix and American Home Shield, and in our company-owned branches at Merry Maids, as well as our historical operating revenue in TruGreen, is impacted by new unit sales, the retention of our existing customers and tuck-in acquisitions. Operating revenue results in our ServiceMaster Clean segment and in our franchise operations at Merry Maids are driven principally by royalty fees earned from our franchisees. We serve both residential and commercial customers, principally in the United States. In 2013, approximately 98% of our operating revenue was generated by sales in the United States.

        Operating Expenses.    In addition to the impact of changes in our operating revenue results, our operating results are affected by, among other things, the level of our operating expenses. A number of our operating expenses are subject to inflationary pressures, such as fuel, chemicals, raw materials, wages and salaries, employee benefits and health care, vehicle, self-insurance costs and other insurance premiums, as well as various regulatory compliance costs.

        Adjusted EBITDA.    We evaluate performance and allocate resources based primarily on Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) before: income (loss) from discontinued operations, net of income taxes; provision (benefit) for income taxes; gain (loss) on extinguishment of debt; interest expense; depreciation and amortization expense; non-cash goodwill and trade name impairment; non-cash asset impairment; non-cash stock-based compensation expense; restructuring charges; management and consulting fees; non-cash effects attributable to the application of purchase accounting; and other non-operating expenses. We believe Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives, consulting agreements and equity-based, long-term incentive plans.

        Net (Loss) Income and Earnings Per Share.    Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options and restricted stock units are reflected in diluted net income (loss) per share by applying the treasury stock method. The presentation of net (loss) income and earnings per share provides GAAP measures of performance which are useful for investors, analysts and other interested parties in company-to-company operating performance comparisons.

Seasonality

        We have seasonality in our business, which drives fluctuations in operating revenue and Adjusted EBITDA for interim periods. In 2013, approximately 19 percent, 30 percent, 29 percent and 22 percent of our operating revenue and approximately 14 percent, 32 percent, 35 percent and 19 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.

Effect of Weather Conditions

        The demand for our services and our results of operations are also affected by weather conditions, including the seasonal nature of our termite and pest control services, home inspection services and disaster restoration services. Weather conditions which have a potentially unfavorable impact to our business include cooler temperatures or droughts which can impede the development of termite swarms and lead to lower demand for our termite control services; severe winter storms which can impact our home cleaning business if we cannot travel to service locations due to hazardous road conditions; and extreme temperatures which can lead to an increase in service requests related to household systems

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and appliances, resulting in higher claim frequency and costs. Weather conditions which have a potentially favorable impact to our business include mild winters which can lead to higher demand for termite and pest control services; mild winters or summers which can lead to lower household systems and appliance claim frequency; and severe storms which can lead to an increase in demand for disaster restoration services.

TruGreen Spin-off

        On January 14, 2014, we completed the TruGreen Spin-off. As a result of the completion of the TruGreen Spin-off, New TruGreen operates the TruGreen Business as a private independent company. In connection with the TruGreen Spin-off, SvM and TruGreen Limited Partnership, an indirect wholly-owned subsidiary of New TruGreen, or "TGLP," entered into a transition services agreement pursuant to which SvM and its subsidiaries provide TGLP with specified communications, public relations, finance and accounting, tax, treasury, internal audit, human resources operations and benefits, risk management and insurance, supply management, real estate management, marketing, facilities, information technology and other support services. The charges for the transition services allow SvM to fully recover the allocated direct costs of providing the services, plus specified margins and any out-of-pocket costs and expenses. The services provided under the transition services agreement will terminate at various specified times, and in no event later than January 14, 2016 (except certain information technology services, which TGLP expects SvM to provide to TGLP beyond the two-year period). TGLP may terminate the transition services agreement (or certain services under the transition services agreement) for convenience upon 90-days written notice, in which case TGLP will be required to reimburse SvM for early termination costs.

        In addition, we, SvM, New TruGreen and TGLP entered into (1) a separation and distribution agreement containing key provisions relating to the separation of the TruGreen Business and the distribution of New TruGreen common stock to our stockholders (including relating to specified TruGreen legal matters with respect to which we have agreed to retain liability, as well as insurance coverage, non-competition, indemnification and other matters), (2) an employee matters agreement allocating liabilities and responsibilities relating to employee benefit plans and programs and other related matters and (3) a tax matters agreement governing the respective rights, responsibilities and obligations of the parties thereto with respect to taxes, including allocating liabilities for income taxes attributable to New TruGreen and its subsidiaries generally to SvM for tax periods (or portions thereof) ending on or before January 14, 2014 and generally to New TruGreen for tax periods (or portions thereof) beginning after that date.

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Results of Operations

 
   
   
   
  Increase
(Decrease)
 
 
  Year Ended December 31,  
 
  2013 vs.
2012
  2012 vs.
2011
 
(in thousands)
  2013   2012   2011  

Operating Revenue

  $ 3,188,835   $ 3,193,281   $ 3,205,872     (0.1 )%   (0.4 )%

Cost of services rendered and products sold

    1,906,054     1,861,669     1,813,706     2.4     2.6  

Selling and administrative expenses

    921,339     872,792     880,769     5.6     (0.9 )

Amortization expense

    55,532     65,298     91,352     (15.0 )   (28.5 )

Goodwill and trade name impairment

    673,253     908,873     36,700     *     *  

Restructuring charges

    20,840     18,177     8,162     14.7     122.7  

Interest expense

    249,033     246,906     266,813     0.9     (7.5 )

Interest and net investment income

    (8,764 )   (7,876 )   (10,952 )   11.3     (28.1 )

Loss on extinguishment of debt

        55,554         *     *  
                       

(Loss) Income from Continuing Operations before Income Taxes

    (628,452 )   (828,112 )   119,322     *     *  

(Benefit) provision for income taxes

    (123,251 )   (114,595 )   46,594     *     *  

Equity in losses of joint venture

    (468 )   (226 )       *     *  
                       

(Loss) Income from Continuing Operations

    (505,669 )   (713,743 )   72,728     *     *  

Loss from discontinued operations, net of income taxes

    (1,135 )   (200 )   (27,016 )   *     *  
                       

Net (Loss) Income

  $ (506,804 ) $ (713,943 ) $ 45,712     *     *  
                       
                       

*
not meaningful

 
  % of Operating Revenue  
 
  Year Ended December 31,  
(in thousands)
  2013   2012   2011  

Operating Revenue

    100.0 %   100.0 %   100.0 %

Cost of services rendered and products sold

    59.8     58.3     56.6  

Selling and administrative expenses

    28.9     27.3     27.5  

Amortization expense

    1.7     2.0     2.8  

Goodwill and trade name impairment

    21.1     28.5     1.1  

Restructuring charges

    0.7     0.6     0.3  

Interest expense

    7.8     7.7     8.3  

Interest and net investment income

    (0.3 )   (0.2 )   (0.3 )

Loss on extinguishment of debt

        1.7      
               

(Loss) Income from Continuing Operations before Income Taxes

    (19.7 )   (25.9 )   3.7  

(Benefit) provision for income taxes

    (3.9 )   (3.6 )   1.5  

Equity in losses of joint venture

    *     *     *  
               

(Loss) Income from Continuing Operations

    (15.9 )   (22.4 )   2.3  

Loss from discontinued operations, net of income taxes

    *     *     (0.8 )
               

Net (Loss) Income

    (15.9 )%   (22.4 )%   1.4 %
               
               

*
not meaningful

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Years Ended December 31, 2013, 2012 and 2011

    Operating Revenue

        We reported operating revenue of $3.189 billion for the year ended December 31, 2013, $3.193 billion for the year ended December 31, 2012 and $3.206 billion for the year ended December 31, 2011. The operating revenue changes from year to year were driven by the results of our business units as described in "—Segment Review."

    Loss from Continuing Operations

        Loss from continuing operations before income taxes was $628.5 million for the year ended December 31, 2013 and $828.1 million for the year ended December 31, 2012. Income from continuing operations before income taxes was $119.3 million for the year ended December 31, 2011.

        The improvement in loss from continuing operations before income taxes for 2013 compared to 2012 of $199.7 million and decrease in income from continuing operations before income taxes for 2012 compared to 2011 of $947.4 million primarily reflect the net effect of year over year changes in the following items:

(In thousands)
  2013
Compared to
2012
  2012
Compared to
2011
 

Non-cash goodwill and trade name impairment(1)

  $ 235,620   $ (872,173 )

Loss on extinguishment of debt(2)

    55,554     (55,554 )

Segment results(3)

    (95,245 )   (39,241 )

Restructuring charges(4)

    (2,663 )   (10,015 )

Non-cash asset impairment(5)

    8,567     (8,732 )

Interest expense(6)

    (2,127 )   19,907  

Depreciation and amortization expense(7)

    (2,870 )   17,194  

Other

    2,824     1,180  
           

  $ 199,660   $ (947,434 )
           
           

(1)
Represents pre-tax non-cash impairment charges of $673.3 million and $908.9 million recorded in 2013 and 2012, respectively, to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name and $36.7 million recorded in 2011 to reduce the carrying value of the TruGreen trade name. See Note 1 to our audited consolidated financial statements included in this prospectus for further details.

(2)
Represents the loss on extinguishment of debt recorded in 2012 related to the redemption of $996.0 million aggregate principal amount of the 2015 Notes and repayment of $276.3 million of outstanding borrowings under the Term Facilities. There were no debt extinguishments in 2013 or 2011.

(3)
Represents the net change in Adjusted EBITDA as described in "—Segment Review." Includes key executive transition charges of $9.8 million, $4.8 million and $6.6 million recorded in 2013, 2012 and 2011, respectively, as described in "—Segment Review." Additionally, at American Home Shield, a $3.3 million reduction in tax related reserves was recorded in 2013, and a $5.4 million increase in tax related reserves was recorded in 2012.

(4)
Represents the net change in restructuring charges related primarily to the impact of a branch optimization project at Terminix, a reorganization of field leadership and a restructuring of branch operations at TruGreen, a reorganization of leadership at American Home Shield and ServiceMaster Clean, the TruGreen Spin-off and an initiative

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    to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters. Our centers of excellence are functions at our headquarters that provide company-wide administrative services for our operations. See Note 8 to our audited consolidated financial statements included in this prospectus for further details.

(5)
Primarily represents a $3.3 million impairment of licensed intellectual property and a $1.2 million impairment of abandoned real estate at Terminix, and a $4.2 million impairment of certain internally developed software at Merry Maids recorded in 2012 for which there were no similar impairments recorded in 2013.

(6)
The increase in 2013 compared to 2012 is primarily due to an increase in our average long-term debt balance. The decrease in 2012 compared to 2011 is primarily due to decreases in our weighted average interest rate and average long-term debt balance.

(7)
The increase in 2013 compared to 2012 is primarily driven by increased depreciation of property and equipment as a result of property additions, offset, in part, by decreased amortization of intangible assets as a result of certain finite lived intangible assets recorded in connection with the 2007 Merger. The decrease in 2012 compared to 2011 is primarily driven by decreased amortization of intangible assets as a result of certain finite lived intangible assets recorded in connection with the 2007 Merger being fully amortized, offset, in part, by increased depreciation of property and equipment as a result of property additions.

    Cost of Services Rendered and Products Sold

        We reported cost of services rendered and products sold of $1.906 billion for the year ended December 31, 2013 compared to $1.862 billion for the year ended December 31, 2012. As a percentage of revenue, these costs increased to 59.8 percent for the year ended December 31, 2013 from 58.3 percent for the year ended December 31, 2012. This percentage increase primarily reflects reduced leverage due to the decline in operating revenue; labor, chemical and vehicle inefficiency and higher bad debt expense at TruGreen; higher bad debt expense at Terminix; and higher expenses in our automobile, general liability and workers' compensation insurance program. These items were offset, in part, by lower claims costs at American Home Shield, including a favorable adjustment to reserves for prior year contract claims. Additionally, in 2012 we recorded a $3.3 million impairment of licensed intellectual property and a $1.2 million impairment of abandoned real estate at Terminix, and a $4.2 million impairment of certain internally developed software at Merry Maids for which there were no similar impairments recorded in 2013.

        We reported cost of services rendered and products sold of $1.862 billion for the year ended December 31, 2012 compared to $1.814 billion for the year ended December 31, 2011. As a percentage of revenue, these costs increased to 58.3 percent for the year ended December 31, 2012 from 56.6 percent for the year ended December 31, 2011. This percentage increase primarily reflects higher fuel and fertilizer prices; a reduction in labor productivity and higher fertilizer usage rates at TruGreen; a $3.3 million impairment of licensed intellectual property, a $1.2 impairment of abandoned real estate and higher product distribution revenue at Terminix, which has lower margins than termite or pest revenue; a $4.2 million impairment of certain internally developed software at Merry Maids; and higher expenses in our automobile, general liability and workers' compensation insurance program due primarily to the reversal, in 2011, of claims reserves driven by favorable claims experience. These items were offset, in part, by improved labor efficiencies and the favorable impact of acquiring assets in connection with exiting certain fleet leases at Terminix; a reduction in ice melt sales at TruGreen, a business that has lower margins than core lawn services; lower claims costs at American Home Shield; and other cost reductions realized through ongoing initiatives.

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    Selling and Administrative Expenses

        We reported selling and administrative expenses of $921.3 million for the year ended December 31, 2013 compared to $872.8 million for the year ended December 31, 2012. As a percentage of revenue, these costs increased to 28.9 percent for the year ended December 31, 2013 from 27.3 percent for the year ended December 31, 2012. This percentage increase primarily reflects reduced leverage due to the decline in operating revenue; higher sales staffing levels, increased investments in sales tools and higher costs related to telephone and information technology systems at TruGreen; increased investments in sales and marketing and higher technology costs at American Home Shield; and a $5.0 million increase in key executive transition charges. These items were offset, in part, by an $8.7 million reduction in tax related reserves and lower provisions for certain legal matters at American Home Shield; lower incentive compensation expense at Terminix; and lower costs in our centers of excellence.

        We reported selling and administrative expenses of $872.8 million for the year ended December 31, 2012 compared to $880.8 million for the year ended December 31, 2011. As a percentage of revenue, these costs decreased to 27.3 percent for the year ended December 31, 2012 from 27.5 percent in 2011. This percentage decrease primarily reflects lower sales and marketing expense and a $1.9 million reduction in key executive transition charges. These items were offset, in part, by increased investments in productivity and standardization initiatives and higher technology costs related to a new operating system at TruGreen; a $5.4 million increase in tax related reserves, higher provisions for certain legal matters and increased investments to drive improvements in service delivery at American Home Shield; and higher technology costs related to PCI standards compliance purposes at Other Operations and Headquarters.

    Amortization Expense

        Amortization expense was $55.5 million, $65.3 million and $91.4 million for the years ended December 31, 2013, 2012 and 2011, respectively. The decreases are a result of certain finite lived intangible assets recorded in connection with the 2007 Merger being fully amortized.

    Goodwill and Trade Name Impairment

        We recorded non-cash goodwill impairment charges of $417.5 million and $790.2 million for the years ended December 31, 2013 and 2012, respectively, to reduce the carrying value of TruGreen's goodwill to its then estimated fair value. We also recorded non-cash trade name impairment charges of $255.8 million, $118.7 million and $36.7 million for the years ended December 31, 2013, 2012 and 2011, respectively, to reduce the carrying value of the TruGreen trade name to its fair value. See "—Critical Accounting Policies and Estimates" below and Note 1 to our audited consolidated financial statements included in this prospectus for further discussion of our goodwill and indefinite-lived intangible asset impairment testing.

        As a result of the TruGreen Spin-off, we will be required to perform an interim impairment analysis as of January 14, 2014 on the TruGreen trade name. The assumptions used in this analysis will be developed with the view of the TruGreen Business as a standalone company, resulting in an expected impairment charge of approximately $140 million in the first quarter of 2014.

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    Restructuring Charges

        We incurred restructuring charges of $20.8 million, $18.2 million and $8.2 million for the years ended December 31, 2013, 2012 and 2011, respectively. Restructuring charges were comprised of the following:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

TruGreen Spin-off(1)

  $ 13,398   $   $  

Terminix branch optimization(2)

    2,099     3,652     3,560  

TruGreen reorganization and restructuring(3)

    1,362     3,241     1,115  

American Home Shield reorganization(4)

        647      

ServiceMaster Clean reorganization(4)

    360     1,370      

Centers of excellence initiative(5)

    3,629     9,267     3,416  

Other(6)

    (8 )       71  
               

Total restructuring charges

  $ 20,840   $ 18,177   $ 8,162  
               
               

(1)
Represents expenses incurred by us directly related to the TruGreen Spin-off. These charges included professional fees of $12.8 million and severance of $0.6 million.

(2)
For the years ended December 31, 2013, 2012 and 2011, these charges included severance costs of $0.9 million, $0.4 million and $0.1 million, respectively, and lease termination costs of $1.2 million, $3.3 million and $3.5 million, respectively.

(3)
For the year ended December 31, 2013, these charges included severance costs. For the years ended December 31, 2012 and 2011, these charges included severance costs of $2.7 million and $0.8 million, respectively, and lease termination costs of $0.5 million and $0.3 million, respectively.

(4)
For the years ended December 31, 2013 and 2012, these charges included severance costs.

(5)
Represents restructuring charges related to an initiative to enhance capabilities and reduce costs in our headquarters functions that provide company-wide administrative services for our operations that we refer to as centers of excellence. For the years ended December 31, 2013, 2012 and 2011, these charges included severance and other costs of $0.9 million, $4.6 million and $1.9 million, respectively, and professional fees of $2.7 million, $4.7 million and $1.5 million, respectively.

(6)
These charges included reserve adjustments associated with previous restructuring initiatives.

    Interest Expense

        Interest expense totaled $249.0 million, $246.9 million and $266.8 million for the years ended December 31, 2013, 2012 and 2011, respectively. The increase in 2013 compared to 2012 is primarily due to an increase in our average long-term debt balance. The decrease in 2012 compared to 2011 is primarily due to decreases in our weighted average interest rate and average long-term debt balance.

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    Interest and Net Investment Income

        Interest and net investment income totaled $8.8 million, $7.9 million and $11.0 million for the years ended December 31, 2013, 2012 and 2011, respectively, and was comprised of the following:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Realized gains(1)

  $ 5,056   $ 6,191   $ 9,972  

Impairments of securities(2)

            (195 )

Deferred compensation trust(3)

    2,271     1,417     (49 )

Other(4)

    1,437     268     1,224  
               

Interest and net investment income

  $ 8,764   $ 7,876   $ 10,952  
               
               

(1)
Represents the net investment gains and the interest and dividend income realized on the American Home Shield investment portfolio.

(2)
Represents other than temporary declines in the value of certain investments in the American Home Shield investment portfolio.

(3)
Represents investment income (loss) resulting from a change in the market value of investments within an employee deferred compensation trust (for which there is a corresponding and offsetting change in compensation expense within income from continuing operations before income taxes).

(4)
Includes interest income on other cash balances and, in 2012, a $2.5 million charge for the impairment of a loan related to a prior business disposition.

    Loss on Extinguishment of Debt

        The loss on extinguishment of debt of $55.6 million for the year ended December 31, 2012 is due to the redemption of $996.0 million aggregate principal amount of the 2015 Notes and repayment of $276.3 million of outstanding borrowings under the Term Facilities. There were no debt extinguishments by us in 2013 or 2011.

    (Benefit) Provision for Income Taxes

        The effective tax rate on (loss) income from continuing operations was a benefit of 19.6 percent and 13.8 percent for the year ended December 31, 2013 and 2012, respectively, and a provision of 39.0 percent for the year ended December 31, 2011. The effective tax rates for the years ended December 31, 2013 and 2012 were impacted by the impairment of permanently nondeductible goodwill at TruGreen that did not produce a tax benefit. For a reconciliation of our effective tax rates to the statutory rate see Note 5 to our audited consolidated financial statements included in this prospectus.

    Net (Loss) Income

        Net loss for the year ended December 31, 2013 was $506.8 million compared to a net loss of $713.9 million for the year ended December 31, 2012 and net income of $45.7 million for the year ended December 31, 2011. The $207.1 million improvement for 2013 compared to 2012 was primarily driven by a $199.7 million improvement in (loss) income from continuing operations before income taxes and an $8.7 million increase in (benefit) provision for income taxes, offset, in part, by a $0.9 million increase in loss from discontinued operations, net of tax. The $759.7 million decrease for 2012 compared to 2011 was primarily driven by a $947.4 million reduction in (loss) income from continuing operations before income taxes, offset, in part, by a $161.2 million reduction in (benefit) provision for income taxes and a $26.8 million improvement in loss from discontinued operations, net of income taxes.

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Segment Review

        The following business segment reviews should be read in conjunction with the required footnote disclosures presented in the notes to our audited consolidated financial statements included in this prospectus.

        Operating Revenues and Adjusted EBITDA by operating segment are as follows:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Operating Revenue:

                   

Terminix

  $ 1,309,469   $ 1,265,417   $ 1,193,075  

American Home Shield

    740,062     720,860     686,737  

ServiceMaster Clean

    150,929     139,441     138,691  

Other Operations and Headquarters

    92,432     88,482     86,628  

TruGreen

    895,943     979,081     1,100,741  
               

Total Operating Revenue

  $ 3,188,835   $ 3,193,281   $ 3,205,872  
               
               

Adjusted EBITDA(1):

                   

Terminix

  $ 318,903   $ 319,838   $ 299,485  

American Home Shield

    170,866     141,542     131,977  

ServiceMaster Clean

    67,942     61,041     64,018  

Other Operations and Headquarters

    (107,721 )   (104,000 )   (94,036 )

TruGreen

    25,999     152,813     209,031  
               

Total Adjusted EBITDA

  $ 475,989   $ 571,234   $ 610,475  
               
               

(1)
For our definition of Adjusted EBITDA and a reconciliation thereof to net (loss) income, see "Prospectus Summary—Summary Historical Consolidated Financial and Other Operating Data."

        The table below presents selected operating metrics related to customer counts and customer retention for our Terminix and American Home Shield segments.

 
  As of December 31,  
 
  2013   2012   2011  

Terminix—

                   

(Reduction) Growth in Pest Control Customers

    (1.6 )%   0.8 %   6.4 %

Pest Control Customer Retention Rate

    79.3 %   79.3 %   80.6 %

Reduction in Termite Customers

    (2.3 )%   (1.4 )%   (1.0 )%

Termite Customer Retention Rate

    85.1 %   85.6 %   86.1 %

American Home Shield—

                   

Growth in Home Warranties

    1.0 %       1.6 %

Customer Retention Rate

    72.8 %   73.7 %   75.1 %

Terminix Segment

Year ended December 31, 2013 Compared to Year Ended December 31, 2012

        The Terminix segment, which provides termite and pest control services to residential and commercial customers and distributes pest control products, reported a 3.5 percent increase in operating revenue and a 0.3 percent decrease in Adjusted EBITDA for the year ended December 31, 2013 compared to 2012. Pest control revenue, which was 56 percent of the segment's operating revenue in 2013, increased 4.3 percent compared to 2012, reflecting improved price realization, offset, in part, by a 0.4 percent decrease in average pest control customer counts. Absolute pest control customer counts as of December 31, 2013 compared to 2012 decreased 1.6 percent, driven by a decrease in new unit sales and acquisitions. The pest control customer retention rate for the year ended December 31,

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2013 was comparable to 2012. Termite revenue, which was 39 percent of the segment's operating revenue in 2013, increased 1.8 percent compared to 2012. Termite renewal revenue comprised 52 percent of total termite revenue, while the remainder consisted of termite new unit revenue. The increase in termite revenue reflects an increase in non-renewable sales and improved price realization, offset, in part, by a 2.1 percent decrease in average customer counts. Absolute termite customer counts as of December 31, 2013 compared to 2012 declined 2.3 percent driven by a decrease in new unit sales and a 50 basis points, or "bps," decrease in the customer retention rate. Product distribution revenue, which has lower margins than pest or termite revenue and accounted for approximately five percent of the segment's operating revenue in 2013, increased $3.8 million compared to 2012.

        Terminix's Adjusted EBITDA decreased $0.9 million for the year ended December 31, 2013 compared to 2012. Key executive transition charges of $0.9 million were recorded in 2013, which included recruiting costs and a signing bonus related to the hiring of the new President of Terminix. Excluding the impact of key executive transition charges, Terminix's Adjusted EBITDA for 2013 was comparable to 2012, reflecting the impact of higher operating revenue and lower incentive compensation expense offset by higher bad debt expense and increased provisions for certain legal matters.

Year ended December 31, 2012 Compared to Year Ended December 31, 2011

        The Terminix segment reported a 6.1 percent increase in operating revenue and a 6.8 percent increase in Adjusted EBITDA for the year ended December 31, 2012 compared to 2011. Pest control revenue, which was 56 percent of the segment's operating revenue in 2012, increased 7.1 percent compared to 2011, reflecting a 4.2 percent increase in average customer counts, a $12.2 million increase in other pest revenue, primarily bed bug services, and improved price realization. Absolute pest control customer counts as of December 31, 2012 compared to 2011 increased 0.8 percent, driven by new unit sales and acquisitions, offset, in part, by a 130 bps decrease in the customer retention rate. Termite revenue, which was 39 percent of the segment's operating revenue in 2012, increased 3.5 percent compared to 2011. Termite renewal revenue comprised 55 percent of total termite revenue, while the remainder consisted of termite new unit revenue. The increase in termite revenue reflected improved price realization and a 0.6 percent increase in new unit sales, offset, in part, by a 1.1 percent decrease in average customer counts. Absolute termite customer counts as of December 31, 2012 compared to 2011 declined 1.4 percent driven by a 50 bps decrease in the customer retention rate, offset, in part, by new unit sales and acquisitions. Product distribution revenue, which has lower margins than pest or termite revenue and accounted for approximately five percent of the segment's operating revenue in 2012, increased $10.1 million compared to 2011.

        Terminix's Adjusted EBITDA increased $20.4 million for the year ended December 31, 2012 compared to 2011. This increase primarily reflects the impact of higher operating revenue, a reduction in sales and marketing expense, as a percent of revenue, cost efficiencies realized through ongoing initiatives, including the benefits of sales mobility and routing and scheduling tools, the favorable impact of acquiring assets in connection with exiting certain fleet leases, and improved production labor efficiencies, offset, in part, by higher fuel prices and product distribution revenue, which has lower margins than pest or termite revenue.

American Home Shield Segment

Year ended December 31, 2013 Compared to Year Ended December 31, 2012

        The American Home Shield segment, which provides home warranties for household systems and appliances, reported a 2.7 percent increase in operating revenue and a 20.7 percent increase in Adjusted EBITDA for the year ended December 31, 2013 compared to 2012. The operating revenue results reflect improved price realization and a 1.1 percent increase in average customer counts. Absolute customer counts as of December 31, 2013 increased 1.0 percent compared to 2012, driven by an increase in new unit sales, offset, in part, by a 90 bps decrease in the customer retention rate.

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        American Home Shield's Adjusted EBITDA increased $29.3 million for the year ended December 31, 2013 compared to 2012. The segment's Adjusted EBITDA included interest and net investment income from the American Home Shield investment portfolio of $5.1 million and $6.2 million recorded in 2013 and 2012, respectively, and key executive transition charges of $1.2 million recorded in 2012, which included recruiting costs and a signing bonus related to the hiring of the new President of American Home Shield and separation charges related to the retirement of the former President of American Home Shield. Additionally, a $3.3 million reduction in tax related reserves was recorded in 2013, and a $5.4 million increase in tax related reserves was recorded in 2012. The remaining increase of $20.5 million primarily reflects the impact of higher operating revenue, lower claims costs, including a favorable adjustment to reserves for prior year contract claims, and lower provisions for certain legal matters, offset, in part, by increased investments in sales and marketing and higher technology costs.

        In February 2014, American Home Shield ceased efforts to deploy a new operating system that had been intended to improve customer relationship management capabilities and enhance its operations. This decision will allow us to more effectively focus our energy and resources on driving growth and serving our customers. Important factors that led to this decision include:

    the ongoing operational costs of the new operating system are high;

    enhancements to our existing operating system enabled it to support our needs;

    certain planned benefits of the new operating system can be achieved through other means; and

    we will now be able to invest our resources in areas that will allow us to focus on growing our business.

        We expect to record an impairment charge of approximately $50 million in the first quarter of 2014 relating to this decision.

Year ended December 31, 2012 Compared to Year Ended December 31, 2011

        The American Home Shield segment reported a 5.0 percent increase in operating revenue and a 7.2 percent increase in Adjusted EBITDA for the year ended December 31, 2012 compared to 2011. The operating revenue results reflect improved price realization and a 0.3 percent increase in average customer counts. Absolute customer counts as of December 31, 2012 were comparable to 2011 driven by an increase in new unit sales, offset by a 140 bps decrease in the customer retention rate.

        American Home Shield's Adjusted EBITDA increased $9.6 million for the year ended December 31, 2012 compared to 2011. The segment's Adjusted EBITDA included interest and net investment income from the American Home Shield investment portfolio of $6.2 million and $9.8 million recorded in 2012 and 2011, respectively. Additionally, a $5.4 million increase in tax related reserves and key executive transition charges of $1.2 million, which included recruiting costs and a signing bonus related to the hiring of the new President of American Home Shield and separation charges related to the retirement of the former President of American Home Shield, were recorded in 2012. The remaining increase of $19.8 million primarily reflects the impact of higher operating revenue and a reduction, as a percent of revenue, in home warranty claims costs and sales and marketing costs, offset, in part, by higher provisions for certain legal matters and increased investments to drive improvements in service delivery.

ServiceMaster Clean Segment

Year ended December 31, 2013 Compared to Year Ended December 31, 2012

        The ServiceMaster Clean segment, which provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster, ServiceMaster Restore, and ServiceMaster Clean brand names, on-site wood furniture repair and restoration services primarily under the Furniture Medic brand name and home inspection services primarily under the

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AmeriSpec brand name, reported an 8.2 percent increase in operating revenue and an 11.3 percent increase in Adjusted EBITDA for the year ended December 31, 2013 compared to 2012. Domestic royalty fees, which were 51 percent of the segment's operating revenue in 2013, increased 3.4 percent compared to 2012, primarily driven by increases in disaster restoration services. Revenue from janitorial national accounts, which was 14 percent of the segment's operating revenue in 2013, increased 32.4 percent compared to 2012, driven by strong sales activity. Sales of products to franchisees, which were 10 percent of the segment's operating revenue in 2013, were comparable to 2012.

        ServiceMaster Clean's Adjusted EBITDA increased $6.9 million for the year ended December 31, 2013 compared to 2012. Key executive transition charges of $1.0 million were recorded in 2012, which included relocation costs related to the hiring of the new President of ServiceMaster Clean and Merry Maids and separation charges related to the retirement of the former President of ServiceMaster Clean. The remaining increase of $5.9 million primarily reflects the impact of higher operating revenue.

Year ended December 31, 2012 Compared to Year Ended December 31, 2011

        The ServiceMaster Clean segment reported a 0.5 percent increase in operating revenue and a 4.7 percent decrease in Adjusted EBITDA for the year ended December 31, 2012 compared to 2011. Domestic royalty fees, which were 52 percent of the segment's operating revenue in 2012, decreased 3.1 percent compared to 2011, primarily driven by decreases in disaster restoration services. Revenue from janitorial national accounts, which was 12 percent of the segment's operating revenue in 2012, increased 36.1 percent compared to 2011, driven by strong sales activity. Sales of products to franchisees, which were 10 percent of the segment's operating revenue in 2012, decreased 12.9 percent compared to 2011, driven by lower franchisee demand for equipment.

        ServiceMaster Clean's Adjusted EBITDA decreased $3.0 million for the year ended December 31, 2012 compared to 2011. Key executive transition charges of $1.0 million and $0.4 million were recorded in 2012 and 2011, respectively, which included recruiting, relocation costs and a signing bonus related to the hiring of the new President of ServiceMaster Clean and Merry Maids and separation charges related to the retirement of the former President of ServiceMaster Clean. The remaining decrease of $2.4 million primarily reflects the impact of lower domestic royalty fees, which have higher margins than janitorial national accounts, and lower sales of products to franchisees.

Other Operations and Headquarters Segment

Year ended December 31, 2013 Compared to Year Ended December 31, 2012

        This segment includes the franchised and company-owned operations of Merry Maids, SMAC and our headquarters functions. The segment reported a 4.5 percent increase in operating revenue and a 3.6 percent decrease in Adjusted EBITDA for the year ended December 31, 2013 compared to 2012.

        Merry Maids, which accounted for 91.5 percent of the segment's operating revenue in 2013, reported a 3.1 percent increase in operating revenue and a 2.4 percent decrease in Adjusted EBITDA for the year ended December 31, 2013 compared to 2012. Revenue from company-owned branches, which was 75 percent of Merry Maids' operating revenue in 2013, increased 4.3 percent compared to 2012, reflecting a 5.3 percent increase in average customer counts, primarily driven by acquisitions, and improved price realization, offset, in part, by a decline in non-recurring services. Absolute customer counts as of December 31, 2013 were comparable to 2012. Royalty fees, which were 18 percent of Merry Maids' operating revenue in 2013, and sales of products to franchisees, which were 7 percent of Merry Maids' operating revenue in 2013, were comparable to 2012.

        Merry Maids' Adjusted EBITDA decreased $0.5 million for the year ended December 31, 2013 compared to 2012. This decrease primarily reflects higher technology costs, offset, in part, by the impact of higher operating revenue.

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        The Adjusted EBITDA of our headquarters functions and SMAC decreased $3.2 million for the year ended December 31, 2013 compared to 2012. The segment's Adjusted EBITDA included interest and net investment income of $1.6 million and $0.1 million in 2013 and 2012, respectively. Additionally, key executive transition charges of $8.3 million and $1.2 million were recorded in 2013 and 2012, respectively, which included recruiting costs and signing bonuses for Robert J. Gillette, our new CEO, Alan J. M. Haughie, our new CFO, and other key executives and separation charges related to the resignation of our former CEO and other key executives. The remaining change in Adjusted EBITDA of our headquarters functions and SMAC is an increase of $2.4 million. This increase primarily reflects lower costs in our centers of excellence, offset, in part, by higher expenses in our automobile, general liability and workers' compensation insurance program.

Year ended December 31, 2012 Compared to Year Ended December 31, 2011

        The segment reported a 2.1 percent increase in operating revenue and an 10.6 percent decrease in Adjusted EBITDA for the year ended December 31, 2012 compared to 2011.

        Merry Maids, which accounted for 93 percent of the segment's operating revenue in 2012, reported a 1.3 percent increase in operating revenue and a 0.8 percent increase in Adjusted EBITDA for the year ended December 31, 2012 compared to 2011. Revenue from company-owned branches, which was 74 percent of Merry Maids' operating revenue in 2012, decreased 0.8 percent compared to 2011, reflecting a $4.6 million reduction in operating revenue driven by the sale of ten company-owned branches to existing and new franchisees in the fourth quarter of 2011, offset, in part, by improved price realization. As adjusted for branch dispositions in 2011, operating revenue reflected a 7.3 percent increase in average customer counts at company-owned branches. Absolute customer counts as of December 31, 2012 compared to 2011 increased 10.5 percent driven by a 420 bps increase in the customer retention rate and an increase in acquisitions, offset, in part, by a decrease in new unit sales. Royalty fees, which were 20 percent of Merry Maids' operating revenue in 2012, increased 7.7 percent compared to 2011, driven by organic franchise growth, franchise license sales and the sale of the company-owned branches to existing and new franchisees. Sales of products to franchisees, which were 6 percent of Merry Maids' operating revenue in 2012, increased 7.7 percent compared to 2011, driven by higher equipment sales.

        Merry Maids' Adjusted EBITDA increased $0.2 million for the year ended December 31, 2012 compared to 2011. Key executive transition charges of $0.6 million, which included separation charges related to the resignation of the former President of Merry Maids, and a gain of $1.3 million, resulting from the sale of the company-owned branches, were recorded in 2011. The remaining increase of $0.9 million reflects the impact of higher operating revenue and improved labor efficiencies.

        The Adjusted EBITDA of our headquarters functions and SMAC decreased $10.1 million for the year ended December 31, 2012 compared to 2011. The segment's Adjusted EBITDA included interest and net investment income of $0.1 million and $1.0 million in 2012 and 2011, respectively. Additionally, key executive transition charges of $1.2 million and $4.7 million were recorded in 2012 and 2011, respectively. The remaining decrease of $12.7 million primarily reflects higher expenses in our automobile, general liability and workers' compensation insurance program due primarily to the reversal, in 2011, of claims reserves driven by favorable claims experience, and higher technology costs related to PCI standards compliance purposes.

TruGreen Segment

        On January 14, 2014, we completed the TruGreen Spin-off resulting in the spin-off of the TruGreen Business through a tax-free, pro rata dividend to our stockholders. As a result of the completion of the TruGreen Spin-off, New TruGreen operates the TruGreen Business as a private independent company. The results of the TruGreen Business are reported in continuing operations.

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Beginning with the reporting period for the three months ended March 31, 2014, the TruGreen Business will be reported in discontinued operations.

Year ended December 31, 2013 Compared to Year Ended December 31, 2012

        The TruGreen segment, which during 2013 provided residential and commercial lawn, tree and shrub care services, reported an 8.5 percent decrease in operating revenue and an 83.0 percent decrease in Adjusted EBITDA for the year ended December 31, 2013 compared to 2012. Revenue from residential lawn service customers, which was 82 percent of the segment's operating revenue in 2013, decreased 8.8 percent compared to 2012, reflecting an 8.9 percent decline in average residential full program customer counts and inefficiencies in service delivery caused, in part, by integration issues with newly implemented technology, offset, in part, by improved price realization. Absolute customer counts as of December 31, 2013 compared to 2012 declined 7.9 percent, driven by a 250 bps decrease in the residential full program customer retention rate, offset, in part, by new unit sales. For the year ended December 31, 2013 compared to 2012, the segment's operating revenue also reflects a $14.4 million decrease in revenue from commercial customers.

        TruGreen's Adjusted EBITDA decreased $126.8 million for the year ended December 31, 2013 compared to 2012. Key executive transition charges of $0.5 million and $1.4 million were recorded in 2013 and 2012, respectively, which included recruiting costs and a signing bonus related to the hiring of R. David Alexander, the President of TruGreen, and separation charges related to the resignation in 2012 of a former President of TruGreen. The remaining decrease of $127.7 million primarily reflects the impact of lower operating revenue; labor, chemical and vehicle inefficiency driven, in part, by integration issues with newly implemented technology; higher bad debt expense; higher sales staffing levels; higher costs related to telephone and information technology systems; and increased investments in sales tools.

        As a result of the TruGreen Spin-off, we will be required to perform an interim impairment analysis as of January 14, 2014 on the TruGreen trade name. The assumptions used in this analysis will be developed with the view of the TruGreen Business as a standalone company, resulting in an expected impairment charge of approximately $140 million in the first quarter of 2014.

Year ended December 31, 2012 Compared to Year Ended December 31, 2011

        The TruGreen segment reported an 11.1 percent decrease in operating revenue and a 26.9 percent decrease in Adjusted EBITDA for the year ended December 31, 2012 compared to 2011. Revenue from residential lawn service customers, which was 83 percent of the segment's operating revenue in 2012, decreased 13.0 percent compared to 2011, reflecting an 11.3 percent decline in average residential full program customer counts and a steep decline in less than full program sales, offset, in part, by improved price realization. Absolute customer counts as of December 31, 2012 compared to 2011 declined 12.2 percent, driven by a decrease in new unit sales and acquisitions, offset, in part, by a 120 bps increase in the residential full program customer retention rate. The decrease in new unit sales was significantly impacted by changes in our product offerings and the rebalancing of our sales channel mix. For the year ended December 31, 2012 compared to 2011, the segment's operating revenue also reflected a $13.5 million increase in revenue from commercial customers, offset, in part, by a $14.4 million decrease in third-party revenue, primarily sales of ice melt products.

        TruGreen's Adjusted EBITDA decreased $56.2 million for the year ended December 31, 2012 compared to 2011. Key executive transition charges of $1.4 million and $1.0 million were recorded in 2012 and 2011, respectively, which included recruiting costs related to the hiring of R. David Alexander, the President of TruGreen, and separation charges related to the resignation in 2012 and 2011 of two former Presidents of TruGreen. The remaining decrease of $55.8 million primarily reflects the impact of lower operating revenue, a reduction in labor productivity, higher fertilizer prices and

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usage rates, higher technology costs related to a new operating system, higher fuel prices and increased investments in productivity and standardization initiatives, offset, in part, by lower sales staffing, driven by our decision to reduce our focus on the neighborhood sales channel, and a reduction in ice melt sales, which has lower margins than core lawn services.

Discontinued Operations

        Loss from discontinued operations, net of income taxes, for all periods presented includes the operating results of the previously sold businesses.

        In the first quarter of 2011, we concluded that TruGreen LandCare did not fit within our long-term strategic plans and committed to a plan to sell the business. On April 21, 2011, we entered into a purchase agreement to sell the TruGreen LandCare business, and the disposition was effective as of April 30, 2011. As a result of the decision to sell this business, a $34.2 million impairment charge ($21.0 million, net of tax) was recorded in loss from discontinued operations, net of income taxes, in the first quarter of 2011 to reduce the carrying value of TruGreen LandCare's assets to their estimated fair value less cost to sell in accordance with applicable accounting standards. Upon completion of the sale, a $6.2 million loss on sale ($1.9 million, net of tax) was recorded. During the year ended December 31, 2012, upon finalization of certain post-closing adjustments and disputes, we recorded an additional $1.3 million loss on sale ($0.5 million gain, net of tax).

Liquidity and Capital Resources

Liquidity

        We are highly leveraged, and a substantial portion of our liquidity needs is due to service requirements on our significant indebtedness and from funding our operations, working capital needs and capital expenditures. The agreements governing the Term Facilities, the 2020 Notes and the Revolving Credit Facility contain covenants that limit or restrict the ability of SvM and certain of its subsidiaries to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates. As of December 31, 2013, SvM was in compliance with the covenants under these agreements that were in effect on such date.

        Our ongoing liquidity needs are expected to be funded by cash on hand, net cash provided by operating activities and, as required, borrowings under the Revolving Credit Facility. We expect that cash provided from operations and available capacity under the Revolving Credit Facility will provide sufficient funds to operate our business, make expected capital expenditures and meet our liquidity requirements for the following 12 months, including payment of interest and principal on our debt. As of December 31, 2013, SvM had $324.2 million of remaining capacity available under the Revolving Credit Facility. On November 27, 2013, SvM entered into the 2013 Revolver Amendment. Pursuant to the 2013 Revolver Amendment, after completion of the TruGreen Spin-off, SvM has $241.7 million of available borrowing capacity through July 23, 2014 and $182.7 million from July 24, 2014 through January 31, 2017. For a description of the Revolving Credit Facility, see "Description of Certain Indebtedness—Revolving Credit Facility."

        Cash and short- and long-term marketable securities totaled $642.9 million as of December 31, 2013, compared with $574.5 million as of December 31, 2012. Cash and short- and long-term marketable securities include balances associated with regulatory requirements at American Home Shield. See "—Limitations on Distributions and Dividends by Subsidiaries." American Home Shield's investment portfolio has been invested in a combination of high-quality, short-duration fixed-income securities and equities. We closely monitor the performance of the investments. From time to time, we review the statutory reserve requirements to which our regulated entities are subject and any changes to such requirements. These reviews may result in identifying current reserve levels above or below minimum statutory reserve requirements, in which case we may adjust our reserves. The reviews may

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also identify opportunities to satisfy certain regulatory reserve requirements through alternate financial vehicles.

        Under the terms of our fuel swap contracts, we are required to post collateral in the event that the fair value of the contracts exceeds a certain agreed upon liability level and in other circumstances required by the counterparty. As of December 31, 2013, the estimated fair value of our fuel swap contracts was a net asset of $1.0 million, and we had posted $2.5 million in letters of credit as collateral under our fuel hedging program, none of which were issued under SvM's Revolving Credit Facility. The continued use of letters of credit for this purpose could limit SvM's ability to post letters of credit for other purposes and could limit SvM's borrowing availability under the Revolving Credit Facility. However, we do not expect the fair value of the outstanding fuel swap contracts to materially impact our financial position or liquidity.

        We may from time to time repurchase or otherwise retire or extend our debt and/or take other steps to reduce our debt or otherwise improve our financial position. These actions may include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and/or opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired or refinanced, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations. Our affiliates may also purchase our debt from time to time, through open market purchases or other transactions. In such cases, our debt may not be retired, in which case we would continue to pay interest in accordance with the terms of the debt, and we would continue to reflect the debt as outstanding in our audited consolidated financial statements.

Term Facilities

        In August 2012, SvM entered into an amendment, or the "2012 Term Loan Facility Amendment," to the credit agreement governing the Term Loan Facility, or the "Credit Agreement," primarily to extend the maturity date of a portion of the borrowings under the Term Loan Facility. Pursuant to the 2012 Term Loan Facility Amendment, the Tranche B loans have a maturity date of January 31, 2017. The interest rates applicable to the Tranche B loans under the Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at SvM's option, (i) an adjusted London inter-bank offered rate (adjusted for maximum reserves), plus a borrowing margin or (ii) an alternate base rate, plus a borrowing margin. As of December 31, 2013, the borrowing margin for the outstanding Tranche B loans was 4.25 percent. The 2012 Term Loan Facility Amendment also includes mechanics for future extension amendments, permits borrower buy-backs of term loans, increases the size of certain baskets and makes certain other changes to the Credit Agreement, including the reduction of the availability under the synthetic letter of credit facility from $150.0 million to $137.6 million.

        On February 22, 2013, SvM entered into Amendment No. 2 to its Term Loan Facility, or the "2013 Term Loan Facility Amendment," to amend the Credit Agreement primarily to extend the maturity date of a portion of the borrowings under the Term Loan Facility. Pursuant to the 2013 Term Loan Facility Amendment, the maturity of the outstanding Tranche A loans was extended, and such loans were converted into a new tranche of term loans in an aggregate principal amount, along with new loans extended by certain new lenders, of $1,220.0 million, or the "Tranche C loans." The maturity date for the Tranche C loans is January 31, 2017. The interest rates applicable to the Tranche C loans under the Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at the SvM's option, (i) an adjusted London inter-bank offered rate (adjusted for maximum reserves) plus 3.25 percent, with a minimum adjusted London inter-bank offered rate of 1.00 percent or (ii) an alternate base rate plus 2.25 percent, with a minimum alternate base rate of 2.00 percent. As part of the 2013 Term Loan Facility Amendment, SvM paid an original issue discount equal to 1.00 percent of the outstanding borrowings, or $12.2 million. Voluntary prepayments of borrowings under the

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Tranche C Loans are permitted at any time, in minimum principal amounts, without premium or penalty.

        As a result of the 2012 Term Loan Facility Amendment and the 2013 Term Loan Facility Amendment, SvM has, as of December 31, 2013, approximately $2.2 billion of outstanding borrowings maturing January 31, 2017, after including the unamortized portion of the original issue discount paid. Additionally, following the 2012 Term Loan Facility Amendment and the 2013 Term Loan Facility Amendment, the availability under the synthetic letter of credit facility will be reduced from the current availability of $137.6 million to $77.9 million as of July 24, 2014. The remaining $77.9 million of availability under the synthetic letter of credit facility will mature January 31, 2017.

Senior Notes

        The 2020 Notes, sold in February 2012, will mature on February 15, 2020 and bear interest at a rate of 8 percent per annum. The proceeds from the 2020 Notes, sold in February 2012, together with available cash, were used to redeem $600.0 million in aggregate principal amount of SvM's outstanding 2015 Notes in the first quarter of 2012. The 2020 Notes, sold in August 2012, will mature on August 15, 2020 and bear interest at a rate of 7 percent per annum. SvM used a majority of the proceeds from the 2020 Notes, sold in August 2012, to redeem the remaining $396.0 million aggregate principal amount of its 2015 Notes and to repay $276.3 million of outstanding borrowings under its Term Facilities during the third quarter of 2012. We recorded a loss on extinguishment of debt of $55.6 million in our consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2012 related to these transactions and the redemption of the 2015 Notes in the first quarter of 2012 discussed above. The 2020 Notes are jointly and severally guaranteed on a senior unsecured basis by SvM's domestic subsidiaries that guarantee its indebtedness under the Credit Facilities. The 2020 Notes are not guaranteed by any of SvM's non-U.S. subsidiaries, any subsidiaries subject to regulation as an insurance, home warranty or similar company, or certain other subsidiaries.

Fleet and Equipment Financing Arrangements

        A portion of our vehicle fleet and some equipment are leased through operating leases. The lease terms are non-cancelable for the first twelve-month term, and then are month-to-month, cancelable at our option. There are residual value guarantees by us (which approximate 84 percent of the estimated terminal value at the inception of the lease) relative to these vehicles and equipment, which historically have not resulted in significant net payments to the lessors. The fair value of the assets under all of the fleet and equipment leases is expected to substantially mitigate our guarantee obligations under the agreements. As of December 31, 2013, our residual value guarantees related to the leased assets totaled $11.4 million for which we have recorded as a liability the estimated fair value of these guarantees of $0.1 million in our consolidated statements of financial position included in this prospectus.

        SvM has entered into the Fleet Agreement which, among other things, allows us to obtain fleet vehicles through a leasing program. We have fulfilled substantially all of our vehicle fleet needs in 2012 and 2013 through the leasing program under the Fleet Agreement. For the year ended December 31, 2013, we acquired $50.9 million of vehicles under the Fleet Agreement leasing program. All leases under the Fleet Agreement are capital leases for accounting purposes. The lease rental payments include an interest component calculated using a variable rate based on one-month LIBOR plus other contractual adjustments and a borrowing margin totaling 2.45 percent. We have no minimum commitment for the number of vehicles to be obtained under the Fleet Agreement. As a result of the TruGreen Spin-off, we anticipate that new lease financings under the Fleet Agreement for the full year 2014 will range from approximately $15 million to $25 million.

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Limitations on Distributions and Dividends by Subsidiaries

        ServiceMaster and SvM are each holding companies, and as such they have no independent operations or material assets other than ownership of equity interests in their respective subsidiaries. ServiceMaster and SvM each depend on their respective subsidiaries to distribute funds to them so that they may pay obligations and expenses, including satisfying obligations with respect to indebtedness. The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements and financial condition and general business conditions, as well as restrictions under the laws of our subsidiaries' jurisdictions.

        The terms of the indenture governing the 2020 Notes and the agreements governing the Credit Facilities significantly restrict the ability of our subsidiaries, including SvM, to pay dividends, make loans or otherwise transfer assets to us. Further, SvM's subsidiaries are permitted under the terms of the Credit Facilities and other indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to SvM and, in turn, to us.

        Furthermore, there are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. These restrictions are related to regulatory requirements at American Home Shield and to a subsidiary borrowing arrangement at SMAC. The payment of ordinary and extraordinary dividends by our home warranty and similar subsidiaries (through which we conduct our American Home Shield business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain such subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can pay to us. As of December 31, 2013, the total net assets subject to these third-party restrictions was $160.2 million. We expect that such limitations will be in effect in 2014. None of our subsidiaries are obligated to make funds available to SvM or to us through the payment of dividends.

        We consider undistributed earnings of our foreign subsidiaries as of December 31, 2013 to be indefinitely reinvested and, accordingly, no U.S. income taxes have been provided thereon. The amount of cash associated with indefinitely reinvested foreign earnings was approximately $19 million and $28.7 million as of December 31, 2013 and 2012, respectively. We have not repatriated, nor do we anticipate the need to repatriate, funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Cash Flows from Operating Activities from Continuing Operations

        Net cash provided from operating activities from continuing operations increased $13.2 million to $249.1 million for the year ended December 31, 2013 compared to $235.9 million for the year ended December 31, 2012 and $304.9 million for the year ended December 31, 2011.

        Net cash provided from operating activities in 2013 was comprised of $219.9 million in earnings adjusted for non-cash charges and a $47.1 million decrease in cash required for working capital, offset, in part, by $17.8 million in cash payments related to restructuring charges. For the year ended December 31, 2013, working capital requirements were favorably impacted by a change in the timing of customer prepayments.

        Net cash provided from operating activities in 2012 was comprised of $311.6 million in earnings adjusted for non-cash charges and $3.0 million in premiums received on the issuance of the 2020 Notes, offset, in part, by a $18.5 million increase in cash required for working capital, $42.9 million in cash payments for the call premium paid on the redemption of $996.0 million aggregate principal amount of the 2015 Notes and $17.3 million in cash payments related to restructuring charges. For the year ended

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December 31, 2012, working capital requirements were adversely impacted by the timing of interest payments on the 2020 Notes and the Continuing Notes, as defined in "Description of Certain Indebtedness," and decreased accruals for incentive compensation.

        Net cash provided from operating activities in 2011 was comprised of $344.0 million in earnings adjusted for non-cash charges, offset, in part, by $7.5 million in cash payments related to restructuring charges and a $31.6 million increase in cash required for working capital. For the year ended December 31, 2011, working capital requirements were adversely impacted by a reduction in reserve levels under certain self-insurance programs and unrecognized tax benefits.

Cash Flows from Investing Activities from Continuing Operations

        Net cash used for investing activities from continuing operations was $91.5 million for the year ended December 31, 2013 compared to $118.3 million for the year ended December 31, 2012 and $135.2 million for the year ended December 31, 2011.

        Capital expenditures decreased to $60.4 million in 2013 from $73.2 million in 2012 and $96.5 million in 2011 and included recurring capital needs, including vehicle fleet purchases in 2011, and information technology projects, including a new operating system and telecommunications infrastructure at TruGreen and technology costs at American Home Shield. We anticipate that capital expenditures for the full year 2014 will range from approximately $55 million to $65 million, reflecting recurring needs and the continuation of investments in information systems and productivity enhancing technology. We have fulfilled our vehicle fleet needs through vehicle capital leases in 2012 and 2013 and expect to fulfill our ongoing vehicle fleet needs in the same manner. We have no additional material capital commitments at this time.

        Cash payments for acquisitions in 2013 totaled $32.1 million, compared with $46.1 million in 2012 and $44.4 million in 2011. Consideration paid for tuck-in acquisitions consisted of cash payments and debt payable to sellers. We expect to continue our tuck-in acquisition program at levels consistent with prior periods. Additionally, we announced that as of February 28, 2014, we acquired HSA Home Warranty, based in Madison, Wisconsin. This acquisition will result in a cash outlay of approximately $32 million, net of cash acquired, in the first quarter of 2014.

        Cash flows used for notes receivable, financial investments and securities, net, in 2013 were $0.4 million and were primarily driven by growth in customer financing through SMAC. Cash flows used for notes receivable, financial investments and securities, net, in 2012 were $1.2 million and were primarily driven by increased investments in marketable securities at American Home Shield and growth in customer financing through SMAC. Cash flows provided from notes receivable, financial investments and securities, net, were $3.0 million for the year ended December 31, 2011.

Cash Flows from Financing Activities from Continuing Operations

        Net cash used for financing activities from continuing operations was $90.5 million for the year ended December 31, 2013 compared to $23.2 million for the year ended December 31, 2012 and $114.3 million for the year ended December 31, 2011.

        During 2013, SvM made scheduled principal payments on long-term debt of $60.6 million, including the payment of the amounts outstanding under its former accounts receivable securitization facility, and made payments on other long-term financing obligations of $4.1 million. During 2013, SvM borrowed an incremental $0.9 million, paid $12.2 million in original issue discount and paid debt issuance costs of $5.6 million as part of the 2013 Term Loan Facility Amendment. Additionally, during 2013, we paid $16.4 million for the repurchase of common stock and restricted stock units, or "RSUs," and received payments totaling $7.5 million from the issuance of common stock.

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        During 2012, SvM sold $1.350 billion aggregate principal amount of the 2020 Notes and used a majority of the proceeds to redeem $996.0 million aggregate principal amount of the 2015 Notes and to repay $276.3 million of outstanding borrowings under the Term Facilities. During 2012, SvM made scheduled principal payments on long-term debt of $55.7 million, made payments on other long-term financing obligations of $6.9 million and paid debt issuance costs of $33.1 million related to the sale of the 2020 Notes. Additionally, during 2012, we paid $10.8 million for the repurchase of common stock and RSUs and received payments totaling $5.6 million from the issuance of common stock.

        During 2011, SvM borrowed $4.0 million under other financing arrangements and made scheduled principal payments of long-term debt of $40.9 million. Additionally, during 2011, we paid $87.6 million for the repurchase of common stock and RSUs and received payments totaling $10.5 million from the issuance of common stock.

Contractual Obligations

        The following table presents our contractual obligations and commitments as of December 31, 2013. The amounts presented do not give effect to the TruGreen Spin-off.

(In millions)
  Total   Less than 1 Yr   1 - 3 Yrs   3 - 5 Yrs   More than 5 Yrs  

Principal repayments*

  $ 3,948.9   $ 32.7   $ 72.8   $ 2,215.7   $ 1,627.7  

Capital leases

    78.0     18.6     33.4     23.6     2.4  

Estimated interest payments(1)

    1,351.2     224.9     442.9     258.8     424.6  

Non-cancelable operating leases(2)

    125.3     38.7     52.1     27.1     7.4  

Purchase obligations:

                               

Supply agreements and other(3)

    72.0     38.0     24.3     9.7      

Outsourcing agreements(4)

    57.9     15.4     20.7     21.8      

Other long-term liabilities:*

                               

Insurance claims

    222.5     80.3     51.2     19.4     71.6  

Discontinued operations

    1.3     1.3              

Other, including deferred compensation trust(2)

    15.1     1.3     2.3     2.0     9.5  
                       

Total Amount

  $ 5,872.2   $ 451.2   $ 699.7   $ 2,578.1   $ 2,143.2  
                       
                       

*
These items are reported in our consolidated statements of financial position included in this prospectus.

(1)
These amounts represent future interest payments related to our existing debt obligations based on fixed and variable interest rates and principal maturities specified in the associated debt agreements. Payments related to variable debt are based on applicable rates at December 31, 2013 plus the specified margin in the associated debt agreements for each period presented as of December 31, 2013. The estimated debt balance (including capital leases) as of each fiscal year end from 2014 through 2018 is $3,975.6 million, $3,913.4 million, $3,869.4 million, $1,720.6 million and $1,630.1 million, respectively. The weighted average interest rate on the estimated debt balances at each fiscal year end from 2014 through 2018 is expected to be 5.6 percent, 5.7 percent, 5.7 percent, 7.4 percent and 7.4 percent, respectively. See Note 12 of our audited consolidated financial statements included in this prospectus for the terms and maturities of existing debt obligations.

(2)
A portion of our vehicle fleet and some equipment are leased through operating leases. For further discussion see "Liquidity and Capital Resources—Fleet and Equipment Financing Arrangements." The amounts in non-cancelable operating leases exclude all prospective cancelable

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    payments under these agreements. The liability for the estimated fair value of the residual value guarantees related to the leased assets has been included in other long-term liabilities above.

(3)
These obligations include commitments for various products and services including, among other things, inventory purchases, telecommunications services, marketing and advertising services and other professional services. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transactions. Most arrangements are cancelable without a significant penalty and with short notice (usually 30-120 days) and amounts reflected above include our minimum contractual obligation (inclusive of applicable cancellation penalties). For obligations with significant penalties associated with termination, the minimum required expenditures over the term of the agreement have been included in the table above.

(4)
Outsourcing agreements include commitments for the purchase of certain outsourced services from third-party vendors. Because the services provided through these agreements are integral to our operations we have concluded that it is appropriate to include the total anticipated costs for services under these agreements in the table above.

        Due to the uncertainty with respect to the timing of future cash flows associated with unrecognized tax benefits at December 31, 2013, we are unable to reasonably estimate the period of cash settlement with the respective taxing authority. Accordingly, $7.8 million of unrecognized tax benefits have been excluded from the contractual obligations table above. See the discussion of income taxes in Note 5 of our audited consolidated financial statements included in this prospectus.

Financial Position—Continuing Operations

        Prepaid expenses and other assets increased from prior year levels, primarily reflecting the inclusion, in 2013, of the current portion of insurance recoverables related to insured claims, which has historically been netted with loss reserves within Accrued liabilities—Self-insured claims and related expenses.

        Property and equipment increased from prior year levels, primarily reflecting purchases for recurring capital needs and information technology projects and the acquisition of vehicles under the Fleet Agreement.

        Goodwill decreased from prior year levels as a result of the goodwill impairment in 2013 in the TruGreen Business. See Note 1 to our audited consolidated financial statements included in this prospectus for further information.

        Intangible assets, primarily trade names, service marks and trademarks, net, decreased from prior year levels due to amortization expense and the trade name impairment in 2013 in the TruGreen Business. See Note 1 to our audited consolidated financial statements included in this prospectus for further information.

        Other assets increased from prior year levels, primarily reflecting the inclusion, in 2013, of the non-current portion of insurance recoverables related to insured claims, which has historically been netted with loss reserves within Other long-term obligations, primarily self-insured claims.

        Accounts payable increased from prior year levels, primarily reflecting a change in the timing of payments to vendors.

        Deferred revenue increased from prior year levels, primarily reflecting higher customer prepayments at Terminix, TruGreen and American Home Shield.

        Deferred taxes decreased from prior year levels, primarily reflecting the goodwill and trade name impairment.

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        Other long-term obligations, primarily self-insured claims, increased from prior year levels, primarily reflecting the exclusion, in 2013, of the non-current portion of insurance recoverables related to insured claims, which is now reported within Other assets.

        Total shareholders' equity was $23.2 million as of December 31, 2013 compared to $535.1 million as of December 31, 2012.

Financial Position—Discontinued Operations

        The assets and liabilities related to discontinued operations have been classified in a separate caption on our consolidated statements of financial position included in this prospectus.

Off-Balance Sheet Arrangements

        As of December 31, 2013, we had off-balance sheet arrangements in the form of guarantees as discussed in Note 9 of our audited consolidated financial statements included in this prospectus.

        We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Accordingly, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies and Estimates

        The preparation of our audited consolidated financial statements requires management to make certain estimates and assumptions required under GAAP which may differ from actual results. The more significant areas requiring the use of management estimates relate to revenue recognition; the allowance for uncollectible receivables; accruals for self-insured retention limits related to medical, workers' compensation, auto and general liability insurance claims; accruals for home warranties and termite damage claims; the possible outcome of outstanding litigation; accruals for income tax liabilities as well as deferred tax accounts; the deferral and amortization of customer acquisition costs; useful lives for depreciation and amortization expense; the valuation of marketable securities; and the valuation of tangible and intangible assets. In 2013, there have been no changes in the significant areas that require estimates or in the underlying methodologies used in determining the amounts of these associated estimates.

        The allowance for receivables is developed based on several factors including overall customer credit quality, historical write-off experience and specific account analyses that project the ultimate collectability of the outstanding balances. As such, these factors may change over time causing the reserve level to vary.

        We carry insurance policies on insurable risks at levels which it believes to be appropriate, including workers' compensation, auto and general liability risks. We purchase insurance from third-party insurance carriers. These policies typically incorporate significant deductibles or self-insured retentions. We are responsible for all claims that fall within the retention limits. In determining our accrual for self-insured claims, we uses historical claims experience to establish both the current year accrual and the underlying provision for future losses. This actuarially determined provision and related accrual include both known claims, as well as incurred but not reported claims. We adjust our estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.

        Accruals for home warranty claims in the American Home Shield business are made based on our claims experience and actuarial projections. Termite damage claim accruals in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per

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claim. Current activity could differ causing a change in estimates. We have certain liabilities with respect to existing or potential claims, lawsuits, and other proceedings. We accrue for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period identified.

        We record deferred income tax balances based on the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and income tax purposes. We record our deferred tax items based on the estimated value of the tax basis. We adjust tax estimates when required to reflect changes based on factors such as changes in tax laws, relevant court decisions, results of tax authority reviews and statutes of limitations. We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. We recognize potential interest and penalties related to our uncertain tax positions in income tax expense.

Revenue

        Revenues from pest control and lawn care services, as well as liquid and fumigation termite applications, are recognized as the services are provided. We eradicate termites through the use of non-baiting methods (e.g., fumigation or liquid treatments) and baiting systems. Termite services using baiting systems, termite inspection and protection contracts, as well as home warranties, are frequently sold through annual contracts for a one-time, upfront payment. Direct costs of these contracts (service costs for termite contracts and claim costs for home warranties) are expensed as incurred. We recognize revenue over the life of these contracts in proportion to the expected direct costs. Those costs bear a direct relationship to the fulfillment of our obligations under the contracts and are representative of the relative value provided to the customer (proportional performance method). We regularly review our estimates of direct costs for our termite bait contracts and home warranties and adjust the estimates when appropriate.

        We have franchise agreements in our Terminix, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec businesses and, during the periods presented in this prospectus, the TruGreen Business. Franchise revenue (which in the aggregate represents approximately four percent of annual consolidated operating revenue from continuing operations) consists principally of continuing monthly fees based upon the franchisee's customer-level revenue. Monthly fee revenue is recognized when the related customer-level revenue generating activity is performed by the franchisee and collectability is reasonably assured. Franchise revenue also includes initial fees resulting from the sale of a franchise or a license. These initial franchise or license fees are pre-established fixed amounts and are recognized as revenue when collectability is reasonably assured and all material services or conditions relating to the sale have been substantially performed.

Deferred Customer Acquisition Costs

        Customer acquisition costs, which are incremental and direct costs of obtaining a customer, are deferred and amortized over the life of the related contract in proportion to revenue recognized. These costs include sales commissions and direct selling costs which can be shown to have resulted in a successful sale.

Property and Equipment, Intangible Assets and Goodwill

        Fixed assets and intangible assets with finite lives are depreciated and amortized on a straight-line basis over their estimated useful lives. These lives are based on our previous experience for similar assets, potential market obsolescence and other industry and business data. As required by accounting standards for the impairment or disposal of long-lived assets, our long-lived assets, including fixed assets and intangible assets (other than goodwill), are tested for recoverability whenever events or

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changes in circumstances indicate that their carrying amounts may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset, an impairment loss would be recognized equal to the difference between the carrying amount and the fair value of the asset. Changes in the estimated useful lives or in the asset values could cause us to adjust our book value or future expense accordingly.

        In February 2014, American Home Shield ceased efforts to deploy a new operating system that had been intended to improve customer relationship management capabilities and enhance its operations. We expect to record an impairment charge of approximately $50 million in the first quarter of 2014 relating to this decision.

        As required under accounting standards for goodwill and other intangibles, goodwill is not subject to amortization, and intangible assets with indefinite useful lives are not amortized until their useful lives are determined to no longer be indefinite. Goodwill and intangible assets that are not subject to amortization are subject to assessment for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. We adopted the provisions of ASU 2011 08, "Testing Goodwill for Impairment," in the fourth quarter of 2011. This Accounting Standards Update, or "ASU," gives entities the option of performing a qualitative assessment before calculating the fair value of a reporting unit in Step 1 of the goodwill impairment test. If entities determine, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not greater than its carrying amount, the two-step impairment test would not be required. For the 2013 and 2012 annual goodwill impairment review performed as of October 1, 2013 and October 1, 2012, respectively, we did not perform qualitative assessments on any reporting unit, but instead completed Step 1 of the goodwill impairment test for all reporting units. For the 2011 annual goodwill impairment review performed as of October 1, 2011, we performed qualitative assessments on the Terminix, American Home Shield and ServiceMaster Clean reporting units. Based on these assessments, we determined that, more likely than not, the fair values of Terminix, American Home Shield and ServiceMaster Clean were greater than their respective carrying amounts. As a result, the two-step goodwill impairment test was not performed for Terminix, American Home Shield and ServiceMaster Clean in 2011.

        Goodwill impairment is determined using a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. In performing the first step, we determine the fair value of a reporting unit using a combination of a discounted cash flow, or "DCF," analysis, a market-based comparable approach and a market-based transaction approach. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, terminal growth rates, the amount and timing of expected future cash flows, as well as relevant comparable company earnings multiples for the market-based comparable approach and relevant transaction multiples for the market-based transaction approach. The cash flows employed in the DCF analyses are based on our most recent budget and, for years beyond the budget, our estimates, which are based on estimated growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the future cash flows of the respective reporting units. In addition, the market-based comparable and transaction approaches utilize comparable company public trading values, comparable company historical results, research analyst estimates and, where available, values observed in private market transactions. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with its goodwill carrying amount to measure the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities

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of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amount equal to that excess.

        The impairment test for other intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of intangible assets not subject to amortization are determined using a DCF valuation analysis. The DCF methodology used to value trade names is known as the relief from royalty method and entails identifying the hypothetical cash flows generated by an assumed royalty rate that a third-party would pay to license the trade names and discounting them back to the valuation date. Significant judgments inherent in this analysis include the selection of appropriate discount rates and hypothetical royalty rates, estimating the amount and timing of estimated future cash flows attributable to the hypothetical royalty rates and identification of appropriate terminal growth rate assumptions. The discount rates used in the DCF analyses are intended to reflect the risk inherent in the projected future cash flows generated by the respective intangible assets.

        Goodwill and indefinite-lived intangible assets, primarily our trade names, are assessed annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. We performed an interim goodwill impairment analysis at TruGreen as of June 30, 2013 that resulted in a pre-tax non-cash goodwill impairment of $417.5 million. After this impairment charge, there was no goodwill remaining at TruGreen. We performed an interim goodwill impairment analysis at TruGreen as of September 30, 2012 that resulted in a pre-tax non-cash goodwill impairment of $794.2 million. During the fourth quarter of 2012, we finalized our September 30, 2012 TruGreen valuation resulting in a $4.0 million adjustment to goodwill decreasing the 2012 goodwill impairment charge to $790.2 million. Our 2013, 2012, and 2011 annual impairment analyses, which were performed as of October 1 of each year, did not result in any goodwill impairments.

        We performed an interim trade name impairment analysis at TruGreen as of June 30, 2013 resulting in a pre-tax non-cash trade name impairment charge of $255.8 million recorded in the second quarter of 2013. We performed an interim trade name impairment analysis at TruGreen as of June 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $67.7 million recorded in the second quarter of 2012. Further, we performed an interim trade name impairment analysis at TruGreen as of September 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $51.0 million recorded in the third quarter of 2012. Our annual trade name impairment analyses, which were performed as of October 1 of each year, resulted in pre-tax non-cash impairment of $36.7 million in 2011 related to the TruGreen trade name. Our October 1, 2013 and 2012 trade name impairment analyses did not result in any trade name impairments. The impairment charges by business segment for the years ended December 31, 2013, 2012 and 2011, as well as the remaining value of the trade

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names not subject to amortization by business segment as of December 31, 2013 and 2012 are as follows:

(In thousands)
  Terminix   American
Home
Shield
  ServiceMaster
Clean
  Other
Operations &
Headquarters(1)
  TruGreen   Total  

Balance at December 31, 2010

  $ 875,100   $ 140,400   $ 152,600   $ 439,900   $ 762,200   $ 2,370,200  

2011 Impairment

                    (36,700 )   (36,700 )
                           

Balance at December 31, 2011

    875,100     140,400     152,600     439,900     725,500     2,333,500  

2012 Impairment

                    (118,700 )   (118,700 )
                           

Balance at December 31, 2012

    875,100     140,400     152,600     439,900     606,800     2,214,800  

2013 Impairment

                    (255,800 )   (255,800 )
                           

Balance at December 31, 2013

  $ 875,100   $ 140,400   $ 152,600   $ 439,900   $ 351,000   $ 1,959,000  
                           
                           

(1)
The Other Operations and Headquarters segment includes Merry Maids.

        The goodwill impairment charge recorded in 2013 was primarily attributable to a decline in forecasted 2013 and future cash flows at TruGreen over a defined projection period as of June 30, 2013 compared to the projections used in the last annual impairment assessment performed on October 1, 2012. The changes in projected cash flows at TruGreen arose in part from the business challenges at TruGreen described in "—Segment Review—TruGreen Segment." Although we projected future improvement in cash flows at TruGreen as a part of its June 30, 2013 impairment analysis, total cash flows and projected growth in those cash flows were lower than those projected at the time TruGreen was last tested for impairment in 2012. The long-term growth rates used in the impairment tests at June 30, 2013 and October 1, 2012 were the same and were in line with historical U.S. gross domestic product growth rates. The discount rate used in the June 30, 2013 impairment test was 100 bps lower than the discount rate used in the October 1, 2012 impairment test for TruGreen. The decrease in the discount rate is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets and a higher risk tolerance for investors since the 2012 analysis.

        The goodwill impairment charge recorded in 2012 was primarily attributable to a decline in forecasted 2012 cash flows and a decrease in projected future growth in cash flows at TruGreen over a defined projection period as of September 30, 2012 compared to the projections used in the previous annual impairment assessment performed on October 1, 2011. Although we projected future growth in cash flows at TruGreen as a part of our September 30, 2012 impairment analysis, total cash flows and projected growth in those cash flows were lower than that projected at the time TruGreen was tested for impairment in 2011. The long-term growth rates used in the impairment tests at September 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rate used in the September 30, 2012 impairment test was 50 bps lower than the discount rate used in the October 1, 2011 impairment test for TruGreen. The decrease in the discount rate is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets since the 2011 analysis.

        Based on the revenue results at TruGreen in the first six months of 2013 and a lower revenue outlook for the remainder of 2013 and future years, we concluded that there was an impairment indicator requiring the performance of an interim indefinite-lived intangible asset impairment test for the TruGreen trade name as of June 30, 2013. The impairment analysis resulted in a $255.8 million impairment charge recorded in the second quarter 2013.

        The impairment charge recorded in the second quarter of 2013 was primarily attributable to a decrease in the assumed royalty rate and a decrease in projected future growth in revenue at TruGreen over a defined projection period as of June 30, 2013 compared to the royalty rate and projections used

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in the last annual impairment assessment performed on October 1, 2012. The decrease in the assumed royalty rate was due to lower current and projected earnings as a percent of revenue as compared to the last annual impairment test. Although we projected future growth in revenue at TruGreen as part of its June 30, 2013 impairment analysis, total projected revenue was lower than the revenue projected at the time the trade name was last tested for impairment in October 2012. The changes in projected future revenue growth at TruGreen arose in part from the business challenges at TruGreen described in "—Segment Review—TruGreen Segment." The long-term revenue growth rates used in the impairment tests at October 1, 2013, June 30, 2013 and October 1, 2012 were the same and in line with historical U.S. gross domestic product growth rates. The discount rates used in the October 1, 2013 and June 30, 2013 impairment tests were the same, but were 100 bps lower than the discount rate used in the October 1, 2012 impairment test for the TruGreen trade name. The decrease in the discount rate from 2012 is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets and a higher risk tolerance for investors since the last analysis.

        Based on the revenue results at TruGreen in the first six months of 2012 and a then lower revenue outlook for the remainder of 2012 and future years, we concluded that there was an impairment indicator requiring the performance of an interim indefinite-lived intangible asset impairment test for the TruGreen trade name as of June 30, 2012. That impairment analysis resulted in a $67.7 million impairment charge recorded in the second quarter of 2012. Based on the revenue results of TruGreen in the third quarter of 2012 and the revised outlook for the remainder of the year and future years, we performed another impairment analysis on its TruGreen trade name to determine its fair value as of September 30, 2012. Based on the revised projected revenue for TruGreen as compared to the projections used in the second quarter 2012 impairment test, we determined the fair value attributable to the TruGreen trade name was less than its carrying value by $51.0 million, which was recorded as a trade name impairment in the third quarter of 2012. Total non-cash trade name impairments recorded in 2012 related to the TruGreen trade name were $118.7 million.

        The impairment charge recorded in the second quarter of 2012 was primarily attributable to a decrease in projected future growth in revenue at TruGreen over a defined projection period as of June 30, 2012 compared to the projections used in the previous annual impairment assessment performed on October 1, 2011. The third quarter impairment charge was primarily attributable to a further reduction in projected revenue growth as compared to expectations in the second quarter of 2012. Although we projected future growth in revenue at TruGreen over a defined projection period as a part of its September 30, 2012 impairment analysis, such growth was lower than the revenue growth projected at the time the trade name was tested for impairment in the second quarter of 2012. The long-term revenue growth rates used for periods after the defined projection period in the impairment tests at September 30, 2012, June 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rates used in the September 30, 2012 and June 30, 2012 impairment tests were the same, but were 50 bps lower than the discount rate used in the October 1, 2011 impairment test for the TruGreen trade name. The decrease in the discount rate from 2011 is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets since the last analysis.

        The impairment charge in 2011 was primarily attributable to the use of higher discount rates in the DCF valuation analyses as compared to the discount rates used in the 2010 impairment analyses. Although the projected future growth in cash flows in 2011 were slightly higher than in the 2010 valuation, the increase in the discount rates more than offset the improved cash flows. The increase in the discount rates is primarily attributable to changes in market conditions which indicated a lower risk tolerance in 2011 as compared to 2010. This lower risk tolerance is exhibited through the marketplace's desire for higher returns in order to accept market risk. The long-term revenue growth rates used in the analyses for the October 1, 2011 and 2010 impairment tests were the same and in line with historical U.S. gross domestic product growth rates.

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        Had we used a discount rate in assessing the impairment of its trade names as of October 1, 2013 that was one percent higher across all business segments (holding all other assumptions unchanged), we would have recorded an additional trade name impairment charge of approximately $55.3 million in 2013.

        As a result of the TruGreen Spin-off, we will be required to perform an interim impairment analysis as of January 14, 2014 on the TruGreen trade name. The assumptions used in this analysis will be developed with the view of the TruGreen Business as a standalone company, resulting in an expected impairment charge of approximately $140 million in the first quarter of 2014.

        We do not hold or issue derivative financial instruments for trading or speculative purposes. We have entered into specific financial arrangements in the normal course of business to manage certain market risks, with a policy of matching positions and limiting the terms of contracts to relatively short durations.

        We have historically hedged a significant portion of our annual fuel consumption. We have historically used approximately 20 million gallons of fuel on an annual basis, with Terminix using approximately 11 million gallons. We have also historically hedged the interest payments on a portion of our variable rate debt through the use of interest rate swap agreements, although we have no interest rate swap agreements outstanding as of December 31, 2013. All of our fuel swap contracts and interest rate swap contracts are classified as cash flow hedges, and, as such, the hedging instruments are recorded on our consolidated statements of financial position included in this prospectus as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in accumulated other comprehensive income (loss).

        See Note 1 of our audited consolidated financial statements included in this prospectus for a summary of newly issued accounting statements and positions applicable to us.

Stock-Based Compensation

        Our board of directors and stockholders have adopted the Amended and Restated ServiceMaster Global Holdings, Inc. Stock Incentive Plan, or the "MSIP." The MSIP provides for the sale of shares and deferred share units, or "DSUs," of our stock to our executives, officers and other employees and to our directors as well as the grant of restricted stock units, or "RSUs," performance-based RSUs and options to purchase our shares to those individuals. DSUs represent a right to receive a share of common stock in the future. Our board of directors, or a committee thereof, selects our executives officers and employees and directors eligible to participate in the MSIP and determines the specific number of shares to be offered or options to be granted to an individual. A maximum of 15,595,000 shares of our stock is authorized for issuance under the MSIP. We currently intend to satisfy any need for our shares of common stock associated with the settlement of DSUs, vesting of RSUs or exercise of options issued under the MSIP through new shares available for issuance or any shares repurchased, forfeited or surrendered from participants in the MSIP.

        All option grants under the MSIP have been, and will be, non-qualified options with a per-share exercise price no less than the fair market value of one share of our stock on the grant date. Any stock options granted will generally have a term of ten years and vesting will be subject to an employee's continued employment. Our board of directors, or a committee designated by it, may accelerate the vesting of an option at any time. In addition, vesting of options will be accelerated if we experience a change in control (as defined in the MSIP) unless options with substantially equivalent terms and economic value are substituted for existing options in place of accelerated vesting. Vesting of options will also be accelerated in the event of an employee's death or disability (as defined in the MSIP). Upon termination for cause (as defined in the MSIP), all options held by an employee are immediately cancelled. Following a termination without cause, vested options will generally remain exercisable through the earlier of the expiration of their term or three months following termination of

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employment (one year in the case of death, disability or retirement at normal retirement age). Unless sooner terminated by our board of directors, the MSIP will remain in effect until November 20, 2017.

        Our stock-based compensation expense is estimated at the grant date based on an award's fair value as calculated by the Black-Scholes option-pricing model and is recognized as expense over the requisite service period. The Black-Scholes model requires various highly judgmental assumptions including expected volatility and option life. If any of the assumptions used in the Black-Scholes model changes significantly, stock-based compensation expense may differ materially in the future from that recorded in the current period. In addition, we estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience. To the extent our actual forfeiture rate is different from our estimate, stock-based compensation expense is adjusted accordingly. See Note 17 to our audited consolidated financial statements included in this prospectus.

    Common Stock Valuation

        In the absence of any publicly traded quotes for our company, our board of directors, with input from management, determined a reasonable estimate of the fair value of our common stock for purposes of determining fair value of our common stock on date of sale and stock options and RSUs on the date of grant. We determined the fair value of our common stock utilizing methodologies and assumptions consistent with the American Institute of Certified Public Accountants Practice Aid "Valuation of Privately-Held-Company Equity Securities Issued as Compensation." In determining the equity value of our company, we considered the following two valuation approaches: the income approach and the market approach. In addition we exercised judgment in evaluating and assessing the foregoing based on several factors including:

    the nature and history of our business;

    our current and historical operating performance;

    our expected future operating performance;

    financial condition at the grant date;

    the lack of marketability of our common stock;

    publicly available information of companies we consider peers based on a number of factors, including, but not limited to, similarity to us with respect to industry, business model, geographic diversification and other factors;

    likelihood of achieving a liquidity event, such as an initial public offering or a merger or acquisition of our company given prevailing market conditions;

    industry information such as market size and growth; and

    macroeconomic conditions.

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    Income approach

        The income approach estimates the value of our company based on the DCF method. The cash flows utilized in the DCF method are based on our most recent long-range forecast. The discount rate is intended to reflect the risks inherent in our future cash flows. Because the cash flows are only projected over a limited number of years, it is also necessary under the income approach to compute a terminal value as of the last period for which discrete cash flows are projected. The terminal value is calculated using the modified Gordon Growth Model, which is determined by taking the projected cash flow for the terminal year of the projection period and applying a capitalization factor (discount rate less the long-term growth rate). This amount is then discounted to its present value using a discount rate to arrive at the present value of the terminal value. The discounted project cash flows and terminal value are totaled to arrive at an indicated aggregate enterprise value under the income approach. In applying the income approach, we derived the discount rate from an analysis of the cost of capital of our comparable industry peer companies as of each valuation date and adjusted it to reflect the risks inherent in our business cash flows. A 10.0% discount rate was used in our fiscal 2013 valuations.

    Market approach

        The market approach incorporates various methodologies to estimate the enterprise value of a company and includes the guideline public company, or the "GPC," method which utilizes market multiples of comparable companies that are publicly traded and the guidelines merged and acquired company, or "GMAC," method which utilizes multiples achieved in comparable industry mergers and acquisition transactions. Given that there was limited meaningful information on mergers and acquisitions within industries comparable to ours the GMAC market approach was not considered.

        When considering which companies to include in our comparable industry peer companies, we mainly focused on U.S.-based publicly traded companies in the industry in which we operate and selected comparable industry peer companies and transactions on the basis of operational and economic similarity to our business at the time of the valuation. The selection of our comparable industry peer companies requires us to make judgments as to the comparability of these companies to us. We considered a number of factors including the business in which the peer company is engaged, business size, market share, revenue model, development stage and historical operating results. We then analyzed the business and financial profiles of the peer companies for relative similarities to us and, based on this assessment, we selected our comparable industry peer companies. The selection of our comparable industry peer companies has changed over time as we continue evaluation whether the selected companies remain comparable to us and considering recent initial public offerings and sale transactions. Based on these considerations, we believe the comparable peer companies are a representative group for purposes of selecting sales and EBITDA multiples in the performance of contemporaneous valuations.

        For each valuation in fiscal 2013, we equally weighted the income and market approaches. We believe an equal weighting of the two methods is appropriate as it utilizes both management's expectations of future results and an estimate of the market's valuation of companies similar to ServiceMaster. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, the amount and timing of expected future cash flows, as well as the relevant comparable company sales and earnings multiples for the market approach.

        Once we determined our enterprise value, we then allocated this value between our outstanding debt and common stock. The amount allocated to our outstanding debt is based on the public trading activity of such debt. The residual enterprise value, after allocation of value to outstanding debt, is further reduced by the value of outstanding stock options. The remaining value is then prescribed to our outstanding common stock in order to estimate a per share value.

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        The following table provides, by sale or grant date, as applicable, the number of shares of common stock sold, and stock options and RSUs awarded, during 2013, the sale price for shares sold or the exercise price for each set of stock option grants, the associated estimated fair value of our common stock and the fair value of such options or RSUs:

Grant or Sale Date
  Shares
Sold
  Options/RSUs
Granted(3)
  Sale/Exercise
Price(4)
  Fair Value
of
Common
Stock(5)
  Fair Value of
Option/RSUs
 

February 25, 2013(1)

          451,506         $ 13.00        

May 21, 2013(1)

          22,727         $ 11.00        

August 28, 2013

          190,000   $ 10.00   $ 10.00   $ 4.94  

August 28, 2013(1)

          52,965         $ 10.00        

September 13, 2013

    367,750     1,455,000   $ 10.00   $ 10.00   $ 4.96  

September 13, 2013(1)

          300,000         $ 10.00        

September 16, 2013(1)

          75,000         $ 10.00        

November 11, 2013(1)

          100,000         $ 10.50        

November 14, 2013

          20,000   $ 10.50   $ 10.50   $ 5.17  

December 2, 2013(1)

          35,000         $ 10.50        

December 11, 2013

    288,702     749,973   $ 10.50   $ 10.50   $ 5.20  

December 26, 2013(2)

    80,000         $ 10.00   $ 10.50        

(1)
Represents RSUs issued to employees. Value of RSUs is based on the fair value of our stock on the date of grant.

(2)
Represents shares of common stock issued pursuant to the exercise of stock options.

(3)
Represents number of options or RSUs granted on each grant date.

(4)
Represents exercise price of options granted and sale price of options exercised.

(5)
Represents fair market value of underlying common stock as of grant date.

        Our board of directors and management intended all shares issued to be sold, and all options and RSUs granted to be exercisable, at a price per share not less than the per share fair value of our common stock on the date of grant. We sell shares or grant options and RSUs to participants with a sale or exercise price equal to the then current fair value of the common stock.

        The decrease in the fair value of our common stock from February 25, 2013 to May 21, 2013 and from May 21, 2013 to August 28, 2013 is reflective of us underperforming relative to our forecast during the period, principally in the TruGreen Business.

        The increase in the fair value of our common stock from September 13, 2013 to November 14, 2013 is reflective of a modestly improved outlook for the TruGreen Business based on results late in 2013.

        We intend to adopt the 2014 Omnibus Incentive Plan, or the "Omnibus Incentive Plan," in connection with this offering. Upon adoption of the Omnibus Incentive Plan, we will make no further grants under the MSIP.

        See Note 1 of our audited consolidated financial statements included in this prospectus for a summary of newly issued accounting statements and positions applicable to us.

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Quantitative and Qualitative Disclosures about Market Risk

        The economy and its impact on discretionary consumer spending, labor wages, fuel prices and other material costs, home resales, unemployment rates, insurance costs and medical costs could have a material adverse impact on future results of operations.

        We do not hold or issue derivative financial instruments for trading or speculative purposes. We have entered into specific financial arrangements, primarily fuel swap agreements, and in the past interest rate swap agreements, in the normal course of business to manage certain market risks, with a policy of matching positions and limiting the terms of contracts to relatively short durations. The effect of derivative financial instrument transactions could have a material impact on our financial statements.

Interest Rate Risk

        We have historically entered into various interest rate swap agreements, although we have no interest rate swap agreements outstanding as of December 31, 2013.

        We believe our exposure to interest rate fluctuations, when viewed on both a gross and net basis, is material to our overall results of operations. A significant portion of our outstanding debt, including debt under the Credit Facilities, bears interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our debt and could materially reduce our profitability and cash flows. As of December 31, 2013, each one percentage point change in interest rates would result in an approximate $22.0 million change in the annual interest expense on our Term Facilities. Assuming all revolving loans were fully drawn as of December 31, 2013, each one percentage point change in interest rates would result in an approximate $3.2 million change in annual interest expense on our Revolving Credit Facility. Our exposure to interest rate fluctuations has not changed significantly since December 31, 2012. The impact of increases in interest rates could be more significant for us than it would be for some other companies because of our substantial debt and floating rate leases.

        The following table summarizes information about our debt as of December 31, 2013, including the principal cash payments and related weighted-average interest rates by expected maturity dates based on applicable rates at December 31, 2013.

 
  Expected Year of Maturity    
 
As of December 31, 2013
($ in millions)
  2014   2015   2016   2017   2018   Thereafter   Total   Fair
Value
 

Debt:

                                                 

Fixed rate

  $ 13.1   $ 10.7   $ 6.5   $ 3.4   $ 80.6   $ 1,627.7   $ 1,742.0   $ 1,691.5  

Average interest rate

    8.3 %   8.1 %   7.6 %   7.0 %   7.1 %   7.4 %   7.4 %      

Variable rate

 
$

38.2
 
$

51.5
 
$

37.5
 
$

2,145.4
 
$

9.9
 
$

2.4
 
$

2,284.9
 
$

2,264.2
 

Average interest rate

    3.5 %   3.3 %   3.6 %   4.3 %   2.5 %   2.5 %   4.3 %      

Fuel Price Risk

        We are exposed to market risk for changes in fuel prices through the consumption of fuel by our vehicle fleet in the delivery of services to our customers. We have historically used approximately 20 million gallons of fuel on an annual basis, with Terminix using approximately 11 million gallons. In 2014, we expect to use approximately 11 million gallons. A ten percent change in fuel prices would result in a change of approximately $4.1 million in our 2014 fuel cost before considering the impact of fuel swap contracts. Our exposure to changes in fuel prices has not changed significantly since December 31, 2012.

        We use fuel swap contracts to mitigate the financial impact of fluctuations in fuel prices. As of December 31, 2013, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $26.0 million, maturing through 2014. The estimated fair value of these contracts as of December 31, 2013 was a net asset of $1.0 million. These fuel swap contracts provide a fixed price for approximately 66 percent of our estimated fuel usage for 2014.

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BUSINESS

Overview

        ServiceMaster is a leading provider of essential residential and commercial services, operating through an extensive service network of more than 7,000 company-owned, franchised and licensed locations. Our mission is to simplify and improve the quality of our customers' lives by delivering services that help them protect and maintain their homes or businesses, typically their most highly valued assets. We have leading market positions across the majority of the markets we serve, as measured by customer-level revenue. Our portfolio of well-recognized brands includes Terminix (termite and pest control), American Home Shield (home warranties), ServiceMaster Restore (disaster restoration), ServiceMaster Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (furniture repair) and AmeriSpec (home inspections). We serve approximately five million residential and commercial customers through an employee base of approximately 13,000 company associates and a franchise network that independently employs an estimated 33,000 additional people.

        We believe that our customers understand the financial and reputational risks associated with inadequate maintenance of their homes or businesses and that our high-quality, professional services are low-cost expenditures when compared to the alternative of failing to perform essential maintenance. We strive to be the service provider of choice and believe our customers have recognized our value proposition, as evidenced by our long-standing customer relationships and the high rate at which our customers renew their contracts from year to year. In 2013, within our Terminix segment, customer retention rates for our termite and pest control businesses were 85% and 79%, respectively, and in our American Home Shield segment our retention rate was 73%.

        We have significant size and scale, which we believe give us a number of competitive advantages. Terminix is the largest termite and pest control business in the United States, as measured by customer-level revenue, and serves approximately 2.8 million residential customers across 47 states and the District of Columbia through approximately 285 company-owned and 100 franchised locations. Additionally, we estimate American Home Shield to be approximately four to five times larger than its nearest competitor, as measured by revenue. American Home Shield serves approximately 1.4 million residential customers across all 50 states and the District of Columbia through a network of approximately 10,000 pre-screened independent home service contractors. Our Franchise Services Group serves both residential and commercial customers across all 50 states and the District of Columbia through approximately 4,000 franchised and 75 company-owned locations. We believe our significant size and scale provide a competitive advantage in our purchasing power, route density, and marketing and operating efficiencies compared to smaller local and regional competitors. Our scale also facilitates the standardization of processes, shared learning and talent development, across our entire organization.

        We believe our businesses are strategically positioned to benefit from a number of favorable demographic and secular trends. These trends include growth in population, household formation and new and existing home sales. In addition, we believe there is increasing demand for outsourced services, fueled by a trend toward "do-it-for-me" as a result of an aging population and shifts in household structure and behaviors, such as dual-income families and consumers with "on-the-go" lifestyles.

Our Market Opportunity

Termite and Pest Control Industry

        The outsourced market for residential and commercial termite and pest control services in the United States was approximately $7 billion in 2012, according to Specialty Products Consultants, LLC. We estimate that there are approximately 17,000 U.S. termite and pest control companies, nearly all of which have fewer than 100 employees.

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        Termites are responsible for an estimated $5 billion in home damage in the United States annually, according to the National Pest Management Association's 2012 survey. The termite control industry provides treatment and inspection services to residential and commercial property owners for the remediation and prevention of termite infestations. We believe homeowners value quality and reliability over price in choosing professional termite control services, as the cost of most professional treatments is well below the potential cost of inaction or ineffective treatment. As a result, we believe the demand for termite remediation services is relatively insulated from changes in consumer spending. In addition to remediation services, the termite control industry offers periodic termite inspections and preventative treatments to residential and commercial property owners in areas with high termite activity, typically through annual contracts. These annual contracts may carry guarantees that protect the property owner against the cost of structural damage caused by a termite infestation. Termites can cause significant damage to a structure before becoming visible to the untrained eye, highlighting the value proposition of professional preventative termite services. As a result, the termite control industry experiences high renewal rates on annual preventative inspection and treatment contracts, and revenues from such contracts are generally stable and recurring.

        Pest infestations may damage a home or business while also carrying the risk of the spread of diseases. Moreover, for many commercial facilities, pest control is essential to regular operations and regulatory compliance (e.g., hotels, restaurants and healthcare facilities). As a result of these dynamics, the pest control industry experiences high rates of renewal for its pest inspection and treatment contracts. Pest control services are often delivered on a contracted basis through regularly scheduled service visits, which include an inspection of premises and application of pest control materials. According to the National Pest Management Association's 2012 survey, approximately 30% of U.S. households currently use a professional pest exterminator.

        Both termite and pest activity are affected by weather. Termite activity peaks during the annual springtime "swarm," the timing and intensity of which varies based on weather. Similarly, pest activity tends to accelerate in the spring months when warmer temperatures arrive in many U.S. regions. However, as a result of the high proportion of termite and pest control services which are contracted and recurring, as well as the high renewal rates for those services, the termite and pest control industry is relatively insulated from weather anomalies in any given year.

Home Warranty Industry

        We estimate that the U.S. home warranty market had total revenue of approximately $1.8 billion in 2013. The home warranty market is characterized by low household penetration, which we estimate to be approximately 3-4%. The home warranty industry offers plans that protect a homeowner against costly repairs or replacement of household systems and appliances. Typically having a one-year term, coverage varies based on a menu of plan options. The most commonly covered items include electrical, plumbing, central heating and air conditioning (HVAC) systems, water heaters, refrigerators, dishwashers and ovens/cook tops. The home warranty industry is characterized by a high level of customer interaction and service requirements. This combination of a high-touch/high-service business model and the peace of mind it delivers to the customer has led to high renewal rates in the home warranty industry.

        As consumer demand shifts towards more outsourced services, we believe that there is an opportunity for American Home Shield, a reliably scaled service provider with a national, pre-screened contractor network, to increase market share and household penetration. Additionally, we believe that increasingly complex household systems and appliances may further highlight the value proposition of professional repair services and, accordingly, the coverage offered by a home warranty.

        One of the drivers of sales of new home warranties is the number of existing homes sold in the United States, since a home warranty is often recommended by a real estate sales professional or

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offered by the seller of a home in conjunction with a real estate resale transaction. According to the National Association of Realtors, existing home resales, as measured in units, increased by approximately 9% in 2013. Approximately 19% of the operating revenue of American Home Shield for the year ended December 31, 2013 was tied directly to existing home resale transactions.

Key Franchise Services Group Industries

        Disaster Restoration (ServiceMaster Restore).    We estimate that the U.S. disaster restoration market is approximately $39 billion, approximately two-thirds of which is related to residential customers and the remainder related to commercial customers. Most emergency response work results from emergency situations for residential and commercial customers, such as fires and flooding. Extreme weather events and natural disasters also provide demand for emergency response work. Critical factors in the selection of an emergency response firm are the firm's reputation, relationships with insurers, available resources, proper insurance and credentials, quality of service, timeliness and responsiveness. This market is highly fragmented, with two large players, including ServiceMaster Restore, and we believe there are opportunities for growth for scaled service providers.

        Janitorial (ServiceMaster Clean).    We estimate that the U.S. janitorial services market was approximately $50.5 billion in 2013. The market is highly fragmented with more than 825,000 companies competing in the janitorial space, a significant majority of which have five or fewer employees.

        Residential Cleaning (Merry Maids).    We estimate that the U.S. residential professional cleaning services market was approximately $3.7 billion in 2013. Competition in this market comes mainly from local, independently owned firms, and from a few national companies.

Our Competitive Strengths

        #1 Market Positions in Large, Fragmented and Growing Markets.    We are the leading provider of essential residential and commercial services in the majority of markets in which we operate. Our markets are generally large, growing and highly fragmented, and we believe we have significant advantages over smaller local and regional competitors. We have spent decades developing a reputation built on reliability and superior quality and service. As a result, we enjoy high unaided brand awareness and a reputation for high-quality customer service, which serve as key drivers of our customer acquisition efforts. Our nationwide presence also allows our brands to effectively serve both local residential customers and large national commercial accounts and to capitalize on lead generation sources that include large real estate agencies, financial institutions and insurance carriers. We believe our significant size and scale also provide a competitive advantage in our purchasing power, route density, and marketing and operating efficiencies compared to smaller local and regional competitors. Our scale also facilitates the standardization of processes, shared learning and talent development across our entire organization.

        Diverse Revenue Streams Across Customers and Geographies.    ServiceMaster is diversified in terms of customers and geographies, and our businesses served approximately five million customers in 2013. We operate in all 50 states and the District of Columbia. Our Terminix business, which accounted for 57% of our 2013 operating revenue, served approximately 2.8 million customers across a branch network of approximately 285 company-owned and 100 franchised locations. American Home Shield, which accounted for 32% of our 2013 operating revenue, responded to nearly three million service requests from approximately 1.4 million customers. Our diverse customer base and geographies help to mitigate the effect of adverse market conditions and other risks in any particular geography or customer segment we serve. We therefore believe that the size and scale of our company provide us with added protection from risk relative to our smaller local and regional competitors.

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        High-Value Service Offerings Resulting in High Retention and Recurring Revenues.    We believe our high annual customer retention demonstrates the highly valued nature of the services we offer and the high level of execution and customer service that we provide. In 2013, in our Terminix termite and pest control businesses, our customer retention rates were 85% and 79%, respectively, and in our American Home Shield segment, our retention rate was 73%. Many of our technicians have built long-standing, personal relationships with their customers. We believe these personal bonds, often forged over decades, help to drive customer loyalty and retention. As a result of our strong retention rates and long-standing customer relationships, we enjoy significant visibility and stability in our business, and these factors limit the effect of adverse economic cycles on our revenue base. We experienced these advantages during the most recent downturn, when we were able to grow operating revenue in each year from 2008 to 2013.

        Multi-Channel Marketing Approach Supported by Sophisticated Customer Analytic Modeling Capabilities.    Our multi-channel marketing approach focuses on building the value of our brands and generating revenue by understanding the decisions customers make at each stage in the purchase of residential and commercial services. The effectiveness of our marketing efforts is demonstrated by an increase in lead generation and online sales, as well as an improvement in close rates over the last few years. For example, in our direct-to-consumer channel at American Home Shield, new home warranty lead generation, marketing yield and close rates have benefited from increased spending on marketing as well as improved digital marketing. We have also been deploying increasingly sophisticated customer analytics models that allow us to more effectively segment our prospective customers and tailor campaigns towards them. In addition, we are seeing success with newer ways of reaching and marketing to consumers via content marketing, promotions and social media channels.

        Operational and Customer Service Excellence Driven by Superior People Development.    We are constantly focused on improving customer service. The customer experience is at the foundation of our business model, and we believe that each employee is an extension of ServiceMaster's reputation. We employ rigorous hiring and training practices and continuously analyze our operating metrics to identify potential improvements in service and productivity. Technicians in our Terminix branches exhibit low levels of turnover, with an average tenure of seven years, creating continuity in customer relationships and ensuring the development of best practices based on on-the-ground experience. We also provide our field personnel with access to sophisticated data management and mobility tools which enable them to drive efficiencies, improve customer service and ultimately grow our customer base and profitability.

        Resilient Financial Model with Track Record of Consistent Performance.    

    Solid revenue and Adjusted EBITDA growth through business cycles.  Our consolidated pro forma operating revenue and pro forma Adjusted EBITDA compound annual growth rates from 2009 through 2013 were 4% and 6%, respectively. We believe that our strong performance through the recent economic and housing downturns is attributable to the essential nature of our services, our strong value proposition and our management's focus on driving results.

    Solid margins with attractive operating leverage and productivity improvement initiatives.  Our business model enjoys inherent operating leverage stemming from route density and fixed investments in infrastructure and technology, among other factors. We have demonstrated our ability to expand our margins through a variety of initiatives, including metric-driven continuous improvement in our customer call centers, application of consistent process guidelines at the branch level, leveraging size and scale to improve the sourcing of labor and materials, and driving productivity in centralized services. We have also deployed mobility solutions and routing and scheduling systems across many of our businesses in order to enhance overall efficiency and reduce operating costs.

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        Capital-Light Business Model with High Cash Flow Conversion.    Our business model is characterized by strong Adjusted EBITDA margins, negative working capital and limited capital expenditure requirements, which have allowed us to deliver consistent and high Cash Flow Conversion (as defined in "—Selected Historical Financial Data"), which averaged        % from 2009 through 2013. We intend to utilize a meaningful portion of our future cash flow to repay debt.

        Experienced Management Team.    We have assembled a management team of highly experienced leaders with significant industry expertise. Our senior leaders have track records of producing profitable growth in a wide variety of industries and economic conditions. We also believe that we have a deep bench of talent across each of our business units, including long-tenured individuals with significant expertise and knowledge of the businesses they operate. Our management team is highly focused on execution and driving growth and profitability across our company. Our compensation structure, including incentive compensation, is tied to key performance metrics and is designed to incentivize senior management to seek the long-term success of our business.

Our Strategy

        Grow Our Customer Base.    We are focused on the growth of our businesses through the introduction and delivery of high-value services to new and existing customers. With approximately five million customers today, we drive growth in recurring and new sales via three primary channels:

    Direct-to-consumer through our company-owned branches;

    Indirectly through partnerships with high-quality contractors in our home warranty business; and

    Through trusted service providers who are franchisees.

        To accelerate new customer growth, we make strategic investments in sales, marketing and advertising to drive new business leads, brand awareness and market penetration. In addition, we are executing multiple initiatives to improve customer satisfaction and service delivery, which we believe will lead to improved retention and growth in our customer base across our business segments.

        Introduce New Service Offerings.    We intend to continue to leverage our existing sales channels and local coverage to deliver additional value-added services to our customers. Our product development teams draw upon the experience of our technicians in the field, combined with in-house scientific expertise, to create innovative customer solutions for both our existing customer base and identified service/category adjacencies. We have a strong history of new product introductions, such as crawlspace encapsulation, mosquito control and wildlife exclusion at Terminix, that we believe will appeal to new potential customers as well as our existing customer base. As another example, in the second quarter of 2014, our ServiceMaster Restore and AmeriSpec teams intend to introduce InstaScope, a new, proprietary technology for instant mold detection and water categorization.

        Expand Our Geographic Markets.    Through detailed assessments of local economic conditions and demographics, we have identified target markets for expansion, both in existing markets, where we have capacity to increase our local market position, and in new markets, where we see opportunities. In addition to geographic expansion opportunities within the United States, we intend to grow our international presence through strategic franchise expansions and additional licensing agreements.

        Grow Our Commercial Business.    Our revenue from commercial customers comprised approximately 13% of our 2013 operating revenue. We believe we are well positioned to leverage our national coverage, brand strength and broad service offerings to target large multi-regional accounts. We believe these capabilities provide us with a meaningful competitive advantage, especially compared to smaller local and regional competitors. We recognize that many of these large accounts seek to outsource and/or reduce the number of vendors used for certain services, and, accordingly, we have reenergized our marketing approach in this channel. At Terminix, for example, we have hired a

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dedicated sales team to focus on the development of commercial sales. Our commercial expansion strategy targets industries with a demonstrated need for our services, including healthcare, manufacturing, warehouses, hotels and commercial real estate.

        Enhance Our Profitability.    We have and will continue to invest in initiatives designed to improve our margins and drive profitable growth. We have been able to increase productivity across our segments through actions such as continuous process improvement, targeted systems investments, sales force initiatives and technician mobility tools. We are also focusing on strategically leveraging the $1.4 billion that we have spent annually with our vendors to capitalize on purchasing power and achieve more favorable pricing and terms. In addition, we have rolled out tools and processes to centralize and systematize pricing decisions. These tools and processes enable us to optimize pricing at the geographic market and product level while creating a flexible and scalable pricing architecture that can grow with the business. We intend to leverage these investments as well as identify further opportunities to enhance profitability across our businesses.

        Pursue Selective Acquisitions.    Since 2008, we have completed nearly 200 acquisitions. We anticipate that the highly fragmented nature of our markets will continue to create opportunities for further consolidation. As we have in the past, we will continue to take advantage of tuck-in as well as strategic acquisition opportunities, particularly in underserved markets where we can enhance and expand our service capabilities. We seek to use acquisitions, cost-effectively grow our customer count and enter high-growth geographies. We may also pursue acquisitions as vehicles for strategic international expansion.

Our Operating Segments

        Beginning with the reporting period for the three months ended March 31, 2014, our operations will be organized into three primary operating segments: Terminix, American Home Shield and the Franchise Services Group (which will include ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec). We spun off the TruGreen Business to our stockholders on January 14, 2014.

Terminix

        Terminix is the leading provider of termite and pest control services in the United States, with a market share of 20%, as measured by customer-level revenue. In addition, Terminix is the most recognized brand in the industry with approximately 1.5x the unaided brand awareness of our next-largest competitor, based on a study by Decision Analyst, Inc. Terminix specializes in protection against termite damage, rodents, insects and other pests, including cockroaches, spiders, wood-destroying ants, ticks, fleas and bed bugs. Our services include termite remediation, annual termite inspection and prevention treatments with damage claim guarantees, and periodic pest control services. Our recent new product introductions include mosquito control, crawlspace encapsulation and wildlife exclusion.

        For the year ended December 31, 2013, 56% of our Terminix operating revenue was generated from pest control services and 39% was generated from termite control services, with the remainder from distribution of pest control products. For the same period, approximately 80% of our Terminix operating revenue was generated from services provided to residential customers, with the remaining 20% from commercial customers. A significant portion of our Terminix revenue base is recurring, with 72% of 2013 operating revenue derived from services delivered through annual contracts. Additionally, in 2013, retention rates for termite and pest control customers with annual contracts were 85% and 79%, respectively.

        We believe that the strength of the Terminix brand, along with our history of providing a high level of consistent service, allows us to enjoy a competitive advantage in attracting, retaining and growing our customer base. We believe our investments in systems and processes, such as routing and scheduling

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optimization, robust reporting capabilities and mobile customer management solutions, enable us to deliver a higher level of customer service when compared to smaller regional and local competitors.

        Our focus on attracting and retaining customers begins with our associates in the field, who interact with our customers every day. Our associates bring a strong level of passion and commitment to the Terminix brand, as evidenced by the 15-year and 7-year average tenure of our branch managers and technicians, respectively. Our field organization is supported by dedicated customer service and call center personnel. Our culture of continuous improvement drives an intense focus on the quality of the services delivered, which we believe produces high levels of customer satisfaction and, ultimately, customer retention and referrals.

        The Terminix national branch structure includes approximately 285 company-owned and 100 franchised locations, which serve approximately 2.8 million residential customers in 47 states and the District of Columbia. Terminix also provides termite and pest control services through subsidiaries in Canada, Mexico, the Caribbean and Central America, as well as a joint venture in India. In addition, licensees of Terminix provide these services in Japan, China, South Korea, Southeast Asia, Central America, the Caribbean and the Middle East. In 2013, substantially all of Terminix operating revenue was generated in the United States, with less than 1% derived from international markets through subsidiaries, a joint venture and licensing arrangements. Franchise fees from Terminix franchisees represented less than 1% of Terminix operating revenue in 2013.

    Terminix Competitive Strengths

    #1 market position and #1 recognized brand in U.S. termite and pest control services

    Track record of high customer retention rates

    Passionate and committed associates focused on delivering superior customer service

    Expansive scale and deep market presence across a national footprint

    Effective multi-channel customer acquisition strategy

    History of innovation leadership and introducing new products and services

American Home Shield

        American Home Shield founded the home warranty industry in 1971 and remains the leading provider of home warranty plans for household systems and appliances in the United States, with approximately 42% market share, as measured by revenue. We estimate American Home Shield to be approximately four to five times larger than its nearest competitor, as measured by revenue. We believe that, as the market leader, American Home Shield can drive increasing use of home warranties given the low industry household penetration of approximately 3-4%.

        American Home Shield provides home warranty plans that cover the repair or replacement of up to 21 major household systems and appliances, including electrical, plumbing, central heating and air conditioning (HVAC) systems, water heaters, refrigerators, dishwashers and ovens/cook tops. Our warranty plans are generally structured as one-year contracts with annual renewal options and, as a result, a significant portion of our revenue base in this segment is recurring. In 2013, our retention rate was 73%. Of the home warranties written by American Home Shield in 2013, 69% were derived from existing contract renewals, while 18% and 13% were derived from sales made in conjunction with existing home resale transactions and direct-to-consumer sales, respectively.

        We have one of the largest contractor networks in the United States, comprised of approximately 10,000 independent home service contractors. We carefully screen our contractors and closely monitor their performance based on a number of criteria, including through feedback from customer satisfaction

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surveys. On an annual basis, our contractors respond to nearly three million service requests from approximately 1.4 million customers across all 50 states and the District of Columbia. Additionally, American Home Shield operates and takes service calls 24 hours a day, seven days a week. Furthermore, as a result of our large contractor network and sophisticated IT systems, approximately 90% of the time we successfully assign contractors to a job within 15 minutes or less.

American Home Shield Competitive Strengths

    #1 market position in the industry with 42% market share, estimated to be four to five times the size of the next largest competitor

    Track record of high customer retention rates

    Large and pre-qualified national contractor network

    Strong partnerships with leading national residential real estate firms

    Core competency around direct-to-consumer marketing and lead generation

Franchise Services Group

        Through December 31, 2013, we reported the Merry Maids business in our Other Operations and Headquarters segment and the ServiceMaster Restore, ServiceMaster Clean, Furniture Medic and AmeriSpec businesses in the ServiceMaster Clean segment. Beginning with the reporting period for the three months ended March 31, 2014, we expect to combine the Merry Maids business with our ServiceMaster Clean segment in a new reporting segment titled Franchise Services Group.

        ServiceMaster's Franchise Services Group consists of the ServiceMaster Restore (disaster restoration), ServiceMaster Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (furniture repair) and AmeriSpec (home inspection) businesses. Our businesses in this segment operate principally through franchisees. Approximately half of our operating revenue in this segment consists of ongoing monthly royalty fees based upon a percentage of our franchisees' customer-level revenue. We believe that each business holds a leading market position in its respective category and that our scale and national presence create competitive advantages for us in attracting and retaining franchisees. We are able to invest in best-in-class systems, training and process development, provide multiple levels of marketing support and direct new business leads to our franchisees through our relationships with major insurance carriers and national account customers. The depth of our franchisee support is evidenced by the long average tenure of our franchisees, many of whom have partnered with ServiceMaster for over 25 years.

Franchise Services Group Competitive Strengths

    Strong and trusted brands with leading market positions in their respective categories

    Attractive value proposition to franchisees

    Exceptional focus on customer service evidenced by strong net promoter scores, or "NPS"

    Infrastructure and scale supporting our ability to service national accounts

    National network and 24/7/365 service availability supports mission-critical nature of the ServiceMaster Restore business

    Long-standing and strong relationships with the majority of the top 20 insurance carriers

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TruGreen

        On January 14, 2014, we completed the TruGreen Spin-off, resulting in the spin-off of the TruGreen Business through a tax-free, pro rata dividend to our stockholders. As a result of the completion of the TruGreen Spin-off, New TruGreen operates the TruGreen Business as a private independent company. The TruGreen Business provided lawn, tree and shrub care services primarily under the TruGreen brand name. Beginning with the reporting period for the three months ended March 31, 2014, the TruGreen Business will be reported in discontinued operations.

Sales and Marketing

Terminix

        Terminix markets its services to both homeowners and businesses through a national sales team and sales professionals in our branches and call centers. We generate leads for these sales professionals through advertising campaigns on television, online, in direct mail and in the yellow pages.

American Home Shield

        In our American Home Shield segment, we market our services primarily through the internet, direct mail, television and radio advertising, print advertisements, marketing partnerships, telemarketing and various social media channels. Additionally, we market our services through a national sales team and various participants in the residential real estate marketplace, such as real estate brokerages, as well as some financial institutions and insurance carriers.

Franchise Services Group

        In our Franchise Services Group segment, we market our services primarily through our franchise network, branch operations and a national sales team to a combination of business-to-business and business-to-consumer audiences. These services are advertised on a national and local level and include such media as television, radio, internet, direct mail, print advertisements, sales collateral materials and yellow page advertisements.

Service Marks, Trademarks and Trade Names

        We hold various service marks, trademarks and trade names, such as ServiceMaster, Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec, that we deem particularly important to the advertising activities conducted by each of our reportable segments as well as the franchising activities conducted by certain reportable segments. As of December 31, 2013, we had marks that were protected by registration (either by direct registration or by treaty) in the United States and approximately 90 other countries. In connection with the TruGreen Spin-off, on January 14, 2014, all of the service marks, trademarks and trade names related to the TruGreen Business were transferred to New TruGreen and its subsidiaries.

Franchises

        Franchises are important to the Terminix, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec businesses. For the years ended December 31, 2013, 2012 and 2011, total franchise fees (monthly royalty fees as well as initial fees from sales of franchises and licenses) were $138.8 million, $127.8 million and $127.1 million, respectively, related franchise operating expenses were $59.7 million, $54.8 million and $53.0 million, respectively, and total profits from our franchised operations were $79.1 million, $73.0 million and $74.1 million, respectively. Franchise fees from our Terminix franchisees represented less than 1% of Terminix operating revenue for each of those years. We evaluate the performance of our franchise businesses based primarily on operating

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profit before corporate general and administrative expenses, interest expense and amortization of intangible assets. Franchise agreements entered into in the course of these businesses are generally for a term of five to ten years. The majority of these franchise agreements are renewed prior to expiration. Internationally, we have license agreements, whereby licensees provide services under our brand names that would ordinarily be provided by franchisees in the United States. The majority of international licenses are for ten-year terms.

Customers and Geographies

        We have no single customer that accounts for more than ten percent of our consolidated operating revenue. Additionally, no operating segment has a single customer that accounts for more than ten percent of its operating revenue. None of our operating segments is dependent on a single customer or a few customers, the loss of which would have a material adverse effect on the segment.

        A significant percentage of our revenues is concentrated in the southern and western regions of the United States. California, Texas and Florida collectively accounted for approximately one-third of the 2013 operating revenue of our Terminix segment. In our American Home Shield segment, Texas and California collectively accounted for approximately one-third of our 2013 operating revenue.

Competition

        We compete in residential and commercial services industries, focusing on termite and pest control, home warranties, disaster restoration, janitorial, residential cleaning, wood furniture repair and home inspection. We compete with many other companies in the sale of our services, franchises and products. The principal methods of competition in our businesses include quality and speed of service, name recognition and reputation, customer satisfaction, brand awareness, pricing and promotions, professional sales forces and referrals. While we compete with a broad range of competitors in each discrete segment, we do not believe that any of our competitors provides all of the services we provide in all of the market segments we serve. All of the primary segments in which we operate are highly fragmented.

Termite and Pest Control

        Competition in the segment for professional termite and pest control services in the United States comes primarily from smaller regional and local, independently operated firms, as well as from Orkin, Inc., a subsidiary of Rollins, Inc., and Ecolab, Inc., both of which compete nationally. We estimate that there are approximately 17,000 termite and pest control companies in the United States, nearly all of which have fewer than 100 employees.

Home Warranties

        Competition for home warranties that cover household systems and appliances comes mainly from regional providers. Our largest national competitor is First American Financial Corporation. We estimate American Home Shield to be four to five times larger than this company, as measured by revenue.

Disaster Restoration, Emergency Response and Related Services

        Competition in the markets for disaster restoration, emergency response and related services comes mainly from local, independently owned firms and a few national professional cleaning companies, such as Servpro Industries, Inc., Belfor, a subsidiary of Belfor Europe GmbH, BMS CAT, Inc., Stanley Steemer International, Inc., and Sears Holdings Corporation.

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Janitorial

        Competition in the market for janitorial services comes mainly from local, independently-owned firms and a few national professional janitorial firms such as ABM Industries Incorporated and Jani-King International, Inc. The market for janitorial services is highly fragmented with more than 825,000 companies.

Residential Cleaning

        Competition in the market segment for residential cleaning services comes mainly from local, independently owned firms, and from a few national companies such as The Maids International, Inc., Molly Maid, Inc. and The Cleaning Authority, LLC.

Insurance

        We maintain insurance coverage that we believe is appropriate for our business, including workers' compensation, auto liability, general liability, umbrella and property insurance. In addition, we provide various insurance coverages, including deductible reimbursement policies, to our business units through our wholly-owned captive insurance company, which is domiciled in Vermont.

Information Technology

        We have invested in information systems and software packages designed to allow us to grow efficiently, deliver and implement nationally, while retaining local and regional flexibility. We believe this provides us with a competitive advantage in our operations. Our sophisticated IT systems enable us to provide a high level of convenience and service to our customers. Terminix is able to provide a two-hour service window to customers. Similarly, American Home Shield's call centers, which operate and take service calls 24 hours a day, seven days a week, successfully assign contractors to a job within 15 minutes or less approximately 90% of the time.

Employees

        The average number of persons employed by us during 2013 was approximately 22,000 (including approximately 9,000 TruGreen employees who transferred to New TruGreen). Due to the seasonal nature of some of our businesses, associate headcount can fluctuate during the course of a year, reaching approximately 24,000 during peak service periods. None of our employees in the United States are represented by collective bargaining agreements.

Properties

        The headquarters for Terminix, along with our corporate headquarters, are located in leased premises at 860 Ridge Lake Boulevard, Memphis, Tennessee. The headquarters for American Home Shield are located in leased premises at 889 Ridge Lake Boulevard, Memphis, Tennessee. The headquarters for ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec, and a training facility are located in owned premises at 3839 Forest Hill Irene Road, Memphis, Tennessee. In addition, we lease space for a call center located at 6399 Shelby View Drive, Memphis, Tennessee; offices located at 850 and 855 Ridge Lake Boulevard, Memphis, Tennessee; a training facility located at 1650 Shelby Oaks Drive North, Memphis, Tennessee; and a warehouse located at 1575 Two Place, Memphis, Tennessee.

        We and our operating companies own and lease a variety of facilities, principally in the United States, for branch and service center operations and for office, storage, call center and data processing space. Our branches are strategically located to optimize route efficiency, market coverage and branch overhead. The following chart identifies the number of owned and leased facilities, other than the

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headquarter properties listed above, used by each of our operating segments and Merry Maids as of December 31, 2013. We believe that these facilities, when considered with the corporate headquarters, call center facility, offices, training facilities and warehouse described above, are suitable and adequate to support the current needs of our business.

Operating Company
  Owned
Facilities
  Leased
Facilities
 

Terminix

    21     398  

American Home Shield

    1     4  

ServiceMaster Clean

        7  

Merry Maids

        77  

TruGreen(1)

    37     232  

(1)
These properties and associated leases were transferred to New TruGreen as part of the TruGreen Spin-off.

Regulatory Compliance

        Our businesses are subject to various international, federal, state, provincial and local laws and regulations, compliance with which increases our operating costs, limits or restricts the services provided by our operating segments or the methods by which our businesses offer, sell and fulfill those services or conduct their respective businesses, or subjects us and our operating segments to the possibility of regulatory actions or proceedings. Noncompliance with these laws and regulations can subject us to fines or various forms of civil or criminal prosecution, any of which could have a material adverse effect on our reputation, business, financial position, results of operations and cash flows.

        These international, federal, state, provincial and local laws and regulations include laws relating to consumer protection, wage and hour, deceptive trade practices, permitting and licensing, state contractor laws, real estate settlements, workers' safety, tax, healthcare reforms, franchise related issues, collective bargaining and other labor matters, environmental and employee benefits. The Terminix business must also meet certain Department of Transportation and Federal Motor Carrier Safety Administration requirements with respect to certain vehicles in its fleet. Terminix is regulated by federal, state and local laws, ordinances and regulations which are enforced by Pest Control Boards, Departments of Environmental Conservation and similar government entities. American Home Shield is regulated in certain states by the applicable state insurance regulatory authority and by the Real Estate Commission in Texas. ServiceMaster Clean and Merry Maids use products containing ingredients regulated by the EPA and ServiceMaster Clean is subject to licensing and certification requirements for applying disinfectants, sanitizers and other EPA registered products in certain states. AmeriSpec is regulated by various state and local home inspection laws and regulations.

    Environmental, Health and Safety Matters

        Our businesses are subject to various international, federal, state and local laws and regulations regarding environmental, health and safety matters. Among other things, these laws regulate the emission or discharge of materials into the environment, govern the use, storage, treatment, disposal and management of hazardous substances and wastes and protect the health and safety of our employees. These laws also impose liability for the costs of investigating and remediating, and damages resulting from, present and past releases of hazardous substances, including releases by prior owners or operators of sites we currently own or operate.

        Compliance with environmental, health and safety laws increases our operating costs, limits or restricts the services provided by our operating segments or the methods by which they offer, sell and

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fulfill those services or conduct their respective businesses, or subjects us and our operating segments to the possibility of regulatory or private actions or proceedings.

        Terminix is regulated under many federal and state environmental laws, including the Comprehensive Environmental Response, Compensation and Liability Act of 1980, or "CERCLA" or "Superfund," the Superfund Amendments and Reauthorization Act of 1986, the Federal Environmental Pesticide Control Act of 1972, the Federal Insecticide, Fungicide and Rodenticide Act of 1947, the Resource Conservation and Recovery Act of 1976, the Clean Air Act, the Emergency Planning and Community Right-to-Know Act of 1986, the Oil Pollution Act of 1990 and the Clean Water Act of 1977, each as amended.

        We cannot predict the effect of possible future environmental laws on our operations. Changes in, or new interpretations of, existing laws, regulations or enforcement policies, the discovery of previously unknown contamination, or the imposition of other environmental liabilities or obligations in the future, may lead to additional compliance or other costs. During 2013, there were no material capital expenditures for environmental control facilities, and there are no material expenditures anticipated for 2014 or 2015 related to such facilities.

    Consumer Protection and Solicitation Matters

        We are subject to international, federal, state, provincial and local laws and regulations designed to protect consumers, including laws governing consumer privacy and fraud, the collection and use of consumer data, telemarketing and other forms of solicitation.

        The telemarketing rules adopted by the Federal Communications Commission pursuant to the Federal Telephone Consumer Protection Act and the Federal Telemarketing Sales Rule issued by the Federal Trade Commission govern our telephone sales practices. In addition, some states and local governing bodies have adopted laws and regulations targeted at direct telephone sales and "do-not-knock," "do-not-mail" and "do-not-leave" activities. The implementation of these marketing regulations requires us to rely more extensively on other marketing methods and channels. In addition, if we were to fail to comply with any applicable law or regulation, we could be subject to substantial fines or damages, be involved in litigation, suffer losses to our reputation and our business or suffer the loss of licenses or penalties that may affect how the business is operated, which, in turn, could have a material adverse effect on our financial position, results of operations and cash flows.

    Franchise Matters

        Terminix, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec are subject to various international, federal, state, provincial and local laws and regulations governing franchise sales, marketing and licensing and franchise trade practices generally, including applicable rules and regulations of the Federal Trade Commission. These laws and regulations generally require disclosure of business information in connection with the sale and licensing of franchises. Certain state regulations also affect the ability of the franchisor to revoke or refuse to renew a franchise. We seek to comply with regulatory requirements and deal with franchisees and licensees in good faith. From time to time, we and one or more franchisees may become involved in a dispute regarding the franchise relationship, including payment of royalties or fees, location of branches, advertising, purchase of products by franchisees, non-competition covenants, compliance with our standards and franchise renewal criteria. There can be no assurance that compliance problems will not be encountered from time to time or that significant disputes with one or more franchisees will not arise.

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Legal Proceedings

        In the ordinary course of conducting business activities, we and our subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedings involving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and other matters. We have entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court approval. If one or more of our settlements are not finally approved, we could have additional or different exposure, which could be material. In addition, in connection with the TruGreen Spin-off, we entered into a separation and distribution agreement with New TruGreen and TGLP pursuant to which we agreed to retain liability for specified legal proceedings relating to the TruGreen Business.

        At this time, we do not expect any of these proceedings to have a material effect on our reputation, business, financial position, results of operations or cash flows; however, we can give no assurance that the results of any such proceedings will not materially affect our reputation, business, financial position, results of operations and cash flows. See Note 9 to our audited consolidated financial statements included in this prospectus.

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MANAGEMENT

Directors and Executive Officers

        The following table sets forth information about our directors and executive officers as of March 21, 2014.

Name
  Age   Present Positions   First
Became
an Officer /
Director
 

John Krenicki, Jr

    51   Chairman     2013  

Robert J. Gillette

    54   Chief Executive Officer & Director     2013  

Alan J. M. Haughie

    50   Senior Vice President & Chief Financial Officer     2013  

Mark J. Barry

    52   President & Chief Operating Officer, American Home Shield     2012  

Thomas J. Coba

    57   President, ServiceMaster Clean, Merry Maids, Furniture Medic & AmeriSpec     2011  

William J. Derwin

    45   President, Terminix     2013  

Tim Haynes

    47   Senior Vice President & Chief Information Officer     2013  

Susan Hunsberger

    51   Senior Vice President, Human Resources        

James T. Lucke

    53   Senior Vice President, General Counsel & Secretary     2013  

Mary Kay Runyan

    46   Senior Vice President, Supply Management     2013  

Darren M. Friedman

    45   Director     2007  

Sarah Kim

    38   Director     2013  

Stephen J. Sedita

    62   Director     2013  

David H. Wasserman

    47   Director     2007  

        John Krenicki, Jr. has served as Chairman of the board of directors since January 2013. He joined CD&R as an operating partner in January 2013, after 29 years with General Electric Company, or "GE." Mr. Krenicki currently serves as Chairman of the board of directors of Wilsonart International Holdings LLC and as a director of Hess Corporation and lead director of Brand Energy & Infrastructure Services, Inc. Mr. Krenicki plans to resign from the Hess Corporation board of directors as of May 1, 2014. From 2005 until 2008, Mr. Krenicki served as the President and Chief Executive Officer of GE Energy and in 2008 he became a Vice Chairman of GE, serving in such capacity until his resignation from GE in 2012. His responsibilities at GE included (among other roles) oversight of GE's Oil & Gas, Power and Water, and Energy Management businesses. While with GE, Mr. Krenicki also served as a member of GE's Corporate Executive Council and the GE Capital board of directors. Mr. Krenicki's extensive management experience and his background as a director of other service businesses give him beneficial insight into our capital and liquidity needs, in addition to our challenges, opportunities and operations and qualify him to serve on our of directors.

        Robert J. Gillette has served as ServiceMaster's Chief Executive Officer and as one of our directors since June 2013. From October 2011 until May 2013, Mr. Gillette served as the president and owner of Gillette Properties, LLC, a company which acquired and developed residential real estate properties. From October 2009 until October 2011, he served as the chief executive officer of First Solar, Inc., a manufacturer of thin film photovoltaic solar modules and solar power plants. From January 2005 to September 2009, Mr. Gillette served as the president and chief executive officer of Honeywell International, Inc.'s aerospace division, a provider of aerospace electronic systems, integrated avionics, engines and services for the aerospace industry. Mr. Gillette's extensive business and management background and his prior experience as a public company executive qualify him to serve as a director on our board of directors.

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        Alan J. M. Haughie has served as ServiceMaster's Senior Vice President and Chief Financial Officer since September 2013. From July 2010 until September 2013, Mr. Haughie served as senior vice president and chief financial officer of Federal-Mogul Corporation, a global supplier of aftermarket products for automotive, light commercial, heavy-duty and off-highway vehicles, as well as power generation, aerospace, marine, rail and industrial equipment. From 2005 until June 2010, he served as vice president, controller and chief accounting officer of Federal-Mogul Corporation, having joined Federal-Mogul in 1994 while serving in various roles until 2005.

        Mark J. Barry has served as President and Chief Operating Officer of American Home Shield since August 2012. From April 2011 until February 2012, Mr. Barry served as president, Automation and Controls Solutions and from March 2010 until April 2011, served as president, Global Security Products, UTC Fire & Safety, both business units within United Technologies Corporation. From February 2008 until March 2010, Mr. Barry served as president of GE Security-Americas, a division of General Electric Company, before it was acquired by United Technologies Corporation in 2010.

        Thomas J. Coba has served as President of ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec since November 2011. From 2004 until November 2011, Mr. Coba was chief operations officer of Subway Restaurants, a global restaurant brand and the operating company of Franchise World Headquarters, LLC.

        William J. Derwin has served as President of Terminix since November 2013. From 2002 until October 2013, Mr. Derwin worked at Otis Elevator, serving most recently as its vice president global field operations. During his tenure at Otis Elevator he served in various other executive roles including group director UK and Ireland, vice president North and South America field operations, and vice president greater New York region. Otis Elevator is a division of United Technologies Corporation, a company which provides a broad range of high technology products and support services to the aerospace and building systems industries.

        Tim Haynes has served as Senior Vice President and Chief Information Officer since December 2013. Mr. Haynes joined ServiceMaster in January 2012 and has served as Vice President of Information Technology for the American Home Shield, ServiceMaster Clean and Merry Maids business units. From February 2006 until January 2012, Mr. Haynes served in a variety of Information Technology executive leadership roles for Nissan Motor Limited and Nissan Americas.

        Susan Hunsberger has served as Senior Vice President, Human Resources since January 2014. From February 2010 until December 2013 she served as senior vice president, human resources, for the global business solutions (GBS) group of Connecticut-based Nielsen Holdings N.V., a $5.4 billion global information and measurement company with leading market positions in marketing and consumer information, television and other media measurement, online intelligence and mobile measurement. While at Nielsen, she also led the human resources team for the GBS organization, which employs more than 35,000 employees worldwide. From November 1997 until February 2010, Ms. Hunsberger served in a variety of human resources leadership positions at GE Aviation, a division of General Electric Company.

        James T. Lucke has served as Senior Vice President, General Counsel and Secretary since September 2013. From May 2007 until May 2013, Mr. Lucke served as vice president, general counsel and secretary of Mohawk Industries, Inc., a leading producer of floor covering products for residential and commercial applications.

        Mary Kay Runyan has served as Senior Vice President, Supply Management since July 2013. Ms. Runyan joined ServiceMaster in April 2010 and served as Vice President, Fleet until July 2013. From March 2009 until April 2010, Ms. Runyan served as the executive in charge of North American fleet operations for Coca-Cola Enterprises, where she was responsible for policy, process and operational performance across the United States and Canada.

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        Darren M. Friedman has served as one of our directors since July 2007. Mr. Friedman is a Partner of StepStone Group LP, a global private markets firm that oversees approximately $60 billion of private capital allocations. Prior to joining StepStone in 2010, Mr. Friedman was a Managing Partner of Citi Private Equity, where he worked from 2001 to 2010, managing over $10 billion of capital across various private equity investing activities. Mr. Friedman sits or has sat on the boards or advisory boards of several portfolio companies, funds and a number of Investment Committees. Mr. Friedman currently serves on the boards of C&J Energy Services, Inc., Educate Inc., Laureate Education, Inc. and Padi Holding Company, LLC. Prior to joining Citi Private Equity, Mr. Friedman worked in the Investment Banking division at Salomon Smith Barney. Mr. Friedman's extensive business, financial and banking expertise to our board of directors from his background in investment banking and private equity fund management and extensive prior board service experience, qualify him to serve as a director on our board of directors.

        Sarah Kim has served as one of our directors since December 2013. Ms. Kim is a principal of CD&R. Prior to joining CD&R in 2008, Ms. Kim held positions at Metalmark Capital and McCown De Leeuw, both private equity firms. She also worked in the investment banking division of Goldman, Sachs & Co. Ms. Kim's extensive knowledge of the capital markets gives her beneficial insight into our capital and liquidity needs, in addition to our challenges, opportunities and operations and qualify her to serve on our board of directors.

        Stephen J. Sedita has served as one of our directors since December 2013. From 2008 until he retired in 2011, Mr. Sedita served as the Chief Financial Officer and Vice President of GE Home & Business Solutions, a business of General Electric Company; from 2007 until 2008, Mr. Sedita served as Chief Financial Officer and Vice President of GE Aviation. Mr. Sedita has served as a director of Controladora Mabe, S.A. de C.V., Camco Inc. and Momentive Performance Materials Holdings Inc. Mr. Sedita's extensive business and financial background and his prior board service experience, qualify him to serve as a director on our board of directors.

        David H. Wasserman has served as one of our directors since July 2007. Mr. Wasserman is a partner of CD&R. Prior to joining CD&R in 1998, Mr. Wasserman worked in the principal investment area at Goldman, Sachs & Co. and as a management consultant at Monitor Company. Mr. Wasserman currently serves on the board of directors of Univar Inc. and John Deere Landscapes LLC and formerly served on the boards of directors of Hertz Global Holdings, Inc., Covansys Corporation, Culligan Ltd., Kinko's, Inc. and ICO Global Communications (Holdings) Limited, currently known as Pendrell Corporation. Mr. Wasserman's extensive knowledge of the capital markets, experience as a management consultant and experience as a director of other consumer-oriented service businesses with nationwide locations that are similar to our business structure give him beneficial insight into our capital and liquidity needs, in addition to our challenges, opportunities and operations and qualify him to serve on our board of directors.

Board Composition and Director Independence

        Our board of directors is currently composed of six directors. Prior to the completion of this offering, we expect to appoint an additional director to our board of directors so that our board will be composed of seven directors. Our amended and restated certificate of incorporation will provide for a classified board of directors, with members of each class serving staggered three-year terms. We will have three directors in Class I (                ), two directors in Class II (                ) and two directors in Class III (                ). Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. See "Description of Capital Stock—Anti-Takeover Effects of our Certificate of Incorporation and By-Laws—Classified Board of Directors."

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        Under the amended stockholders agreement, the CD&R Funds and the StepStone Funds will have the right to designate nominees for our board of directors, whom we refer to as the CD&R Designees and the StepStone Designees, respectively, subject to the maintenance of specified ownership requirements. See "Certain Relationships and Related Party Transactions—Stockholders Agreement."

        Our board of directors is led by our non-executive Chairman, Mr. Krenicki, a CD&R Designee. The amended stockholders agreement will provide that a CD&R Designee will serve as our Chairman of the board of directors as long as the CD&R Affiliates own at least 25% of the outstanding shares of our common stock.

        The number of members on our board of directors may be fixed by resolution adopted from time to time by the board of directors. Subject to our amended stockholders agreement, any vacancies or newly created directorships may be filled only by the affirmative vote of a majority of directors then in office, even if less than a quorum, or by a sole remaining director. Each director shall hold office until his or her successor has been duly elected and qualified, or until his or her earlier death, resignation or removal.

        With respect to any vacancy of a CD&R Designee or StepStone Designee, the CD&R Funds and the StepStone Funds, respectively, will have the right to designate a new director for election by a majority of the remaining directors then in office.

        Our board of directors has determined Mr. Sedita is "independent" as defined under stock exchange and Exchange Act rules and regulations.

Controlled Company

        After the completion of this offering, we anticipate that the CD&R Funds and the StepStone Funds will control a majority of the voting power of our outstanding common stock. The CD&R Funds and the StepStone Funds will collectively own approximately        % of our common stock after the completion of this offering (or approximately        % if the underwriters exercise in full their option to purchase additional shares). Accordingly, we expect to qualify as a "controlled company" within the meaning of the       corporate governance standards. Under the      rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain      corporate governance standards, including:

    the requirement that a majority of the board of directors consist of independent directors;

    the requirement that our nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities;

    the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities; and

    the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

        Following this offering, we intend to utilize these exemptions. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the      corporate governance rules and requirements. The "controlled company" exception does not modify audit committee independence requirements of Rule 10A-3 under the Exchange Act and the      rules.

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Board Committees

        Our board of directors maintains an Audit Committee and a Compensation Committee. Upon the completion of this offering, our board of directors will also maintain a Nominating and Corporate Governance Committee. Under the      rules, we will be required to have one independent director on our Audit Committee during the 90-day period beginning on the date of effectiveness of the registration statement filed with the SEC in connection with this offering. After such 90-day period and until one year from the date of effectiveness of the registration statement, we are required to have a majority of independent directors on our Audit Committee. Thereafter, our Audit Committee is required to be composed entirely of independent directors. As a      controlled company, we are not required to have independent Compensation or Nominating and Corporate Governance Committees. The following is a brief description of our committees.

Audit Committee

        Our Audit Committee is responsible, among its other duties and responsibilities, for overseeing our accounting and financial reporting processes, the audits of our financial statements, the qualifications and independence of our independent registered public accounting firm, the effectiveness of our internal control over financial reporting and the performance of our internal audit function and independent registered public accounting firm. Our Audit Committee reviews and assesses the qualitative aspects of our financial reporting, our processes to manage business and financial risks, and our compliance with significant applicable legal, ethical and regulatory requirements. Our Audit Committee is directly responsible for the appointment, compensation, retention and oversight of our independent registered public accounting firm. The charter of our Audit Committee will be available without charge on the investor relations portion of our website upon completion of this offering.

        Prior to the completion of this offering, we expect the members of our Audit Committee to be             (Chairperson),       and      . Our board of directors has designated            as "audit committee financial experts," and each of the three members has been determined to be "financially literate" under the       rules. Our board of directors has also determined that      and      are "independent" as defined under stock exchange and Exchange Act rules and regulations.

Compensation Committee

        Our Compensation Committee is responsible, among its other duties and responsibilities, for reviewing and approving all forms of compensation to be provided to, and employment agreements with, the executive officers and directors of our company and its subsidiaries (including the Chief Executive Officer), establishing the general compensation policies of our company and its subsidiaries and reviewing, approving and overseeing the administration of the employee benefits plans of our company and its subsidiaries. Our Compensation Committee also periodically reviews management development and succession plans. The charter of our Compensation Committee will be available without charge on the investor relations portion of our website upon completion of this offering.

        Prior to the completion of this offering, we expect the members of our Compensation Committee to be        (Chairperson),         and        . In light of our status as a "controlled company" within the meaning of the corporate governance standards of the        following this offering, we are exempt from the requirement that our Compensation Committee be composed entirely of independent directors under listing standards applicable to membership on the Compensation Committee, with a written charter addressing the committee's purpose and responsibilities and the requirement that there be an annual performance evaluation of the Compensation Committee. We intend to establish a sub-committee of our Compensation Committee consisting of                         for purposes of approving any compensation that may otherwise be subject to Section 162(m) of the Code.

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Nominating and Corporate Governance Committee

        Our Nominating and Corporate Governance Committee will be responsible, among its other duties and responsibilities, for identifying and recommending candidates to the board of directors for election to our board of directors, reviewing the composition of the board of directors and its committees, developing and recommending to the board of directors corporate governance guidelines that are applicable to us, and overseeing board of directors evaluations. The charter of our Nominating and Corporate Governance Committee will be available without charge on the investor relations portion of our website upon completion of this offering.

        Upon completion of this offering, we expect the members of our Nominating and Corporate Governance Committee to be      (Chairperson),      and      . In light of our status as a "controlled company" within the meaning of the corporate governance standards of the      following this offering, we are exempt from the requirement that our Nominating Committee be composed entirely of independent directors, with a written charter addressing the committee's purpose and responsibilities and the requirement that there be an annual performance evaluation of the Nominating Committee.

Compensation Committee Interlocks and Insider Participation

        The members of the Compensation Committee currently are Messrs. Krenicki and Wasserman and Ms. Kim. All three members of the Compensation Committee are principals of CD&R. Mr. Krenicki assumed the role of Interim CEO from April 12, 2013 through June 16, 2013 following the resignation of our former CEO and prior to the hiring of Mr. Gillette. No other member of the Compensation Committee was at any time during 2013 an officer or employee of ServiceMaster or any of our subsidiaries nor is any such person a former officer of ServiceMaster or any one of our subsidiaries. See "Certain Relationships and Related Party Transactions" for a discussion of agreements between ServiceMaster, CD&R and the CD&R Funds.

Code of Conduct and Financial Code of Ethics

        We have a Financial Code of Ethics that applies to the CEO, CFO and Controller, or persons performing similar functions, and other designated officers and associates, including the primary financial officer of each of our business units and the Treasurer. We also have a Code of Conduct that applies to all of our directors, officers and associates. The Financial Code of Ethics and Code of Conduct each address matters such as conflicts of interest, confidentiality, fair dealing and compliance with laws and regulations. The Financial Code of Ethics and the Code of Conduct will be available without charge on the investor relations portion of our website upon completion of this offering.

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

        This section describes the material elements of our 2013 executive compensation program and the principles underlying our executive compensation policies and decisions. In addition, in this section we provide information regarding the compensation paid to each individual who served in the capacity as principal executive officer (CEO) or principal financial officer (CFO) during 2013 and the three most highly compensated executive officers (other than the CEO and CFO) who were serving as such as of the end of our most recent fiscal year, collectively referred to as our Named Executive Officers, or "NEOs."

Highlights

    Our leadership continued to undergo significant change during 2013, with the resignations of Harry J. Mullany III (former CEO), Charles M. Fallon (former President, Terminix), Greerson G. McMullen (former Senior Vice President and General Counsel), Jed L. Norden (former Senior Vice President, Human Resources) and Linda A. Goodspeed (former Senior Vice President and Chief Information Officer) and the hiring of Robert Gillette (CEO), Alan Haughie (Senior Vice President and CFO), James Lucke (Senior Vice President and General Counsel) and William Derwin (President, Terminix). Additionally, Mr. Krenicki, our Chairman, assumed the role of Interim CEO following the resignation of Mr. Mullany and prior to the hiring of Mr. Gillette. During the majority of 2013 (January 1 through September 15), Mr. Martin served as the Interim CFO, relinquishing that position upon the hiring of Mr. Haughie. We announced in November that we intended to spin-off the TruGreen Business. This transaction was closed on January 14, 2014. New TruGreen is operating as a private independent company.

    Base salaries of the NEOs who were with us prior to November 2012 were increased by percentages ranging from 4 to 23 percent in 2013 to recognize individual performance and to better align base salary levels with competitive pay levels for similar positions in the marketplace. Mr. Krenicki did not receive any compensation for his service as Interim CEO. Mr. Mullany received no increase during 2013 prior to his resignation. Mr. Alexander did not receive a salary increase during 2013 as he was hired in the fourth quarter of 2012. Messrs. Haughie and Derwin were hired during 2013 and received no increase subsequent to their hire. Mr. Martin received a 23 percent increase in his salary in preparation for his assignment to the role of chief financial officer of TruGreen upon its spin-off. The salaries for NEOs hired after November 1, 2012 and during 2013 were set at competitive levels needed to attract these executives to ServiceMaster.

    Our financial performance did not meet expectations for 2013, primarily due to the performance of TruGreen. However, as we prepared for the spin-off of the TruGreen Business, the board of directors of SvM, or the "SvM Board," separated the financial performance of TruGreen from the remainder of ServiceMaster and based the corporate consolidated performance goal under the Annual Bonus Plan, or "ABP," on the performance of ServiceMaster, less TruGreen. The SvM Board established separate financial goals for TruGreen focusing on the turnaround of that business.

    As part of our strategy to align interests between our NEO's and stockholders, and in recognition of their hire into the senior management team, Messrs. Gillette, Haughie, Alexander, and Derwin purchased shares of our common stock and simultaneously were granted options under the MSIP to acquire additional shares in the future. Mr. Krenicki purchased shares of our common stock, but did not receive any stock options. Messrs. Gillette, Haughie,

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      Alexander, Derwin, and Barry were also awarded RSUs to provide additional value and alignment with our stockholders.

    The Board approved a grant of Performance-Based RSUs, or "P-RSUs," in February 2013 to enhance our ability to retain key talent. These P-RSUs were awarded to Messrs. Mullany, Martin and Barry. Mr. Mullany's P-RSUs were cancelled upon his resignation. These P-RSUs would be earned based on our attainment of a specified profit goal. This goal was adjusted in May 2013 to reflect the planned spin-off of the TruGreen Business, with the awards for those NEOs in the TruGreen Business at that time based on a TruGreen profit goal and the awards for NEOs in the remainder of ServiceMaster based on a ServiceMaster, less TruGreen, profit goal. Neither the ServiceMaster nor TruGreen profit goals were achieved for 2013 and the P-RSUs did not vest and were forfeited.

    Mr. Martin received a retention award comprised of RSUs and cash to enhance our ability to retain Mr. Martin as we were in the process of separating the TruGreen Business and Mr. Martin was offered the position of chief financial officer of New TruGreen.

Objectives of Our Compensation Program

        Our compensation plans for executive officers (including the NEOs) are designed to:

    Attract, motivate and retain highly qualified executives;

    Reward successful performance by the executives and us by linking a significant portion of compensation to financial and business results;

    Align our executives' long-term interests with those of our stockholders through meaningful share ownership; and

    Appropriately balance long- and short-term incentive compensation so that short-term performance is not emphasized at the expense of long-term value creation.

Elements of Executive Compensation, including for NEOs

        To meet these objectives, our executive compensation program consists of the following:

    Base salary, which is intended to attract and retain highly qualified executives and to recognize individual performance by the executive;

    Annual cash incentive, which is intended to motivate each executive to achieve short-term company (and, where applicable, business unit) performance goals and special bonus awards from time to time;

    Stock, RSUs (including P-RSUs) and stock options to motivate executives to achieve long-term performance goals and to provide equity ownership of our common stock to our executives to ensure goal alignment with our stockholders; and

    Employee benefits, including retirement benefits, perquisites, new hire bonus, relocation benefits and commuting benefits, which are intended to attract and retain qualified executives by ensuring that our benefit programs are competitive.

        Each of these elements, discussed in more detail below, plays an integral role in our balancing of executive rewards over short and long-term periods and our ability to attract and retain key executives. We believe the design of our executive compensation program creates alignment between performance achieved and compensation awarded, and motivates achievement of both annual goals and sustainable long-term performance.

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Determination of Executive Compensation

Pay Decision Process

        Prior to the initial public offering, the compensation committee of the Board, or the "Compensation Committee," and the SvM Board, acting jointly, established the compensation of our CEO. Historically, in determining the CEO's compensation, the Compensation Committee and the SvM Board considered the following factors: (1) our operating and financial performance, (2) the competitive market data provided by Semler Brossy Consulting Group, our external compensation consultant at the time of the competitive review, as presented to the Compensation Committee and the SvM Board by our Senior Vice President, Human Resources, (3) the assessment by the Compensation Committee and the SvM Board of the CEO's individual performance, and (4) prevailing economic conditions. The CEO historically recommended to the Compensation Committee and the SvM Board compensation for the other executive officers based on his assessment of each executive officer's area of responsibility, individual and business unit performance, overall contribution, the competitive market data provided by Semler Brossy and prevailing economic conditions. Prior to the initial public offering, the Compensation Committee and the SvM Board then approved the compensation arrangements for each executive officer. Following the initial public offering, it is expected that many of the functions described in this Compensation Discussion and Analysis will be performed by our Compensation Committee as provided in its charter.

        We believe that our executive compensation program must be attractive to compete in the market for executive talent and must support our growth strategy. As a result of this focus, we rely on competitive pay practices and individual and business performance in determining the compensation of our executives. In making these determinations, we also consider historical individual compensation levels, historical company payout levels for annual cash incentives and our current privately held ownership structure. The executive compensation program and underlying philosophy are reviewed at least annually to determine what, if any, modifications should be considered.

        As part of our review of competitive pay practices, SvM engaged Semler Brossy Consulting Group in 2013 to conduct a total market review to determine whether executive officer total compensation opportunities were competitive. The Compensation Committee and the SvM Board reaffirmed the group of 21 peer companies, or the "Peer Group," that are generally 0.3 to 3.0 times our revenue size, based on 2012 revenue figures. These peer companies are generally from the service and retail industries where they have a distributed business model. The Compensation Committee and the SvM Board also considered the growth rates of the companies when selecting this group of companies. SvM has continually reviewed the Peer Group and may from time to time adjust the companies comprising the group to better reflect competitors in our industry, companies with similar business models and

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companies that compete in our labor markets for talent. For 2013, the Peer Group consisted of the following companies:

Peer Group

ABM Industries Incorporated   O'Reilly Automotive, Inc.
AutoZone, Inc.   Republic Services, Inc.
Chemed Corporation   Rollins, Inc.
Chico's FAS Inc.   Service Corporation International
Chipotle Mexican Grill, Inc.   Spectrum Brands Holdings, Inc.
Cintas Corporation   Starbucks Corporation
Darden Restaurants, Inc.   The Scotts Miracle Gro Company
DSW Inc.   The Wendy's Company
Ecolab Inc.   Urban Outfitters, Inc.
Harris Teeter Supermarkets, Inc.   Waste Connections, Inc.
L Brands, Inc.    

        In determining 2013 executive compensation, the Compensation Committee and the SvM Board relied on the Peer Group data for positions reported in the peer companies' respective proxy statements provided by Semler Brossy. A general survey of competitive market data for positions which were not reported in Peer Group proxy statements was provided by Aon Hewitt and was adjusted to mirror general market merit increases, as identified in market salary increase surveys sponsored by compensation consulting organizations. The survey data reflects companies in general industries with revenue sizes between $1 and $5 billion. The Compensation Committee and the SvM Board then evaluated base pay and annual bonuses for our executives as discussed below. Differences in total compensation generally reflect the relevant experience, expertise, tenure and performance of the individual executive officer within his or her role.

Base Salary

        Base salaries for executive officers are reviewed annually during our merit review process at the beginning of each year. To determine base salaries for executive officers, we first review market data and target base salaries at the market median of the Peer Group or Aon Hewitt survey data for each respective position. The base salary for each NEO is then determined by adjusting the amount based on the assessment of Compensation Committee and the SvM Board of the NEO's experience relative to industry peers, time in his or her position, individual performance, future potential and leadership qualities. In 2013, when a detailed review was performed prior to salary increases, the base salary of Mr. Mullany was at the median of the Peer Group, and the base salary for Mr. Martin as our Controller was within competitive ranges of the median of the Aon Hewitt surveys. The base salary for Mr. Barry was within competitive ranges for the median of peer company business unit leaders. Base salaries were increased for each NEO who was an employee in April 2013 (other than Mr. Alexander) based on the assessment of the Compensation Committee and the SvM Board of the individual's contribution to our sustained success. Base salaries for Messrs. Gillette, Haughie, Alexander and Derwin were set at their respective hire dates of June 17, 2013, September 16, 2013, December 11, 2012 and November 11, 2013 as part of their hiring. The salary increases for the NEOs who were with us for the majority of 2012 ranged from 4.0 percent to 23.0 percent. In determining Mr. Martin's salary increase in 2013, which was larger than the normal merit increase, the Compensation Committee and the SvM Board considered that he was preparing to take on the position as the chief financial officer of New TruGreen, which was separated from ServiceMaster on January 14, 2014. Base salaries for the NEOs hired after November 1, 2012 (Messrs. Gillette, Haughie, Alexander and Derwin) were set at levels that were deemed to be competitive with market segment salaries to recognize the skills and

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experience of each officer. The following table sets forth information regarding the 2013 base salaries for our NEOs.

2013 Salary Table

Named Executive Officer
  Base Salary as of
January 1, 2013
  Base Salary as of
December 31, 2013
  Aggregate
Increase %

Robert J. Gillette(1)

    N/A   $ 1,100,000   N/A

John Krenicki(2)

    N/A     N/A   N/A

Harry J. Mullany

  $ 1,100,000     N/A   N/A

Alan J. M. Haughie(1)

    N/A   $ 550,000   N/A

David W. Martin(3)

  $ 312,000   $ 385,000   23%

R. David Alexander(4)

  $ 550,000   $ 550,000   0%

Mark J. Barry

  $ 425,000   $ 440,000   4%

William J. Derwin(1)

    N/A   $ 475,000   N/A

(1)
Messrs. Gillette, Haughie and Derwin were hired during 2013. The base salaries shown above were provided for in their offers of employment.

(2)
Mr. Krenicki received no compensation for his service as Interim CEO.

(3)
The amount in the table reflects Mr. Martin's base salary in his capacity as our Senior Vice President, Controller and Chief Accounting Officer. During his tenure as Interim CFO, Mr. Martin also received $10,000 per month in incremental base salary prorated for any partial month of service. During 2013, this incremental base salary totaled $95,000. His salary as of December 31, 2013 reflects the rate approved for his role as the chief financial officer for New TruGreen, which was separated from ServiceMaster on January 14, 2014.

(4)
Mr. Alexander was hired after November 1, 2012 and was not eligible for a salary increase as part of the 2013 annual review of base salaries.

Annual Bonus Plan

        The ABP, our annual cash incentive program, is designed to reward the achievement of specific pre-set financial results measured over one or more fiscal years or a portion of a fiscal year. For 2013, the ABP was measured over the 2013 calendar year results. Each participant is assigned an annual incentive target expressed as a percentage of base salary. For the NEOs (other than Mr. Krenicki), these targets ranged from 50 percent of base salary to 100 percent of base salary. For 2013, Mr. Martin was assigned an annual target bonus of 50 percent of his base salary during the period he served as our Senior Vice President, Controller and Chief Accounting Officer, and he was assigned a target bonus of 65 percent of base salary during the period he served as Interim CFO. As further compensation for his services as Interim CFO, Mr. Martin was also guaranteed a minimum incremental bonus under the ABP of $50,000 above his calculated bonus if he had served as Senior Vice President, Controller and Chief Accounting Officer for the entire year. Mr. Martin served as the Interim CFO until the hire of Mr. Haughie in September 2013. Consequently, his annual bonus for the period January 1, 2013 through September 15, 2013 was calculated at a target of 65 percent of his base salary. We subsequently approved a 65 percent target bonus for Mr. Martin for the remainder of 2013 as he accepted the role as chief financial officer of New TruGreen. We calculate the actual awards based on year end salary, except in the case of Mr. Martin, whose 2013 ABP award was calculated at 65 percent of his base salary as Senior Vice President, Controller and Chief Accounting Officer and at 65 percent of his base salary as Interim CFO, prorated for the time served in each capacity.

        To encourage our executive officers to focus on short term company (and, where applicable, business unit) goals and financial performance, incentives under the ABP are based on our

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performance with respect to the following measures at both a corporate consolidated and, where applicable, a business unit level:

    Adjusted Operating Performance, or "AOP," which is calculated by making the following adjustments to Adjusted EBITDA: (1) deducting interest and investment income; (2) adding back compensation expense resulting from a change in market value of investments within an employee deferred compensation trust (for which there is a corresponding and offsetting charge in interest and investment income); (3) adding back key executive transition charges; (4) adding back charges associated with the TruGreen Spin-off; (5) deducting depreciation and amortization; and (6) adding back TruGreen AOP;

    Revenue; and

    Cash Flow, which is calculated by making the following adjustments to AOP: (1) adding back depreciation and amortization; (2) subtracting capital expenditures; and (3) adjusting for the change in net working capital.

        These performance measures were selected as the most appropriate measures upon which to determine annual bonuses because they are the primary metrics that management and the Equity Sponsors use to measure our performance for purposes unrelated to compensation. Additionally, these measures were selected to incentivize profitable growth and cash flow generation to meet debt obligations and fund investments for future growth. All of the opportunity for payment under the ABP to our NEOs is based on these performance measures.

        The Compensation Committee and the SvM Board amended the performance goals for 2013 under the ABP in May 2013 in consideration of the strategic decision to spin off the TruGreen Business. Consequently, the targets for the performance measures were adjusted, providing for separate thresholds and targets for ServiceMaster, less TruGreen, and for TruGreen on a standalone basis. The goals for ServiceMaster, less TruGreen, were the same targets as determined at the beginning of the year, but eliminated any effect that TruGreen's performance would have on the rest of ServiceMaster. TruGreen's goals were revised to provide an opportunity to earn some payout if the modified TruGreen AOP goals were achieved. Payments under the ABP were also subject to the achievement of a minimum level of performance on the AOP financial measure, or the "AOP Threshold." In order to earn any payment under the ABP, the AOP Threshold had to be achieved at the corporate consolidated or, where applicable, business unit levels. The corporate consolidated AOP Threshold and business unit AOP Thresholds applicable to the NEOs (other than Messrs. Krenicki and Mullany) are set forth in the table below.

Participating NEO
  Performance Measure   AOP
Threshold
($ in 000s)
  AOP
Actual
($ in 000s)
 

Robert J. Gillette

  ServiceMaster AOP   $ 370,726   $ 396,425  

Alan J. M. Haughie

  ServiceMaster AOP   $ 370,726   $ 396,425  

David W. Martin

  ServiceMaster AOP   $ 370,726   $ 396,425  

R. David Alexander

  ServiceMaster AOP   $ 370,726   $ 396,425  

  TruGreen AOP   $ 30,000   $ (22,474 )

Mark J. Barry

  ServiceMaster AOP   $ 370,726   $ 396,425  

  American Home Shield AOP   $ 137,917   $ 159,413  

        Performance targets are established by the Compensation Committee and the SvM Board toward the beginning of each year and are based on expected performance in accordance with ServiceMaster's and, where applicable, the business unit's approved business plan for the year. In the event we and, where applicable, the business unit achieve the performance targets, payout under the ABP would be 100 percent of a specified percentage of the executive's base salary. In the event we and, where

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applicable, the business unit do not achieve the performance targets, a lesser bonus may be earned if we and, where applicable, the business unit meet or exceed the threshold amounts for the performance targets, which are generally equal to the previous year's results achieved for the applicable performance measure. In the event we exceed the performance targets, the amount of the bonus will increase accordingly. There is no maximum payout under the ABP on the theory that we pay for performance and our executives should receive additional compensation when we exceed our performance goals. The components and weightings of the performance measures are reviewed and determined annually by the Compensation Committee and the SvM Board to reflect company strategy. As mentioned above, these actions historically have been taken by the Compensation Committee and the SvM Board acting jointly, but we expect that many of these functions will be performed by our Compensation Committee following the initial public offering.

        The tables below provide information regarding the 2013 ABP for our participating NEOs, including the performance goals, the weight assigned to each performance goal, and the payout as a percentage of the target bonus if the threshold or target performance goal is met. The performance goals and relative weightings reflect the Compensation Committee and the SvM Board's objective of ensuring that a substantial amount of each NEO's total compensation is tied to our and, where applicable, business unit performance.

2013 ABP Weighting, Threshold and Target Performance Goals

Participating
NEO(1)(2)
  Organizational
Weighting
  Performance Weighting   Threshold
($ in 000s)
  Target
($ in 000s)(3)
  % of Target
Performance
for
Threshold
Payout
  % Payout
With
Threshold
Performance
 

Robert J. Gillette

      50% ServiceMaster AOP   $ 370,726   $ 399,720     92.7 %   56.5 %

Harry J Mullany

  100% ServiceMaster   30% ServiceMaster Revenue   $ 2,221,286   $ 2,369,210     93.8 %   62.5 %

Alan J. M. Haughie

      20% ServiceMaster Cash Flow   $ 357,038   $ 391,254     91.3 %   47.5 %

David W. Martin

                                 

Mark J. Barry

  20% ServiceMaster   20% ServiceMaster AOP   $ 370,726   $ 399,720     92.7 %   56.5 %

  80% American Home   35% American Home Shield AOP   $ 137,917   $ 139,950     98.5 %   91.3 %

  Shield   35% American Home Shield Revenue   $ 720,860   $ 765,105     94.2 %   65.3 %

      10% American Home Shield Cash Flow   $ 126,580   $ 126,580     100.0 %   100.0 %

R. David Alexander

  20% ServiceMaster   20% ServiceMaster AOP   $ 370,726   $ 399,720     92.7 %   56.5 %

  80% TruGreen   80%TruGreen AOP   $ 30,000   $ 70,000     42.9 %   50.0 %

William J. Derwin

  20% ServiceMaster   20% ServiceMaster AOP   $ 370,726   $ 399,720     92.7 %   56.5 %

  80% Terminix   35% Terminix AOP   $ 282,706   $ 298,514     94.7 %   68.2 %

      35% Terminix Revenue   $ 1,265,417   $ 1,325,738     95.5 %   72.7 %

      10% Terminix Cash Flow   $ 303,779   $ 312,006     97.4 %   84.2 %

(1)
Mr. Krenicki did not receive any compensation for his service as Interim CEO during 2013.

(2)
Mr. Mullany resigned in April 2013 and was not eligible for a payout under the ABP for 2013.

(3)
The Compensation Committee and the SvM Board adjusted the ABP targets in May 2013 to reflect the decision to separate TruGreen from the rest of ServiceMaster. Our financial goals are consistent with the goals established at the beginning of the year, except that TruGreen's financial performance was excluded from the consolidated ServiceMaster financials. The Compensation Committee and the SvM Board set a new threshold and target for TruGreen based solely upon TruGreen's AOP, with a 50% payout at threshold achievement.

        The "% of Target Performance for Threshold Payout" is equal to threshold performance (which is generally equal to the prior year's actual performance) divided by the current year's target goal. The payout levels for performance above threshold are based on a 6:1 ratio—for every one percent of achievement above threshold performance levels, the plan pays out six additional percentage points of the targeted payout. We believe the 6:1 ratio to be an effective motivator to improve over the prior year's results. The 2013 ABP target payout opportunity for each participating NEO (see table below) was based on our review of Peer Group and survey data and the importance of the NEO's position relative to our overall financial success. The following table sets forth information regarding the 2013 performance under the ABP, including the percentage of performance target attained and the percentage of target bonus earned. The table does not list values for Mr. Krenicki, who received no compensation for his service as Interim CEO, or Mr. Mullany, who was not eligible for a payment under the ABP due to his resignation.

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2013 ABP Performance

Participating NEO
  Target %
of
Salary
  % of
ServiceMaster
Target AOP
Attained
  % of
ServiceMaster
Target
Revenue
Attained
  % of
ServiceMaster
Target Cash
Flow Attained
  Business Unit   % of
Business
Unit
Target
AOP
Attained
  % of
Business
Unit
Target
Revenue
Attained
  % of
Business
Unit
Target
Cash
Flow
Attained
  % of
Target
Bonus
Earned
 

Robert J. Gillette

    100.0 %   99.2 %   97.0 %   108.4 %   Corporate     N/A     N/A     N/A     102.1 %

John Krenicki

          N/A                 Corporate                          

Harry J. Mullany

                            Corporate                          

Alan J. M. Haughie

    70.0 %   99.2 %   97.0 %   108.4 %   Corporate     N/A     N/A     N/A     102.1 %

David W. Martin

    65.0 %   99.2 %   97.0 %   108.4 %   Corporate     N/A     N/A     N/A     102.1 %

Mark J. Barry

    65.0 %   99.2 %   N/A     N/A     American Home Shield     113.9 %   96.7 %   108.2 %   126.3 %

R. David Alexander

    65.0 %   99.2 %   N/A     N/A     TruGreen     N/M (1)   N/A     N/A     19.0 %

William J. Derwin

    65.0 %   N/A     N/A     N/A     Terminix     N/A     N/A     N/A     N/A  

(1)
TruGreen reported a loss in AOP, resulting in the percent attainment not being measureable.

2013 ABP Payments

Participating NEO
  % of Salary
Paid at Target
Performance
  Base
Salary
  Actual % of
Target
Awarded
  Total
Bonus
Earned
 

Robert J. Gillette(1)

    100.0 % $ 1,100,000     102.1 % $ 609,335  

John Krenicki(2)

    N/A     N/A     N/A     N/A  

Harry J. Mullany(3)

    100.0 % $ 1,100,000     N/A   $ 0  

Alan J. M. Haughie(4)

    70.0 % $ 550,000     102.1 % $ 350,000  

David M. Martin(5)

    65.0 % $ 385,000     102.1 % $ 292,184  

Mark J. Barry

    65.0 % $ 440,000     126.3 % $ 361,112  

David R. Alexander(6)

    65.0 % $ 550,000     19.0 % $ 178,750  

William J. Derwin(7)

    65.0 % $ 475,000     N/A     N/A  

(1)
Mr. Gillette's annual bonus was prorated from his hire date on June 17, 2013.

(2)
Mr. Krenicki did not receive any compensation for his service as Interim CEO.

(3)
Mr. Mullany resigned on April 12, 2013 and was not eligible for a payout under the ABP.

(4)
Mr. Haughie was hired on September 16, 2013 and, as a part of his employment offer, received a guaranteed ABP payment of $350,000 for 2013.

(5)
Mr. Martin served in the role of Interim CFO from January 1, 2013 through September 15, 2013. In connection with such appointment, he received, in addition to his base salary, an additional $10,000 per month of base salary. Mr. Martin also received an increase in his bonus target under the 2013 ABP to 65 percent from 50 percent of his base salary during his tenure in this interim role. Subsequent to the hiring of Mr. Haughie as CFO, Mr. Martin was offered and accepted the role of chief financial officer of the TruGreen Business in anticipation of its spin-off from ServiceMaster. His target bonus was increased to 65 percent of base salary, which resulted in his annual bonus being calculated for the full year based on a target bonus of 65 percent of base salary.

(6)
Mr. Alexander was hired on December 11, 2012 and, as a part of his employment offer, received a guaranteed ABP payment of a minimum of 50 percent of his target payout for 2013.

(7)
Mr. Derwin was not eligible to participate in the 2013 ABP as he was hired on November 11, 2013.

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Sign-On Bonuses

        We have historically included sign-on bonuses for newly hired executives as a part of the new hire compensation offers. The sign-on bonus is used to provide a compensation offer that differentiates our offer of employment (for executives who frequently have other available opportunities) and may be needed to compensate the executives for the lost value of existing compensation arrangements at the executives' prior employers. In 2013, we paid sign-on bonuses to Messrs. Gillette, Haughie, Alexander and Derwin in the following amounts:

Name
  Sign-On Bonus  

Robert J. Gillette

  $ 1,000,000  

Alan J. M. Haughie

    250,000  

R. David Alexander

    471,698  

William J. Derwin

    250,000  

        All sign-on bonuses for the respective NEOs, other than Mr. Gillette, are subject to repayment provisions if the officer voluntarily terminates employment with us or is terminated by us for cause prior to the second anniversary of his hire date. If Mr. Gillette voluntarily terminates his employment without good reason after his six month service anniversary but prior to his first service anniversary, he is required to repay one half of the signing bonus within five business days following the date of termination.

Long-Term Equity Incentive Plan

        Our long-term equity incentive plan is designed to retain key executives and to align the interests of our executives with the achievement of sustainable long-term growth and performance. For 2013, our NEOs were participants under the MSIP.

MSIP

        The MSIP provides certain key associates (including all of our NEOs) with the opportunity (1) to invest in shares of our common stock via actual share purchases and (2) to receive RSUs and options to purchase shares of our common stock. Executives employed with us in 2007 had the opportunity to purchase shares with cash or by means of deferred share units, or "DSUs," which were sold to key associates through the notional purchases of DSUs using associates' deferred compensation balances. No further DSUs have been sold or issued since 2007. Mr. Martin is the only currently serving NEO who had the opportunity to allocate a portion of his eligible deferred compensation to purchase DSUs. Each DSU represents a right to receive a share of our common stock in the future and was fully vested when acquired.

        For each share of common stock or DSU purchased by an NEO, we granted such NEO up to four matching options to purchase shares of our common stock, or "Matching Options," except in the cases of Messrs. Gillette and Mullany, where we granted five and one half Matching Options and five Matching Options, respectively, for each share purchased. Mr. Mullany received no equity awards during 2013. Pursuant to the terms of his equity award agreements, all unvested equity awards to Mr. Mullany were canceled on his termination date. Since 2010, we have also awarded RSUs to both newly hired executives and longer tenured NEOs. Each RSU represents a right to receive a share of common stock in the future, if and when the RSU vests. Vesting of RSUs is subject to the executive's continued employment. Unlike equity awards at publicly traded companies, these investment opportunities are not available to the general public and present an employment reward opportunity, as well as subjecting the executive officer to liquidity risks and transfer restrictions. Generally, our policy has been to provide this opportunity to invest and receive equity grants at one time only, either shortly after the closing of the 2007 Merger or upon hire or promotion, if later. We do not typically

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supplement the NEOs' stock awards with subsequent annual equity awards. We may decide, from time to time, to grant additional equity awards to certain key associates, including our NEOs, in order to recognize outstanding performance, enhance retention or otherwise as the Compensation Committee may determine is in our best interest. The MSIP investment opportunities provided to any executive officer or the executive officers as a group are entirely at the discretion of the Compensation Committee.

        On February 25, 2013, the Compensation Committee approved a form of an employee performance restricted stock unit agreement to be used when awards of P-RSUs are made under the MSIP and the Compensation Committee granted 401,506 P-RSU awards to certain of our officers and associates, including grants to the following NEOs in the following amounts: Mr. Mullany, 42,307 P-RSUs; Mr. Martin, 13,461 P-RSUs; and Mr. Barry, 19,230 P-RSUs. If our internal financial performance target for fiscal 2013, or the "Performance Target," had been met or exceeded, the P-RSUs would have vested in three equal installments on the first three anniversaries of the grant date. If the Performance Target had been exceeded, the number of P-RSUs granted to each associate, including the NEOs, would have been increased in accordance with the adjustment table adopted by the Compensation Committee. Any increased number of P-RSUs would have vested in accordance with the same schedule described above. The Performance Target was adjusted in May 2013 to reflect separate targets for ServiceMaster, less TruGreen, and for TruGreen. The separation of the Performance Targets was done in consideration of the then contemplated spin-off of the TruGreen Business and the negative impact that TruGreen was exerting on our financial results. The Performance Targets for ServiceMaster and TruGreen were not met and all P-RSUs that had been awarded have been forfeited.

        We believe that the opportunity to purchase shares and to receive options to purchase shares of our common stock and grants of RSUs encourages our executive officers to focus on our long-term performance, thereby aligning their interests with the interests of our stockholders. The purchase of shares under the MSIP allows executive officers to have a stake in our performance by putting their own financial resources at risk. Additionally, through stock option and RSU grants, the executive officers are encouraged to focus on sustained increases in stockholder value. Specifically, we believe the granting of stock options and RSUs, both time vested and performance based, assists us to:

    Enhance the link between the creation of stockholder value and long term executive incentive compensation;

    Maintain competitive levels of total compensation; and

    Enable us to retain key leaders by providing value for key executives.

        Consistent with our historical practices, equity awards were granted in 2013 as follows:

        Mr. Krenicki made an investment of $1,000,000 for which he acquired 95,238 shares of our common stock.

        Pursuant to the terms of his employment agreement, Mr. Gillette made an initial investment of $1,500,000 in our common stock and was granted Matching Options at a rate of five and one half options per share purchased and 300,000 RSUs. Based on Mr. Gillette's investment, he acquired 150,000 shares of our common stock and was granted 825,000 Matching Options and 300,000 RSUs.

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        Pursuant to the terms of their offers of employment, Messrs. Haughie, Alexander and Derwin each made an investment to acquire shares of our common stock, received Matching Options and RSUs as noted below:

Name
  Investment
$
  # of Shares
Acquired
  # Matching
Options
  # RSUs  

Robert J. Gillette

    1,500,000     150,000     825,000     300,000  

John Krenicki

    1,000,000     95,238     N/A     N/A  

Alan J. M. Haughie

    500,000     48,000     192,000     75,000  

R. David Alexander

    500,000     50,000     200,000     50,000  

William J. Derwin

    1,100,000     104,761     419,044     50,000  

        Mr. Barry did not make an investment in our common stock in 2013.

        The disclosure regarding stock options in this Compensation Discussion and Analysis, including in the table above and in the "Outstanding Equity Awards at Fiscal Year End" table refers to the number of options held by each NEO, and the exercise price of each such option, as of December 31, 2013 (or as of the grant date if specified). In connection with the TruGreen Spin-off, the number of options held by each employee with respect to each grant date was adjusted by dividing the number of options held by such employee with respect to each grant date as of immediately prior to the TruGreen Spin-off by the Option Conversion Ratio. The exercise price of each option was adjusted by multiplying the exercise price of each option as of immediately prior to the TruGreen Spin-off by the Option Conversion Ratio. Where the fair market value of an award is disclosed, the fair market value is the fair market as of the date of grant or as of December 31, 2013, as applicable, and does not reflect any adjustment that resulted from the TruGreen Spin-off.

        In addition to the stock options listed in the table above, the Board awarded 20,000 standalone stock options to Mr. Martin as part of his offer letter for the position of chief financial officer of New TruGreen. These options have terms similar to other stock option awards. Mr. Martin also received a retention award valued at $500,000 that was comprised of 22,727 RSUs and two cash payments of a total of $250,000. The award was granted in May 2013 and was intended to ensure continuity in the office of the chief financial officer as Mr. Martin was serving in an interim capacity. The RSUs vest in two installments, with 50 percent having vested in January 2014 and the remaining 50 percent vesting in January 2015. The cash portion of the award vests in two installments of $125,000 each on the same dates. The award is subject to an indefinite confidentiality covenant and a one-year non-competition covenant. Mr. Martin will not be eligible for the second installment of the cash portion of the award in the event of a termination of employment prior to January 15, 2015, except in circumstances specified in the retention agreement.

        Shares previously purchased by Mr. Mullany were repurchased by us in 2013 subsequent to his departure from ServiceMaster, consistent with the MSIP and the stock subscription agreement entered into at the time of purchase.

        Please see the Grants of Plan Based Awards Table (2013) for information regarding the vesting terms of the equity awards.

        We intend to adopt the Omnibus Incentive Plan in connection with this offering. Upon adoption of the Omnibus Incentive Plan, we will make no further grants under the MSIP.

Retirement Benefits

        Associates, including the NEOs (other than Mr. Krenicki), are generally eligible to participate in the ServiceMaster Profit Sharing and Retirement Plan, as amended and restated, as it may be further amended from time to time, or the "PSRP." The PSRP is a tax qualified 401(k) defined contribution plan under which we may make discretionary matching contributions. Historically, we have provided for

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a matching contribution in the PSRP where associates receive a dollar for dollar match on the first 1 percent of their contributions, and then a $0.50 per dollar match on the next 2 percent to 6 percent contributed.

        We also maintain the ServiceMaster Deferred Compensation Plan, as amended and restated, as it may be further amended from time to time, or the "DCP," which is a non-qualified deferred compensation plan designed to afford certain highly compensated associates (including the NEOs (other than Mr. Krenicki), executive officers and certain other associates) the opportunity to defer additional amounts of compensation on a pre-tax basis. All deferred amounts under the DCP are subject to earnings or losses based on the investments selected by the individual participants. We believe that provision of the DCP is an important recruitment and retention tool. Many, if not all, of the companies with which we compete for executive talent provide a similar plan to their senior employees and the cost to us of providing this benefit is minimal. Under the DCP, participants may be provided with discretionary matching contributions, but since 2007 we have not elected to do so. No earnings in the DCP are credited at above market levels.

Employee Benefits and Executive Perquisites

        We offer a variety of health and welfare programs to all eligible associates, including the NEOs (other than Mr. Krenicki). The NEOs (other than Mr. Krenicki) are eligible for the same health and welfare benefit programs on the same basis as the rest of our associates, including medical and dental care coverage, life insurance coverage and short and long-term disability.

        We limit the use of perquisites as a method of compensation and provide executive officers with only those perquisites that we believe are reasonable and consistent with our compensation goal of enabling us to attract and retain superior executives for key positions. The perquisites provided to our NEOs are memberships in social and professional clubs and, for Messrs. Gillette and Mullany, commuting expenses. Expenses associated with relocation of newly hired executives (including income tax gross ups on taxable relocation expense reimbursements) are paid to certain executives pursuant to our relocation policy and are based on standard market practices for executive level relocations.

        Mr. Gillette is also provided with personal use of our aircraft and certain spousal travel as described in his employment agreement. The personal use of the company aircraft benefit in Mr. Gillette's employment agreement provides that we will bear the full cost of up to 100 flight hours of the executive's personal use of our aircraft per calendar year (50 hours for 2013), including the cost of landing fees, but excluding any taxes imputed to the executive.

        Mr. Mullany was also provided with personal use of our aircraft during his tenure as CEO under an aircraft policy that was then applicable to him. The policy provides that the CEO shall reimburse us for personal use of the company aircraft exceeding 100 hours annually (50 hours for 2013). Any amount so reimbursed to us would be applied to reduce the executive's taxable income arising from the personal use. If our CEO utilizes our aircraft for commuting purposes, the amount applied toward his annual commuting benefit is generally calculated under the income imputation rules established by the IRS for personal use of company aircraft. These rules require the cost of each flight to be estimated by applying published IRS per mile rates based on the size of the aircraft to the total miles flown. This method of calculation was affirmed by the Compensation Committee and the SvM Board.

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        In addition to the personal usage allowed under the aircraft policy, Mr. Mullany was also eligible to receive up to $50,000 in 2013 for reimbursement of commuting expenses. Mr. Mullany could utilize commercial flights, private charter service or our aircraft for his commuting travel. To the extent Mr. Mullany utilized commercial flights or a private charter, the actual amount paid by us on his behalf is applied toward his maximum commuting benefit of $50,000 per annum. Mr. Mullany did not exceed his flight hours or $50,000 maximum commuting benefits in 2013.

Employment Arrangements

        ServiceMaster or an affiliate generally provides an executive with an offer letter prior to the time an executive joins ServiceMaster. The offer letter generally describes the basic terms of the executive's employment, including his or her start date, starting salary, ABP bonus target, special bonuses (if any), relocation benefits, severance benefits (if any), sign-on bonus (if any) and equity awards granted in connection with the commencement of his or her employment. The terms of the executive's employment are thereafter based on sustained good performance rather than contractual terms, and our policies will apply as warranted. During 2013, ServiceMaster and Messrs. Haughie and Derwin executed offer letters memorializing the terms of their respective offers of employment.

        Under certain circumstances, we recognize that special arrangements with respect to an executive's employment may be necessary or desirable. In 2013, we entered into an employment agreement with Mr. Gillette setting forth the terms of his employment as our CEO and we entered into severance agreements and/or offer letters with Messrs. Haughie, Martin, Alexander and Derwin setting forth certain severance benefits to be received by Messrs. Haughie, Martin, Alexander and Derwin upon a qualifying termination of employment. Please see the narrative following the Grants of Plan Based Awards table and the Potential Payments Upon Termination or Change in Control section for a description of the agreements with Messrs. Gillette, Haughie, Martin, Alexander and Derwin.

Post Termination Compensation

        Mr. Barry is covered under our standard severance policy or practice as in effect at the time employment is terminated. The standard severance policy and the terms of the post termination arrangements between us and the other NEOs are described in detail below under the Potential Payments Upon Termination or Change in Control section.

2014 Investment and Awards

        Under the terms of Mr. Gillette's employment agreement, at his discretion, Mr. Gillette had the opportunity, prior to December 31, 2014, to purchase up to an aggregate of $1.5 million of additional common stock at its then-current fair market value. On March 18, 2014, Mr. Gillette purchased $1.5 million of additional common stock and in connection therewith received 1,031,250 nonqualified options pursuant to the terms of the employment agreement. The options will vest at a rate of one-fourth per year on each of the first four anniversaries of March 18, 2014, subject to Mr. Gillette's continued employment with us.

        Also on March 18, 2014, Mr. Barry purchased $200,000 of our common stock and received 100,000 nonqualified options. Of the options received by Mr. Barry, 50 percent will become vested upon the value of the common shares underlying the options achieving a price of $16 per share and the remaining 50 percent of the options will become vested upon the value of the common shares underlying the options achieving a price of $24 per share, subject to Mr. Barry's continued employment with us.

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Changes to the Compensation Program in Connection with the Initial Public Offering

Omnibus Incentive Plan

        Background.    As described above (see "—Compensation Discussion and Analysis—Long-Term Incentive Plan"), since 2007 we have provided our officers and associates with long-term equity incentives under the MSIP. Prior to the completion of the offering, we intend to adopt the Omnibus Incentive Plan pursuant to which we will make grants of long-term incentive compensation to our officers and associates after the adoption of the Omnibus Incentive Plan. When we adopt the Omnibus Incentive Plan, the MSIP will terminate and we will make no more awards thereunder. However, awards previously granted under the MSIP will be unaffected by the termination of the MSIP. The following are the material terms of the Omnibus Incentive Plan.

        Administration.    Our Board has the authority to interpret the terms and conditions of the Omnibus Incentive Plan, to determine eligibility for and terms of awards for participants and to make all other determinations necessary or advisable for the administration of the Omnibus Incentive Plan. The Board will delegate its authority to the Compensation Committee, or the "Administrator." To the extent consistent with applicable law, the Administrator may further delegate the ability to grant awards to our CEO or other of our officers. In addition, subcommittees may be established to the extent necessary to comply with Section 162(m) of the Code or Rule 16b-3 under the Securities Exchange Act of 1934.

        Eligible Award Recipients.    Our directors, officers, associates and consultants are eligible to receive awards under the Omnibus Incentive Plan.

        Awards.    Awards under the Omnibus Incentive Plan may be made in the form of stock options, which may be either incentive stock options or non-qualified stock options; stock purchase rights; restricted stock; restricted stock units; performance shares; performance units; stock appreciation rights, or "SARs"; dividend equivalents; deferred share units; and other stock-based awards.

        Shares Subject to the Plan.    Subject to adjustment as described below, a total of                         shares of our common stock will be available for issuance under the Omnibus Incentive Plan. This figure represents approximately    percent of our outstanding common stock on a fully diluted basis as of                        , 2014. In addition, shares subject to awards granted under the MSIP that terminate, are forfeited, or otherwise lapse without issuance of shares will be available for issuance under the Omnibus Incentive Plan. As of                        , 2014, there were                         shares subject to outstanding awards under the MSIP. Shares issued under the Omnibus Incentive Plan may be authorized but unissued shares or shares reacquired by us. During any period that Section 162(m) of the Code is applicable to us, (1) the maximum number of stock options, SARs or other awards based solely on the increase in the value of common stock that a participant may receive in any year is 2,000,000; (2) a participant may receive a maximum of 1,000,000 performance shares, shares of performance-based restricted stock and restricted stock units in any year; and (3) the maximum dollar amount of cash that may be earned in connection with the grant of performance units during any year may not exceed $5,000,000.

        Any shares covered by an award, or portion of an award, granted under the Omnibus Incentive Plan or under the MSIP that terminates, is forfeited, is repurchased, expires or lapses for any reason will again be available for the grant of awards under the Omnibus Incentive Plan. Additionally, any shares tendered or withheld to satisfy the grant or exercise price or tax withholding obligations pursuant to any award under the Omnibus Incentive Plan or under the MSIP will again be available for issuance. The Omnibus Incentive Plan permits us to issue replacement awards to employees of companies acquired by us, but those replacement awards would not count against the share maximum listed above, and any forfeited replacement awards would not be eligible to be available for future grant.

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        Terms and Conditions of Options and Stock Appreciation Rights.    An "incentive stock option" is an option that meets the requirements of Section 422 of the Code, and a "non-qualified stock option" is an option that does not meet those requirements. A SAR is the right of a participant to a payment, in cash, shares of common stock, or a combination of cash and shares equal to the amount by which the market value of a share of common stock exceeds the exercise price of the SAR. An option or SAR granted under the Omnibus Incentive Plan will be exercisable only to the extent that it is vested on the date of exercise. No non-qualified option or SAR may be exercisable more than ten years from the grant date. The Administrator may include in the option agreement the period during which an option may be exercised following termination of employment or service. SARs may be granted to participants in tandem with options or on their own. Tandem SARs will generally have substantially similar terms and conditions as the options with which they are granted.

        The exercise price per share under each non-qualified option granted under the Omnibus Incentive Plan may not be less than 100 percent of the fair market value of our common stock on the option grant date. For so long as our common stock is listed on the New York Stock Exchange or the NASDAQ Stock Market, the fair market value of the common stock will be equal to the average of the high sale price and the low sale price of our common stock on the exchange on which it is listed on the option grant date. If no sales of common stock were reported on the option grant date, the fair market value will be deemed equal to the average between the high sale price and the low sale price on the exchange on which it is listed for the last preceding date on which sales of our common stock were reported. If our common stock is not listed on any stock exchange or traded in the over-the-counter market, fair market value will be as determined in good faith by our Board in a manner consistent with Section 409A of the Code. The Omnibus Incentive Plan prohibits repricing of options and SARs without shareholder approval.

        Terms and Conditions of Restricted Stock and Restricted Stock Units.    Restricted stock is an award of common stock on which certain restrictions are imposed over specified periods that subject the shares to a substantial risk of forfeiture, as defined in Section 83 of the Code. A restricted stock unit is a unit, equivalent in value to a share of common stock, credited by means of a bookkeeping entry in our books to a participant's account, which is settled in stock or cash upon vesting. Subject to the provisions of the Omnibus Incentive Plan, our Administrator will determine the terms and conditions of each award of restricted stock or restricted stock units, including the restricted period for all or a portion of the award, and the restrictions applicable to the award. Restricted stock and restricted stock units granted under the Omnibus Incentive Plan will vest based on a period of service specified by our Administrator or the occurrence of events specified by our Administrator.

        Terms and Conditions of Performance Shares and Performance Units.    A performance share is a right to receive a specified number of shares of common stock after the date of grant subject to the achievement of predetermined performance conditions. A performance unit is a unit, equivalent in value to a share of common stock, that represents the right to receive a share of common stock or the equivalent cash value of a share of common stock if predetermined performance conditions are achieved. Vested performance units may be settled in cash, stock or a combination of cash and stock, at the discretion of the Administrator. Performance shares and performance units will vest based on the achievement of pre-determined performance goals established by the Administrator. Performance goals may be based on:                        . At any time when Section 162(m) of the Code is not applicable to us and the Omnibus Incentive Plan and for persons whose compensation is not subject to Section 162(m) of the Code performance goals may be based on such other criteria as may be determined by the Administrator.

        Terms and Conditions of Deferred Share Units.    A deferred share unit is a unit credited to a participant's account in our books that represents the right to receive a share of common stock or the equivalent cash value of a share of common stock upon a predetermined settlement date. Deferred

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share units may be granted by the Administrator independent of other awards or compensation. Unless the Administrator determines otherwise, deferred share units would be fully vested when granted.

        Other Stock-Based Awards.    The Administrator may make other equity-based or equity-related awards not otherwise described by the terms of the Omnibus Incentive Plan, including formula grants to our non-associate directors under our director compensation program.

        Dividend Equivalents.    A dividend equivalent is the right to receive payments in cash or in stock, based on dividends with respect to shares of stock. Dividend equivalents may be granted to participants in tandem with another award or as freestanding awards.

        Termination of Employment.    Except as otherwise determined by the Administrator, in the event a participant's employment terminates for any reason other than "cause" (as defined in the Omnibus Incentive Plan), all unvested awards will be forfeited and all options and SARs that are vested and exercisable will remain exercisable until the first anniversary of the participant's termination of employment, in the case of death, disability or retirement at normal retirement age, or until the three month anniversary of the date of termination in the case of any other termination (or the expiration of the award's term, whichever is earlier). In the event of a participant's termination for cause, all unvested or unpaid awards, and all options and SARs, whether vested or unvested, will immediately be forfeited and canceled. In addition, any award that vested or was paid or otherwise settled during the 12 months prior to or any time after the participant engaged in the conduct that gave rise to the termination for cause is subject to forfeiture and disgorgement to us together with all gains earned or accrued due to the exercise of awards or sale of any of our common stock issued pursuant to the award upon demand by the Administrator.

        Change in Capitalization or Other Corporate Event.    The number or amount of shares of stock, other property or cash covered by outstanding awards, the number and type of shares of stock that have been authorized for issuance under the Omnibus Incentive Plan, the exercise or purchase price of each outstanding award, and the other terms and conditions of outstanding awards, will be subject to adjustment by the Administrator in the event of any stock dividend, extraordinary dividend, stock split or share combination or any recapitalization, merger, consolidation, exchange of shares, spin-off, liquidation or dissolution of ServiceMaster or other similar transaction affecting our common stock. Any such adjustment would not be considered repricing for purposes of the prohibition on repricing described above.

        Effect of a Change in Control.    Upon a future change in control of us, all outstanding awards would fully vest and be cancelled for the same per share payment made to the shareholders in the change in control (less, in the case of options and SARs, the applicable exercise or base price). The Administrator has the ability to prescribe different treatment of awards in the award agreements. In addition, unless prohibited by applicable law (including if such action would trigger adverse tax treatment under Section 409A of the Code), no vesting or cancellation of awards will occur if awards are assumed and/or replaced in the change in control with substitute awards having the same or better terms and conditions, provided that any substitute awards must fully vest on a participant's involuntary termination of employment without "cause" or constructive termination of employment, in each case occurring within two years following the date of the change in control.

Annual Bonus Plan

        As described above (see "—Compensation Discussion and Analysis—Annual Bonus Plan"), prior to the initial public offering, we maintained the ABP pursuant to which we have provided our executive officers and other associates with the opportunity to earn performance-based annual cash bonuses. The ABP was approved by the public shareholders of The ServiceMaster Company in 2003 and has been used by us as the basis of our annual bonus program for our executive officers from 2003 through the present. In connection with the initial public offering, our Board intends to amend and restate the plan.

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The terms and conditions of the plan as amended and restated will be substantially similar to the terms and conditions of the prior plan. The material terms of the amended and restated ABP that will be adopted in connection with the initial public offering are described below.

        Purpose.    The ABP is designed to retain and motivate our officers and other associates and our subsidiaries who are designated by the Compensation Committee by providing them with an opportunity to earn cash incentives based on our attainment of certain specified performance goals. The ABP is designed to meet the requirements of the performance-based compensation exemption for purposes of Section 162(m) of the Code, to the extent applicable.

        Administration.    The ABP is administered by our Compensation Committee, which may delegate authority under the ABP to our Chief Executive Officer or any other of our executive officers, except that the Compensation Committee may not delegate its responsibilities with respect to awards to any associate whose compensation is subject to Section 162(m) of the Code.

        Eligible Employees.    All of our officers and associates are eligible to participate in the ABP.

        Performance Goals.    The Compensation Committee will select those of our associates who will participate in the ABP for a specified performance period and will establish the applicable performance goals for such performance period no later than 90 days after the beginning of the performance period, or if earlier, the date on which 25 percent of the performance period has been completed. It is expected that the performance period will be our fiscal year, unless our Compensation Committee determines to use another period. At any time when Section 162(m) of the Code applies to us, the performance goals shall include the following objective performance measures:                        . Each such goal may be expressed on an absolute or relative basis and may include comparisons based on current internal targets, our past performance (including the performance of one or more subsidiaries, divisions, or operating units) or the past or current performance of other companies (or a combination of such past and current performance). In the case of earnings-based measures, performance goals may include comparisons relating to capital (including, but limited to, the cost of capital), shareholders' equity, shares outstanding, assets or net assets, or any combination thereof. In the case of associates whose compensation is not subject to Section 162(m) of the Code, the Compensation Committee may establish performance goals consisting of any objective corporate-wide or subsidiary, division, operating unit or individual measures. Performance goals may also be subject to such other conditions as the Compensation Committee may determine appropriate.

        Maximum Award; Discretion.    The maximum amount payable to any participant under the ABP during any given performance period is $5,000,000. In all cases, our Compensation Committee has the sole and absolute discretion to reduce the amount of any payment under the ABP that would otherwise be made to any participant or to decide that no payment shall be made.

        Payment.    Payment of awards will be made in cash as soon as practicable after our Compensation Committee certifies that one or more of the applicable performance goals have been attained for a performance period. Awards earned in one year are paid no later than March 15th of the following year. In order to receive payment of an award, an associate typically must be employed by us on the date of payment.

        Forfeiture.    We may cancel, reduce or require an associate to forfeit any awards granted under the ABP or require an associate to reimburse and disgorge to us any amounts received pursuant to awards granted under the ABP, to the extent permitted or required by applicable law or regulations in effect on or after the effective date of the ABP.

Effect of Tax Treatment on Compensation Decisions

        ServiceMaster intends to avail itself of the transition rules of Section 162(m) of the Code and U.S. Treasury regulations thereunder applicable to entities that become publicly traded during a taxable

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year. Under these transition rules, our compensation plans will first be subject to the limitations on deductibility of compensation in excess of $1,000,000 that is paid to certain of our executives on the earliest to occur of (1) the date that the plan expires or is materially modified, (2) the issuance of all stock and other compensation that has been allocated under the plan, or (3) the first meeting of the shareholders at which directors are to be elected that occurs after the close of the third calendar year following the calendar year of this initial public offering. As part of its role, our Compensation Committee will review and consider the deductibility of executive compensation under Section 162(m) of the Code. We believe that compensation paid under the Omnibus Incentive Plan and the ABP will be eligible for this transition relief and therefore fully deductible for federal income tax purposes during the transition period. However, in certain situations, where determined to be in our best interests, our Compensation Committee reserves the right to pay compensation that is not fully deductible.

Summary Compensation Table

Name and Principal Position
  Year   Salary ($)   Bonus ($)   Stock
Awards
($)(1)
  Option
Awards
($)(2)
  Non-Equity
Incentive Plan
Compensation
($)
  All Other
Compensation
($)(3)
  Total ($)  

Robert J. Gillette

    2013     592,308 (6)   1,596,712 (4)   3,000,000     4,087,875     12,623     108,945     9,398,463  

Chief Executive Officer

                                                 

John Krenicki

   
2013
   
N/A
   
N/A
   
N/A
   
N/A
   
N/A
   
N/A
   
N/A
 

Former Interim Chief Executive Officer

                                                 

Harry J. Mullany

   
2013
   
316,667

(5)
 
0
   
0
   
0
   
0
   
1,814,289
   
2,130,956
 

Former Chief Executive Officer

    2012     1,075,000           100,002     539,455           289,760     2,004,217  

    2011     856,482     2,422,662     950,004     3,614,120     427,338     161,140     8,431,746  

Alan J. M. Haughie

   
2013
   
140,417

(6)
 
600,000

(7)
 
750,000
   
998,899
   
0
   
112,919
   
2,602,235
 

Chief Financial Officer

                                                 

David W. Martin

   
2013
   
430,497

(8)
 
50,000

(9)
 
424,990
   
103,476
   
242,184
   
9,260
   
1,260,407
 

Former SVP, Interim

    2012     320,000     109,157     0     0     0     8,973     438,130  

Chief Financial Officer &

    2011     367,800     50,000     0     72,400     162,216     257     652,673  

Chief Accounting Officer

                                                 

Mark J. Barry

   
2013
   
436,250
         
416,660
   
197,560
   
361,112
   
9,260
   
1,420,842
 

President & COO—

    2012     156,424     338,148     750,000     950,657     72,327     22,358     2,289,914  

American Home Shield

                                                 

R. David Alexander

   
2013
   
550,000
   
650,448

(10)
 
650,000
   
991,000
   
0
   
204,867
   
3,046,315
 

President—TruGreen

                                                 

William J. Derwin

   
2013
   
68,371

(6)
 
250,000

(11)
 
525,000
   
2,180,118
   
0
   
0
   
3,023,489
 

President—Terminix

                                                 

(1)
The amounts in this column reflect the aggregate grant date fair value of RSUs and P-RSUs awarded. The assumptions used in the valuation of RSU and P-RSU awards are disclosed in Note 17 to our audited consolidated financial statements included in this prospectus.

(2)
The amounts in this column reflect the aggregate grant date fair value of stock options awarded. The assumptions used in the valuation of option awards are disclosed in Note 17 to our audited consolidated financial statements included in this prospectus.

(3)
Amounts in this column for 2013 are detailed in the All Other Compensation (2013) table below.

(4)
The amount in the Bonus column for Mr. Gillette represents his sign-on bonus of $1 million and the guaranteed minimum annual bonus for 2013 to be paid pursuant to his employment agreement ($596,712). The actual annual bonus earned for 2013 was $609,335, with the additional $12,623 listed in the Non-Equity Incentive Plan Compensation column.

(5)
The salary presented for Mr. Mullany is the actual salary paid through his departure date of April 12, 2013.

(6)
This salary figure reflects the actual partial year salary paid during 2013 from Messrs. Gillette's, Haughie's and Derwin's respective hiring dates of June 17, 2013, September 16, 2013 and November 11, 2013 through the end of the year.

(7)
This amount represents a sign-on bonus of $250,000 paid at the commencement of Mr. Haughie's service with us and his guaranteed 2013 annual bonus of $350,000.

(8)
Mr. Martin's salary includes an additional $95,000 allowance as additional salary for his service as the Interim CFO during 2013.

(9)
This amount represents the guaranteed annual bonus amount for Mr. Martin's service as the Interim CFO. His total annual bonus is $292,184, with the additional amount listed in the Non-Equity Incentive Plan Compensation column.

(10)
Includes Mr. Alexander's sign-on bonus ($471,698) and his guaranteed annual bonus ($178,750).

(11)
The amount represents the sign-on bonus paid to Mr. Derwin upon his hire.

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All Other Compensation (2013)

Named
Executive Officer
  Perquisites and
Other Personal
Benefits ($)
  Company Paid
Life Insurance
Premiums ($)
  Company
Contributions to
PSRP
($)(1)
  Separation
Payment ($)
  Tax
Payment(s)
($)(2)
  Total ($)  

Robert J Gillette

    73,639 (3)(4)   84     6,417     0     28,805     108,945  

John Krenicki

    0     0     0     0     0     0  

Harry J. Mullany

    57,944 (4)(5)   112     8,925     1,747,308 (6)   0     1,814,289  

Alan J. M. Haughie

    100,819 (7)   0     458     0     11,642     112,919  

David W. Martin

    0     335     8,925     0     0     9,260  

Mark J. Barry

    0     335     8,925     0     0     9,260  

R. David Alexander

    186,892 (8)   251     8,925     0     8,799     204,867  

William J. Derwin

    0     0     0     0     0     0  

(1)
The PSRP is our tax qualified retirement savings plan.

(2)
Tax payments related to relocation expenses were paid to Messrs. Gillette, Haughie and Alexander. These tax payments for relocation expenses are payments under our policy and are available to all employees in general that receive relocation benefits.

(3)
Mr. Gillette's perquisites include personal use of the corporate aircraft ($64,589), company-provided membership fees ($1,550) for one business and social dining club, and company-provided auto allowance ($7,500).

(4)
The incremental cost of the use of our aircraft included in the table above is calculated based on the variable operating costs to us, including fuel costs, mileage, trip related maintenance, universal weather monitoring costs, on board catering, lamp/ramp fees and other miscellaneous variable costs based on occupied seat hours. Fixed costs, which do not change based on usage, such as pilot salaries, depreciation and the cost of maintenance not related to trips are excluded. The compensation for personal use of our aircraft calculated based on the variable operating costs incurred is typically greater than the amount calculated under the income imputation rules established by the IRS for personal use of company aircraft. The aggregate cost of other perquisites and personal benefits is measured on the basis of the actual cost to us.

(5)
Mr. Mullany's perquisites include personal use of the corporate aircraft ($39,826), reimbursement of personal air transportation costs ($8,781), personal ground transportation costs ($2,787), company-provided membership fees ($1,550) for one business and social dining club, and company-provided auto allowance ($5,000).

(6)
This amount represents total severance payments made to Mr. Mullany in 2013 pursuant to the terms of his separation agreement.

(7)
The amount listed reflects company-paid relocation expenses.

(8)
Mr. Alexander's perquisites include personal use of the corporate aircraft ($2,795), company-paid relocation expenses ($178,164), and reimbursement of expenses related to the continuation of his benefits through COBRA ($5,933).

Grants of Plan Based Awards (2013)

        The amounts listed in the table below in the column entitled Estimated Future Payouts Under Non-Equity Incentive Plan Awards represent the potential 2013 earnings under the ABP, which is a non-equity incentive plan. The threshold amount is the minimum earned amount if threshold performance is attained for all performance measures. There is no maximum under the plan in effect in 2013. Mr. Krenicki received no compensation from ServiceMaster related to his service as Interim CEO. Mr. Mullany was not eligible for a payout under the 2013 ABP as he resigned prior to the ABP payout on March 15, 2014. Mr. Derwin was not eligible for a payout under the 2013 ABP as he commenced his employment on November 11, 2013, beyond the eligible date for an ABP payout.

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Additional information is discussed under the heading, Annual Bonus Plan, in the Compensation Discussion and Analysis section above.

 
   
   
   
   
   
   
   
   
  All
Other
Stock
Awards:
Number
of
Shares
of
Stock
(#)(2)
   
   
   
 
 
   
   
   
   
   
   
   
   
  All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)(3)
  Exercise
or
Base
Price
of
Option
Awards
($/Sh)(4)
  Grant
Date
Fair
Value
of Stock
and
Option
Awards(5)
 
 
   
   
  Estimated Future Payouts
Under Non-Equity Incentive
Plan Awards
  Estimated Future Payouts
Under Equity Incentive
Plan Awards
 
Named
Executive
Officer
  Grant
Date
  Approval
Date
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
(#)
  Target
(#)(1)
  Maximum
(#)
 

Robert J. Gillette

  N/A   N/A     621,500     1,100,000   None                                          

  9/13/2013   9/13/2013                                     300,000     825,000   $ 10.00     7,087,875  

John Krenicki

  N/A   N/A     N/A     N/A   N/A     N/A     N/A   N/A     N/A     N/A     N/A     N/A  

Harry J. Mullany

  N/A   N/A     621,500     1,100,000   None                                          

  2/25/2013   2/25/2013                     42,307     42,307                           0  

Alan J. M. Haughie

  N/A   N/A     217,525     385,000   None                                          

  9/16/2013   9/16/2013                                     75,000                 750,000  

  12/11/2013   11/7/2013                                           192,000   $ 10.50     998,899  

David W. Martin

  N/A   N/A     161,765     167,500   None                                          

  2/25/2013   2/25/2013                     13,461     13,461                           174,993  

  5/21/2013   5/21/2013           250,000   250,000                     22,727                 249,997  

  11/14/2013   11/7/2013                                           20,000   $ 10.50     103,476  

Mark J. Barry

  N/A   N/A     217,649     286,000   None                                          

  2/25/2013   2/25/2013                     19,230     19,230                           249,990  

  8/28/2013   8/13/2013                                     16,667     40,000   $ 10.00     364,230  

R. David Alexander

  N/A   N/A     183,382     357,500   None                                          

  2/25/2013   2/25/2013                                     50,000                 650,000  

  9/13/2013   9/13/2013                                           200,000   $ 10.00     991,000  

William J. Derwin

  N/A   N/A     213,146     308,750   None                                          

  11/11/2013   11/11/2013                                     50,000                 525,000  

  12/11/2013   12/11/2013                                           419,044   $ 10.50     2,180,118  

(1)
Represents Performance Based Restricted Stock Unit awards, where the P-RSUs are earned based on the achievement of specified profit goals for 2013 for ServiceMaster, less TruGreen, and TruGreen. The P-RSUs vest in equal installments on the first through third anniversaries of the award. The profit goals for ServiceMaster and TruGreen were not achieved and there will be no payout of the P-RSUs. Mr. Mullany's P-RSUs were forfeited upon his resignation.

(2)
Represents RSU awards granted as a component of the new hire offers to Messrs. Gillette, Haughie, Alexander and Derwin and as additional retention awards to Messrs. Martin and Barry to enhance our ability to retain these executives. These units generally will vest at a rate of one third per year on each of the first three anniversaries of their grant dates, except that the units granted to Mr. Martin as a retention award vest 50% in January 2014 and 50% in January 2015.

(3)
Represents the number of stock options granted in conjunction with the purchase of shares by Messrs. Gillette, Haughie, Alexander and Derwin and to provide additional retention value to Messrs. Martin and Barry. Options listed in this column become exercisable on the basis of passage of time and continued employment over a four year period, with one fourth becoming exercisable on each anniversary following the date of grant.

(4)
The exercise price was based on the fair market value of the options on the date of grant, as established by the Compensation Committee.

(5)
Represents the aggregate grant date fair value of RSU and stock option awards detailed in the prior columns. The assumptions used in the valuation of both RSU and stock option awards are disclosed in Note 17 to our audited consolidated financial statements included in this prospectus.

Employment Arrangements

Employment Agreement with Mr. Gillette

        On June 17, 2013, SvM announced that Robert J. Gillette had been elected to serve as our CEO pursuant to an employment agreement with us. Mr. Gillette's employment agreement is for a term of three years subject to automatic one year renewals thereafter, absent termination notice by either party. Under his employment agreement, Mr. Gillette received an initial annual base salary of $1.1 million, and a target annual incentive bonus opportunity of 100 percent of his base salary. Additionally, for the 2013 performance year, Mr. Gillette was guaranteed a minimum annual bonus of not less than his target bonus prorated for the portion of the year after he began his employment. This minimum bonus payable to Mr. Gillette for 2013 performance is $596,712. Mr. Gillette also received a sign-on bonus of $1 million.

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        Mr. Gillette's employment agreement also entitles him to an automobile allowance of $15,000 per year and personal use of the company aircraft for up to 100 flight hours (50 for 2013). Mr. Gillette's employment agreement also provides for severance benefits as described below under Potential Payments Upon Termination or Change in Control. A failure by ServiceMaster to renew the agreement will constitute a termination of Mr. Gillette's employment without cause for purposes of his severance benefits.

        As noted in the Compensation Discussion and Analysis, in connection with his commencement of employment, Mr. Gillette purchased $1.5 million of our common stock at a price of $10 per share. In connection with his initial investment, Mr. Gillette has been awarded RSUs and nonqualified stock options under the MSIP. He has received 300,000 RSUs, 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 purchased, he received five and one half Matching Options with an exercise price equal to the fair market value of a share of common stock at the time of the option grant. Mr. Gillette's Matching Options vest at a rate of one fourth per year on each of the first four anniversaries of the grant date. Based on Mr. Gillette's equity investment, he acquired 150,000 shares of our common stock and was granted 825,000 Matching Options.

        Should Mr. Gillette's employment terminate for cause, all vested and unvested options will be canceled, along with all unvested RSUs. In the case of Mr. Gillette'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. Gillette's unvested Matching Options will fully vest. 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. Gillette or his estate will retain the right to exercise any vested options for up to 12 months following termination for death, disability, or retirement, and for three months following termination for all other reasons (except for termination for cause). Under the award agreements, if Mr. Gillette's employment is terminated by us without cause or Mr. Gillette resigns with good reason, in either case, when we are party to an agreement that, if consummated, would result in a change in control or such termination was otherwise connected to such an agreement, and in each case such change in control is consummated, Mr. Gillette will receive a cash payment equal to the value of his forfeited awards.

Compensation Arrangements for Messrs. Haughie, Alexander and Derwin

        At the time Mr. Haughie was hired, we provided him with an offer letter that set forth his initial base salary and initial annual target bonus opportunity under our ABP, with the actual payouts under the ABP subject to the satisfaction of performance targets established by the Compensation Committee and the SvM Board each year. Base salary, target annual bonus and all other compensation are subject to approval each year by the Compensation Committee and the SvM Board. Mr. Haughie's offer letter provided for the payment of his annual bonus for 2013 in the amount of $350,000 within 30 days of his hire date. In addition, the offer letter provided that he would be offered a grant of stock options in connection with his purchase of our common stock. Mr. Haughie received such grant of options in 2013 as disclosed in the Summary Compensation Table. Mr. Haughie also received 75,000 RSUs as a part of his offer of employment. Additionally, a cash sign-on bonus of $250,000 was paid to Mr. Haughie.

        At the time Mr. Alexander was hired, we provided him with an offer letter that set forth his initial base salary and initial annual target bonus opportunity under our ABP, with the actual payouts under the ABP subject to the satisfaction of performance targets established by the Compensation Committee and the SvM Board each year. Base salary, target annual bonus and all other compensation are subject to approval each year by the Compensation Committee and the SvM Board. Mr. Alexander's offer letter provided for a minimum annual bonus for 2013 in the amount not less than 50 percent of his annual target bonus. In addition, the offer letter provided that he would be offered a grant of stock options in connection with his purchase of our common stock. Mr. Alexander received such grant of

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options in 2013 as disclosed in the Summary Compensation Table. Mr. Alexander also received 50,000 RSUs as a part of his offer of employment. Additionally, a cash sign-on bonus of $471,698 was paid to Mr. Alexander.

        At the time Mr. Derwin was hired, we provided him with an offer letter that set forth his initial base salary and initial annual target bonus opportunity under our ABP, with the actual payouts under the ABP subject to the satisfaction of performance targets established by the Compensation Committee and the SvM Board each year. Base salary, target annual bonus and all other compensation are subject to approval each year by the Compensation Committee and the SvM Board. Mr. Derwin's offer letter provided that he would be offered a grant of stock options to be made in connection with his purchase of our common stock. Mr. Derwin received such grant of options in 2013 as disclosed in the Summary Compensation Table. Mr. Derwin also received 50,000 RSUs as a part of his offer of employment. Additionally, a cash sign-on bonus of $250,000 was paid to Mr. Derwin.

MSIP Awards

        As noted in the Compensation Discussion and Analysis, during 2013, Messrs. Gillette, Haughie, Alexander and Derwin received Matching Options in connection with their respective purchases of shares of our common stock. Mr. Barry received RSUs and stock options and Mr. Martin received RSUs to enhance our ability to retain their services. Additionally, Mr. Martin received a standalone grant of options in connection with his offer letter for the position of chief financial officer at TruGreen. All stock options and RSUs currently held by the NEOs are shown in the Outstanding Equity Awards at Fiscal Year End (2013) table below.

        The MSIP and an employee stock option agreement govern each option award and provide, among other things, that the options vest in equal annual installments over a period of four years from the date of grant, subject to continued employment through each applicable vesting date. Prior to the exercise of an option, the holder has no rights as a stockholder with respect to the shares subject to such option, including voting rights and the right to receive dividends or dividend equivalents. The MSIP and an RSU award agreement govern each RSU award and provide, among other things, that the RSUs vest in equal annual installments over a period of three years from the date of grant, subject to continued employment through each applicable vesting date. Holders of RSUs have no rights as stockholders, including voting rights. Holders of RSUs are, however, entitled to dividend equivalents if a dividend is declared on our common stock. For more information on the MSIP, see "—Compensation Discussion and Analysis—Long-Term Incentive Plan" above. See "—Potential Payments Upon Termination or Change in Control" below for information regarding the cancellation or acceleration of vesting of stock options and RSUs upon certain terminations of employment or a change in control.

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Outstanding Equity Awards at Fiscal Year End (2013)

 
   
  Option Awards   Stock Awards  
Named Executive Officer
  Grant Date   Number of
Securities
Underlying
Unexercised
Options
(#)
Exercisable(1)
  Number of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable(1)
  Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
  Option
Exercise
Price
($)
  Option
Expiration
Date
  Number of
Units of
Stock
That
Have Not
Vested
(#)(3)
  Market
Value
of Units of
Stock That
Have Not
Vested
($)(4)
 

Robert J. Gillette

    9/13/2013     0     825,000         $ 10.00     9/13/2023     300,000     3,150,000  

John Krenicki

    N/A     N/A     N/A           N/A     N/A     N/A     N/A  

Harry J. Mullany(2)

                                                 

Alan J. M. Haughie

    9/16/2013     0                             75,000     787,500  

    12/11/2013     0     192,000         $ 10.50     12/11/2023              

David W. Martin

    12/19/2007     155,000     0         $ 10.00     12/19/2017              

    9/27/2011     10,000     10,000         $ 11.00     9/27/2021              

    2/25/2013     0                             13,461     0  

    5/1/2013     0                             22,727     238,634  

    11/14/2013     0     20,000         $ 10.50     11/14/2023              

William J. Derwin

    11/11/2013     0                             50,000     525,000  

    12/11/2013     0     419,044         $ 10.50     12/11/2023     0     0  

Mark J. Barry

    8/20/2012     0                             33,333     349,997  

    9/28/2012     33,333     99,999         $ 15.00     9/28/2022              

    2/25/2013     0                             19,230     0  

    8/28/2013     0     40,000         $ 10.00     8/28/2023     16,667     175,004  

R. David Alexander

    2/25/2013     0                             50,000     525,000  

    9/13/2013     0     200,000         $ 10.00     9/13/2023     0     0  

(1)
Represents options to purchase shares of our common stock granted under the MSIP. Options become exercisable on the basis of passage of time and continued employment over a four year period, with one fourth becoming exercisable on each anniversary following the grant date.

(2)
All of Mr. Mullany's shares owned were repurchased by us following his resignation. All unvested equity awards were canceled on his termination date. Vested options expired unexercised on the three month anniversary of his termination date.

(3)
Represents RSUs to be settled in our common stock granted under the MSIP. RSUs become vested and will settle on the basis of passage of time and continued employment over a three year period, with one third becoming vested on each anniversary following the grant date. Performance based RSUs are also listed in this column. The P-RSUs were to be earned if we achieved a profit goal and vest in equal installments over a three year period. The profit goal was not met and the P-RSUs were forfeited.

(4)
Fair market value as of December 31, 2013 of $10.50 per share was determined by the board of directors.

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Option Exercises and Stock Vested (2013)

 
  Option Awards   Stock Awards  
Named Executive Officer
  Number of
Shares Acquired
on Exercise
(#)
  Value
Realized on
Exercise
($)
  Number of
Shares Acquired
on Vesting
(#)
  Value
Realized on
Vesting
($)
 

Robert J. Gillette

    0     0     0     0  

John Krenicki

    NA     NA     NA     NA  

Harry J. Mullany

    0     0     31,169 (1)   462,773  

Alan J. M. Haughie

    0     0     0     0  

David W. Martin

                13,333 (2)   133,330  

Mark J. Barry

    0     0     16,667 (2)   166,670  

R. David Alexander

    0     0     0     0  

William J. Derwin

    0     0     0     0  

(1)
Reflects the vesting of RSUs in 2013. Mr. Mullany elected to surrender a portion of the shares that settled upon vesting of the RSUs on February 22, 2013 to satisfy tax withholding obligations, resulting in net shares of 20,952. He elected to pay cash for taxes due on the 2,381 RSUs that vested on March 21, 2013.

(2)
Reflects the vesting of RSUs in 2013. Messrs. Martin and Barry elected to surrender a portion of the shares that settled upon vesting of the RSUs to satisfy tax withholding obligations, resulting in net shares of 9,688 and 12,109, respectively.

Nonqualified Deferred Compensation Plans

        The table below sets forth information regarding the NEOs' deferred compensation.

Nonqualified Deferred Compensation (2013)

Named Executive Officer
  Executive
Contributions
in Last FY
($)
  Registrant
Contributions
in Last FY
($)
  Aggregate
Earnings in
Last FY
($)(1)
  Aggregate
Withdrawals /
Distributions
($)
  Aggregate
Balance
at
Last FYE
($)(2)
 

Robert J. Gillette

    0     0     0     0     0  

John Krenicki

    0     0     0     0     0  

Harry J. Mullany

    0     0     0     0     0  

Alan J. M. Haughie

    0     0     0     0     0  

David W. Martin

    0     0     (2,520 )   0     5,880  

Mark J. Barry

    0     0     0     0     0  

R. David Alexander

    0     0     0     0     0  

William J. Derwin

    0     0     0     0     0  

(1)
The amounts in this column do not represent above market or preferential earnings, and therefore are not included in the Summary Compensation Table. For Mr. Martin, the amounts in this column represent the decrease in the value of his DSUs in 2013.

(2)
Mr. Martin elected to allocate a portion of his eligible deferred compensation to invest in 560 DSUs in 2007. The amounts in this column for Mr. Martin represent the value of these DSUs.

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Deferred Compensation Programs

        The DCP is a nonqualified deferred compensation plan designed to afford certain highly compensated associates the opportunity to defer not less than 2 percent and not more than 75 percent of their compensation on a pre tax basis. Deferred amounts are credited with earnings or losses based on the rate of return of investments selected by the participants in the DCP. The plan provides for a range of mutual fund investments identical to our 401(k) plan. We, in our sole discretion, may make matching contributions, based on the amounts that are deferred by associates pursuant to the DCP. We did not make matching contributions for 2013. Distributions are paid at the time elected by the participant in accordance with the DCP.

        The DCP is not currently funded by SvM, and participants have an unsecured contractual commitment from SvM to pay the amounts due under the DCP. All plan assets are held in a rabbi trust and are considered general assets of SvM. When such payments are due, the cash will be distributed from the DCP's trust.

        Participants in the 2007 offering under the MSIP were permitted to allocate eligible deferred compensation under the DCP to purchase DSUs, which represent the right to receive a share of our common stock on the first to occur of (1) the date that is 30 days following participant's termination of employment, (2) a fixed date selected by the participant or (3) a change in control of ServiceMaster. DSUs were acquired for $10 each. Mr. Martin is the only currently serving NEO who had the opportunity to allocate a portion of his eligible deferred compensation to purchase DSUs.

Potential Payments Upon Termination or Change in Control

Severance Benefits for NEOs

        Unless modified by separate agreement, upon a termination by us for cause, by the executive without good reason, or upon death or disability, we have no obligation to pay any prospective amounts or provide any benefits to our NEOs. Our obligations will consist of those obligations accrued at the date of termination, including payment of earned salary, vacation, reimbursement of expenses and obligations that may otherwise be payable in the event of death or disability. For this purpose, "cause" means a material breach by the executive of the duties and responsibilities of the executive (other than as a result of incapacity due to physical or mental illness) that is demonstrably willful and deliberate on the executive's part, committed in bad faith or without reasonable belief that such breach is in our best interests and not remedied in a reasonable period of time after receipt of written notice from us specifying such breach; or the commission by the executive of a felony or misdemeanor involving any act of fraud, embezzlement or dishonesty or any other intentional misconduct by the executive that materially and adversely affects our business affairs or reputation. The NEOs' agreements described below also include in the definition of "cause": any failure by the executive to cooperate with any investigation or inquiry into the executive's business practices, whether internal or external, including, but not limited to, the executive's refusal to be deposed or to provide testimony at any trial or inquiry.

        Upon each executive's retirement, death or disability, we will pay to the executive (or his executors or legal representatives, to the extent applicable) the annual bonus earned for the fiscal year immediately preceding the date of termination to the extent not previously paid; plus if the date of termination is after June 30 of a fiscal year, a prorated bonus through his date of termination (determined based on the target bonus, in the event of retirement or death, or actual accomplishment, in the event of disability).

Mr. Gillette

        Mr. Gillette's employment agreement provides that if we were to terminate Mr. Gillette's employment without cause, or Mr. Gillette terminates his employment for good reason, he would

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receive: (1) continued payment of his monthly base salary for 24 months following the date of termination; (2) reimbursement of COBRA premiums paid by him for 18 months following the date of termination (and reimbursement of COBRA premiums for up to an additional 6 months following the end of the original 18 month period to the extent that Mr. Gillette and his dependents have not obtained coverage from a subsequent employer); (3) the annual bonus earned for the fiscal year immediately preceding the date of termination to the extent not previously paid; (4) a prorated bonus through his date of termination; and (5) an amount equal to two times his average annual bonus paid or payable to Mr. Gillette with respect to the two fiscal years immediately preceding the date of termination or, if Mr. Gillette has not received an annual bonus for either or both of those fiscal years immediately preceding the date of termination, such average to be calculated using his target annual bonus for such year or years, as applicable. Payments of Mr. Gillette's severance benefits are subject to Mr. Gillette's signing a general release of claims. Mr. Gillette is also subject to covenants not to compete or, solicit for two years following termination and an indefinite covenant not to disclose confidential information. Upon Mr. Gillette's retirement, death or disability, we shall pay to Mr. Gillette (or his executors or legal representatives) the annual bonus earned for the fiscal year immediately preceding the date of termination to the extent not previously paid, plus a prorated bonus through his date of termination.

Mr. Mullany

        Mr. Mullany resigned on April 12, 2013 and received benefits under a Resignation Agreement and General Release. The benefits provided for the receipt of (1) continued payment of his monthly base salary for 24 months ($2,200,000) following the date of termination; (2) reimbursement of an amount that, after taxes, would equal the employer contribution for active employees for the COBRA coverage so elected for a maximum period of 18 months as in effect immediately prior to his date of termination; (3) a prorated bonus of $211,500 through his date of termination; and (4) an amount equal to two times his average annual bonus paid ($1,650,000) with respect to the two fiscal years immediately preceding the date of termination. Payments of Mr. Mullany's severance benefits were subject to Mr. Mullany's signing a general release of claims, which was executed on April 11, 2013. Mr. Mullany is also subject to covenants not to compete, solicit nor disclose confidential information for two years following termination.

Messrs. Haughie and Derwin

        We entered into a severance agreement with each of Messrs. Haughie and Derwin upon their respective hires that provides that if we were to terminate Mr. Haughie's or Mr. Derwin's employment without cause, or if such executive were to terminate his employment for good reason, he would receive: (1) continued payment of monthly base salary for 12 months following the date of termination; (2) an amount equal to the executive's then current year's annual bonus at target; (3) if the date of termination is after June 30 of a fiscal year, a prorated bonus through the date of termination; and (4) an amount equal to twelve times the executive's monthly cost for health care continuation coverage for those eligible plans in place immediately prior to termination.

Mr. Alexander

        We entered into a severance agreement with Mr. Alexander upon his hire that provides that if we were to terminate his employment without cause, or he terminates his employment for good reason, he would receive: (1) continued payment of monthly base salary for 16 months following the date of termination; (2) an amount equal to the executive's then current year's annual bonus at target; and (3) if the date of termination is after June 30 of a fiscal year, a prorated bonus through the date of termination.

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Mr. Martin

        We provided an offer of employment to Mr. Martin for the position of chief financial officer of New TruGreen. This offer letter included provisions relating to severance benefits. The letter provides that (1) if Mr. Martin's employment is terminated by New TruGreen without cause or he terminates his employment for good reason (as those terms are defined in his offer letter) at any time or (2) if Mr. Martin's employment terminates between April 1, 2015 and September 30, 2016 for any reason (other than termination for cause), he would receive: (i) an amount equal to twelve times Executive's monthly base salary in effect as of the termination date; plus (ii) an amount equal to Mr. Martin's then current year's annual bonus at target, or the "Target Bonus," pursuant to the terms of the then ABP; plus (iii) an amount equivalent to the pro rata percentage of Mr. Martin's then current annual bonus target pursuant to the ABP based on actual plan year performance, if the termination date is after June 30th, payable when annual bonuses are generally payable pursuant to the ABP (currently in March of the following year). In the event that New TruGreen is unable to make the payments, SvM will assume the liability to make any or all remaining payments through December 31, 2016.

Severance Arrangements with Other NEOs

        We have not historically offered severance agreements or change in control agreements to newly hired executive officers; however, the Compensation Committee and the SvM Board periodically reassess the need to offer these types of arrangements as part of maintaining competitive executive compensation packages and has included severance agreements for Messrs. Haughie, Alexander and Derwin, where the agreements were needed to hire the executives. The severance provisions in Mr. Martin's offer letter were an integral part of his offer of employment to assume the role of chief financial officer for the TruGreen Business. Mr. Barry is covered under our standard severance practices and guidelines. As an officer who reports directly to our CEO, he is eligible to receive severance if terminated without cause (as defined in "Potential Payments Upon Termination or Change in Control—Severance Benefits for NEOs"). Under our practice for executive officers as in effect as of December 31, 2013, in the event of such termination, an amount equal to one times base salary plus target bonus for the year of termination is paid out generally in monthly installments over a period of 12 to 24 months, and, if termination occurs after June 30 of a year, a prorated portion of the bonus earned under the ABP, would be payable to the terminated executive at the same time as annual bonuses are paid to other executives for the applicable year, subject to execution of a general release and observing covenants not to compete, solicit, nor disclose confidential information.

MSIP

        If an executive's employment is terminated by us for "cause" (as defined in the MSIP), all options (vested and unvested) and unvested RSUs are immediately cancelled.

        If an executive's employment is terminated by us without "cause" or if the executive voluntarily terminates his employment for any reason, all unvested options and RSUs immediately terminate. Upon such a termination, the executive may exercise vested options before the first to occur of (1) the three month anniversary of the executive's termination of employment, (2) the expiration of the options' normal term, after which date such options are cancelled, or (3) the cancellation of the options in the event of a change in control in exchange for a cash payment.

        If an executive's employment terminates by reason of death or disability, all unvested options will vest and all options will remain exercisable until the first to occur of (1) the one year anniversary of the executive's date of termination, (2) the expiration of the options' normal term, after which date such options are cancelled, or (3) the cancellation of the options in the event of a change in control in exchange for a cash payment. RSUs will vest as to the number of RSUs that would have vested on the next anniversary of the grant date (assuming the executive's employment had continued through such

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anniversary) multiplied by a fraction, the numerator of which is the number of days elapsed since (x) the grant date, if the termination due to death or disability occurs on or prior to the first anniversary of the grant date, or (y) the most recent prior anniversary of the grant date, if the termination due to death or disability occurs after the first anniversary of the grant date, and the denominator of which was 365 for 2013.

        The stock option agreements provide that all then outstanding options (whether vested or unvested) will be cancelled in exchange for a cash payment if we experience a "change in control" (as defined in the MSIP), unless the board of directors reasonably determines in good faith that options with substantially equivalent or better terms are substituted for the existing options. Upon a change in control occurring prior to the third anniversary of the grant date, all RSUs will become vested.

        An initial public offering of our common stock will not constitute a change in control.

        The board of directors also has the discretion to accelerate the vesting of options or RSUs at any time and from time to time.

Payment Upon Retirement, Death, Disability, Qualifying Termination, or Change in Control as of December 31, 2013

        The following table sets forth information regarding the value of payments and other benefits payable by us to each of the NEOs employed by us as of December 31, 2013 in the event of retirement, death, disability, qualifying termination (a termination which qualifies an NEO for severance payments under his employment agreement or offer letter or our general severance policy) or change in control. The amounts shown do not include payments of compensation that have previously been deferred as disclosed in the Nonqualified Deferred Compensation (2013) table. Except as otherwise noted below, the amounts shown assume termination or change in control effective as of December 31, 2013 and a fair market value of our common stock on December 31, 2013 of $10.50 per share, as determined by our board of directors. Since Mr. Krenicki received no compensation and no longer serves as Interim CEO, there are no potential payments to him in any case. Also, since Mr. Mullany resigned from ServiceMaster as of April 12, 2013, all of his compensation for 2013 is reflected in the Summary Compensation Table above.

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Potential Payments Upon Retirement, Death, Disability, Qualifying Termination or Change in Control (2013)

Named Executive Officer
  Event   Base Salary and
Target Bonus
($)(1)
  Payment of
Current
Year Bonus
($)(2)
  Acceleration of
Vesting of
Stock Options
($)(3)
  Acceleration of
Vesting of
RSUs
($)(3)
  Health &
Welfare
($)
  Total
Payments
($)
 

Robert J. Gillette

 

Retirement

    0     596,712     0     0           596,712  

 

Death

    0     596,712     412,500     313,562     0     1,322,774  

 

Disability

    0     609,335     412,500     313,562     0     1,335,397  

 

Qualifying Termination

    4,400,000     609,335     0     0     21,734     5,031,069  

 

Change in Control

    0     0     412,500     3,150,000     0     3,562,500  

Alan J. M. Haughie

 

Retirement

    0     112,863     0     0           112,863  

 

Death

    0     112,863     0     78,393     0     191,256  

 

Disability

    0     0     0     78,393     0     78,393  

 

Qualifying Termination

    962,500     0     0     0     0     962,500  

 

Change in Control

    0     0     0     787,500     0     787,500  

David W. Martin

 

Retirement

    0     286,146     0     0           286,146  

 

Death

    0     286,146     0     73,227     0     359,373  

 

Disability

    0     292,184     0     73,227     0     365,411  

 

Qualifying Termination

    635,250     292,184     0     0     0     927,434  

 

Change in Control

    0     0     0     238,634     0     238,634  

Mark J. Barry

 

Retirement

    0     286,000     0     0           286,000  

 

Death

    0     286,000     20,000     83,749     0     389,749  

 

Disability

    0     361,112     20,000     83,749     0     464,861  

 

Qualifying Termination

    726,000     361,112     0     0     0     1,087,112  

 

Change in Control

    0     0     20,000     525,000     0     545,000  

R. David Alexander

 

Retirement

    0     357,500     0     0           357,500  

 

Death

    0     357,500     100,000     148,155     0     605,655  

 

Disability

    0     178,750     100,000     148,155     0     426,905  

 

Qualifying Termination

    1,090,833     178,750     0     0     0     1,269,583  

 

Change in Control

    0     0     100,000     525,000     0     625,000  

William J. Derwin

 

Retirement

    0     308,750     0     0           308,750  

 

Death

    0     308,750     0     23,972     0     332,722  

 

Disability

    0     0     0     23,972     0     23,972  

 

Qualifying Termination

    783,750     0     0     0     0     783,750  

 

Change in Control

    0     0     0     525,000     0     525,000  

(1)
Calculations are based upon the terms previously discussed under Severance Benefits for NEOs.

(2)
Because termination is assumed to occur on the last day of the performance period for the 2013 ABP, amounts shown for Disability and Qualifying Termination are the same as those reflected in the 2013 ABP Payments Table. The amounts are payable upon an involuntary termination without cause (and for Messrs. Gillette, Haughie, Martin, Alexander and Derwin upon voluntary termination for good reason). The amounts shown for Retirement and Death reflect ABP payments at the NEOs' target award percentage prorated for the number of days worked.

(3)
As noted above in the section entitled MSIP, (1) upon a change in control, all time-based vesting options and RSUs are vested and cancelled for cash (unless the options are substituted or replaced in connection with the change in control) and (2) upon a termination of employment due to death or disability, options fully vest

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    and RSUs vest pro-rata. The values in the table were based on a value of $10.50 per share at December 31, 2013, and option exercise prices of $10 per share for those options in-the-money. As described above under "—Employment Arrangements—Employment Agreement with Mr. Gillette," Mr. Gillette would be entitled to receive a cash payment in respect of his forfeited options and RSUs if his employment is terminated by us without cause or he resigns for good reason, in either case, prior to and in connection with a change in control.

    Compensation Risk Assessment

            The Board assessed the risks associated with our compensation and practices to evaluate whether they create risks that are likely to have a material adverse effect on us. Based on its assessment, the Board concluded that our compensation policies and practices do not create incentives to take risks that are likely to have a material adverse effect on us. We believe we have allocated our compensation among base salary, short term incentives and long-term equity in such a way as to not encourage excessive risk taking.

    Director Compensation

            Prior to the completion of this offering, directors who are employed by us or affiliated with the CD&R Funds or the StepStone Funds are not entitled to receive any fees for serving as a member of our board of directors. Upon completion of this offering, directors who are employed by us will continue to not be entitled to receive any fees for serving as a member of our board of directors. We intend to use a combination of cash and stock-based incentive compensation to attract and retain independent, qualified candidates to serve on our board of directors. In setting director compensation, we consider the significant amount of time that directors expend in fulfilling their duties as well as the skill level we require of members of our board of directors.

            During 2013, three of our directors were principals of CD&R and one of our directors was a principal of StepStone. We and SvM are party to consulting agreements with each of CD&R and StepStone pursuant to which CD&R and StepStone provide us with financial advisory and management consulting services in exchange for a fee.

    Cash and Equity Retainers

            Members of the board of directors who are not employed by us are entitled to receive an annual retainer of $120,000, 50 percent of which will be payable in cash and the other 50 percent payable in restricted stock vesting on the day immediately preceding the first anniversary following the grant date, subject to continued service on the board of directors. We expect that directors will be given the ability to defer receipt of their cash retainers under our Deferred Compensation Plan (see "Nonqualified Deferred Compensation Plans"). Any independent chairperson of the Audit Committee will receive an additional annual cash retainer of $10,000. The chairpersons of the Compensation Committee and the Nominating and Corporate Governance Committee will each receive an additional annual cash retainer of $5,000. One-fourth of the annual cash retainer will be paid at the end of each quarter, provided the director served as a director in such fiscal quarter. Each of our directors who is employed by or affiliated with the CD&R Funds or the StepStone Funds may assign all or a portion of the compensation the director would receive for his or her services as a director to the fund he or she is affiliated with or its affiliates. All of our directors will be reimbursed for reasonable expenses incurred in connection with attending board of directors meetings and committee meetings.

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    Equity Compensation Plan Information

            The following table contains information, as of December 31, 2013, about the amount of our common shares to be issued upon the exercise of outstanding options, RSUs and DSUs granted under the MSIP.

Plan Category
  Number of
Securities to
be Issued Upon
Exercise of
Outstanding
Options, Warrants
and Rights(1)
  Weighted Average
Exercise Price of
Outstanding Options
  Number of Securities
Remaining Available
for
Future Issuance Under
Equity Compensation
Plans (excluding
securities reflected in
first column)
 

Equity compensation plans approved by shareholders

    8,677,601   $ 10.39     5,023,116  

Equity compensation plans not approved by shareholders

             

Total

    8,677,601   $ 10.39     5,023,116  

(1)
The figures in this column reflect 7,958,574 stock options and 944,389 RSUs granted to officers pursuant to the MSIP. For a description of the MSIP, please refer to "Executive Compensation—Compensation Discussion and Analysis."

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Policies and Procedures for Related Person Transactions

        Prior to the offering, our board of directors will approve policies and procedures with respect to the review and approval of certain transactions between us and a "Related Person," or a "Related Person Transaction," which we refer to as our "Related Person Transaction Policy." Pursuant to the terms of the Related Person Transaction Policy, the board of directors must review and decide whether to approve or ratify any Related Person Transaction. Any Related Person Transaction is required to be reported to our legal department and the legal department will then determine whether it should be submitted to our Audit Committee for consideration.

        For the purposes of the Related Person Transaction Policy, a "Related Person Transaction" is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we (including any of our subsidiaries) were, are or will be a participant and the amount involved exceeds $120,000, and in which any Related Person had, has or will have a direct or indirect interest.

        A "Related Person," as defined in the Related Person Transaction Policy, means any person who is, or at any time since the beginning of our last fiscal year was, a director or executive officer of ServiceMaster or a nominee to become a director of ServiceMaster; any person who is known to be the beneficial owner of more than five percent of our common stock; any immediate family member of any of the foregoing persons, including any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer, nominee or more than five percent beneficial owner, and any person (other than a tenant or employee) sharing the household of such director, executive officer, nominee or more than five percent beneficial owner; and any firm, corporation or other entity in which any of the foregoing persons is a general partner or, for other ownership interests, a limited partner or other owner in which such person has a beneficial ownership interest of ten percent or more.

Stockholders Agreement

        We are currently party to the stockholders agreement, as amended, or the "stockholders agreement," with the Equity Sponsors. The stockholders agreement contains, among other things, agreements with respect to the election of our directors. Currently, the directors include three designees of the CD&R Funds (one of whom shall serve as the chairman and each of whom is entitled to three votes) and one designee of the StepStone Funds. The stockholders agreement currently provides for our CEO (as well as any successor CEO) to be a director of ServiceMaster, subject to the approval of our board of directors and Clayton, Dubilier & Rice Fund VII, L.P., or the "Lead Investor." The stockholders agreement, as currently in effect, grants to the Equity Sponsors special governance rights, including rights of approval over certain corporate and other transactions. The stockholders agreement, as currently in effect, also gives the Equity Sponsors preemptive rights with respect to certain issuances of our equity securities, subject to certain exceptions, and contains tag-along and rights of first offer. However, these provisions will fall away automatically upon the consummation of this offering. The stockholders agreement also contains a lock-up provision under which the Equity Sponsors have agreed not to sell, transfer or dispose of, directly or indirectly, any shares of our common stock in a public offering until January 15, 2015.

        Prior to the completion of this offering, we expect to enter into an amendment to the stockholders agreement.

        The amended stockholders agreement will grant the CD&R Funds the right to designate for nomination for election a number of CD&R Designees equal to: (i) at least a majority of the total number of directors comprising our board of directors at such time as long as the CD&R Funds own at

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least 50% of the outstanding shares of our common stock; (ii) at least 40% of the total number of directors comprising our board of directors at such time as long as the CD&R Funds own at least 40% but less than 50% of the outstanding shares of our common stock; (iii) at least 30% of the total number of directors comprising our board of directors at such time as long as the CD&R Funds own at least 30% but less than 40% of the outstanding shares of our common stock; (iv) at least 20% of the total number of directors comprising our board of directors at such time as long as the CD&R Funds own at least 20% but less than 30% of the outstanding shares of our common stock; and (v) at least 5% of the total number of directors comprising our board of directors at such time as long as the CD&R Funds own at least 5% but less than 20% of the outstanding shares of our common stock. For purposes of calculating the number of CD&R Designees that the CD&R Funds are entitled to nominate pursuant to the formula outlined above, any fractional amounts would be rounded to the nearest whole number and the calculation would be made on a pro forma basis after taking into account any increase in the size of our board of directors.

        Our amended stockholders agreement will also provide that, for as long as the StepStone Funds own 5% or more of the outstanding shares of our common stock, the StepStone Funds will have the right to designate one member of our board of directors for nomination for election.

Registration Rights Agreement

        We are a party to a registration rights agreement, or the "Registration Rights Agreement," with Equity Sponsors holding substantially all of the shares of our common stock. The Registration Rights Agreement grants to these Equity Sponsors the right, in the case of the Lead Investor at any time, and in the case of the other Equity Sponsors at least 18 months following the initial public offering of our common stock, to cause us, at our own expense, to use our best efforts to register shares held by the Equity Sponsors for public resale, subject to certain limitations. In the event we register any of our common stock following our initial public offering, these Equity Sponsors also have the right to require us to use our best efforts to include shares of our common stock held by them, subject to certain limitations, including as determined by the underwriters. The Registration Rights Agreement also provides for us to indemnify the Equity Sponsors party to that agreement and their affiliates in connection with the registration of our common stock.

Consulting Agreements

        We and SvM are parties to a consulting agreement with CD&R under which CD&R provides us with ongoing consulting and management advisory services. The annual consulting fee payable under the consulting agreement with CD&R is $6.25 million. Under this agreement, we recorded consulting fees of $6.25 million in each of the years ended December 31, 2013, 2012 and 2011. The consulting agreement also provides that CD&R may receive additional fees in connection with certain subsequent financing and acquisition or disposition transactions. There were no additional fees incurred in each of the years ended December 31, 2013, 2012 and 2011. The consulting agreement will terminate on July 24, 2017, unless terminated earlier at CD&R's election. As described below, the CD&R consulting agreement will be terminated in connection with this offering.

        We and SvM are parties to consulting agreements with StepStone, JPMorgan and Ridgemont (and formerly with BAS). The consulting agreements terminate on June 30, 2016 or upon the earlier termination of our consulting agreement with CD&R (the Ridgemont consulting agreement also provides for termination upon an initial public offering). Effective January 1, 2012, the annual consulting fee formerly payable to BAS (and now payable to Ridgemont) was reduced to $0.25 million. Pursuant to the consulting agreements, we are required to pay annual consulting fees of $0.5 million, $0.25 million and $0.25 million to StepStone, JPMorgan and Ridgemont (formerly payable to BAS), respectively. We recorded aggregate consulting fees related to these agreements of $1.0 million in each

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of the years ended December 31, 2013 and 2012 and $1.25 million for the year ended December 31, 2011.

        In connection with this offering, we will enter into termination agreements with CD&R, StepStone, JPMorgan and Ridgemont pursuant to which the parties will agree to terminate the ongoing consulting fees described above. Pursuant to the termination agreements, we intend to pay aggregate termination fees of $         million, payable upon consummation of this offering. Thereafter, the annual consulting fees will terminate. No transaction fee will be payable to any Equity Sponsor under the consulting agreements as a result of this offering.

Indemnification Agreements

        We and SvM are parties to indemnification agreements with the CD&R Funds and CD&R, StepStone, JPMorgan and Ridgemont (and formerly with BAS), pursuant to which we and SvM indemnify such Equity Sponsors and CD&R, and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities arising out of performance of the consulting agreements, transaction fee agreements described above under "—Consulting Agreements" and certain other claims and liabilities, including liabilities arising out of financing arrangements and securities offerings.

        Prior to the completion of this offering, we will enter into indemnification agreements with our directors. The indemnification agreements will provide the directors with contractual rights to the indemnification and expense advancement rights. See "Description of Capital Stock—Limitations on Liability and Indemnification."

Share Repurchase from BAS

        On December 22, 2011, we purchased 7.5 million shares of our common stock from BAS for an aggregate purchase price of $75 million.

Financing Arrangements with Related Parties

        Affiliates of JPMorgan (which is one of the Equity Sponsors) have provided investment banking and commercial banking services to us for which they have received customary fees and commissions. These parties have acted as agents and lenders to us under the Credit Facilities, as an issuing bank under our Revolving Credit Facility and as initial purchasers for the 2020 Notes, for which they received customary fees, commissions, expenses or other compensation. SvM entered into a registration rights agreement with an affiliate of JPMorgan in connection with the issuance of the 2020 Notes.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

Term Facilities

        In connection with the 2007 Merger, SvM entered into the Credit Agreement with respect to the Term Facilities, with Citibank, N.A. as administrative agent, collateral agent and letter of credit facility issuing bank, JPMorgan Chase Bank, N.A., as syndication agent, and a syndicate of lenders party thereto from time to time. The following is a brief description of the principal terms of the Credit Agreement, as amended and the related documents governing the Term Facilities.

Overview

        The Term Facilities consist of a senior secured term loan facility in an original principal amount of $2.650 billion, or the "Term Loan Facility," and a pre-funded synthetic letter of credit facility in an original principal amount of $150.0 million, or the "L/C Facility" and, together with the Term Loan Facility, the "Term Facilities." The proceeds of the Term Loan Facility were used to finance a portion of the transactions in connection with the 2007 Merger, including the refinancing of certain existing indebtedness.

        SvM entered into the 2012 Term Loan Facility Amendment and the 2013 Term Loan Facility Amendment, together the "Term Facility Amendments," primarily, in each case, to extend the maturity date of a portion of the borrowings under the Term Facilities.

        Pursuant to the 2012 Term Loan Facility Amendment, a portion of the outstanding Tranche A term loans were converted into a new tranche of Tranche B loans in an aggregate principal amount of approximately $1.0 billion, or the "Tranche B loans." Pursuant to the 2013 Term Loan Facility Amendment, the remaining outstanding Tranche A loans were converted into a new tranche of term loans in an aggregate principal amount, along with new loans extended by certain new lenders, of $1.220 billion, or the "Tranche C loans." Pursuant to the Term Loan Facility Amendments, the availability under the L/C Facility was reduced to $137.6 million and will be further reduced to $77.9 million as of July 24, 2014.

        As of December 31, 2013, approximately $2.2 billion of term loan borrowings were outstanding under the Term Loan Facility and SvM had obtained $134.6 million of letters of credit, resulting in unused commitments under the L/C Facility of $3.0 million.

Maturity; prepayments

        The Tranche B loans and the Tranche C loans have a maturity date of January 31, 2017. The Term Loan Facility amortizes in nominal quarterly installments equal to $5.6 million until the maturity date.

        Voluntary prepayments of borrowings under the Term Loan Facility are permitted at any time, in minimum principal amounts, without (for prepayments made after February 22, 2014) premium or penalty. Subject to certain exceptions, the Term Loan Facility is subject to mandatory prepayment in an amount equal to:

    the net cash proceeds of (1) certain asset sales, (2) certain debt offerings and (3) certain insurance recovery and condemnation events; and

    50% of annual excess cash flow (as defined in the Credit Agreement) for any fiscal year unless a certain secured leverage ratio target is met.

        The $137.6 million of available borrowing capacity under the L/C Facility will be reduced to $77.9 million as of July 24, 2014 and that $77.9 million of availability will mature on January 31, 2017.

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Guarantees; security

        SvM is the borrower under the Term Facilities. CDRSVM Holding, LLC, the direct parent of SvM, and each direct and indirect domestic subsidiary of SvM (other than any subsidiary that is a foreign subsidiary holding company, a subsidiary of a foreign subsidiary, an unrestricted subsidiary, any subsidiary below a certain materiality threshold, a receivables financing subsidiary, a subsidiary subject to regulation as an insurance, home warranty, service contract or similar company (or any subsidiary thereof) and certain other specified subsidiaries) have guaranteed SvM's obligations under the Term Facilities. The Term Facilities and the guarantees thereof are secured by substantially all of the tangible and intangible assets of SvM and the guarantors (including pledges of (1) a $100 million intercompany promissory note made by The Terminix International Company Limited Partnership in favor of ServiceMaster Consumer Services Limited Partnership and (2) all the capital stock of all direct domestic subsidiaries (other than foreign subsidiary holding companies, which are deemed to be foreign subsidiaries) owned by SvM or any guarantor and of up to 65% of the capital stock of each direct foreign subsidiary owned by SvM or any guarantor), subject to certain exceptions, including but not limited to exceptions for equity interests, indebtedness or other obligations of subsidiaries, real estate or any other assets if the granting of a security interest therein would require that the notes described under "—Continuing Notes" below be secured. The Term Facilities are secured on a pari passu basis with the security interests created in the same collateral securing the Revolving Credit Facility.

Interest

        The interest rates applicable to the Tranche B loans under the Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at the borrower's option, (i) an adjusted London inter-bank offered rate plus 4.25 percent, or (ii) an alternate base rate plus 3.25 percent.

        The interest rates applicable to the Tranche C loans under the Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at the borrower's option, (i) an adjusted London inter-bank offered rate plus 3.25 percent, with a minimum adjusted London inter-bank offered rate of 1.00 percent or (ii) an alternative base rate plus 2.25 percent, with a minimum alternative base rate of 2.00 percent.

Fees

        SvM pays (1) letter of credit participation fees on the full amount of the L/C Facility plus fronting fees for the letter of credit issuing bank and (2) other customary fees in respect of the Term Facilities.

Covenants

        The Credit Agreement as amended by the Term Facility Amendments contains a number of negative covenants that, among other things, limit or restrict the ability of SvM and its restricted subsidiaries to:

    incur additional debt (including guarantees of other debt);

    pay dividends or make other restricted payments, including investments;

    make acquisitions;

    prepay or amend the terms of certain outstanding debt;

    create restrictions on the ability of our restricted subsidiaries to pay dividends to us or make other intercompany transfers;

    enter into certain types of transactions with affiliates;

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    sell certain assets, or, in the case of SvM, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets;

    create liens; and

    enter into agreements restricting dividends or other distributions by subsidiaries to SvM.

        The Credit Agreement also contains certain affirmative covenants, including financial and other reporting requirements.

Events of default

        The Credit Agreement provides for customary events of default, including non-payment of principal, interest or fees, violation of covenants, material inaccuracy of representations or warranties, specified cross payment default and cross acceleration to other material indebtedness, certain bankruptcy events, certain ERISA events, material invalidity of guarantees or security interests, material judgments and change of control.

Revolving Credit Facility

        In connection with the 2007 Merger, SvM also entered into a revolving credit agreement, dated as of July 24, 2007, with respect to the Revolving Credit Facility, with Citibank, N.A. as administrative agent, revolving collateral agent and issuing bank, JPMorgan Chase Bank, N.A., as syndication agent and a syndicate of lenders party thereto from time to time. The following is a brief description of the principal terms of the revolving credit agreement and related documents governing the Revolving Credit Facility.

Overview

        The Revolving Credit Facility provides for senior secured revolving loans up to a maximum aggregate original principal amount of $500 million. Up to $75 million of the Revolving Credit Facility is available for the issuance of stand by and commercial letters of credit. Amounts under the Revolving Credit Facility may be borrowed in certain designated foreign currencies up to a principal amount not to exceed $50 million, and revolving credit loans to foreign subsidiary borrowers may not exceed $50 million.

        On February 2, 2011, SvM entered into an amendment, or the "2011 Revolver Amendment," to its Revolving Credit Facility. Prior to the amendment, the facility was scheduled to mature on July 24, 2013. SvM desired to extend the maturity date of the facility by one year, and as an inducement for such extension offered to allow any lenders in the syndicate group that were willing to extend the maturity date by one year a 20 percent reduction of such lender's loan commitment. As a result of the 2011 Revolver Amendment, SvM had available borrowing capacity under its amended Revolving Credit Facility of $442.5 million through July 24, 2013 and $229.6 million from July 25, 2013 through July 24, 2014.

        On January 30, 2012, SvM entered into an amendment, or the "2012 Revolver Amendment," and an increase supplement, or the "Increase Supplement," to the Revolving Credit Facility. The 2012 Revolver Amendment extended the maturity date of a portion of the facility until January 31, 2017. The Increase Supplement increased borrowing capacity under the Revolving Credit Facility by approximately $5.2 million. As a result of the 2012 Revolver Amendment and the Increase Supplement, SvM had available borrowing capacity under its Revolving Credit Facility of $447.7 million through July 24, 2013, $324.2 million from July 25, 2013 through July 24, 2014 and $265.2 million from July 25, 2014 through January 31, 2017.

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        On November 27, 2013, SvM entered into an amendment, or the "2013 Revolver Amendment." Pursuant to the 2013 Revolver Amendment, after completion of the TruGreen Spin-off, SvM has $241.7 million of available borrowing capacity through July 23, 2014 and $182.7 million from July 24, 2014 through January 31, 2017. SvM will continue to have access to letters of credit of up to $75 million through January 31, 2017.

        As of December 31, 2013, there were no amounts outstanding under the Revolving Credit Facility.

Maturity; prepayments

        The final maturity date of the Revolving Credit Facility is January 31, 2017. The Revolving Credit Facility is not subject to mandatory prepayment.

Guarantees; security

        SvM and The Terminix International Company Limited Partnership are the domestic borrowers under the Revolving Credit Facility. One or more foreign subsidiaries of SvM may become borrowers under the Revolving Credit Facility on the terms and conditions in the revolving credit agreement. The direct parent of each domestic borrower and each domestic subsidiary of SvM (other than any subsidiary that is a foreign subsidiary holding company, a subsidiary that is a subsidiary of a foreign subsidiary, an unrestricted subsidiary, any subsidiary below a certain materiality threshold, a receivables financing subsidiary, a subsidiary subject to regulation as an insurance, home warranty, service contract or similar company (or any subsidiary thereof) and certain other specified subsidiaries) have guaranteed the domestic borrowers' obligations under the Revolving Credit Facility. With respect to any non U.S. borrower, certain non U.S. subsidiaries may be required to provide a guarantee of its borrowings (subject to certain limitations), and such borrowings shall be guaranteed by the U.S. guarantors. The Revolving Credit Facility and the guarantees thereof are secured by the same collateral securing the Term Facilities, on a pari passu basis with the security interests created in the same collateral securing the Term Facilities. If any non U.S. borrower is included, certain assets of such non U.S. borrower and related non U.S. subsidiary guarantors may be similarly pledged to the extent such pledge may be obtained without material cost or expense, and subject to legal and certain other limitations.

Interest

        The interest rates applicable to the loans under the Revolving Credit Facility are based on a fluctuating rate of interest measured by reference to either, at the borrower's option, (i) an adjusted London inter-bank offered rate (or, in the case of loans made in Euros, an adjusted Euro inter-bank offered rate) plus a borrowing margin (2.50 percent as of December 31, 2013) or (ii) an alternate base rate plus a borrowing margin (1.50 percent as of December 31, 2013).

Fees

        The borrowers pay customary fees in respect of the Revolving Credit Facility, including a commitment fee on the unutilized portion thereof.

Covenants

        The Credit Agreement governing the Revolving Credit Facility contains a number of negative covenants that, among other things, limit or restrict the ability of SvM and its material restricted subsidiaries to:

    incur additional indebtedness (including guarantees of other indebtedness);

    pay dividends or make other restricted payments, including investments;

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    make acquisitions;

    prepay or amend the terms of certain outstanding debt;

    enter into certain types of transactions with affiliates;

    sell certain assets, or, in the case of any borrower, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets;

    create liens;

    change their business or SvM's fiscal year; and

    enter into agreements restricting their ability to incur liens securing the Revolving Credit Facility.

        The Credit Agreement governing the Revolving Credit Facility also contains certain affirmative covenants, including financial and other reporting requirements.

Events of default

        The Credit Agreement governing the Revolving Credit Facility provides for customary events of default, including non-payment of principal, interest or fees, violation of covenants, material inaccuracy of representations or warranties, cross default to other material indebtedness, certain bankruptcy events, certain ERISA events, material invalidity of guarantees or security interests, material judgments and change of control.

2020 Notes

        In February 2012, SvM issued $600 million aggregate principal amount of the 2020 Notes, or the "February 2020 Notes." The February 2020 Notes were issued pursuant to an indenture, dated as of February 13, 2012, among SvM, the subsidiary guarantors of the February 2020 Notes and Wilmington Trust, National Association as trustee. SvM used $600 million of the proceeds of the sale of the February 2020 Notes, together with available cash, to redeem $600 million in aggregate principal amount of its 2015 Notes. The February 2012 Notes bear an interest rate of 8% and mature on February 15, 2020.

        In August 2012, SvM issued the August 2020 Notes to redeem the remaining $396 million aggregate principal amount of its 2015 Notes and to repay $276 million of outstanding borrowings under its Term Facilities during the third quarter of 2012. The August 2020 Notes bear an interest rate of 7% and will mature on August 15, 2020.

        We intend to use a portion of the net proceeds of this offering to redeem up to 35% in principal amount of the February 2020 Notes and the August 2020 Notes. See "Use of Proceeds."

Ranking

        The 2020 Notes are senior unsecured obligations of SvM and rank equally in right of payment with all of SvM's other existing and future senior unsecured indebtedness. The 2020 Notes are guaranteed by certain of our subsidiaries on a senior unsecured basis. The subsidiary guarantees are general unsecured senior obligations of the subsidiary guarantors and rank equally in right of payment with all of the existing and future senior unsecured indebtedness of our guarantor subsidiaries. The 2020 Notes are effectively junior to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness.

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Optional redemption

        SvM may redeem the February 2020 Notes, in whole or in part, at its option, at any time prior to February 15, 2015 at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the applicable make-whole premium. In addition, at any time prior to February 15, 2015, SvM may redeem up to 35% of the original aggregate principal amount of the February 2020 Notes with the proceeds of certain equity offerings at a redemption price of 108%, plus accrued and unpaid interest, if any, to the applicable redemption date.

        SvM may redeem the February 2020 Notes, in whole or in part, at any time (i) on or after February 15, 2015 and prior to February 15, 2016, at a redemption price equal to 106% of the principal amount thereof, (ii) on or after February 15, 2016 and prior to February 15, 2017, at a redemption price equal to 104% of the principal amount thereof, (iii) on or after February 15, 2017 and prior to February 15, 2018, at a redemption price equal to 102% of the principal amount thereof and (iv) on or after February 15, 2018, at a redemption price equal to 100% of the principal amount thereof, in each case, plus accrued and unpaid interest, if any, to the redemption date.

        SvM may redeem the August 2020 Notes, in whole or in part, at its option, at any time prior to August 15, 2015 at a redemption price equal to 100% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, plus the applicable make-whole premium. In addition, at any time prior to August 15, 2015, SvM may redeem up to 35% of the aggregate principal amount of the August 2020 Notes with the proceeds of certain equity offerings at a redemption price of 107%, plus accrued and unpaid interest, if any, to the applicable redemption date.

        SvM may redeem the August 2020 Notes, in whole or in part, at any time (i) on or after August 15, 2015 and prior to August 15, 2016, at a redemption price equal to 105.25% of the principal amount thereof, (ii) on or after August 15, 2016 and prior to August 15, 2017, at a redemption price equal to 103.5% of the principal amount thereof, (iii) on or after August 15, 2017 and prior to August 15, 2018, at a redemption price equal to 101.75% of the principal amount thereof and (iv) on or after August 15, 2018, at a redemption price equal to 100% of the principal amount thereof, in each case, plus accrued and unpaid interest, if any, to the redemption date.

Covenants

        The indenture governing the 2020 Notes contains certain covenants that, among other things, limit the ability of SvM and its restricted subsidiaries (as defined in the indenture governing such notes) to:

    incur more debt;

    pay dividends, redeem stock or make other distributions, or make investments;

    limit the ability of restricted subsidiaries to make payments to us;

    enter into certain transactions with their affiliates;

    transfer or sell assets;

    create certain liens;

    merge or consolidate; and

    designate their subsidiaries as unrestricted subsidiaries.

Events of default

        The indenture governing the 2020 Notes provides for customary events of default including non-payment of principal or interest, failure to comply with covenants, and certain bankruptcy or insolvency events.

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Continuing Notes

        As of December 31, 2013, SvM had outstanding approximately $357.1 million aggregate principal amount of senior unsecured notes issued prior to the 2007 Merger, consisting of approximately $195.0 million aggregate principal amount of its 7.45% notes due August 15, 2027, $79.5 million aggregate principal amount of its 7.10% notes due March 1, 2018 and $82.6 million aggregate principal amount of its 7.25% notes due March 1, 2038, or collectively, the "Continuing Notes."

Ranking

        The Continuing Notes rank pari passu with all other unsubordinated indebtedness of SvM.

Optional redemption

        SvM may redeem the Continuing Notes of any series, upon not less than 30 or more than 60 days prior written notice, at any time, at a redemption price equal to the greater of (i) 100% of their principal amount or (ii) the sum of the present values of the remaining scheduled payments (as defined) thereon discounted to the redemption date, on a semi-annual basis, at the treasury yield (as defined in the indenture governing such notes) plus 20 basis points, together with all accrued but unpaid interest, if any, to the date of redemption.

Covenants

        The indenture governing the Continuing Notes contains certain covenants that, among other things, limit the ability of SvM and the ability of its significant subsidiaries, (as defined in the indenture governing such notes) to create certain liens, enter into certain sale and lease back transactions, and, with respect to SvM, consolidate, merge, sell or otherwise dispose of all or substantially all of its assets.

Events of default

        The indenture governing the Continuing Notes provides for customary events of default including non-payment of principal or interest, failure to comply with covenants, and certain bankruptcy or insolvency events.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth information as of March 21, 2014 with respect to the ownership of our common stock by:

    each person known to own beneficially more than five percent of our common stock;

    each of our directors;

    each of our named executive officers; and

    all of our current executive officers and directors as a group.

        The amounts and percentages of shares beneficially owned are reported on the basis of regulations of the SEC governing the determination of beneficial ownership of securities. Under SEC rules, a person is deemed to be a "beneficial owner" of a security if that person has or shares voting power or investment power, which includes the power to dispose of or to direct the disposition of such security. A person is also deemed to be a beneficial owner of any securities of which that person has a right to acquire beneficial ownership within 60 days. Securities that can be so acquired are deemed to be outstanding for purposes of computing such person's ownership percentage, but not for purposes of computing any other person's percentage. Under these rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which such person has no economic interest.

        Percentage computations are based on approximately 137.9 million shares of our common stock outstanding as of March 21, 2014, and          shares outstanding following this offering (or              shares if the underwriters exercise in full their option to purchase additional shares).

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        Except as otherwise indicated in these footnotes, each of the beneficial owners listed has, to our knowledge, sole voting and investment power with respect to the indicated shares of common stock. Addresses for the beneficial owners are set forth in the footnotes to the table.

 
  Shares Beneficially Owned
Before the Offering and
After the Offering
Assuming the Underwriters' Option
is Not Exercised(1)
   
   
 
 
  Shares Beneficially
Owned
After the Offering
Assuming the
Underwriters' Option is
Exercised in Full
 
 
   
  Percent of
Class
Before the
Offering
(%)
   
 
 
   
  Percent of
Class After
the Offering
(%)
 
 
  Number of
Shares Owned
 
Name of Beneficial Owner
  Number   Percent  

Clayton, Dubilier & Rice Fund VII, L.P. and related funds(2)

    90,610,000     65.70                    

StepStone Group LP managed funds(3)

    19,840,774     14.39                    

JPMorgan Chase Funding Inc.(4)

    10,000,000     7.25                    

Ridgemont Partners Secondary Fund I, L.P.(5)

    7,500,000     5.44                    

John Krenicki, Jr.(6)

    95,238     0                    

David H. Wasserman(6)

    0     0                    

Sarah Kim(6)

    0     0                    

Darren M. Friedman(7)

    0     0                    

Stephen J. Sedita(8)

    0     0                    

Robert J. Gillette(8)

    384,375     *                    

Alan J. M. Haughie(8)

    63,000     *                    

Mark J. Barry(8)(9)

    128,392     *                    

William J. Derwin(8)

    137,498     *                    

Harry J. Mullany(8)

    0     0                    

David W. Martin(10)

    0     *                    

R. David Alexander(10)

    0     *                    

All current directors and executive officers as a group (14 persons)(9)

    1,172,042     *                    

*
Less than one percent.

(1)
We have granted the underwriters an option to purchase up to an additional            shares.

(2)
Represents the following shares: (i) 60,000,000 shares of common stock held by Clayton, Dubilier & Rice Fund VII, L.P., whose general partner is CD&R Associates VII, Ltd., whose sole stockholder is CD&R Associates VII, L.P., whose general partner is CD&R Investment Associates VII, Ltd.; (ii) 14,682,792 shares of common stock held by Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P., whose general partner is CD&R Associates VII (Co-Investment), Ltd., whose sole stockholder is CD&R Associates VII, L.P., whose general partner is CD&R Investment Associates VII, Ltd.; (iii) 10,500,000 shares of common stock held by CDR SVM Co-Investor L.P., whose general partner is CDR SVM Co-Investor GP Limited, whose sole stockholder is Clayton, Dubilier & Rice Fund VII, L.P.; (iv) 5,000,000 shares of common stock held by CDR SVM Co-Investor No. 2 L.P., whose general partner is CDR SVM Co-Investor No. 2 GP Limited, whose sole stockholder is Clayton, Dubilier & Rice Fund VII, L.P.; and (v) 427,208 shares of common stock held by CD&R Parallel Fund VII, L.P., whose general partner is CD&R Parallel Fund Associates VII, Ltd., CD&R Investment Associates VII, Ltd. and CD&R Parallel Fund Associates VII, Ltd. are each managed by a two-person board of directors, Donald J. Gogel and Kevin J. Conway, as the directors of each of CD&R Investment Associates VII, Ltd. and CD&R Parallel Fund Associates VII, Ltd., may be deemed to share beneficial ownership of

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    the shares shown as beneficially owned by Clayton, Dubilier & Rice Fund VII, L.P., Clayton Dubilier & Rice Fund VII (Co-Investment), L.P., CDR SVM Co-Investor L.P., CDR SVM Co-Investor No. 2 L.P. and CD&R Parallel Fund VII, L.P. Such persons expressly disclaim such beneficial ownership.
    Investment and voting decisions with respect to shares held by each of Clayton, Dubilier & Rice Fund VII, L.P., Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P., CDR SVM Co-Investor L.P., CDR SVM Co-Investor No. 2 L.P. and CD&R Parallel Fund VII, L.P. are made by an investment committee of limited partners of CD&R Associates VII, L.P., currently consisting of more than ten individuals, or the "Investment Committee." All members of the Investment Committee disclaim beneficial ownership of the shares shown as beneficially owned by the funds associated with Clayton, Dubilier & Rice, LLC.
    Each of CD&R Associates VII, Ltd., CD&R Associates VII, L.P. and CD&R Investment Associates VII, Ltd. expressly disclaims beneficial ownership of the shares held by Clayton, Dubilier & Rice Fund VII, L.P., as well as of the shares held by each of Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P., CD&R Parallel Fund VII, L.P., CDR SVM Co-Investor L.P. and CDR SVM Co-Investor No. 2 L.P. Each of CDR SVM Co-Investor GP Limited and CDR SVM No. 2 GP Limited expressly disclaims beneficial ownership of the shares held by each of CDR SVM Co-Investor L.P., Clayton, Dubilier & Rice Fund VII, L.P., Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P., CD&R Parallel Fund VII, L.P., and CDR SVM Co-Investor No. 2 L.P. CD&R Parallel Fund Associates VII, Ltd. expressly disclaims beneficial ownership of the shares held by each of CD&R Parallel Fund VII, L.P., Clayton, Dubilier & Rice Fund VII, L.P., Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P., CDR SVM Co-Investor L.P. and CDR SVM Co-Investor No. 2 L.P.
    The address for each of Clayton, Dubilier & Rice Fund VII, L.P., Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P., CD&R Parallel Fund VII, L.P., CD&R Associates VII, Ltd., CD&R Associates VII, L.P., CD&R Parallel Fund Associates VII, Ltd., CDR SVM Co-Investor L.P., CDR SVM Co-Investor L.P., CDR SVM Co-Investor No. 2 L.P. and CD&R Investment Associates VII, Ltd. is c/o Maples Corporate Services Limited, PO Box 309, Ugland House, South Church Street, George Town, Grand Cayman, KY1-1104, Cayman Islands.

(3)
Represents shares held by 2007 Co-Investment Portfolio L.P., StepStone Capital Partners II Onshore, L.P., StepStone Capital Partners II Cayman Holding, L.P., and StepStone Co-Investment (ServiceMaster) LLC. The address for each of 2007 Co-Investment Portfolio L.P., StepStone Capital Partners II Onshore, L.P., StepStone Capital Partners II Cayman Holding, L.P. and StepStone Co-Investment (ServiceMaster) LLC, is c/o StepStone Group LP, 4350 LaJolla Village Drive, Suite 800, San Diego, CA 92122.

(4)
JPMorgan Chase Funding Inc. is an affiliate of JPMorgan Chase & Co. The address for JPMorgan Chase Funding Inc. is 270 Park Avenue, New York, NY 10017.

(5)
Represents shares held by Ridgemont Partners Secondary Fund I, L.P. The address for Ridgemont Partners Secondary Fund I, L.P. is c/o Ridgemont Partners Management, LLC, 150 North College Street, Suite 2500, Charlotte, NC 28202. Ridgemont Secondary Management I, L.P. is the sole general partner of Ridgemont Partners Secondary Fund I, L.P. and may therefore be deemed to be the beneficial owner of the shares, and its address is c/o Ridgemont Partners Management, LLC, 150 North College Street, Suite 2500, Charlotte, NC 28202. Ridgemont Secondary Management I, LLC is the sole general partner of Ridgemont Secondary Management I, L.P. and may therefore also be deemed to be the beneficial owner of the shares, and its address is c/o Ridgemont Partners Management, LLC, 150 North College Street, Suite 2500, Charlotte, NC 28202. A majority of the following members of Ridgemont Secondary Management I, LLC have the authority to vote or dispose of the shares held by Ridgemont Partners Secondary Fund

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    I, L.P.: J. Travis Hain, Walker L. Poole, Robert H. Sheridan, III, Robert L. Edwards, Jr., John A. Shimp and George E. Morgan, III. The address for each of the members of Ridgemont Secondary Management I, LLC is c/o Ridgemont Partners Management, LLC, 150 North College Street, Suite 2500, Charlotte, NC 28202. Ridgemont Secondary Management I, L.P., Ridgemont Secondary Management I, LLC and each of the members of Ridgemont Secondary Management I, LLC disclaim beneficial ownership of such shares except to the extent of their respective pecuniary interest therein, if any.

(6)
Does not include common stock held by the CD&R Funds. Ms. Kim and Messrs. Krenicki and Wasserman are directors of ServiceMaster Global Holdings, Inc. and principals of Clayton, Dubilier & Rice, LLC. They expressly disclaim beneficial ownership of the shares held by the CD&R Funds. The address for Ms. Kim and Messrs. Krenicki and Wasserman is 375 Park Avenue, New York, New York 10152.

(7)
Does not include common stock held by investment funds associated with or designated by StepStone Group LP. Mr. Friedman is a director of ServiceMaster and an executive of StepStone Group LP. He disclaims beneficial ownership of the shares held by investment funds associated with or designated by StepStone Group LP. The address for Mr. Friedman is 505 5th Avenue, 17th Floor, New York, NY 10017.

(8)
The business address for these persons is c/o ServiceMaster Global Holdings, Inc., 860 Ridge Lake Boulevard, Memphis, TN 38120.

(9)
Includes shares which the current executive officers have the right to acquire prior to May 20, 2014 through the exercise of stock options or vesting of RSUs as follows: Mr. Barry, 43,750 shares. All current executive officers as a group have the right to acquire 164,088 shares prior to May 20, 2014 through the exercise of stock options or vesting of RSUs.

(10)
The business address for these persons is c/o TruGreen Holding Corporation, 860 Ridge Lake Boulevard, 2nd Floor, Memphis, TN 38120.

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DESCRIPTION OF CAPITAL STOCK

        In connection with this offering, we will amend and restate our certificate of incorporation and by-laws. The following descriptions of our capital stock, amended and restated certificate of incorporation and amended and restated by-laws are intended as summaries only and are qualified in their entirety by reference to our amended and restated certificate of incorporation and amended and restated by-laws, which will become effective upon the completion of this offering and will be filed as exhibits to the registration statement of which this prospectus forms a part and to the applicable provisions of the DGCL.

General

        Upon the closing of this offering, our authorized capital stock will consist of 2,000,000,000 shares of common stock, par value $0.01 per share and 200,000,000 shares of undesignated preferred stock, par value $0.01 per share. Upon the closing of this offering, there will be             shares of our common stock issued and outstanding (assuming that the underwriters do not exercise their option to purchase additional shares), not including            shares of our common stock issuable upon exercise of outstanding stock options and            shares of our common stock subject to outstanding restricted stock units.

Common Stock

        Holders of common stock will be entitled:

    to cast one vote for each share held of record on all matters submitted to a vote of the stockholders;

    to receive, on a pro rata basis, dividends and distributions, if any, that our board of directors may declare out of legally available funds, subject to preferences that may be applicable to preferred stock, if any, then outstanding; and

    upon our liquidation, dissolution or winding up, to share equally and ratably in any assets remaining after the payment of all debt and other liabilities, subject to the prior rights, if any, of holders of any outstanding shares of preferred stock.

        Our ability to pay dividends on our common stock is subject to our subsidiaries' ability to pay dividends to us, which is in turn subject to the restrictions set forth in the Credit Facilities and the indenture governing the 2020 Notes. See "Dividend Policy."

        The holders of our common stock will not have any preemptive, cumulative voting, subscription, conversion, redemption or sinking fund rights. The common stock will not be subject to future calls or assessments by us. The rights and privileges of holders of our common stock are subject to any series of preferred stock that we may issue in the future, as described below.

        Before the date of this prospectus, there has been no public market for our common stock.

        As of March 21, 2014, we had approximately 137.9 million shares of common stock outstanding and 105 holders of record of common stock.

Preferred Stock

        Under our amended and restated certificate of incorporation, our board of directors will have the authority, without further action by our stockholders, to issue up to 200,000,000 shares of preferred stock in one or more series and to fix the voting powers, designations, preferences and the relative participating, optional or other special rights and qualifications, limitations and restrictions of each series, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption,

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liquidation preferences and the number of shares constituting any series. Upon completion of the offering, no shares of our authorized preferred stock will be outstanding. Because the board of directors will have the power to establish the preferences and rights of the shares of any additional series of preferred stock, it may afford holders of any preferred stock preferences, powers and rights, including voting and dividend rights, senior to the rights of holders of our common stock, which could adversely affect the holders of the common stock and could delay, discourage or prevent a takeover of us even if a change of control of our company would be beneficial to the interests of our stockholders.

Annual Stockholders Meeting

        Our amended and restated by-laws will provide that annual stockholder meetings will be held at a date, time and place, if any, as exclusively selected by our board of directors. To the extent permitted under applicable law, we may conduct meetings by remote communications, including by webcast.

Voting

        The affirmative vote of a plurality of the shares of our common stock present, in person or by proxy, at the meeting and entitled to vote on the election of directors will decide the election of any directors, and the affirmative vote of a majority of the shares of our common stock present, in person or by proxy, at the meeting and entitled to vote at any annual or special meeting of stockholders will decide all other matters voted on by stockholders, unless the question is one upon which, by express provision of law, under our amended and restated certificate of incorporation, or under our amended and restated by-laws, a different vote is required, in which case such provision will control.

Anti-Takeover Effects of our Certificate of Incorporation and By-Laws

        The provisions of our amended and restated certificate of incorporation and amended and restated by-laws summarized below may have an anti-takeover effect and may delay, defer or prevent a tender offer or takeover attempt that you might consider in your best interest, including an attempt that might result in your receipt of a premium over the market price for your shares. These provisions are also designed, in part, to encourage persons seeking to acquire control of us to first negotiate with our board of directors, which could result in an improvement of their terms.

        Authorized but Unissued Shares of Common Stock.    We are issuing            shares of our authorized common stock in this offering. The remaining shares of authorized and unissued common stock will be available for future issuance without additional stockholder approval. While the additional shares are not designed to deter or prevent a change of control, under some circumstances we could use the additional shares to create voting impediments or to frustrate persons seeking to effect a takeover or otherwise gain control by, for example, issuing those shares in private placements to purchasers who might side with our board of directors in opposing a hostile takeover bid.

        Authorized but Unissued Shares of Preferred Stock.    Under our amended and restated certificate of incorporation, our board of directors will have the authority, without further action by our stockholders, to issue up to 200,000,000 shares of preferred stock in one or more series and to fix the voting powers, designations, preferences and the relative participating, optional or other special rights and qualifications, limitations and restrictions of each series, including dividend rights, dividend rates, conversion rights, voting rights, terms of redemption, liquidation preferences and the number of shares constituting any series. The existence of authorized but unissued preferred stock could reduce our attractiveness as a target for an unsolicited takeover bid since we could, for example, issue shares of preferred stock to parties who might oppose such a takeover bid or shares that contain terms the potential acquiror may find unattractive. This may have the effect of delaying or preventing a change of control, may discourage bids for the common stock at a premium over the market price of the common

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stock, and may adversely affect the market price of, and the voting and other rights of the holders of, our common stock.

        Classified Board of Directors.    Upon completion of this offering, in accordance with the terms of our amended and restated certificate of incorporation, our board of directors will be divided into three classes, Class I, Class II and Class III, with members of each class serving staggered three-year terms. Under our amended and restated certificate of incorporation, our board of directors will consist of such number of directors as may be determined from time to time by resolution of the board of directors, but in no event may the number of directors be less than one. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. Our amended and restated certificate of incorporation will also provide that any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by the affirmative vote of a majority of our directors then in office, even if less than a quorum, or by a sole remaining director, subject to our amended stockholders agreement with respect to the director designation rights of the CD&R Funds and the StepStone Funds. Any director elected to fill a vacancy will hold office until such director's successor shall have been duly elected and qualified or until such director's earlier death, resignation or removal. Our classified board of directors could have the effect of delaying or discouraging an acquisition of us or a change in our management.

        Removal of Directors.    Our amended and restated certificate of incorporation will provide that directors may be removed with or without cause at any time upon the affirmative vote of holders of at least a majority of the outstanding shares of common stock then entitled to vote at an election of directors until the CD&R Funds and the StepStone Funds cease to collectively own at least 40% of the outstanding shares of our common stock. Thereafter, our amended and restated certificate of incorporation will provide that directors may be removed only for cause upon the affirmative vote of holders of at least a majority of the outstanding shares of common stock then entitled to vote at an election of directors.

        Special Meetings of Stockholders.    Our amended and restated certificate of incorporation will provide that a special meeting of stockholders may be called only by the Chairman of our board of directors or by a resolution adopted by a majority of our board of directors. Special meetings may also be called by our corporate secretary at the request of the holders of at least a majority of the outstanding shares of our common stock until the CD&R Funds and the StepStone Funds cease to collectively own at least 40% of the outstanding shares of our common stock. Thereafter, stockholders will not be permitted to call a special meeting of stockholders.

        Stockholder Advance Notice Procedure.    Our amended and restated by-laws will establish an advance notice procedure for stockholders to make nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders. The amended and restated by-laws will provide that any stockholder wishing to nominate persons for election as directors at, or bring other business before, an annual meeting must deliver to our corporate secretary a written notice of the stockholder's intention to do so. These provisions may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed. We expect that these provisions may also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company. To be timely, the stockholder's notice must be delivered to our corporate secretary at our principal executive offices not less than 90 days nor more than 120 days before the first anniversary date of the annual meeting for the preceding year; provided, however, that in the event that the annual meeting is set for a date that is more than 30 days before or more than 70 days after the first anniversary date of the preceding year's annual meeting, a stockholder's notice must be delivered to our corporate secretary (x) not less than 90 days nor more than 120 days prior to the meeting or (y) no later than the

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close of business on the 10th day following the day on which a public announcement of the date of the meeting is first made by us.

        No Stockholder Action by Written Consent.    Our amended and restated certificate of incorporation will provide that stockholder action may be taken only at an annual meeting or special meeting of stockholders, provided that stockholder action may be taken by written consent in lieu of a meeting until the CD&R Funds and the StepStone Funds cease to collectively own at least 40% of the outstanding shares of our common stock.

        Amendments to Certificate of Incorporation and By-Laws.    Our amended and restated certificate of incorporation will provide that our amended and restated certificate of incorporation may be amended by both the affirmative vote of a majority of our board of directors and the affirmative vote of the holders of a majority of the outstanding shares of our common stock then entitled to vote at any annual or special meeting of stockholders; provided that, at any time when the CD&R Funds and the StepStone Funds collectively own less than 40% of the outstanding shares of our common stock, specified provisions of our amended and restated certificate of incorporation may not be amended, altered or repealed unless the amendment is approved by the affirmative vote of the holders of at least 662/3% of the outstanding shares of our common stock then entitled to vote at any annual or special meeting of stockholders, including the provisions governing:

    liability and indemnification of directors;

    corporate opportunities;

    elimination of stockholder action by written consent if the CD&R Funds and the StepStone Funds cease to collectively own at least 40% of the outstanding shares of our common stock;

    prohibition on the rights of stockholders to call a special meeting if the CD&R Funds and the StepStone Funds cease to collectively own at least 40% of the outstanding shares of our common stock;

    removal of directors for cause if the CD&R Funds and the StepStone Funds cease to collectively own at least 40% of our outstanding common stock;

    classified board of directors; and

    required approval of the holders of at least 662/3% of the outstanding shares of our common stock to amend our amended and restated by-laws and certain provisions of our amended and restated certificate of incorporation if the CD&R Funds and the StepStone Funds cease to collectively own at least 40% of the outstanding shares of our common stock.

        In addition, our amended and restated by-laws may be amended, altered or repealed, or new by-laws may be adopted, by the affirmative vote of a majority of the board of directors, or by the affirmative vote of the holders of (x) as long as the CD&R Funds and the StepStone Funds own at least 40% of the outstanding shares of our common stock, at least a majority, and (y) thereafter, at least 662/3%, of the outstanding shares of our common stock then entitled to vote at any annual or special meeting of stockholders.

        These provisions make it more difficult for any person to remove or amend any provisions in our amended and restated certificate of incorporation and amended and restated by-laws that may have an anti-takeover effect.

        Section 203 of the Delaware General Corporation Law.    In our amended and restated certificate of incorporation, we will elect not to be governed by Section 203 of the DGCL, as permitted under and pursuant to subsection (b)(3) of Section 203. Section 203 prohibits a publicly held Delaware corporation from engaging in a business combination, such as a merger, with a person or group owning

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15% or more of the corporation's outstanding voting stock for a period of three years following the date the person became an interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Accordingly, we will not be subject to any anti-takeover effects of Section 203.

Limitations on Liability and Indemnification

        Our amended and restated certificate of incorporation will contain provisions permitted under DGCL relating to the liability of directors. These provisions will eliminate a director's personal liability for monetary damages resulting from a breach of fiduciary duty, except in circumstances involving:

    any breach of the director's duty of loyalty;

    acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law;

    Section 174 of the DGCL (unlawful dividends); or

    any transaction from which the director derives an improper personal benefit.

        The principal effect of the limitation on liability provision is that a stockholder will be unable to prosecute an action for monetary damages against a director unless the stockholder can demonstrate a basis for liability for which indemnification is not available under the DGCL. These provisions, however, should not limit or eliminate our rights or any stockholder's rights to seek non-monetary relief, such as an injunction or rescission, in the event of a breach of a director's fiduciary duty. These provisions will not alter a director's liability under federal securities laws. The inclusion of this provision in our amended and restated certificate of incorporation may discourage or deter stockholders or management from bringing a lawsuit against directors for a breach of their fiduciary duties, even though such an action, if successful, might otherwise have benefited us and our stockholders. In addition, your investment may be adversely affected to the extent we pay costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.

        Our amended and restated certificate of incorporation and our amended and restated by-laws will require us to indemnify and advance expenses to our directors and officers to the fullest extent not prohibited by the DGCL and other applicable law, except in the case of a proceeding instituted by the director without the approval of our board of directors. Our amended and restated certificate of incorporation and our amended and restated by-laws will provide that we are required to indemnify our directors and executive officers, to the fullest extent permitted by law, for all judgments, fines, settlements, legal fees and other expenses incurred in connection with pending or threatened legal proceedings because of the director's or officer's positions with us or another entity that the director or officer serves at our request, subject to various conditions, and to advance funds to our directors and officers to enable them to defend against such proceedings. To receive indemnification, the director or officer must have been successful in the legal proceeding or have acted in good faith and in what was reasonably believed to be a lawful manner in our best interest and, with respect to any criminal proceeding, have had no reasonable cause to believe his or her conduct was unlawful.

        Prior to the completion of this offering, we will enter into an indemnification agreement with each of our directors. The indemnification agreement will provide our directors with contractual rights to the indemnification and expense advancement rights provided under our amended and restated by-laws, as well as contractual rights to additional indemnification as provided in the indemnification agreement.

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Corporate Opportunities

        Our amended and restated certificate of incorporation will provide that we, on our behalf and on behalf of our subsidiaries, renounce any interest or expectancy in, or in being offered an opportunity to participate in, corporate opportunities, that are from time to time presented to the CD&R Funds and the StepStone Funds or any of their respective officers, directors, employees, agents, stockholders, members, partners, affiliates or subsidiaries (other than us and our subsidiaries), even if the opportunity is one that we or our subsidiaries might reasonably be deemed to have pursued or had the ability or desire to pursue if granted the opportunity to do so. Neither the CD&R Funds, the StepStone Funds nor their respective officers, directors, employees, agents, stockholders, members, partners, affiliates or subsidiaries will generally be liable to us or any of our subsidiaries for breach of any fiduciary or other duty, as a director or otherwise, by reason of the fact that such person pursues or acquires such corporate opportunity, directs such corporate opportunity to another person or fails to present such corporate opportunity, or information regarding such corporate opportunity, to us or our subsidiaries unless, in the case of any such person who is a director or officer of ServiceMaster, such corporate opportunity is expressly offered to such director or officer in writing solely in his or her capacity as a director or officer of ServiceMaster. Stockholders will be deemed to have notice of and consented to this provision of our amended and restated certificate of incorporation.

Choice of Forum

        Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the DGCL or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. We may consent in writing to alternative forums. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum.

Market Listing

        We have applied to list the common stock on the    under the symbol "SERV".

Transfer Agent and Registrar

        Upon the completion of this offering, the transfer agent and registrar for our common stock will be    .

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SHARES AVAILABLE FOR FUTURE SALE

        Immediately prior to this offering, there was no public market for our common stock. Sales of substantial amounts of our common stock in the public market could adversely affect prevailing market prices of our common stock. Some shares of our common stock will not be available for sale for a certain period of time after this offering because they are subject to contractual and legal restrictions on resale some of which are described below. Sales of substantial amounts of common stock in the public market after these restrictions lapse, or the perception that these sales could occur, could adversely affect the prevailing market price and our ability to raise equity capital in the future.

Sales of Restricted Securities

        After this offering,            shares of our common stock will be outstanding, assuming that the underwriters do not exercise their option to purchase additional shares. Of these shares, all of the shares sold in this offering will be freely tradable without restriction under the Securities Act, unless purchased by our "affiliates," as that term is defined in Rule 144 under the Securities Act. The remaining            shares of our common stock that will be outstanding after this offering are "restricted securities" within the meaning of Rule 144 under the Securities Act. Restricted securities may be sold in the public market only if they are registered under the Securities Act or are sold pursuant to an exemption from registration under Rule 144 or Rule 701 under the Securities Act, which are summarized below. Subject to the lock-up agreements described below, shares held by our affiliates that are not restricted securities or that have been owned for more than one year may be sold subject to compliance with Rule 144 of the Securities Act without regard to the prescribed one-year holding period under Rule 144.

Stock Options

        Upon completion of this offering, we intend to file one or more registration statements under the Securities Act to register the shares of common stock to be issued under our stock option plans and, as a result, all shares of common stock acquired upon exercise of stock options and other equity-based awards granted under these plans will, subject to a 180-day lock-up period, also be freely tradable under the Securities Act unless purchased by our affiliates. A total of             million shares of common stock are subject to outstanding stock options and stock units previously granted under our stock incentive plans as of            2014, and an additional             million shares of common stock are available for grants of additional equity awards in the future under our stock incentive plans.

Lock-up Agreements

        Upon completion of the offering, our directors and executive officers, and stockholders currently representing substantially all of the outstanding shares of our common stock will have signed lock-up agreements, under which they will agree not to sell, transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock without the prior written consent of            for a period of 180 days, subject to possible extension under certain circumstances, after the date of this prospectus. These agreements are described below under "Underwriting." In addition, the stockholders agreement contains a lock-up provision under which the Equity Sponsors have agreed not to sell, transfer or dispose of, directly or indirectly, any shares of our common stock in a public offering until January 15, 2015.

Registration Rights Agreement

        Stockholders currently representing substantially all of the outstanding shares of our common stock will have the right to require us to register shares of common stock for resale in some circumstances. See "Certain Relationships and Related Party Transactions—Registration Rights Agreement."

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Rule 144

        In general, under Rule 144, as currently in effect, a person (or persons whose shares are aggregated) who is not deemed to be or have been one of our affiliates for purposes of the Securities Act at any time during 90 days preceding a sale and who has beneficially owned the shares proposed to be sold for at least six months, including the holding period of any prior owner other than an affiliate, is entitled to sell such shares without registration, subject to compliance with the public information requirements of Rule 144. If such a person has beneficially owned the shares proposed to be sold for at least one year, including the holding period of a prior owner other than an affiliate, then such person is entitled to sell such shares without complying with any of the requirements of Rule 144.

        In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates, who have met the six-month holding period for beneficial ownership of "restricted shares" of our common stock, are entitled to sell within any three-month period, a number of shares that does not exceed the greater of:

    1% of the number of shares of our common stock then outstanding, which will equal approximately        shares immediately after this offering; and

    the average reported weekly trading volume of our common stock on the    during the four calendar weeks preceding the date of filing a Notice of Proposed Sale of Securities Pursuant to Rule 144 with respect to the sale.

        Sales under Rule 144 by our affiliates or persons selling shares on behalf of our affiliates are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about us. The sale of these shares, or the perception that sales will be made, could adversely affect the price of our common stock after this offering because a great supply of shares would be, or would be perceived to be, available for sale in the public market.

Rule 701

        Any of our employees, officers or directors who acquired shares under a written compensatory plan or contract may be entitled to sell them in reliance on Rule 701. Rule 701 permits affiliates to sell their Rule 701 shares under Rule 144 without complying with the holding period requirements of Rule 144. Rule 701 further provides that non-affiliates may sell these shares in reliance on Rule 144 without complying with the holding period, public information, volume limitation or notice provisions of Rule 144. However, all shares issued under Rule 701 are subject to lock-up agreements and will only become eligible for sale when the 180-day lock-up agreements expire.

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MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS

        The following is a discussion of material U.S. federal income tax considerations relating to the purchase, ownership and disposition of our common stock by Non-U.S. Holders (as defined below) that purchase our common stock pursuant to this offering and hold such common stock as a capital asset. This discussion is based on the Code, U.S. Treasury regulations promulgated or proposed thereunder, and administrative and judicial interpretations thereof, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect, or to different interpretation. This discussion does not address all of the U.S. federal income tax considerations that may be relevant to specific Non-U.S. Holders in light of their particular circumstances or to Non-U.S. Holders subject to special treatment under U.S. federal income tax law (such as banks, insurance companies, dealers in securities or other Non-U.S. Holders that generally mark their securities to market for U.S. federal income tax purposes, foreign governments, international organizations, tax-exempt entities, certain former citizens or residents of the United States, or Non-U.S. Holders that hold our common stock as part of a straddle, hedge, conversion or other integrated transaction). This discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal gift or alternative minimum tax considerations.

        As used in this discussion, the term "Non-U.S. Holder" means a beneficial owner of our common stock that, for U.S. federal income tax purposes, is:

    an individual who is neither a citizen nor a resident of the United States;

    a corporation that is not created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

    an estate that is not subject to U.S. federal income tax on income from non-U.S. sources which is not effectively connected with the conduct of a trade or business in the United States; or

    a trust unless (i) a court within the United States is able to exercise primary supervision over its administration and one or more U.S. persons have the authority to control all of its substantial decisions or (ii) it has in effect a valid election under applicable U.S. Treasury regulations to be treated as a U.S. person.

        If an entity treated as a partnership for U.S. federal income tax purposes invests in our common stock, the U.S. federal income tax considerations relating to such investment will depend in part upon the status and activities of such entity and the particular partner. Any such entity should consult its own tax advisor regarding the U.S. federal income tax considerations applicable to it and its partners relating to the purchase, ownership and disposition of our common stock.

        PERSONS CONSIDERING AN INVESTMENT IN OUR COMMON STOCK SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE AND LOCAL AND NON-U.S. INCOME, ESTATE AND OTHER TAX CONSIDERATIONS RELATING TO THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

Distributions on Common Stock

        If we make a distribution of cash or other property (other than certain pro rata distributions of our common stock or rights to acquire our common stock) in respect of a share of our common stock, the distribution generally will be treated as a dividend to the extent it is paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If the amount of such distribution exceeds our current and accumulated earnings and profits, such excess generally will be treated first as a tax-free return of capital to the extent of the Non-U.S. Holder's adjusted tax basis in such share of our common stock, and then as capital gain (which will be treated in

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the manner described below under "Sale, Exchange or Other Disposition of Common Stock"). Distributions treated as dividends on our common stock that are paid to or for the account of a Non-U.S. Holder generally will be subject to U.S. federal withholding tax at a rate of 30%, or at a lower rate if provided by an applicable tax treaty and the Non-U.S. Holder provides the documentation (generally, IRS Form W-8BEN) required to claim benefits under such tax treaty to the applicable withholding agent. Special documentation requirements apply to claim benefits under such a tax treaty when our common stock is held though certain foreign intermediaries or Non-U.S. entities that are pass through entities.

        If, however, a dividend is effectively connected with the conduct of a trade or business in the United States by a Non-U.S. Holder (and, if required by an applicable income tax treaty, is attributable to a U.S. permanent establishment), such dividend generally will not be subject to the 30% U.S. federal withholding tax if such Non-U.S. Holder provides the appropriate documentation (generally, IRS Form W-8ECI) to the applicable withholding agent. Instead, such Non-U.S. Holder generally will be subject to U.S. federal income tax on such dividend in substantially the same manner as a U.S. person (except as provided by an applicable tax treaty). In addition, a Non-U.S. Holder that is treated as a corporation for U.S. federal income tax purposes may be subject to a branch profits tax at a rate of 30% (or a lower rate if provided by an applicable tax treaty) on its effectively connected income for the taxable year, subject to certain adjustments.

        The foregoing discussion is subject to the discussion below under "—FATCA Withholding" and "—Information Reporting and Backup Withholding."

Sale, Exchange or Other Disposition of Common Stock

        A Non-U.S. Holder generally will not be subject to U.S. federal income tax on any gain recognized on the sale, exchange or other disposition of our common stock unless:

    (i)
    such gain is effectively connected with the conduct of a trade or business in the United States by such Non-U.S. Holder, in which event such Non-U.S. Holder generally will be subject to U.S. federal income tax on such gain in substantially the same manner as a U.S. person (except as provided by an applicable tax treaty) and, if it is treated as a corporation for U.S. federal income tax purposes, may also be subject to a branch profits tax at a rate of 30% (or a lower rate if provided by an applicable tax treaty);

    (ii)
    such Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year of such sale, exchange or other disposition and certain other conditions are met, in which event such gain (net of certain U.S. source losses) generally will be subject to U.S. federal income tax at a rate of 30% (except as provided by an applicable tax treaty); or

    (iii)
    we are or have been a "United States real property holding corporation" for U.S. federal income tax purposes at any time during the shorter of (x) the five-year period ending on the date of such sale, exchange or other disposition and (y) such Non-U.S. Holder's holding period with respect to such common stock, and certain other conditions are met.

        Generally, a corporation is a "United States real property holding corporation" if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business (all as determined for U.S. federal income tax purposes). We believe that we presently are not, that we have not been at any time during the five-year period ending as of the date of this offering and we do not presently anticipate that we will become, a United States real property holding corporation.

        The foregoing discussion is subject to the discussion below under "—FATCA Withholding" and "—Information Reporting and Backup Withholding."

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FATCA Withholding

        Under the Foreign Account Tax Compliance Act provisions of the Code and related U.S. Treasury guidance, or "FATCA," a withholding tax of 30% will be imposed in certain circumstances on payments of (i) dividends on our common stock on or after July 1, 2014, and (ii) gross proceeds from the sale or other disposition of our common stock on or after January 1, 2017. In the case of payments made to a "foreign financial institution" (such as a bank, a broker or an investment fund), as a beneficial owner or as an intermediary, this tax generally will be imposed, subject to certain exceptions, unless such institution (i) has agreed to (and does) comply with the requirements of an agreement with the United States, or an "FFI Agreement," or (ii) is required to (and does) comply with FATCA pursuant to applicable foreign law enacted in connection with an intergovernmental agreement between the United States and a foreign jurisdiction, or an "IGA," in either case to, among other things, collect and provide to the U.S. tax authorities or other relevant tax authorities certain information regarding U.S. account holders of such institution. In the case of payments made to a foreign entity that is not a financial institution (as a beneficial owner), the tax generally will be imposed, subject to certain exceptions, unless such entity provides the withholding agent with a certification that it does not have any "substantial" U.S. owner (generally, any specified U.S. person that directly or indirectly owns more than a specified percentage of such entity) or that identifies its substantial U.S. owners. If our common stock is held through a foreign financial institution that has agreed to comply with the requirements of an FFI Agreement, such foreign financial institution (or, in certain cases, a person paying amounts to such foreign financial institution) generally will be required, subject to certain exceptions, to withhold tax on payments of dividends and proceeds described above made to (i) a person (including an individual) that fails to comply with certain information requests or (ii) a foreign financial institution that has not agreed to comply with the requirements of an FFI Agreement, unless such foreign financial institution is required to (and does) comply with FATCA pursuant to applicable foreign law enacted in connection with an IGA. Each Non-U.S. Holder should consult its own tax advisor regarding the application of FATCA to the ownership and disposition of our common stock.

Information Reporting and Backup Withholding

        Amounts treated as payments of dividends on our common stock paid to a Non-U.S. Holder and the amount of any U.S. federal tax withheld from such payments generally must be reported annually to the IRS and to such Non-U.S. Holder by the applicable withholding agent.

        The information reporting and backup withholding rules that apply to payments of dividends to certain U.S. persons generally will not apply to payments of dividends on our common stock to a Non-U.S. Holder if such Non-U.S. Holder certifies under penalties of perjury that it is not a U.S. person (generally by providing an IRS Form W-8BEN to the applicable withholding agent) or otherwise establishes an exemption.

        Proceeds from the sale, exchange or other disposition of our common stock by a Non-U.S. Holder effected outside the United States through a non-U.S. office of a non-U.S. broker generally will not be subject to the information reporting and backup withholding rules that apply to payments to certain U.S. persons, provided that the proceeds are paid to the Non-U.S. Holder outside the United States. However, proceeds from the sale, exchange or other disposition of our common stock by a Non-U.S. Holder effected through a non-U.S. office of a non-U.S. broker with certain specified U.S. connections or a U.S. broker generally will be subject to these information reporting rules (but generally not to these backup withholding rules), even if the proceeds are paid to such Non-U.S. Holder outside the United States, unless such Non-U.S. Holder certifies under penalties of perjury that it is not a U.S. person (generally by providing an IRS Form W-8BEN to the applicable withholding agent) or otherwise establishes an exemption. Proceeds from the sale, exchange or other disposition of our common stock by a Non-U.S. Holder effected through a U.S. office of a broker generally will be subject to these information reporting and backup withholding rules unless such Non-U.S. Holder certifies under

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penalties of perjury that it is not a U.S. person (generally by providing an IRS Form W-8BEN to the applicable withholding agent) or otherwise establishes an exemption.

        Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against a Non-U.S. Holder's U.S. federal income tax liability if the required information is furnished by such Non-U.S. Holder on a timely basis to the IRS.

U.S. Federal Estate Tax

        Shares of our common stock owned or treated as owned by an individual Non-U.S. Holder at the time of such Non-U.S. Holder's death will be included in such Non-U.S. Holder's gross estate for U.S. federal estate tax purposes and may be subject to U.S. federal estate tax unless an applicable estate tax treaty provides otherwise.

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UNDERWRITING

        We are offering the shares of common stock described in this prospectus through a number of underwriters. J.P. Morgan Securities LLC, Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. and Morgan Stanley & Co. LLC are acting as representatives of the underwriters. We will enter into an underwriting agreement with the underwriters. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriters, and each underwriter has severally agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus, the number of shares of common stock listed next to its name in the following table:

Name
  Number of
Shares

J.P. Morgan Securities LLC

   

Credit Suisse Securities (USA) LLC

   

Goldman, Sachs & Co. 

   

Morgan Stanley & Co. LLC

   
     

Total

   
     
     

        The underwriters are committed to purchase all the common shares offered by us if they purchase any shares, other than those shares covered by the underwriters' option to purchase additional shares described below. The underwriting agreement will also provide that if an underwriter defaults, the purchase commitments of non-defaulting underwriters may also be increased or the offering may be terminated.

        The underwriters have an option to buy on a pro rata basis up to            additional shares of common stock from us at the initial public offering price less the underwriting discounts and commissions to cover sales of shares by the underwriters which exceed the number of shares specified in the table above. The underwriters have 30 days from the date of this prospectus to exercise this option. If any additional shares of common stock are purchased, the underwriters will offer the additional shares on the same terms as those on which the shares are being offered.

        The underwriters propose to offer the common shares directly to the public at the initial public offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $        per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $        per share from the initial public offering price. After the initial public offering of the shares, the offering price and other selling terms may be changed by the underwriters. Sales of shares made outside of the United States may be made by affiliates of the underwriters.

        The underwriting fee is equal to the public offering price per share of common stock less the amount paid by the underwriters to us per share of common stock. The underwriting fee is $        per share. The following table shows the per share and total underwriting discounts and commissions to be paid to the underwriters assuming both no exercise and full exercise of the underwriters' option to purchase additional shares.

 
  Without
exercise of option
  With
exercise of option
 

Per share

  $     $    

Total

  $     $    

        We estimate that the total expenses of this offering, including registration, filing and listing fees, printing fees and legal and accounting expenses, but excluding the underwriting discounts and

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commissions, will be approximately $        . We have agreed to reimburse the underwriters for expenses up to $        related to clearance of this offering with the Financial Regulatory Authority, Inc., or "FINRA." The underwriters have agreed to reimburse us in an amount of $        for certain expenses of the offering.

        A prospectus in electronic format may be made available on the web sites maintained by one or more underwriters, or selling group members, if any, participating in the offering. The underwriters may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters and selling group members that may make Internet distributions on the same basis as other allocations.

        We have agreed that we will not (i) offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose, except as provided in the underwriting agreement, of any of our securities that are substantially similar to the securities offered hereby, including but not limited to any options or warrants to purchase shares of our common stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, shares of our common stock or any such substantially similar securities, or (ii) enter into any hedging or other transaction which is designed or which reasonably could be expected to lead to or result in a sale or disposition of our common stock (other than pursuant to employee stock option plans existing on, or upon the conversion, exercise or exchange of any option or convertible or exchangeable securities outstanding as of, the date of this prospectus), in each case without the prior written consent of                    for a period of 180 days after the date of this prospectus. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the release of the earnings results or the announcement of the material news or material event.

        Our directors, executive officers and stockholders currently representing substantially all of the outstanding shares of our common stock will enter into lock-up agreements with the underwriters prior to the commencement of this offering pursuant to which each of these persons or entities, with limited exceptions, for a period of 180 days after the date of this prospectus, may not, without the prior written consent of            , offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of our common stock, or any options or warrants to purchase any shares of our common stock, or any securities convertible into, exchangeable for or that represent the right to receive shares of our common stock. Notwithstanding the foregoing, if (1) during the last 17 days of the 180-day restricted period, we issue an earnings release or announce material news or a material event; or (2) prior to the expiration of the 180-day restricted period, we announce that we will release earnings results during the 16-day period beginning on the last day of the 180-day period, the restrictions described above shall continue to apply until the expiration of the 18-day period beginning on the release of the earnings results or the announcement of the material news or material event.

        We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act, or contribute payments that the underwriters may be required to make in that respect.

        We will apply to have our common stock approved for listing on the            under the symbol "SERV".

        In connection with this offering, the underwriters may engage in stabilizing transactions, which involves making bids for, purchasing and selling shares of common stock in the open market for the purpose of preventing or retarding a decline in the market price of the common stock while this

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offering is in progress. These stabilizing transactions may include making short sales of the common stock, which involves the sale by the underwriters of a greater number of shares of common stock than they are required to purchase in this offering, and purchasing shares of common stock on the open market to cover positions created by short sales. Short sales may be "covered" shorts, which are short positions in an amount not greater than the underwriters' option to purchase additional shares referred to above, or may be "naked" shorts, which are short positions in excess of that amount. The underwriters may close out any covered short position either by exercising their option to purchase additional shares, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares through the over-allotment option. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this offering. To the extent that the underwriters create a naked short position, they will purchase shares in the open market to cover the position.

        The underwriters have advised us that, pursuant to Regulation M of the Securities Act, they may also engage in other activities that stabilize, maintain or otherwise affect the price of the common stock, including the imposition of penalty bids. This means that if the representatives of the underwriters purchase common stock in the open market in stabilizing transactions or to cover short sales, the representatives can require the underwriters that sold those shares as part of this offering to repay the underwriting discount received by them.

        These activities may have the effect of raising or maintaining the market price of the common stock or preventing or retarding a decline in the market price of the common stock, and, as a result, the price of the common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the            , in the over-the-counter market or otherwise.

        Prior to this offering, there has been no public market for our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In determining the initial public offering price, we and the representatives of the underwriters expect to consider a number of factors including:

    the information set forth in this prospectus and otherwise available to the representatives;

    our prospects and the history and prospects for the industry in which we compete;

    an assessment of our management;

    our prospects for future earnings;

    the general condition of the securities markets at the time of this offering; and

    the recent market prices of, and demand for, publicly traded common stock of generally comparable companies.

        Neither we nor the underwriters can assure investors that an active trading market will develop for our common shares, or that the shares will trade in the public market at or above the initial public offering price.

        The underwriters do not expect sales to discretionary accounts to exceed 5 percent of the total number of shares offered.

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        Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.

Selling Restrictions

United Kingdom

        This document is only being distributed to and is only directed at (i) persons who are outside the United Kingdom or (ii) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the "Order," or (iii) high net worth entities, and other persons to whom it may lawfully be communicated, falling with Article 49(2)(a) to (d) of the Order (all such persons together being referred to as "relevant persons"). The securities are only available to, and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such securities will be engaged in only with, relevant persons. Any person who is not a relevant person should not act or rely on this document or any of its contents.

European Economic Area

        In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, each, a "Relevant Member State," from and including the date on which the European Union Prospectus Directive, or the "EU Prospectus Directive," was implemented in that Relevant Member State, or the "Relevant Implementation Date," an offer of securities described in this prospectus may not be made to the public in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the EU Prospectus Directive, except that, with effect from and including the Relevant Implementation Date, an offer of securities described in this prospectus may be made to the public in that Relevant Member State at any time:

        (a)   to any legal entity which is a qualified investor as defined in the Prospectus Directive;

        (b)   to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the relevant dealer or dealers nominated by us for any such offer; or

        (c)   in any other circumstances falling within Article 3(2) of the Prospectus Directive,

        provided that no such offer of shares shall require us or the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive.

        For the purposes of this provision, the expression an "offer of shares to the public" in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression Prospectus

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Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.

Other Relationships

        The underwriters and their affiliates have provided in the past to us and our affiliates and may provide from time to time in the future certain commercial banking, financial advisory, investment banking and other services for us and such affiliates in the ordinary course of their business, for which they have received and may continue to receive customary fees and commissions. In addition, from time to time, certain of the underwriters and their affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

        J.P. Morgan Securities LLC and affiliates of Goldman, Sachs & Co. and Morgan Stanley & Co. LLC acted as joint lead arrangers, and affiliates of the underwriters act as lenders, under our Term Facilities and our Revolving Credit Facility. As described under "Use of Proceeds," we intend to redeem a portion of our 2020 Notes from the net proceeds of this offering received by us and will pay such amounts to such underwriters or their respective affiliates in proportion to their respective holdings of 2020 Notes, if any. In addition, each of the underwriters acted as initial purchasers of the 2020 Notes, for which they received customary compensation.

        We intend to retain Solebury Capital LLC, or "Solebury," a FINRA member, to provide certain financial consulting services in connection with this offering. We will agree to pay Solebury, only upon successful completion of this offering, a fee of $            and, at our sole discretion, an additional potential incentive fee of $            . In determining whether we elect to award any or all of the incentive fee, we will consider the level of, and our satisfaction with, the services provided by Solebury throughout the offering process. We also will agree to reimburse Solebury for reasonable and documented travel and other out-of-pocket expenses up to a maximum of $            and will provide indemnification of Solebury. Solebury is not acting as an underwriter and has no contact with any public or institutional investor on behalf of us or the underwriters. In addition, Solebury will not underwrite or purchase any of our common stock in this offering or otherwise participate in any such undertaking.

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VALIDITY OF COMMON STOCK

        The validity of the shares of our common stock offered hereby will be passed upon for us by Debevoise & Plimpton LLP, New York, New York. Various legal matters related to this offering will be passed upon for the underwriters by Simpson Thacher & Bartlett LLP, New York, New York.


EXPERTS

        The financial statements included in this prospectus and the related financial statement schedules included elsewhere in the registration statement have been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their reports appearing herein. Such financial statements and financial statement schedules are included in reliance upon the reports of such firm given upon their authority as experts in accounting and auditing.


WHERE YOU CAN FIND MORE INFORMATION

        We have filed with the SEC a registration statement on Form S-1 with respect to the shares of our common stock being sold in this offering. This prospectus does not contain all of the information set forth in the registration statement and the exhibits thereto because some parts have been omitted in accordance with the rules and regulations of the SEC. You will find additional information about us and the common stock being sold in this offering in the registration statement and the exhibits thereto. For further information with respect to ServiceMaster and the common stock being sold in this offering, reference is made to the registration statement and the exhibits filed therewith. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference. A copy of the registration statement, including the exhibits thereto, may be read and copied at the SEC's Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Information on the operation of the Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an internet site at http://www.sec.gov, from which interested persons can electronically access the registration statement, including the exhibits and any schedules thereto. Copies of the registration statement, including the exhibits and schedules thereto, are also available at your request, without charge, from ServiceMaster Global Holdings, Inc., 860 Ridge Lake Boulevard, Memphis, Tennessee 38120.

        We will be subject to the informational requirements of the Exchange Act and, accordingly, will file annual reports containing financial statements audited by an independent registered public accounting firm, quarterly reports containing unaudited financial statements, current reports, proxy statements and other information with the SEC. You will be able to inspect and copy these reports, proxy statements and other information at the public reference facilities maintained by the SEC at the address noted above. You will also be able to obtain copies of this material from the Public Reference Room of the SEC as described above, or inspect them without charge at the SEC's website. You will also be able to access, free of charge, our reports filed with the SEC (for example, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K and any amendments to those forms) through our website (www.servicemaster.com). Reports filed with or furnished to the SEC will be available as soon as reasonably practicable after they are filed with or furnished to the SEC. None of the information contained on, or that may be accessed through our websites or any other website identified herein is part of, or incorporated into, this prospectus. All website addresses in this prospectus are intended to be inactive textual references only.

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INDEX TO FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
ServiceMaster Global Holdings, Inc.
Memphis, Tennessee

        We have audited the accompanying consolidated statements of financial position of ServiceMaster Global Holdings, Inc., and subsidiaries (the "Company") as of December 31, 2013 and 2012, and the related consolidated statements of operations and comprehensive (loss) income, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ServiceMaster Global Holdings, Inc., and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with accounting principles generally accepted in the United States of America.

/s/ Deloitte & Touche LLP
Memphis, Tennessee
March 24, 2014

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Consolidated Statements of Operations and Comprehensive (Loss) Income

(In thousands, except per share data)

 
  Year Ended December 31,  
 
  2013   2012   2011  

Operating Revenue

  $ 3,188,835   $ 3,193,281   $ 3,205,872  

Cost of services rendered and products sold

    1,906,054     1,861,669     1,813,706  

Selling and administrative expenses

    921,339     872,792     880,769  

Amortization expense

    55,532     65,298     91,352  

Goodwill and trade name impairment

    673,253     908,873     36,700  

Restructuring charges

    20,840     18,177     8,162  

Interest expense

    249,033     246,906     266,813  

Interest and net investment income

    (8,764 )   (7,876 )   (10,952 )

Loss on extinguishment of debt

        55,554      
               

(Loss) Income from Continuing Operations before Income Taxes

    (628,452 )   (828,112 )   119,322  

(Benefit) provision for income taxes

    (123,251 )   (114,595 )   46,594  

Equity in losses of joint venture

    (468 )   (226 )    
               

(Loss) Income from Continuing Operations

    (505,669 )   (713,743 )   72,728  

Loss from discontinued operations, net of income taxes

    (1,135 )   (200 )   (27,016 )
               

Net (Loss) Income

    (506,804 )   (713,943 )   45,712  
               

Other Comprehensive Income, Net of Income Taxes:

                   

Net unrealized gains (losses) on securities

    1,384     965     (695 )

Net unrealized gains on derivative instruments

    2,635     12,239     13,314  

Foreign currency translation

    (3,974 )   (426 )   (1,460 )
               

Other Comprehensive Income, Net of Income Taxes

    45     12,778     11,159  
               

Total Comprehensive (Loss) Income

  $ (506,759 ) $ (701,165 ) $ 56,871  
               
               

Basic (Loss) Earnings Per Share:

                   

(Loss) income from continuing operations

  $ (3.68 ) $ (5.18 ) $ 0.53  

(Loss) income from discontinued operations, net of income taxes

    (0.01 )   (0.00 )   (0.20 )

Net (loss) income

    (3.69 )   (5.18 )   0.33  

Diluted (Loss) Earnings Per Share:

                   

(Loss) income from continuing operations

  $ (3.68 ) $ (5.18 ) $ 0.53  

(Loss) income from discontinued operations, net of income taxes

    (0.01 )   (0.00 )   (0.20 )

Net (loss) income

    (3.69 )   (5.18 )   0.33  

   

See accompanying Notes to the Consolidated Financial Statements.

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Consolidated Statements of Financial Position

(In thousands, except share data)

 
  As of December 31,  
 
  2013   2012  

Assets:

             

Current Assets:

             

Cash and cash equivalents

  $ 494,269   $ 428,650  

Marketable securities

    27,060     19,347  

Receivables, less allowances of $35,076 and $21,347, respectively

    421,346     401,055  

Inventories

    56,323     56,562  

Prepaid expenses and other assets

    64,234     37,932  

Deferred customer acquisition costs

    39,130     33,921  

Deferred taxes

    111,073     107,499  
           

Total Current Assets

    1,213,435     1,084,966  
           

Property and Equipment:

             

At cost

    732,426     633,582  

Less: accumulated depreciation

    (374,315 )   (293,534 )
           

Net Property and Equipment

    358,111     340,048  
           

Other Assets:

             

Goodwill

    2,018,340     2,412,251  

Intangible assets, primarily trade names, service marks and trademarks, net

    2,075,706     2,373,469  

Notes receivable

    22,499     22,419  

Long-term marketable securities

    121,572     126,456  

Other assets

    55,072     10,197  

Debt issuance costs

    40,556     44,951  
           

Total Assets

  $ 5,905,291   $ 6,414,757  
           
           

Liabilities and Shareholders' Equity:

             

Current Liabilities:

             

Accounts payable

  $ 111,466   $ 86,710  

Accrued liabilities:

             

Payroll and related expenses

    75,571     78,502  

Self-insured claims and related expenses

    80,257     83,035  

Accrued interest payable

    51,118     54,156  

Other

    61,728     58,994  

Deferred revenue

    539,338     483,897  

Liabilities of discontinued operations

    1,320     905  

Current portion of long-term debt

    51,399     52,214  
           

Total Current Liabilities

    972,197     898,413  
           

Long-Term Debt

    3,904,130     3,909,039  

Other Long-Term Liabilities:

             

Deferred taxes

    834,325     957,320  

Other long-term obligations, primarily self-insured claims

    171,445     114,855  
           

Total Other Long-Term Liabilities

    1,005,770     1,072,175  
           

Commitments and Contingencies (See Note 9)

             

Shareholders' Equity:

             

Common stock $0.01 par value, authorized 2,000,000,000 shares; issued 148,373,291 and 147,505,554 shares at December 31, 2013 and 2012, respectively

    1,486     1,477  

Additional paid-in capital

    1,522,779     1,513,086  

Retained deficit

    (1,389,791 )   (882,987 )

Accumulated other comprehensive income

    6,611     6,566  
           

Less common stock held in treasury, at cost

    (117,891 )   (103,012 )
           

Total Shareholders' Equity

    23,194     535,130  
           

Total Liabilities and Shareholders' Equity

  $ 5,905,291   $ 6,414,757  
           
           

   

See accompanying Notes to the Consolidated Financial Statements.

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Consolidated Statements of Shareholders' Equity

(In thousands)

 
  Shares   Common
Stock
  Additional
Paid-in
Capital
  Retained
Earnings
(Deficit)
  Accumulated
Other
Comprehensive
Income (Loss)
  Deferred
Share Units
(DSUs)
  Shares   Amount   Total
Equity
 

Balance December 31, 2010

    145,676   $ 1,456   $ 1,484,429   $ (214,756 ) $ (17,371 )   434     (794 ) $ (7,944 ) $ 1,245,814  
                                       

Net income

                      45,712                             45,712  

Other comprehensive income, net of tax

                            11,159                       11,159  
                                       

Total comprehensive income

                      45,712     11,159                       56,871  

Issuance of common stock

    496     5     5,445                                   5,450  

Exercise of stock options

    500     5     4,995                                   5,000  

Vesting of RSUs

    134     1     (467 )                                 (466 )

DSUs converted into common stock

                (424 )               (42 )   42     424      

Repurchase of common stock

                                        (8,601 )   (87,108 )   (87,108 )

Stock-based employee compensation

                8,412                                   8,412  
                                       

Balance December 31, 2011

    146,806   $ 1,467   $ 1,502,390   $ (169,044 ) $ (6,212 )   392     (9,353 ) $ (94,628 ) $ 1,233,973  
                                       

Net loss

                      (713,943 )                           (713,943 )

Other comprehensive income, net of tax

                            12,778                       12,778  
                                       

Total comprehensive loss

                      (713,943 )   12,778                       (701,165 )

Issuance of common stock

    123     2     1,798                                   1,800  

Exercise of stock options

    381     5     3,801                                   3,806  

Vesting of RSUs

    196     3     (1,054 )                                 (1,051 )

DSUs converted into common stock

                (1,345 )               (135 )   135     1,345      

Repurchase of common stock

                                        (657 )   (9,729 )   (9,729 )

Stock-based employee compensation

                7,119                                   7,119  

Other

                377                                   377  
                                       

Balance December 31, 2012

    147,506   $ 1,477   $ 1,513,086   $ (882,987 ) $ 6,566     257     (9,875 ) $ (103,012 ) $ 535,130  
                                       

Net loss

                      (506,804 )                           (506,804 )

Other comprehensive income, net of tax

                            45                       45  
                                       

Total comprehensive loss

                      (506,804 )   45                       (506,759 )

Issuance of common stock

    656     7     6,702                                   6,709  

Exercise of stock options

    80     1     799                                   800  

Vesting of RSUs

    131     1     (532 )                                 (531 )

DSUs converted into common stock

                (945 )               (95 )   95     945      

Repurchase of common stock

                                        (1,251 )   (15,824 )   (15,824 )

Stock-based employee compensation

                4,046                                   4,046  

Other

                (377 )                                 (377 )
                                       

Balance December 31, 2013

    148,373   $ 1,486   $ 1,522,779   $ (1,389,791 ) $ 6,611     162     (11,031 ) $ (117,891 ) $ 23,194  
                                       
                                       

See accompanying Notes to the Consolidated Financial Statements.

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Table of Contents


Consolidated Statements of Cash Flows

(In thousands)

 
  Year Ended December 31,  
 
  2013   2012   2011  

Cash and Cash Equivalents at Beginning of Period

  $ 428,650   $ 338,687   $ 264,690  

Cash Flows from Operating Activities from Continuing Operations:

                   

Net (Loss) Income

    (506,804 )   (713,943 )   45,712  

Adjustments to reconcile net (loss) income to net cash provided from operating activities:

                   

Loss from discontinued operations, net of income taxes

    1,135     200     27,016  

Equity in losses of joint venture

    468     226      

Depreciation expense

    93,580     80,944     72,084  

Amortization expense

    55,532     65,298     91,352  

Amortization of debt issuance costs

    9,970     13,275     13,844  

Loss on extinguishment of debt

        55,554      

Call premium paid on retirement of debt

        (42,893 )    

Premium received on issuance of debt

        3,000      

Deferred income tax (benefit) provision

    (132,117 )   (124,038 )   40,745  

Stock-based compensation expense

    4,046     7,119     8,412  

Goodwill and trade name impairment

    673,253     908,873     36,700  

Restructuring charges

    20,840     18,177     8,162  

Cash payments related to restructuring charges

    (17,847 )   (17,342 )   (7,530 )

Change in working capital, net of acquisitions:

                   

Current income taxes

    (1,009 )   599     (5,872 )

Receivables

    (19,740 )   (23,187 )   (22,888 )

Inventories and other current assets

    (6,103 )   7,096     1,538  

Accounts payable

    17,267     6,495     2,581  

Deferred revenue

    55,329     9,173     22,134  

Accrued liabilities

    (758 )   (40,904 )   (30,438 )

Other, net

    2,069     22,209     1,338  
               

Net Cash Provided from Operating Activities from Continuing Operations

    249,111     235,931     304,890  
               

Cash Flows from Investing Activities from Continuing Operations:

                   

Property additions

    (60,404 )   (73,228 )   (96,540 )

Sale of equipment and other assets

    1,421     2,197     4,605  

Acquisition of The ServiceMaster Company

            (35 )

Other business acquisitions, net of cash acquired

    (32,085 )   (46,138 )   (44,365 )

Purchase of other intangibles

            (1,900 )

Notes receivable, financial investments and securities, net

    (444 )   (1,176 )   3,009  
               

Net Cash Used for Investing Activities from Continuing Operations

    (91,512 )   (118,345 )   (135,226 )
               

Cash Flows from Financing Activities from Continuing Operations:

                   

Borrowings of debt

    855     1,350,000     4,000  

Payments of debt

    (64,717 )   (1,334,947 )   (40,905 )

Repurchase of common stock and RSU vesting

    (16,355 )   (10,780 )   (87,574 )

Issuance of Common Stock

    7,509     5,606     10,450  

Discount paid on issuance of debt

    (12,200 )        

Debt issuance costs paid

    (5,575 )   (33,089 )   (267 )
               

Net Cash Used for Financing Activities from Continuing Operations

    (90,483 )   (23,210 )   (114,296 )
               

Cash Flows from Discontinued Operations:

                   

Cash used for operating activities

    (1,497 )   (802 )   (5,888 )

Cash (used for) provided from investing activities:

                   

Proceeds from sale of businesses

        (3,611 )   26,134  

Other investing activities

            (1,617 )
               

Net Cash (Used for) Provided from Discontinued Operations

    (1,497 )   (4,413 )   18,629  
               

Cash Increase During the Period

    65,619     89,963     73,997  
               

Cash and Cash Equivalents at End of Period

  $ 494,269   $ 428,650   $ 338,687  
               
               

   

See accompanying Notes to the Consolidated Financial Statements.

F-6


Table of Contents


Notes to the Consolidated Financial Statements

Note 1. Significant Accounting Policies

        The Consolidated Financial Statements include the accounts of ServiceMaster Global Holdings Inc. (the "Company") and its majority-owned subsidiary partnerships, limited liability companies and corporations. All consolidated Company subsidiaries are wholly owned. Intercompany transactions and balances have been eliminated.

        Summary:    The preparation of the Consolidated Financial Statements requires management to make certain estimates and assumptions required under GAAP which may differ from actual results. The more significant areas requiring the use of management estimates relate to revenue recognition; the allowance for uncollectible receivables; accruals for self-insured retention limits related to medical, workers' compensation, auto and general liability insurance claims; accruals for home warranties and termite damage claims; the possible outcome of outstanding litigation; accruals for income tax liabilities as well as deferred tax accounts; the deferral and amortization of customer acquisition costs; useful lives for depreciation and amortization expense; the valuation of marketable securities; and the valuation of tangible and intangible assets. In 2013, there have been no changes in the significant areas that require estimates or in the underlying methodologies used in determining the amounts of these associated estimates.

        The allowance for receivables is developed based on several factors including overall customer credit quality, historical write-off experience and specific account analyses that project the ultimate collectability of the outstanding balances. As such, these factors may change over time causing the reserve level to vary.

        The Company carries insurance policies on insurable risks at levels which it believes to be appropriate, including workers' compensation, auto and general liability risks. The Company purchases insurance from third-party insurance carriers. These policies typically incorporate significant deductibles or self-insured retentions. The Company is responsible for all claims that fall within the retention limits. In determining the Company's accrual for self-insured claims, the Company uses historical claims experience to establish both the current year accrual and the underlying provision for future losses. This actuarially determined provision and related accrual include both known claims, as well as incurred but not reported claims. The Company adjusts its estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.

        The Company seeks to reduce the potential amount of loss arising from self-insured claims by insuring certain levels of risk. While insurance agreements are designed to limit the Company's losses from large exposure and permit recovery of a portion of direct unpaid losses, insurance does not relieve the Company of its ultimate liability. Accordingly, the accruals for insured claims represent the Company's total unpaid gross losses. Insurance recoverables, which are reported within Prepaid expenses and other assets and Other assets, relate to estimated insurance recoveries on the insured claims reserves.

        Accruals for home warranty claims in the American Home Shield business are made based on the Company's claims experience and actuarial projections. Termite damage claim accruals in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per claim. Current activity could differ causing a change in estimates. The Company has certain liabilities with respect to existing or potential claims, lawsuits, and other proceedings. The Company accrues for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period identified.

F-7


Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

        The Company records deferred income tax balances based on the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and income tax purposes. The Company records its deferred tax items based on the estimated value of the tax basis. The Company adjusts tax estimates when required to reflect changes based on factors such as changes in tax laws, relevant court decisions, results of tax authority reviews and statutes of limitations. The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company recognizes potential interest and penalties related to its uncertain tax positions in income tax expense.

        Revenue:    Revenues from lawn care and pest control services, as well as liquid and fumigation termite applications, are recognized as the services are provided. The Company eradicates termites through the use of non-baiting methods (e.g., fumigation or liquid treatments) and baiting systems. Termite services using baiting systems, termite inspection and protection contracts, as well as home warranties, are frequently sold through annual contracts for a one-time, upfront payment. Direct costs of these contracts (service costs for termite contracts and claim costs for home warranties) are expensed as incurred. The Company recognizes revenue over the life of these contracts in proportion to the expected direct costs. Those costs bear a direct relationship to the fulfillment of the Company's obligations under the contracts and are representative of the relative value provided to the customer (proportional performance method). The Company regularly reviews its estimates of direct costs for its termite bait contracts and home warranties and adjusts the estimates when appropriate.

        The Company has franchise agreements in its Terminix, TruGreen, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec businesses. Franchise revenue (which in the aggregate represents approximately four percent of annual consolidated operating revenue from continuing operations) consists principally of continuing monthly fees based upon the franchisee's customer-level revenue. Monthly fee revenue is recognized when the related customer-level revenue generating activity is performed by the franchisee and collectability is reasonably assured. Franchise revenue also includes initial fees resulting from the sale of a franchise or a license. These initial franchise or license fees are pre-established fixed amounts and are recognized as revenue when collectability is reasonably assured and all material services or conditions relating to the sale have been substantially performed. Total profits from the franchised operations were $79.1 million, $73.0 million and $74.1 million for the years ended December 31, 2013, 2012 and 2011, respectively. The Company evaluates the performance of its franchise businesses based primarily on operating profit before corporate general and administrative expenses, interest expense and amortization of intangible assets. The portion of total franchise fee income related to initial fees received from the sale of franchises was immaterial to the Company's Consolidated Financial Statements for all periods.

        Revenues are presented net of sales taxes collected and remitted to government taxing authorities on the consolidated statements of operations and comprehensive (loss) income.

        The Company had $539.3 million and $483.9 million of deferred revenue as of December 31, 2013 and 2012, respectively. Deferred revenue consists primarily of payments received for annual contracts relating to home warranties, termite baiting, termite inspection, pest control and lawn care services.

        Deferred Customer Acquisition Costs:    Customer acquisition costs, which are incremental and direct costs of obtaining a customer, are deferred and amortized over the life of the related contract in proportion to revenue recognized. These costs include sales commissions and direct selling costs which can be shown to have resulted in a successful sale. Deferred customer acquisition costs amounted to $39.1 million and $33.9 million as of December 31, 2013 and 2012, respectively.

F-8


Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

        Advertising:    On an interim basis, certain pre-season advertising costs are deferred and recognized approximately in proportion to the revenue over the year and are not deferred beyond the calendar year-end. Certain other advertising costs are expensed when the advertising occurs. The cost of direct-response advertising at Terminix, consisting primarily of direct-mail promotions, is capitalized and amortized over its expected period of future benefits. Advertising expense for the years ended December 31, 2013, 2012 and 2011 was $166.9 million, $163.9 million and $161.0 million, respectively.

        Inventory:    Inventories are recorded at the lower of cost (primarily on a weighted average cost basis) or market. The Company's inventory primarily consists of finished goods to be used on the customers' premises or sold to franchisees.

    Property and Equipment, Intangible Assets and Goodwill:

        Property and equipment consist of the following:

 
  Balance as of
December 31,
   
 
  Estimated
Useful
Lives
(Years)
(In millions)
  2013   2012

Land

  $ 21.6   $ 21.7   N/A

Buildings and improvements

    80.1     77.4   10 - 40

Technology and communications

    307.2     259.0   3 - 7

Machinery, production equipment and vehicles

    303.9     255.7   3 - 9

Office equipment, furniture and fixtures

    19.6     19.7   5 - 7
             

    732.4     633.5    

Less accumulated depreciation

    (374.3 )   (293.5 )  
             

Net property and equipment

  $ 358.1   $ 340.0    
             
             

        Depreciation of property and equipment, including depreciation of assets held under capital leases, was $93.6 million, $80.9 million and $72.1 million for the years ended December 31, 2013, 2012 and 2011, respectively.

        Intangible assets consisted primarily of goodwill in the amount of $2.018 billion and $2.412 billion, indefinite-lived trade names in the amount of $1.959 billion and $2.215 billion, and other intangible assets in the amount of $116.7 million and $158.7 million as of December 31, 2013 and 2012, respectively.

        Fixed assets and intangible assets with finite lives are depreciated and amortized on a straight-line basis over their estimated useful lives. These lives are based on the Company's previous experience for similar assets, potential market obsolescence and other industry and business data. As required by accounting standards for the impairment or disposal of long-lived assets, the Company's long-lived assets, including fixed assets and intangible assets (other than goodwill), are tested for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset, an impairment loss would be recognized equal to the difference between the carrying amount and the fair value of the asset. Changes in the estimated useful lives or in the asset values could cause the Company to adjust its book value or future expense accordingly.

F-9


Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

        As required under accounting standards for goodwill and other intangibles, goodwill is not subject to amortization, and intangible assets with indefinite useful lives are not amortized until their useful lives are determined to no longer be indefinite. Goodwill and intangible assets that are not subject to amortization are subject to assessment for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. The Company adopted the provisions of ASU 2011-08, "Testing Goodwill for Impairment," in the fourth quarter of 2011. This ASU gives entities the option of performing a qualitative assessment before calculating the fair value of a reporting unit in Step 1 of the goodwill impairment test. If entities determine, on the basis of qualitative factors, that the fair value of a reporting unit is more likely than not greater than its carrying amount, the two-step impairment test would not be required. For the 2013 and 2012 annual goodwill impairment review performed as of October 1, 2013 and October 1, 2012, respectively, the Company did not perform qualitative assessments on any reporting unit, but instead completed Step 1 of the goodwill impairment test for all reporting units. For the 2011 annual goodwill impairment review performed as of October 1, 2011, the Company performed qualitative assessments on the Terminix, American Home Shield and ServiceMaster Clean reporting units. Based on these assessments, the Company determined that, more likely than not, the fair values of Terminix, American Home Shield and ServiceMaster Clean were greater than their respective carrying amounts. As a result, the two-step goodwill impairment test was not performed for Terminix, American Home Shield and ServiceMaster Clean in 2011.

        Goodwill impairment is determined using a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. In performing the first step, the Company determines the fair value of a reporting unit using a combination of a DCF analysis, a market-based comparable approach and a market-based transaction approach. Determining fair value requires the exercise of significant judgment, including judgment about appropriate discount rates, terminal growth rates, the amount and timing of expected future cash flows, as well as relevant comparable company earnings multiples for the market-based comparable approach and relevant transaction multiples for the market-based transaction approach. The cash flows employed in the DCF analyses are based on the Company's most recent budget and, for years beyond the budget, the Company's estimates, which are based on estimated growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the future cash flows of the respective reporting units. In addition, the market-based comparable and transaction approaches utilize comparable company public trading values, comparable company historical results, research analyst estimates and, where available, values observed in private market transactions. If the estimated fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with its goodwill carrying amount to measure the amount of impairment, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amount equal to that excess.

F-10


Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

        The impairment test for other intangible assets not subject to amortization involves a comparison of the estimated fair value of the intangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. The estimates of fair value of intangible assets not subject to amortization are determined using a DCF valuation analysis. The DCF methodology used to value trade names is known as the relief from royalty method and entails identifying the hypothetical cash flows generated by an assumed royalty rate that a third-party would pay to license the trade names and discounting them back to the valuation date. Significant judgments inherent in this analysis include the selection of appropriate discount rates and hypothetical royalty rates, estimating the amount and timing of estimated future cash flows attributable to the hypothetical royalty rates and identification of appropriate terminal growth rate assumptions. The discount rates used in the DCF analyses are intended to reflect the risk inherent in the projected future cash flows generated by the respective intangible assets.

        Goodwill and indefinite-lived intangible assets, primarily the Company's trade names, are assessed annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. The Company performed an interim goodwill impairment analysis at TruGreen as of June 30, 2013 that resulted in a pre-tax non-cash goodwill impairment of $417.5 million. After this impairment charge, there was no goodwill remaining at TruGreen. The Company performed an interim goodwill impairment analysis at TruGreen as of September 30, 2012 that resulted in a pre-tax non-cash goodwill impairment of $794.2 million. During the fourth quarter of 2012, the Company finalized its September 30, 2012 TruGreen valuation resulting in a $4.0 million adjustment to goodwill decreasing the 2012 goodwill impairment charge to $790.2 million. The Company's 2013, 2012, and 2011 annual impairment analyses, which were performed as of October 1 of each year, did not result in any goodwill impairments.

        The Company performed an interim trade name impairment analysis at TruGreen as of June 30, 2013 resulting in a pre-tax non-cash trade name impairment charge of $255.8 million recorded in the second quarter of 2013. The Company performed an interim trade name impairment analysis at TruGreen as of June 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $67.7 million recorded in the second quarter of 2012. Further, the Company performed an interim trade name impairment analysis at TruGreen as of September 30, 2012 resulting in a pre-tax non-cash trade name impairment charge of $51.0 million recorded in the third quarter of 2012. The Company's annual trade name impairment analyses, which were performed as of October 1 of each year, resulted in pre-tax non-cash impairment of $36.7 million in 2011 related to the TruGreen trade name. The Company's October 1, 2013 and 2012 trade name impairment analyses did not result in any trade name impairments. The impairment charges by business segment for the years ended December 31, 2013,

F-11


Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

2012 and 2011, as well as the remaining value of the trade names not subject to amortization by business segment as of December 31, 2013 and 2012 are as follows:

(In thousands)
  Terminix   TruGreen   American
Home
Shield
  ServiceMaster
Clean
  Other
Operations &
Headquarters(1)
  Total  

Balance at December 31, 2010

  $ 875,100   $ 762,200   $ 140,400   $ 152,600   $ 439,900   $ 2,370,200  

2011 Impairment

        (36,700 )               (36,700 )
                           

Balance at December 31, 2011

    875,100     725,500     140,400     152,600     439,900     2,333,500  

2012 Impairment

        (118,700 )               (118,700 )
                           

Balance at December 31, 2012

    875,100     606,800     140,400     152,600     439,900     2,214,800  

2013 Impairment

        (255,800 )               (255,800 )
                           

Balance at December 31, 2013

  $ 875,100   $ 351,000   $ 140,400   $ 152,600   $ 439,900   $ 1,959,000  
                           
                           

(1)
The Other Operations and Headquarters segment includes Merry Maids.

        The goodwill impairment charge recorded in 2013 was primarily attributable to a decline in forecasted 2013 and future cash flows at TruGreen over a defined projection period as of June 30, 2013 compared to the projections used in the last annual impairment assessment performed on October 1, 2012. The changes in projected cash flows at TruGreen arose in part from business challenges which drove declines in TruGreen's operating revenue and Adjusted EBITDA as disclosed in Note 3. Although the Company projected future improvement in cash flows at TruGreen as a part of its June 30, 2013 impairment analysis, total cash flows and projected growth in those cash flows were lower than those projected at the time TruGreen was last tested for impairment in 2012. The long-term growth rates used in the impairment tests at June 30, 2013 and October 1, 2012 were the same and were in line with historical U.S. gross domestic product growth rates. The discount rate used in the June 30, 2013 impairment test was 100 bps lower than the discount rate used in the October 1, 2012 impairment test for TruGreen. The decrease in the discount rate is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets and a higher risk tolerance for investors since the 2012 analysis.

        The goodwill impairment charge recorded in 2012 was primarily attributable to a decline in forecasted 2012 cash flows and a decrease in projected future growth in cash flows at TruGreen over a defined projection period as of September 30, 2012 compared to the projections used in the previous annual impairment assessment performed on October 1, 2011. Although the Company projected future growth in cash flows at TruGreen as a part of its September 30, 2012 impairment analysis, total cash flows and projected growth in those cash flows were lower than that projected at the time TruGreen was tested for impairment in 2011. The long-term growth rates used in the impairment tests at September 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rate used in the September 30, 2012 impairment test was 50 bps lower than the discount rate used in the October 1, 2011 impairment test for TruGreen. The decrease in the discount rate is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets since the 2011 analysis.

        Based on the revenue results at TruGreen in the first six months of 2013 and a lower revenue outlook for the remainder of 2013 and future years, the Company concluded that there was an impairment indicator requiring the performance of an interim indefinite-lived intangible asset

F-12


Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

impairment test for the TruGreen trade name as of June 30, 2013. The impairment analysis resulted in a $255.8 million impairment charge recorded in the second quarter of 2013.

        The impairment charge recorded in the second quarter of 2013 was primarily attributable to a decrease in the assumed royalty rate and a decrease in projected future growth in revenue at TruGreen over a defined projection period as of June 30, 2013 compared to the royalty rate and projections used in the last annual impairment assessment performed on October 1, 2012. The decrease in the assumed royalty rate was due to lower current and projected earnings as a percent of revenue as compared to the last annual impairment test. Although the Company projected future growth in revenue at TruGreen as part of its June 30, 2013 impairment analysis, total projected revenue was lower than the revenue projected at the time the trade name was last tested for impairment in October 2012. The changes in projected future revenue growth at TruGreen arose in part from business challenges which drove declines in TruGreen's operating revenue and Adjusted EBITDA at TruGreen as disclosed in Note 3. The long-term revenue growth rates used in the impairment tests at October 1, 2013, June 30, 2013 and October 1, 2012 were the same and in line with historical U.S. gross domestic product growth rates. The discount rates used in the October 1, 2013 and June 30, 2013 impairment tests were the same, but were 100 bps lower than the discount rate used in the October 1, 2012 impairment test for the TruGreen trade name. The decrease in the discount rate from 2012 is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets and a higher risk tolerance for investors since the last analysis.

        Based on the revenue results at TruGreen in the first six months of 2012 and a then lower revenue outlook for the remainder of 2012 and future years, the Company concluded that there was an impairment indicator requiring the performance of an interim indefinite-lived intangible asset impairment test for the TruGreen trade name as of June 30, 2012. That impairment analysis resulted in a $67.7 million impairment charge recorded in the second quarter of 2012. Based on the revenue results of TruGreen in the third quarter of 2012 and the revised outlook for the remainder of the year and future years, the Company performed another impairment analysis on its TruGreen trade name to determine its fair value as of September 30, 2012. Based on the revised projected revenue for TruGreen as compared to the projections used in the second quarter 2012 impairment test, the Company determined the fair value attributable to the TruGreen trade name was less than its carrying value by $51.0 million, which was recorded as a trade name impairment in the third quarter of 2012. Total non-cash trade name impairments recorded in 2012 related to the TruGreen trade name were $118.7 million.

        The impairment charge recorded in the second quarter of 2012 was primarily attributable to a decrease in projected future growth in revenue at TruGreen over a defined projection period as of June 30, 2012 compared to the projections used in the previous annual impairment assessment performed on October 1, 2011. The third quarter impairment charge was primarily attributable to a further reduction in projected revenue growth as compared to expectations in the second quarter of 2012. Although the Company projected future growth in revenue at TruGreen over a defined projection period as a part of its September 30, 2012 impairment analysis, such growth was lower than the revenue growth projected at the time the trade name was tested for impairment in the second quarter of 2012. The long-term revenue growth rates used for periods after the defined projection period in the impairment tests at September 30, 2012, June 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rates used in the September 30, 2012 and June 30, 2012 impairment tests were the same, but were 50 bps lower than the discount rate used in the October 1, 2011 impairment test for the TruGreen trade name. The decrease in the discount rate from 2011 is primarily attributable to changes in market conditions which indicated an improved outlook for the U.S. financial markets since the last analysis.

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

        The impairment charge in 2011 was primarily attributable to the use of higher discount rates in the DCF valuation analyses as compared to the discount rates used in the 2010 impairment analyses. Although the projected future growth in cash flows in 2011 were slightly higher than in the 2010 valuation, the increase in the discount rates more than offset the improved cash flows. The increase in the discount rates is primarily attributable to changes in market conditions which indicated a lower risk tolerance in 2011 as compared to 2010. This lower risk tolerance is exhibited through the marketplace's desire for higher returns in order to accept market risk. The long-term revenue growth rates used in the analyses for the October 1, 2011 and 2010 impairment tests were the same and in line with historical U.S. gross domestic product growth rates.

        Restricted Net Assets:    There are third-party restrictions on the ability of certain of the Company's subsidiaries to transfer funds to the Company. These restrictions are related to regulatory requirements at American Home Shield and to a subsidiary borrowing arrangement at SMAC. The payment of ordinary and extraordinary dividends by the Company's home warranty and similar subsidiaries (through which the Company conducts its American Home Shield business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain such subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can pay to the Company or to The ServiceMaster Company, LLC ("SvM"). As of December 31, 2013, the total net assets subject to these third-party restrictions was $160.2 million. None of the subsidiaries of the Company are obligated to make funds available to the Company through the payment of dividends.

        Fair Value of Financial Instruments and Credit Risk:    See Note 19 for information relating to the fair value of financial instruments.

        Financial instruments, which potentially subject the Company to financial and credit risk, consist principally of investments and receivables. Investments consist primarily of publicly traded debt and common equity securities. The Company periodically reviews its portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which it competes. The majority of the Company's receivables have little concentration of credit risk due to the large number of customers with relatively small balances and their dispersion across geographical areas. The Company maintains an allowance for losses based upon the expected collectability of receivables.

        Income Taxes:    The Company and its subsidiaries file consolidated U.S. federal income tax returns. State and local returns are filed both on a separate company basis and on a combined unitary basis with the Company. Current and deferred income taxes are provided for on a separate company basis. The Company accounts for income taxes using an asset and liability approach for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts expected to be realized.

        The Company records a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in its tax return. The Company recognizes potential interest and penalties related to its uncertain tax positions in income tax expense.

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Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

        Stock-Based Compensation:    The Company accounts for stock-based compensation under accounting standards for share based payments, which require that stock options, restricted stock units and share grants be measured at fair value and this value is recognized as compensation expense over the vesting period.

        Earnings Per Share:    Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options and restricted stock units are reflected in diluted net income (loss) per share by applying the treasury stock method.

        Newly Issued Accounting Statements and Positions:    In July 2012, the Financial Accounting Standards Board ("FASB") issued ASU 2012-02, "Intangibles—Goodwill and Other: Testing Indefinite-Lived Intangible Assets for Impairment," which amends the guidance on testing indefinite-lived intangible assets, other than goodwill, for impairment. This standard allows an entity testing an indefinite-lived intangible asset for impairment the option of performing a qualitative assessment before calculating the fair value of the asset. If entities determine, on the basis of the qualitative assessment, that the fair value of the indefinite-lived intangible asset is more likely than not greater than its carrying amount, the quantitative impairment test would not be required. Otherwise, further testing would be needed. This standard revises the examples of events and circumstances that an entity should consider in interim periods, but it does not revise the requirements to test indefinite-lived intangible assets (1) annually for impairment and (2) between annual tests if there is a change in events or circumstances. The amendments in this standard are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted the required provisions of this standard during the first quarter of 2013. The adoption of this standard did not have a material impact on the Company's Consolidated Financial Statements.

        In February 2013, the FASB issued ASU 2013-02, "Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income" to improve the reporting of reclassifications out of accumulated other comprehensive income by requiring an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. The amendments in this standard do not change the current requirements for reporting net income or other comprehensive income in financial statements and are effective prospectively for reporting periods beginning after December 15, 2012. The Company adopted the required provisions of this standard during the first quarter of 2013. The disclosures required by this standard are presented in Note 14.

        In July 2013, the FASB issued ASU 2013-11, "Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or Tax Credit Carryforward Exists" to eliminate the diversity in practice associated with the presentation of unrecognized tax benefits in

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Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

instances where a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. ASU 2013-11 generally requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except in certain circumstances. The amendments in ASU 2013-11 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The adoption of this standard is not expected to have a material impact on the Company's Consolidated Financial Statements.

Note 2. Acquisition of SvM

        On the 2007 Closing Date, the Company acquired SvM pursuant to the 2007 Merger. As a result of the Merger, SvM became an indirect wholly owned subsidiary of the Company. Immediately following the completion of the 2007 Merger, all of the outstanding common stock of the Company, the ultimate parent company of SvM, was owned by investment funds sponsored by, or affiliated with, certain Equity Sponsors.

        Equity contributions totaling $1.431 billion, together with (i) borrowings under a then new $1.150 billion senior unsecured interim loan facility, (the "Interim Loan Facility"), (ii) borrowings under a then new $2.650 billion Term Loan Facility, and (iii) cash on hand at SvM, were used, among other things, to finance the aggregate 2007 Merger consideration, to make payments in satisfaction of other equity-based interests in the Company under the 2007 Merger agreement, to settle existing interest rate swaps, to redeem or provide for the repayment of certain of the SvM's existing indebtedness and to pay related transaction fees and expenses. In addition, letters of credit issued under a new $150.0 million pre-funded letter of credit facility were used to replace and/or secure letters of credit previously issued under a SvM credit facility that was terminated as of the 2007 Closing Date. On the 2007 Closing Date, the SvM also entered into, but did not then draw under, the Revolving Credit Facility.

        In connection with the 2007 Merger and the related transactions, SvM retired certain of its existing indebtedness, including SvM's $179.0 million, 7.875 percent notes due August 15, 2009 (the "2009 Notes"). On the 2007 Closing Date, the 2009 Notes were called for redemption, and they were redeemed on August 29, 2007. Additionally, SvM utilized a portion of the proceeds from the Term Facilities to repay at maturity SvM's $49.2 million, 6.95 percent notes due August 15, 2007. The Interim Loan Facility matured on July 24, 2008. On the maturity date, outstanding amounts under the Interim Loan Facility were converted on a one-to-one basis into the 2015 Notes.

Note 3. Business Segment Reporting

        As of December 31, 2013, the business of the Company was conducted through five reportable segments: Terminix, TruGreen, American Home Shield, ServiceMaster Clean and Other Operations and Headquarters.

        In accordance with accounting standards for segments, the Company's reportable segments are strategic business units that offer different services. The Terminix segment provides termite and pest control services to residential and commercial customers and distributes pest control products. The TruGreen segment provides residential and commercial lawn, tree and shrub care services. The American Home Shield segment provides home warranties for household systems and appliances. The ServiceMaster Clean segment provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster, ServiceMaster Restore and

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Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 3. Business Segment Reporting (Continued)

ServiceMaster Clean brand names, on-site wood furniture repair and restoration services primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name. The Other Operations and Headquarters segment includes the franchised and Company-owned operations of Merry Maids, which provides home cleaning services. The Other Operations and Headquarters segment also includes SMAC, our financing subsidiary exclusively dedicated to providing financing to our franchisees and retail customers of our operating units, and the Company's headquarters operations, which provide various technology, marketing, finance, legal and other support services to the business units. The composition of our reportable segments is consistent with that used by our chief operating decision maker (the "CODM") to evaluate performance and allocate resources.

        Information regarding the accounting policies used by the Company is described in Note 1. The Company derives substantially all of its revenue from customers and franchisees in the United States with less than two percent generated in foreign markets. Operating expenses of the business units consist primarily of direct costs. Identifiable assets are those used in carrying out the operations of the business unit and include intangible assets directly related to its operations.

        The Company uses Adjusted EBITDA as its measure of segment profitability. Accordingly, the CODM evaluates performance and allocates resources based primarily on Adjusted EBITDA. Adjusted EBITDA is defined as net income (loss) before: income (loss) from discontinued operations, net of income taxes; provision (benefit) for income taxes; gain (loss) on extinguishment of debt; interest expense; depreciation and amortization expense; non-cash goodwill and trade name impairment; non-cash asset impairment; non-cash stock-based compensation expense; restructuring charges; management and consulting fees; non-cash effects attributable to the application of purchase accounting; and other non-operating expenses. The Company's definition of Adjusted EBITDA may not be calculated or comparable to similarly titled measures of other companies.

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Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 3. Business Segment Reporting (Continued)

        Segment information for continuing operations is presented below:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Operating Revenue:

                   

Terminix

  $ 1,309,469   $ 1,265,417   $ 1,193,075  

TruGreen

    895,943     979,081     1,100,741  

American Home Shield

    740,062     720,860     686,737  

ServiceMaster Clean

    150,929     139,441     138,691  

Other Operations and Headquarters

    92,432     88,482     86,628  
               

Total Operating Revenue

  $ 3,188,835   $ 3,193,281   $ 3,205,872  
               
               

Adjusted EBITDA:(1)

                   

Terminix

  $ 318,903   $ 319,838   $ 299,485  

TruGreen

    25,999     152,813     209,031  

American Home Shield

    170,866     141,542     131,977  

ServiceMaster Clean

    67,942     61,041     64,018  

Other Operations and Headquarters

    (107,721 )   (104,000 )   (94,036 )
               

Total Adjusted EBITDA

  $ 475,989   $ 571,234   $ 610,475  
               
               

Identifiable Assets:

                   

Terminix

  $ 2,694,448   $ 2,591,967   $ 2,601,869  

TruGreen

    598,257     1,200,063     2,087,055  

American Home Shield

    999,541     976,280     954,599  

ServiceMaster Clean

    373,650     373,314     370,526  

Other Operations and Headquarters

    1,239,395     1,273,133     1,142,140  
               

Total Identifiable Assets(2)

  $ 5,905,291   $ 6,414,757   $ 7,156,189  
               
               

Depreciation & Amortization Expense:

                   

Terminix

  $ 73,014   $ 75,713   $ 75,347  

TruGreen

    49,721     45,729     41,929  

American Home Shield

    8,037     8,606     27,331  

ServiceMaster Clean

    4,914     5,071     6,150  

Other Operations and Headquarters

    13,426     11,123     12,679  
               

Total Depreciation & Amortization Expense(3)

  $ 149,112   $ 146,242   $ 163,436  
               
               

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Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 3. Business Segment Reporting (Continued)

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Capital Expenditures:

                   

Terminix

  $ 10,701   $ 13,623   $ 23,457  

TruGreen

    21,391     29,079     44,714  

American Home Shield

    13,013     15,087     17,529  

ServiceMaster Clean

    811     454     935  

Other Operations and Headquarters

    14,488     14,985     9,905  
               

Total Capital Expenditures

  $ 60,404   $ 73,228   $ 96,540  
               
               

(1)
Presented below is a reconciliation of Adjusted EBITDA to Net (Loss) Income:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Adjusted EBITDA:

                   

Terminix

  $ 318,903   $ 319,838   $ 299,485  

TruGreen

    25,999     152,813     209,031  

American Home Shield

    170,866     141,542     131,977  

ServiceMaster Clean

    67,942     61,041     64,018  

Other Operations and Headquarters

    (107,721 )   (104,000 )   (94,036 )
               

Total Adjusted EBITDA

  $ 475,989   $ 571,234   $ 610,475  
               
               

Depreciation and amortization expense

  $ (149,112 ) $ (146,242 ) $ (163,436 )

Non-cash goodwill and trade name impairment

    (673,253 )   (908,873 )   (36,700 )

Non-cash asset impairment

    (165 )   (8,732 )    

Non-cash stock-based compensation expense

    (4,046 )   (7,119 )   (8,412 )

Restructuring charges

    (20,840 )   (18,177 )   (8,162 )

Management and consulting fees

    (7,250 )   (7,250 )   (7,500 )

Loss from discontinued operations, net of income taxes

    (1,135 )   (200 )   (27,016 )

Benefit (provision) for income taxes

    123,251     114,595     (46,594 )

Loss on extinguishment of debt

        (55,554 )    

Interest expense

    (249,033 )   (246,906 )   (266,813 )

Non-cash credits attributable to purchase accounting

        16     81  

Other

    (1,210 )   (735 )   (211 )
               

Net (Loss) Income

  $ (506,804 ) $ (713,943 ) $ 45,712  
               
               
(2)
Assets of discontinued operations are not included in the business segment table.

(3)
There are no adjustments necessary to reconcile total depreciation and amortization as presented in the business segment table to the consolidated totals. Amortization of debt issue costs is not included in the business segment table.

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Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 3. Business Segment Reporting (Continued)

        The Other Operations and Headquarters segment includes the operations of Merry Maids, as well as the Company's headquarters function. The Merry Maids operations reported operating revenue of $84.6 million, $82.0 million and $81.0 million for the years ended December 31, 2013, 2012 and 2011, respectively, and Adjusted EBITDA of $20.7 million, $21.2 million and $21.0 million for the years ended December 31, 2013, 2012 and 2011, respectively.

        See Note 4 for information relating to segment goodwill.

Note 4. Goodwill and Intangible Assets

        Goodwill and intangible assets that are not amortized are subject to assessment for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. As described in Note 1, the 2013, 2012 and 2011 results include pre-tax non-cash impairment charges of $673.3 million and $908.9 million and $36.7 million, respectively, to reduce the carrying value of goodwill and trade names as a result of the Company's annual and interim impairment testing of goodwill and indefinite-lived intangible assets.

        During the years ended December 31, 2013 and 2012, the increase in goodwill and other intangible assets related primarily to tuck-in acquisitions completed throughout the period by Terminix, TruGreen and Merry Maids.

        The table below summarizes the goodwill balances by segment for continuing operations:

(In thousands)
  Terminix   TruGreen   American
Home
Shield
  ServiceMaster
Clean
  Other
Operations &
Headquarters
  Total  

Balance at December 31, 2011

  $ 1,424,518   $ 1,201,922   $ 347,573   $ 135,677   $ 52,290   $ 3,161,980  

Impairment charge

        (790,173 )               (790,173 )

Acquisitions

    34,220     5,586             1,211     41,017  

Other(1)

    (248 )   (266 )   (93 )   92     (58 )   (573 )
                           

Balance at December 31, 2012

    1,458,490     417,069     347,480     135,769     53,443     2,412,251  

Impairment charge

        (417,453 )               (417,453 )

Acquisitions

    22,055     683         1,514     730     24,982  

Other(1)

    (533 )   (299 )   (12 )   (476 )   (120 )   (1,440 )
                           

Balance at December 31, 2013

  $ 1,480,012   $   $ 347,468   $ 136,807   $ 54,053   $ 2,018,340  
                           
                           

(1)
Reflects the impact of the amortization of tax deductible goodwill and foreign exchange rate changes.

        Accumulated impairment losses as of December 31, 2013 and 2012 were $1.208 billion and $790.2 million, respectively, and related entirely to the TruGreen reporting unit. There were no accumulated impairment losses as of December 31, 2011.

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Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 4. Goodwill and Intangible Assets (Continued)

        The table below summarizes the other intangible asset balances for continuing operations:

 
  Estimated
Remaining
Useful
Lives
(Years)
  December 31, 2013   December 31, 2012  
(In thousands)
  Gross   Accumulated
Amortization
  Net   Gross   Accumulated
Amortization
  Net  

Trade names(1)

    N/A   $ 1,959,000   $   $ 1,959,000   $ 2,214,800   $   $ 2,214,800  

Customer relationships

    3 - 10     705,307     (636,732 )   68,575     697,264     (592,724 )   104,540  

Franchise agreements

    20 - 25     88,000     (54,111 )   33,889     88,000     (48,649 )   39,351  

Other

    4 - 30     64,913     (50,671 )   14,242     59,117     (44,339 )   14,778  
                                 

Total

        $ 2,817,220   $ (741,514 ) $ 2,075,706   $ 3,059,181   $ (685,712 ) $ 2,373,469  
                                 
                                 

(1)
Not subject to amortization. Includes a pre-tax non-cash impairment charge of $255.8 million recorded in the year ended December 31, 2013 to reduce the carrying value of the TruGreen trade name.

        Amortization expense of $55.5 million, $65.3 million and $91.4 million was recorded in the years ended December 31, 2013, 2012 and 2011, respectively. For the existing intangible assets, the Company anticipates amortization expense of $50.9 million, $27.5 million, $7.8 million, $5.8 million and $3.8 million in 2014, 2015, 2016, 2017 and 2018, respectively.

Note 5. Income Taxes

        As of December 31, 2013, 2012 and 2011, the Company had $7.8 million, $8.3 million and $9.0 million, respectively, of tax benefits primarily reflected in state tax returns that have not been recognized for financial reporting purposes ("unrecognized tax benefits"). At December 31, 2013 and 2012, $7.8 million and $8.3 million, respectively, of unrecognized tax benefits would impact the effective tax rate if recognized. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:

 
  Year Ended
December 31,
 
(In millions)
  2013   2012   2011  

Gross unrecognized tax benefits at beginning of period

  $ 8.3   $ 9.0   $ 13.7  

Increases in tax positions for prior years

    0.4     0.3     1.1  

Decreases in tax positions for prior years

    (0.2 )   (0.4 )   (2.1 )

Increases in tax positions for current year

    1.0     0.9     1.1  

Lapse in statute of limitations

    (1.7 )   (1.5 )   (4.8 )
               

Gross unrecognized tax benefits at end of period

  $ 7.8   $ 8.3   $ 9.0  
               
               

        Up to $1.4 million of the Company's unrecognized tax benefits could be recognized within the next 12 months. As of December 31, 2012, the Company believed that it was reasonably possible that a decrease of up to $0.9 million in unrecognized tax benefits would have occurred during the year ended December 31, 2013. During the year ended December 31, 2013 unrecognized tax benefits actually decreased by $1.9 million as a result of the closing of certain state audits and the expiration of statutes of limitation.

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Table of Contents


Notes to the Consolidated Financial Statements (Continued)

Note 5. Income Taxes (Continued)

        The Company files consolidated and separate income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions. The Company has been audited by the IRS through its year ended December 31, 2011, and is no longer subject to state and local or foreign income tax examinations by tax authorities for years before 2006.

        In the ordinary course of business, the Company is subject to review by domestic and foreign taxing authorities. For U.S. federal income tax purposes, the Company participates in the IRS's Compliance Assurance Process whereby its U.S. federal income tax returns are reviewed by the IRS both prior to and after their filing. The U.S. federal income tax returns filed by the Company through the year ended December 31, 2011 have been audited by the IRS. In the second quarter of 2013, the IRS completed the audits of the Company's tax returns for the year ended December 31, 2011 with no adjustments or additional payments. The Company's tax returns for the year ended December 31, 2012 are under audit, which is expected to be completed by the second quarter of 2014. The IRS commenced examinations of the Company's U.S. federal income tax returns for 2013 in the first quarter of 2013. The examination is anticipated to be completed by the second quarter of 2015. Seven state tax authorities are in the process of auditing state income tax returns of various subsidiaries.

        The Company's policy is to recognize potential interest and penalties related to its tax positions within the tax provision. During the years ended December 31, 2013, 2012 and 2011, the Company reversed interest expense of $0.1 million, $0.2 million and $1.7 million, respectively, through the tax provision. During the years ended December 31, 2012 and 2011, the Company reversed penalties of $0.1 million and $0.3 million, respectively, through the tax provision. There were no similar reversals for the year ended December 31, 2013. As of December 31, 2013 and 2012, the Company had accrued for the payment of interest and penalties of $1.1 million and $1.2 million, respectively.

        The components of our (loss) income from continuing operations before income taxes are as follows:

 
  Year Ended December 31,  
 
  2013   2012   2011  

U.S. 

  $ (630,144 ) $ (821,857 ) $ 116,176  

Foreign

    1,692     (6,255 )   3,146  
               

Total

  $ (628,452 ) $ (828,112 ) $ 119,322  
               
               

        The reconciliation of income tax computed at the U.S. federal statutory tax rate to the Company's effective income tax rate for continuing operations is as follows:

 
  Year Ended
December 31,
 
 
  2013   2012   2011  

Tax at U.S. federal statutory rate

    35.0 %   35.0 %   35.0 %

State and local income taxes, net of U.S. federal benefit

    3.0     3.2     1.4  

Tax credits

    0.5     0.2     (2.1 )

Nondeductible goodwill

    (17.2 )   (24.8 )    

Other permanent items

    (0.8 )   (0.2 )   1.4  

Other, including foreign rate differences and reserves

    (0.9 )   0.4     3.3  
               

Effective rate

    19.6 %   13.8 %   39.0 %
               
               

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Notes to the Consolidated Financial Statements (Continued)

Note 5. Income Taxes (Continued)

        The effective tax rate for discontinued operations for the years ended December 31, 2013, 2012 and 2011 was a tax benefit of 40.6 percent, 91.9 percent and 42.3 percent, respectively. The effective tax rate for the year ending December 31, 2012 was impacted by an adjustment to the estimated tax benefit of goodwill in connection with the sale of TruGreen LandCare in 2011.

        Income tax expense from continuing operations is as follows:

 
  2013  
(In thousands)
  Current   Deferred   Total  

U.S. federal

  $ 1,111   $ (112,958 ) $ (111,847 )

Foreign

    2,936     (1,854 )   1,082  

State and local

    4,820     (17,306 )   (12,486 )
               

  $ 8,867   $ (132,118 ) $ (123,251 )
               
               

 

 
  2012  
 
  Current   Deferred   Total  

U.S. federal

  $ (322 ) $ (104,168 ) $ (104,490 )

Foreign

    2,544     (2,934 )   (390 )

State and local

    7,277     (16,992 )   (9,715 )
               

  $ 9,499   $ (124,094 ) $ (114,595 )
               
               

 

 
  2011  
 
  Current   Deferred   Total  

U.S. federal

  $ (967 ) $ 46,111   $ 45,144  

Foreign

    3,285     (3,985 )   (700 )

State and local

    3,531     (1,381 )   2,150  
               

  $ 5,849   $ 40,745   $ 46,594  
               
               

        Deferred income tax expense results from timing differences in the recognition of income and expense for income tax and financial reporting purposes. Deferred income tax balances reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. The deferred tax asset primarily reflects the impact of future tax deductions related to the Company's accruals and certain net operating loss carryforwards. The deferred tax liability is primarily attributable to the basis differences related to intangible assets. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The valuation allowance for deferred tax assets as of December 31, 2013 was $7.3 million. The net change in the total valuation allowance for the year ended December 31, 2013 was an increase of $1.3 million and was primarily attributable to additional net operating loss carryforwards in foreign jurisdictions.

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Notes to the Consolidated Financial Statements (Continued)

Note 5. Income Taxes (Continued)

        Significant components of the Company's deferred tax balances are as follows:

 
  December 31,  
(In thousands)
  2013   2012  

Deferred tax assets (liabilities):

             

Current Asset:

             

Prepaid expenses

  $ (18,351 ) $ (15,812 )

Receivables allowances

    19,400     13,365  

Accrued insurance expenses

    9,130     5,758  

Current reserves

    6,666     5,925  

Accrued expenses and other

    19,900     23,935  

Net operating loss and tax credit carryforwards

    74,328     74,328  
           

Total current asset

    111,073     107,499  
           

Non-current Asset:

             

Intangible assets

    3,512      

Other assets

    5      
           

Total non-current assets(1)

    3,517      
           

Long-Term Liability:

             

Intangible assets(2)

    (799,476 )   (937,746 )

Accrued insurance expenses

    2,895     3,735  

Net operating loss and tax credit carryforwards

    51,463     50,639  

Other long-term obligations

    (81,883 )   (67,935 )

Less valuation allowance

    (7,324 )   (6,013 )
           

Total long-term liability

    (834,325 )   (957,320 )
           

Net deferred tax liability

  $ (719,735 ) $ (849,821 )
           
           

(1)
Included in Other assets on the consolidated statement of financial position.

(2)
The deferred tax liability relates primarily to the difference in the tax versus book basis of intangible assets. The majority of this liability will not actually be paid unless certain business units of the Company are sold.

        As of December 31, 2013, the Company had deferred tax assets, net of valuation allowances, of $104.9 million for federal and state net operating loss and capital loss carryforwards which expire at various dates up to 2033. The Company also had deferred tax assets, net of valuation allowances, of $13.6 million for federal and state credit carryforwards which expire at various dates up to 2033.

        For the year ended December 31, 2011, the Company reorganized certain foreign subsidiaries in conjunction with its international growth initiatives and evaluated its liquidity requirements in the U.S. and the capital requirements of its foreign subsidiaries. Based on these factors, the Company considers undistributed earnings of its foreign subsidiaries as of December 31, 2013 to be indefinitely reinvested. Accordingly, the Company has not recorded deferred taxes for U.S. or foreign withholding taxes on the excess of the amount for financial reporting purposes over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. Determination of

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Notes to the Consolidated Financial Statements (Continued)

Note 5. Income Taxes (Continued)

the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable due to the complexities of the hypothetical calculation. The amount of cash associated with indefinitely reinvested foreign earnings was approximately $17.9 million and $28.7 million as of December 31, 2013 and 2012, respectively. The Company does not anticipate the need to repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Note 6. Acquisitions

        Acquisitions have been accounted for using the acquisition method and, accordingly, the results of operations of the acquired businesses have been included in the Company's Consolidated Financial Statements since their dates of acquisition. The assets and liabilities of these businesses were recorded in the financial statements at their estimated fair values as of the acquisition dates.

2013

        During the year ended December 31, 2013, the Company completed several pest control and termite and lawn care acquisitions, along with several Merry Maids franchise acquisitions and the purchase of a distributor license agreement at ServiceMaster Clean. The total net purchase price for these acquisitions was $40.7 million. The Company recorded goodwill of $25.0 million and other intangibles of $13.8 million related to these acquisitions.

Prior Years

        During the year ended December 31, 2012, the Company completed several pest control and termite and lawn care acquisitions, along with several Merry Maids franchise acquisitions and the purchase of a distributor license agreement at ServiceMaster Clean. The total net purchase price for these acquisitions was $57.3 million. Related to these acquisitions, the Company recorded goodwill of $41.0 million and other intangibles of $16.8 million.

        During the year ended December 31, 2011, the Company completed several pest control and termite and lawn care acquisitions for a total net purchase price of $57.1 million. Related to these acquisitions, the Company recorded goodwill of $39.5 million and other intangibles of $16.2 million.

Cash Flow Information for Acquisitions

        Supplemental cash flow information regarding the Company's acquisitions, excluding the 2007 Merger, is as follows:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Purchase price (including liabilities assumed)

  $ 40,767   $ 61,792   $ 58,844  

Less liabilities assumed

    (96 )   (4,499 )   (1,700 )
               

Net purchase price

  $ 40,671   $ 57,293   $ 57,144  
               
               

Net cash paid for acquisitions

  $ 32,085   $ 46,138   $ 44,365  

Seller financed debt

    8,586     11,155     12,779  
               

Payment for acquisitions

  $ 40,671   $ 57,293   $ 57,144  
               
               

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Notes to the Consolidated Financial Statements (Continued)

Note 7. Discontinued Operations

        In the first quarter of 2011, the Company concluded that TruGreen LandCare did not fit within the long-term strategic plans of the Company and committed to a plan to sell the business. On April 21, 2011, the Company entered into a purchase agreement to sell the TruGreen LandCare business, and the disposition was effective as of April 30, 2011. As a result of the decision to sell this business, a $34.2 million impairment charge ($21.0 million, net of tax) was recorded in loss from discontinued operations, net of income taxes, in the first quarter of 2011 to reduce the carrying value of TruGreen LandCare's assets to their estimated fair value less cost to sell in accordance with applicable accounting standards. Upon completion of the sale, a $6.2 million loss on sale ($1.9 million, net of tax) was recorded. During the year ended December 31, 2012, upon finalization of certain post-closing adjustments and disputes, the Company recorded an additional $1.3 million loss on sale ($0.5 million gain, net of tax).

Financial Information for Discontinued Operations

        Loss from discontinued operations, net of income taxes, for all periods presented includes the operating results of the previously sold businesses.

        The operating results of discontinued operations are as follows:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Operating Revenue

  $   $   $ 75,765  

Loss before income taxes(1)

    (1,912 )   (1,138 )   (40,620 )

Benefit for income taxes(1)

    (777 )   (453 )   (15,461 )
               

Loss, net of income taxes(1)

    (1,135 )   (685 )   (25,159 )

Gain (loss) on sale, net of income taxes

        485     (1,857 )
               

Loss from discontinued operations, net of income taxes(1)

  $ (1,135 ) $ (200 ) $ (27,016 )
               
               

(1)
During 2011, a pre-tax non-cash impairment charge of $34.2 million ($21.0 million, net of tax) was recorded to reduce the carrying value of TruGreen LandCare's assets to their estimated fair value less cost to sell in accordance with applicable accounting standards.

        The table below summarizes the activity during the year ended December 31, 2013 for the remaining liabilities of previously sold businesses. The remaining obligations primarily relate to self-insurance claims and related costs. The Company believes that the remaining reserves continue to be adequate and reasonable.

(In thousands)
  As of
December 31,
2012
  Cash
Payments
or Other
  Expense
(Income)
  As of
December 31,
2013
 

Remaining liabilities of discontinued operations:

                         

TruGreen LandCare

  $ 415   $ (696 ) $ 1,337   $ 1,056  

InStar

    352     (61 )   (83 )   208  

Other

    138     37     (119 )   56  
                   

Total liabilities of discontinued operations

  $ 905   $ (720 ) $ 1,135   $ 1,320  
                   
                   

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Notes to the Consolidated Financial Statements (Continued)

Note 8. Restructuring Charges

        The Company incurred restructuring charges of $20.8 million ($16.4 million, net of tax), $18.2 million ($11.1 million, net of tax) and $8.2 million ($5.0 million, net of tax) for the years ended December 31, 2013, 2012 and 2011, respectively. Restructuring charges were comprised of the following:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

TruGreen Separation Transaction(1)

  $ 13,398   $   $  

Terminix branch optimization(2)

    2,099     3,652     3,560  

TruGreen reorganization and restructuring(3)

    1,362     3,241     1,115  

American Home Shield reorganization(4)

        647      

ServiceMaster Clean reorganization(4)

    360     1,370      

Centers of excellence initiative(5)

    3,629     9,267     3,416  

Other(6)

    (8 )       71  
               

Total restructuring charges

  $ 20,840   $ 18,177   $ 8,162  
               
               

(1)
Represents expenses incurred by the Company directly related to the TruGreen Separation Transaction. These charges included professional fees of $12.8 million and severance of $0.6 million.

(2)
For the years ended December 31, 2013, 2012 and 2011, these charges included severance costs of $0.9 million, $0.4 million and $0.1 million, respectively, and lease termination costs of $1.2 million, $3.3 million and $3.5 million, respectively.

(3)
For the year ended December 31, 2013, these charges included severance costs. For the years ended December 31, 2012 and 2011, these charges included severance costs of $2.7 million and $0.8 million, respectively, and lease termination costs of $0.5 million and $0.3 million, respectively.

(4)
For the years ended December 31, 2013 and 2012, these charges included severance costs.

(5)
Represents restructuring charges related to an initiative to enhance capabilities and reduce costs in the Company's headquarters functions that provide company-wide administrative services for our operations that we refer to as "centers of excellence." For the years ended December 31, 2013, 2012 and 2011, these charges included severance and other costs of $0.9 million, $4.6 million and $1.9 million, respectively, and professional fees of $2.7 million, $4.7 million and $1.5 million, respectively.

(6)
These charges included reserve adjustments associated with previous restructuring initiatives.

        The pretax charges discussed above are reported in Restructuring charges on the consolidated statements of operations and comprehensive (loss) income.

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Notes to the Consolidated Financial Statements (Continued)

Note 8. Restructuring Charges (Continued)

        A reconciliation of the beginning and ending balances of accrued restructuring charges, which are included in Accrued Liabilities—Other on the consolidated statements of financial position, is presented as follows:

(In thousands)
  Accrued
Restructuring
Charges
 

Balance as of December 31, 2011

  $ 3,890  

Costs incurred

    18,177  

Costs paid or otherwise settled

    (17,525 )
       

Balance as of December 31, 2012

    4,542  

Costs incurred

    20,840  

Costs paid or otherwise settled

    (17,847 )
       

Balance as of December 31, 2013

  $ 7,535  
       
       

Note 9. Commitments and Contingencies

        The Company leases certain property and equipment under various operating lease arrangements. Most of the property leases provide that the Company pay taxes, insurance and maintenance applicable to the leased premises. As leases for existing locations expire, the Company expects to renew the leases or substitute another location and lease.

        Rental expense for the years ended December 31, 2013, 2012 and 2011 was $63.0 million, $68.0 million and $76.7 million, respectively. Based on leases in place as of December 31, 2013, future long-term non-cancelable operating lease payments will be approximately $38.7 million in 2014, $29.5 million in 2015, $22.6 million in 2016, $16.4 million in 2017, $10.7 million in 2018 and $7.4 million in 2019 and thereafter.

        A portion of the Company's vehicle fleet and some equipment are leased through operating leases. The lease terms are non-cancelable for the first twelve-month term, and then are month-to-month, cancelable at the Company's option. There are residual value guarantees by the Company (which approximate 84 percent of the estimated terminal value at the inception of the lease) relative to these vehicles and equipment, which historically have not resulted in significant net payments to the lessors. The fair value of the assets under all of the fleet and equipment leases is expected to substantially mitigate the Company's guarantee obligations under the agreements. As of December 31, 2013, the Company's residual value guarantees related to the leased assets totaled $11.4 million for which the Company has recorded as a liability the estimated fair value of these guarantees of $0.1 million on the consolidated statements of financial position.

        Certain of the Company's assets, including vehicles, equipment and a call center facility, are leased under capital leases with $78.0 million in remaining lease obligations as of December 31, 2013. Based on leases in place as of December 31, 2013, future lease payments under capital leases will be approximately $18.6 million in 2014, $17.2 million in 2015, $16.2 million in 2016, $13.8 million in 2017, $9.8 million in 2018 and $2.4 million in 2019 and thereafter.

        In the normal course of business, the Company periodically enters into agreements that incorporate indemnification provisions. While the maximum amount to which the Company may be exposed under such agreements cannot be estimated, the Company does not expect these guarantees and indemnifications to have a material effect on the Company's business, financial condition, results of operations or cash flows.

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Notes to the Consolidated Financial Statements (Continued)

Note 9. Commitments and Contingencies (Continued)

        The Company carries insurance policies on insurable risks at levels which it believes to be appropriate, including workers' compensation, auto and general liability risks. The Company purchases insurance policies from third-party insurance carriers, which typically incorporate significant deductibles or self-insured retentions. The Company is responsible for all claims that fall below the retention limits. In determining the Company's accrual for self- insured claims, the Company uses historical claims experience to establish both the current year accrual and the underlying provision for future losses. This actuarially determined provision and related accrual includes known claims, as well as incurred but not reported claims. The Company adjusts its estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.

        A reconciliation of the beginning and ending accrued self-insured claims, which are included in Accrued liabilities—Self-insured claims and related expenses and Other long-term obligations, primarily self-insured claims, on the consolidated statements of financial position, net of insurance recoverables, which are included in Prepaid expenses and other assets and Other assets on the consolidated statements of financial position, is presented as follows:

(In thousands)
  Accrued
Self-insured
Claims, Net
 

Balance as of December 31, 2011

  $ 108,082  

Provision for self-insured claims

    35,413  

Cash payments

    (39,670 )
       

Balance as of December 31, 2012

    103,825  

Provision for self-insured claims

    47,452  

Cash payments

    (48,590 )
       

Balance as of December 31, 2013

  $ 102,687  
       
       

        Accruals for home warranty claims in the American Home Shield business are made based on the Company's claims experience and actuarial projections. Termite damage claim accruals in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per claim. Current activity could differ causing a change in estimates. The Company has certain liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified.

        In the ordinary course of conducting business activities, the Company and its subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedings involving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and other matters. The Company has entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court or other approvals. If one or more of the Company's settlements are not finally approved, the Company could have additional or different exposure, which could be material. At this time, the Company does not expect any of these proceedings to have a material effect on its reputation, business, financial position, results of operations

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Notes to the Consolidated Financial Statements (Continued)

Note 9. Commitments and Contingencies (Continued)

or cash flows; however, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial position, results of operations and cash flows.

Note 10. Related Party Transactions

        In connection with the 2007 Merger and the related transactions, the Company entered into a consulting agreement with CD&R under which CD&R provides the Company with on-going consulting and management advisory services. The annual management fee payable under the consulting agreement with CD&R is $6.25 million. Under this agreement, the Company recorded management fees in each of the years ended December 31, 2013, 2012 and 2011 of $6.25 million, which is included in Selling and administrative expenses in the consolidated statements of operations and comprehensive (loss) income. The consulting agreement also provides that CD&R may receive additional fees in connection with certain subsequent financing and acquisition or disposition transactions. There were no additional fees incurred in each of the years ended December 31, 2013, 2012 and 2011. The consulting agreement will terminate on July 24, 2017, unless terminated earlier at CD&R's election.

        In addition, in August 2009, the Company entered into consulting agreements with Citigroup, BAS and JPMorgan. Under the consulting agreements, Citigroup, BAS and JPMorgan each provide the Company with on-going consulting and management advisory services through June 30, 2016 or the earlier termination of the existing consulting agreement between the Company and CD&R. On September 30, 2010, Citigroup transferred the management responsibility for certain investment funds that owned shares of common stock of the Company to StepStone. Citigroup also assigned its obligations and rights under its consulting agreement to StepStone, and beginning in the fourth quarter of 2010, the consulting fee otherwise payable to Citigroup became payable to StepStone. As of December 22, 2011, the Company purchased from BAS 7.5 million shares of the Company's common stock, and, effective January 1, 2012, the annual consulting fee payable to BAS was reduced to $0.25 million. The Company pays annual consulting fees of $0.5 million, $0.25 million and $0.25 million to StepStone, BAS and JPMorgan, respectively. The Company recorded aggregate consulting fees related to these agreements of $1.0 million in each of the years ended December 31, 2013 and 2012 and $1.25 million for the year ended December 31, 2011, which is included in Selling and administrative expenses in the consolidated statements of operations and comprehensive (loss) income.

Note 11. Employee Benefit Plans

        Discretionary contributions to qualified profit sharing and non-qualified deferred compensation plans were made in the amount of $19.3 million, $17.4 million and $15.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.

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Notes to the Consolidated Financial Statements (Continued)

Note 12. Long-Term Debt

        Long-term debt as of December 31, 2013 and December 31, 2012 is summarized in the following table:

 
  As of December 31,  
(In thousands)
  2013   2012  

Senior secured term loan facility maturing in 2014 (Tranche A)

  $   $ 1,219,145  

Senior secured term loan facility maturing in 2017 (Tranche B)

    990,683     1,000,741  

Senior secured term loan facility maturing in 2017 (Tranche C)(1)

    1,198,196      

7.00% senior notes maturing in 2020

    750,000     750,000  

8.00% senior notes maturing in 2020(2)

    602,446     602,750  

Revolving credit facility maturing in 2017

         

7.10% notes maturing in 2018(3)

    71,326     69,400  

7.45% notes maturing in 2027(3)

    158,564     155,894  

7.25% notes maturing in 2038(3)

    63,058     62,250  

Vehicle capital leases(4)

    72,445     37,837  

Other

    48,811     63,236  

Less current portion

    (51,399 )   (52,214 )
           

Total long-term debt

  $ 3,904,130   $ 3,909,039  
           
           

(1)
Presented net of $9.6 million in unamortized original issue discount paid as part of the 2013 Term Loan Facility Amendment.

(2)
Includes $2.4 million in unamortized premium received on the sale of $100.0 million aggregate principal amount of such notes.

(3)
The increase in the balance from 2012 to 2013 reflects the amortization of fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates shown above.

(4)
SvM has entered into the Fleet Agreement. All leases under the Fleet Agreement are capital leases for accounting purposes. The lease rental payments include an interest component calculated using a variable rate based on one-month LIBOR plus other contractual adjustments and a borrowing margin totaling 2.45 percent.

Term Facilities

        On the 2007 Closing Date, in connection with the completion of the 2007 Merger, SvM became obligated under the Term Facilities. The Term Facilities consist of (i) the Term Loan Facility providing for term loans in an aggregate principal amount of $2.65 billion and (ii) a then new pre-funded synthetic letter of credit facility in an aggregate principal amount of $150.0 million. As of December 31, 2013, after giving effect to the 2012 Term Loan Facility Amendment and 2013 Term Loan Facility Amendment discussed below, SvM had outstanding $134.6 million of letters of credit, resulting in unused commitments under the synthetic letter of credit facility of $3.0 million.

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Notes to the Consolidated Financial Statements (Continued)

Note 12. Long-Term Debt (Continued)

        The Term Loan Facility and the guarantees thereof are secured by substantially all of the tangible and intangible assets of SvM and certain of its domestic subsidiaries, excluding certain subsidiaries subject to regulatory requirements in various states, including pledges of all the capital stock of all direct domestic subsidiaries (other than foreign subsidiary holding companies, which are deemed to be foreign subsidiaries) owned by SvM or any Guarantor and of up to 65% of the capital stock of each direct foreign subsidiary owned by SvM or any Guarantor. The Term Loan Facility security interests are subject to certain exceptions, including, but not limited to, exceptions for (i) equity interests, (ii) indebtedness or other obligations of subsidiaries, (iii) real estate or (iv) any other assets, if the granting of a security interest therein would require that any notes issued under SvM's indenture dated as of August 15, 1997 be secured. The Term Loan Facility is secured on a pari passu basis with the security interests created in the same collateral securing the Revolving Credit Facility.

        Pursuant to the 2012 Term Loan Facility Amendment, the Tranche B loans have a maturity date of January 31, 2017. The interest rates applicable to the Tranche B loans under the Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at SvM's option, (i) an adjusted London inter-bank offered rate (adjusted for maximum reserves), plus a borrowing margin or (ii) an alternate base rate, plus a borrowing margin. As of December 31, 2013, the borrowing margin for the outstanding Tranche B loans was 4.25 percent. The 2012 Term Loan Facility Amendment also included mechanics for future extension amendments, permits borrower buy-backs of term loans, increased the size of certain baskets and made certain other changes to the Credit Agreement, including the reduction of the availability under the synthetic letter of credit facility from $150.0 million to $137.6 million.

        On February 22, 2013, SvM entered into the 2013 Term Loan Facility Amendment to amend the Credit Agreement primarily to extend the maturity date of a portion of the borrowings under the Term Loan Facility. Pursuant to the 2013 Term Loan Facility Amendment, the maturity of the outstanding Tranche A loans was extended, and such loans were converted into the Tranche C loans. The maturity date for the Tranche C loans is January 31, 2017. The interest rates applicable to the Tranche C loans under the Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at the SvM's option, (i) an adjusted London inter-bank offered rate (adjusted for maximum reserves) plus 3.25 percent, with a minimum adjusted London inter-bank offered rate of 1.00 percent or (ii) an alternate base rate plus 2.25 percent, with a minimum alternate base rate of 2.00 percent. As part of the 2013 Term Loan Facility Amendment, the SvM paid an original issue discount equal to 1.00 percent of the outstanding borrowings, or $12.2 million. Voluntary prepayments of borrowings under the Tranche C Loans are permitted at any time, in minimum principal amounts, without premium or penalty.

        As a result of the 2012 Term Loan Facility Amendment and the 2013 Term Loan Facility Amendment, SvM has, as of December 31, 2013, approximately $2.2 billion of outstanding borrowings maturing January 31, 2017, after including the unamortized portion of the original issue discount paid. Additionally, following the 2012 Term Loan Facility Amendment and the 2013 Term Loan Facility Amendment the availability under the synthetic letter of credit facility will be reduced from the current availability of $137.6 million to $77.9 million as of July 24, 2014. The remaining $77.9 million of availability under the synthetic letter of credit will mature January 31, 2017.

        SvM has historically entered into interest rate swap agreements. Under the terms of these agreements, SvM pays a fixed rate of interest on the stated notional amount and SvM receives a floating rate of interest (based on one month LIBOR) on the stated notional amount. Therefore,

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Notes to the Consolidated Financial Statements (Continued)

Note 12. Long-Term Debt (Continued)

during the term of the swap agreements, the effective interest rate on the portion of the term loans equal to the stated notional amount is fixed at the stated rate in the interest rate swap agreements plus the incremental borrowing margin. The changes in interest rate swap agreements in effect for the years ended December 31, 2013, 2012 and 2011, as well as the cumulative interest rate swaps outstanding as of December 31, 2012 and 2011 are as follows:

(In thousands)
  Notional
Amount
  Weighted
Average Fixed
Rate(1)
 

Interest rate swap agreements in effect as of December 31, 2011

  $ 1,430,000     2.84 %

Expired

    (450,000 )      
           

Interest rate swap agreements in effect as of December 31, 2012

    980,000     1.70 %

Expired

    (980,000 )      
           

Interest rate swap agreements in effect as of December 31, 2013

  $      
           
           

(1)
Before the application of the applicable borrowing margin.

        In accordance with accounting standards for derivative instruments and hedging activities, and as further described in Note 18, these interest rate swap agreements are classified as cash flow hedges, and, as such, the hedging instruments are recorded on the consolidated statements of financial position as either an asset or liability at fair value, with the effective portion of the changes in fair value attributable to the hedged risks recorded in accumulated other comprehensive income (loss).

Senior Notes

        On the 2007 Closing Date, in connection with the completion of the 2007 Merger, SvM became obligated under the Interim Loan Facility. The Interim Loan Facility matured on July 24, 2008. On the maturity date, outstanding amounts under the Interim Loan Facility were converted on a one to one basis into 2015 Notes.

        The 2020 Notes, sold in February 2012, will mature on February 15, 2020 and bear interest at a rate of 8 percent per annum. The proceeds from the 2020 Notes, sold in February 2012, together with available cash, were used to redeem $600 million in aggregate principal amount of the SvM's outstanding 2015 Notes in the first quarter of 2012. The 2020 Notes, sold in August 2012, will mature on August 15, 2020 and bear interest at a rate of 7 percent per annum. SvM used a majority of the proceeds from the sale of the 2020 Notes, sold in August 2012, to redeem the remaining $396 million aggregate principal amount of its 2015 Notes and to repay $276 million of outstanding borrowings under its Term Facilities during the third quarter of 2012. The Company recorded a loss on extinguishment of debt of $55.6 million on the consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2012 related to these transactions and the redemption of the 2015 Notes in the first quarter of 2012 discussed above. The 2020 Notes are jointly and severally guaranteed on a senior unsecured basis by the Guarantors. The 2020 Notes are not guaranteed by the Non-Guarantors.

        The 2020 Notes are senior unsecured obligations of SvM and rank equally in right of payment with all of SvM's other existing and future senior unsecured indebtedness. The subsidiary guarantees are general unsecured senior obligations of the Guarantors and rank equally in right of payment with all of the existing and future senior unsecured indebtedness of our Non-Guarantors. The 2020 Notes are

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Notes to the Consolidated Financial Statements (Continued)

Note 12. Long-Term Debt (Continued)

effectively junior to all of SvM's existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness.

Revolving Credit Facility

        On the 2007 Closing Date, in connection with the completion of the 2007 Merger, SvM became obligated under the Revolving Credit Facility. The Revolving Credit Facility provides for senior secured revolving loans and stand-by and other letters of credit. The Revolving Credit Facility limits outstanding letters of credit to $75.0 million. As of December 31, 2013 and 2012, there were no revolving loans or letters of credit outstanding under the Revolving Credit Facility. As of December 31, 2013, SvM had $324.2 million of remaining capacity available under the Revolving Credit Facility.

        On November 27, 2013, SvM entered into the 2013 Revolver Amendment. Pursuant to the 2013 Revolver Amendments, after completion of the TruGreen Separation Transaction, SvM has $241.7 million of available borrowing capacity through July 23, 2014 and $182.7 million from July 24, 2014 through January 31, 2017. SvM will continue to have access to letters of credit up to $75.0 million through January 31, 2017.

        The Revolving Credit Facility and the guarantees thereof are secured by the same collateral securing the Term Loan Facility, on a pari passu basis with the security interests created in the same collateral securing the Term Loan Facility.

        The interest rates applicable to the loans under the Revolving Credit Facility will be based on a fluctuating rate of interest measured by reference to either, at the borrower's option, (1) an adjusted London inter-bank offered rate (adjusted for maximum reserves), plus a borrowing margin (2.50 percent as of December 31, 2013) or (2) an alternate base rate, plus a borrowing margin (1.50 percent as of December 31, 2013). The borrowing margin, in each case, will be adjusted from time to time based on the Consolidated Secured Leverage Ratio (as defined in the Revolving Credit Agreement) for the previous fiscal quarter.

        The agreements governing the Term Facilities, the 2020 Notes and the Revolving Credit Facility contain certain covenants that, among other things, limit or restrict the incurrence of additional indebtedness, liens, sales of assets, certain payments (including dividends) and transactions with affiliates, subject to certain exceptions. SvM was in compliance with the covenants under these agreements at December 31, 2013.

        As of December 31, 2013, future scheduled long-term debt payments are $51.3 million, $62.2 million, $44.0 million, $2.149 billion and $90.5 million for the years ended December 31, 2014, 2015, 2016, 2017 and 2018, respectively.

Note 13. Cash and Marketable Securities

        Cash, money market funds and certificates of deposits with maturities of three months or less when purchased are included in Cash and cash equivalents on the consolidated statements of financial position. As of December 31, 2013 and 2012, the Company's investments consist primarily of domestic publicly traded debt and certificates of deposit ("Debt securities") and common equity securities ("Equity securities"). The amortized cost, fair value and gross unrealized gains and losses of the

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Notes to the Consolidated Financial Statements (Continued)

Note 13. Cash and Marketable Securities (Continued)

Company's short- and long-term investments in Debt and Equity securities as of December 31, 2013 and 2012 is as follows:

(In thousands)
  Amortized
Cost
  Gross
Unrealized
Gains
  Gross
Unrealized
Losses
  Fair Value  

Available-for-sale and trading securities, December 31, 2013:

                         

Debt securities

  $ 96,809   $ 2,611   $ (795 ) $ 98,625  

Equity securities

    41,268     8,946     (207 )   50,007  
                   

Total securities

  $ 138,077   $ 11,557   $ (1,002 ) $ 148,632  
                   

 

(In thousands)
  Amortized
Cost
  Gross
Unrealized
Gains
  Gross
Unrealized
Losses
  Fair Value  

Available-for-sale and trading securities, December, 31, 2012:

                         

Debt securities

  $ 99,071   $ 5,773   $ (20 ) $ 104,824  

Equity securities

    38,786     3,809     (1,616 )   40,979  
                   

Total securities

  $ 137,857   $ 9,582   $ (1,636 ) $ 145,803  
                   

        The portion of unrealized losses which had been in a loss position for more than one year was $0.1 million and $1.5 million as of December 31, 2013 and 2012, respectively. The aggregate fair value of the investments with unrealized losses was $30.2 million and $13.1 million as of December 31, 2013 and 2012, respectively.

        Gains and losses on sales of investments, as determined on a specific identification basis, are included in investment income in the period they are realized. The Company periodically reviews its portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which the issuer competes.

        The table below summarizes proceeds, gross realized gains, gross realized losses, each resulting from sales of available-for-sale securities, and impairment charges due to other than temporary declines in the value of certain investments.

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Proceeds from sales of securities

  $ 23,305   $ 22,612   $ 45,065  

Gross realized gains, pre-tax

    2,272     1,990     6,065  

Gross realized gains, net of tax

    1,386     1,218     3,714  

Gross realized losses, pre-tax

    (640 )   (20 )   (249 )

Gross realized losses, net of tax

    (390 )   (12 )   (153 )

Impairment charges, pre-tax

            (195 )

Impairment charges, net of tax

            (119 )

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Notes to the Consolidated Financial Statements (Continued)

Note 14. Comprehensive Income (Loss)

        Comprehensive income (loss), which primarily includes net income (loss), unrealized gain (loss) on marketable securities, unrealized gain (loss) on derivative instruments and the effect of foreign currency translation is disclosed on the consolidated statements of operations and comprehensive income (loss) and the consolidated statements of shareholders' equity.

        The following table summarizes the activity in other comprehensive income (loss) and the related tax effects.

(In thousands)
  Unrealized
Losses on
Derivatives
  Unrealized
Gains on
Available-for-
Sale Securities
  Foreign
Currency
Translation
  Total  

Balance as of December 31, 2011

  $ (14,268 ) $ 4,330   $ 3,726   $ (6,212 )

Other comprehensive loss before reclassifications:

                         

Pre-tax amount

    (387 )   (1,473 )   (426 )   (2,286 )

Tax provision (benefit)

    184     (781 )       (597 )
                   

After tax amount

    (571 )   (692 )   (426 )   (1,689 )

Amounts reclassified from accumulated other comprehensive income (loss)(1)

    12,810     1,657         14,467  
                   

Net current period other comprehensive income (loss)

    12,239     965     (426 )   12,778  
                   

Balance as of December 31, 2012

  $ (2,029 ) $ 5,295   $ 3,300   $ 6,566  
                   

Other comprehensive income (loss) before reclassifications

                         

Pre-tax amount

    494     4,728     (3,974 )   1,248  

Tax provision (benefit)

    (107 )   2,052         1,945  
                   

After tax amount

    601     2,676     (3,974 )   (697 )

Amounts reclassified from accumulated other comprehensive income (loss)(1)

    2,034     (1,292 )       742  
                   

Net current period other comprehensive income (loss)

    2,635     1,384     (3,974 )   45  
                   

Balance as of December 31, 2013

  $ 606   $ 6,679   $ (674 )   6,611  
                   
                   

(1)
Amounts are net of tax. See reclassifications out of accumulated other comprehensive income (loss) below for further details.

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Notes to the Consolidated Financial Statements (Continued)

Note 14. Comprehensive Income (Loss) (Continued)

        Reclassifications out of accumulated other comprehensive income (loss) included the following components for the periods indicated.

 
  Amount Reclassified from
Accumulated Other
Comprehensive Income
   
 
  As of December 31   Consolidated Statements of
Operations and Comprehensive
(Loss) Income
 
  2013   2012   2011
(In thousands)
   

(Gains) losses on derivatives:

                     

Fuel swap contracts

  $ (1,472 ) $ (1,944 ) $ (10,010 ) Cost of services rendered and products sold

Interest rate swap contracts

    4,731     21,898     37,613   Interest expense
                 

Net losses on derivatives

    3,259     19,954     27,603    

Impact of income taxes

    1,225     7,144     10,870   (Benefit) provision for income taxes
                 

Total reclassifications related to derivatives

  $ 2,034   $ 12,810   $ 16,733    
                 
                 

(Gains) losses on available-for-sale securities

  $ (2,118 ) $ 2,629   $ (6,012 ) Interest and net investment income

Impact of income taxes

    (826 )   972     (2,225 ) (Benefit) provision for income taxes
                 

Total reclassifications related to securities

  $ (1,292 ) $ 1,657   $ (3,787 )  
                 
                 

Total reclassifications for the period

  $ 742   $ 14,467   $ 12,946    
                 
                 

Note 15. Supplemental Cash Flow Information

        Supplemental information relating to the consolidated statements of cash flows is presented in the following table:

 
  Year Ended December 31,  
(In thousands)
  2013   2012   2011  

Cash paid for or (received from):

                   

Interest expense

  $ 234,930   $ 235,419   $ 245,274  

Interest and dividend income

    (5,304 )   (5,370 )   (4,954 )

Income taxes, net of refunds

    9,922     8,839     11,677  

        The Company acquired $50.9 million, $47.1 million and $10.1 million of property and equipment through capital leases and other non-cash financing transactions in the years ended December 31, 2013, 2012 and 2011, respectively, which have been excluded from the consolidated statements of cash flows as non-cash investing and financing activities.

Note 16. Capital Stock

        The Company is authorized to issue 2,000,000,000 shares of common stock. As of December 31, 2013, there were 148,373,291 shares of common stock issued and 137,341,514 shares of common stock outstanding. The Company has no other classes of equity securities issued or outstanding. All of the issued and outstanding shares of the Company are held by investment funds sponsored by, or affiliated with, the

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Notes to the Consolidated Financial Statements (Continued)

Note 16. Capital Stock (Continued)

Equity Sponsors and certain executive officers and key employees of SvM. The Company has completed equity offerings to certain executive officers and key employees pursuant to the MSIP (as defined below). The shares sold and options granted to employees in connection with these equity offerings are subject to and governed by the terms of the MSIP and are discussed further in Note 17.

        In connection with these offerings, the Company sold 576,668 deferred share units ("DSUs") at a purchase price of $10.00 per DSU. DSUs represent a right to receive a share of common stock in the future. In 2008, the Company issued 576,668 shares of common stock to a rabbi trust to be held for future distribution related to the DSUs. The shares held by the rabbi trust are presented in treasury stock on the consolidated statements of financial position and the consolidated statements of shareholders' equity. As of December 31, 2013, there are 162,769 DSUs outstanding, which have not yet been converted to common stock.

Note 17. Stock-Based Compensation

        The board of directors and stockholders of the Company have adopted the Amended and Restated ServiceMaster Global Holdings, Inc. Stock Incentive Plan (the "MSIP"). The MSIP provides for the sale of shares and deferred share units ("DSUs") of the Company's stock to SvM's executives, officers and other employees and to the Company's directors as well as the grant of restricted stock units ("RSUs"), performance-based RSUs and options to purchase shares of the Company's stock to those individuals. DSUs represent a right to receive a share of common stock in the future. The board of directors of the Company, or a committee designated by it, selects the SvM executives, officers and employees and the Company's directors eligible to participate in the MSIP and determines the specific number of shares to be offered or options to be granted to an individual. A maximum of 15,595,000 shares of the Company's stock is authorized for issuance under the MSIP. The Company currently intends to satisfy any need for shares of common stock of the Company associated with the settlement of DSUs, vesting of RSUs or exercise of options issued under the MSIP through those new shares available for issuance or any shares repurchased, forfeited or surrendered from participants in the MSIP.

        All option grants under the MSIP have been, and will be, non-qualified options with a per-share exercise price no less than the fair market value of one share of the Company's stock on the grant date. Any stock options granted will generally have a term of ten years and vesting will be subject to an employee's continued employment. The board of directors of the Company, or a committee designated by it, may accelerate the vesting of an option at any time. In addition, vesting of options will be accelerated if the Company experiences a change in control (as defined in the MSIP) unless options with substantially equivalent terms and economic value are substituted for existing options in place of accelerated vesting. Vesting of options will also be accelerated in the event of an employee's death or disability (as defined in the MSIP). Upon a termination for cause (as defined in the MSIP), all options held by an employee are immediately cancelled. Following a termination without cause, vested options will generally remain exercisable through the earliest of the expiration of their term or three months following termination of employment (one year in the case of death, disability or retirement at normal retirement age). Unless sooner terminated by the board of directors of the Company, the MSIP will remain in effect until November 20, 2017.

        In 2013, 2012 and 2011, the Company completed various equity offerings to certain executives, officers and employees of SvM pursuant to the MSIP. The shares sold and options granted in connection with these equity offerings are subject to and governed by the terms of the MSIP. In connection with these offerings, the Company sold a total of 656,452; 122,853; and 495,538 shares of common stock in 2013, 2012 and 2011,

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Notes to the Consolidated Financial Statements (Continued)

Note 17. Stock-Based Compensation (Continued)

respectively, at a weighted average purchase price of $10.22 per share in 2013, $14.65 per share in 2012 and $11.00 per share in 2011. In addition, the Company granted SvM's executives, officers and employees options to purchase 2,414,973; 506,116; and 2,280,391 shares of the Company's common stock in 2013, 2012 and 2011, respectively, at a weighted average exercise price of $10.16 per share for options issued in 2013, $14.67 per share for options issued in 2012 and $11.00 per share for options issued in 2011. These options are subject to and governed by the terms of the MSIP. The per share purchase price and exercise price was based on the determination by the Compensation Committee of the Company of the fair market value of the common stock of the Company as of the purchase/grant dates.

        All options granted to date generally will vest in four equal annual installments, subject to an employee's continued employment. The four-year vesting period is the requisite service period over which compensation cost will be recognized on a straight-line basis for all grants. All options issued are accounted for as equity-classified awards. The non-cash stock-based compensation expense associated with the MSIP is pushed down from the Company and recorded in the Company's Consolidated Financial Statements.

        The value of each option award was estimated on the grant date using the Black-Scholes option valuation model that incorporates the assumptions noted in the following table. For options granted in 2013, 2012 and 2011, the expected volatilities were based on the historical and implied volatilities of the publicly traded stock of a group of companies comparable to the Company. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using the simplified method as outlined by the SEC in Staff Accounting Bulletins No. 107 and 110. The risk-free interest rates were based on the U.S. Treasury securities with terms similar to the expected lives of the options as of the grant dates.

 
  Year Ended December 31,  
Assumption
  2013   2012   2011  

Expected volatility

    49.2% - 49.6%     49.2% - 50.3%     31.0% - 50.3%  

Expected dividend yield

    0.0%     0.0%     0.0%  

Expected life (in years)

    6.3     6.3     6.3  

Risk-free interest rate

    1.69% - 2.02%     0.78% - 1.43%     1.07% - 2.65%  

        The weighted-average grant-date fair value of the options granted during 2013, 2012 and 2011 was $5.03, $7.06 and $4.31 per option, respectively. The Company has applied a forfeiture assumption of 18.80 percent per annum in the recognition of the expense related to these options, with the exception of the options held by the Company's CEO for which the Company has applied a forfeiture rate of zero.

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Notes to the Consolidated Financial Statements (Continued)

Note 17. Stock-Based Compensation (Continued)

        A summary of option activity under the MSIP as of December 31, 2013, and changes during the year then ended is presented below:

 
  Stock
Options
  Weighted Avg.
Exercise
Price
  Weighted Avg.
Remaining
Contractual
Term (in years)
 

Total outstanding, December 31, 2012

    8,968,313   $ 10.49        

Granted to employees

    2,414,973   $ 10.16        

Exercised

    (80,000 ) $ 10.00        

Forfeited

    (949,128 ) $ 11.21        

Expired

    (2,395,584 ) $ 10.31        
               

Total outstanding, December 31, 2013

    7,958,574   $ 10.36     5.81  
               
               

Total exercisable, December 31, 2013

    4,930,646   $ 10.15     3.57  
               
               

        The Company granted SvM's executives, officers and employees 1,037,198; 72,143; and 350,454 RSUs in 2013, 2012 and 2011, respectively, with weighted average grant date fair values of $11.39 per unit for 2013, $14.90 per unit in 2012 and $11.00 per unit in 2011, which was equivalent to the then current fair value of the Company's common stock at the grant date. All RSUs outstanding as of December 31, 2013 will vest in three equal annual installments, subject to an employee's continued employment. Upon vesting, each RSU will be converted into one share of the Company's common stock.

        A summary of RSU activity under the MSIP as of December 31, 2013, and changes during the year then ended is presented below:

 
  RSUs   Weighted Avg.
Grant Date
Fair Value
 

Total outstanding, December 31, 2012

    335,780   $ 11.60  

Granted to employees

    1,037,198   $ 11.39  

Vested

    (179,758 ) $ 11.19  

Forfeited

    (474,193 ) $ 12.57  
           

Total outstanding, December 31, 2013

    719,027   $ 10.69  
           
           

        During the years ended December 31, 2013, 2012 and 2011, the Company recognized stock-based compensation expense of $4.0 million ($2.5 million, net of tax), $7.1 million ($4.4 million, net of tax) and $8.4 million ($5.2 million, net of tax), respectively. As of December 31, 2013, there was $16.6 million of total unrecognized compensation costs related to non-vested stock options and RSUs granted by the Company under the MSIP. These remaining costs are expected to be recognized over a weighted-average period of 3.08 years.

        In 2013 and 2012, the Company modified options held by certain executive officers of SvM. These modifications resulted in $0.1 million and $0.9 million in additional stock compensation expense, which was recorded during 2013 and 2012, respectively. There were no stock option modifications in 2011.

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Notes to the Consolidated Financial Statements (Continued)

Note 18. Fair Value Measurements

        The period-end carrying amounts of receivables, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The period-end carrying amounts of long-term notes receivable approximate fair value as the effective interest rates for these instruments are comparable to period-end market rates. The period-end carrying amounts of short- and long-term marketable securities also approximate fair value, with unrealized gains and losses reported net of tax as a component of accumulated other comprehensive income on the consolidated statements of financial position, or, for certain unrealized losses, reported in interest and net investment income on the consolidated statements of operations and comprehensive (loss) income if the decline in value is other than temporary. The carrying amount of total debt was $3.956 billion and $3.961 billion and the estimated fair value was $3.956 billion and $4.018 billion as of December 31, 2013 and 2012, respectively. The fair value of the Company's debt is estimated based on available market prices for the same or similar instruments which are considered significant other observable inputs (Level 2) within the fair value hierarchy. The fair values presented reflect the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value estimates presented in this report are based on information available to the Company as of December 31, 2013 and 2012.

        The Company has estimated the fair value of its financial instruments measured at fair value on a recurring basis using the market and income approaches. For investments in marketable securities, deferred compensation trust assets and derivative contracts, which are carried at their fair values, the Company's fair value estimates incorporate quoted market prices, other observable inputs (for example, forward interest rates) and unobservable inputs (for example, forward commodity prices) at the balance sheet date.

        Interest rate swap contracts are valued using forward interest rate curves obtained from third-party market data providers. The fair value of each contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. The expected future settlements are determined by comparing the contract interest rate to the expected forward interest rate as of each settlement date and applying the difference between the two rates to the notional amount of debt in the interest rate swap contracts.

        Fuel swap contracts are valued using forward fuel price curves obtained from third-party market data providers. The fair value of each contract is the sum of expected future settlements between contract counterparties, discounted to present value. The expected future settlements are determined by comparing the contract fuel price to the expected forward fuel price as of each settlement date and applying the difference between the contract and expected prices to the notional gallons in the fuel swap contracts. The Company regularly reviews the forward price curves obtained from third-party market data providers and related changes in fair value for reasonableness utilizing information available to the Company from other published sources.

        The Company has not changed its valuation techniques for measuring the fair value of any financial assets and liabilities during the year. Transfers between levels, if any, are recognized at the end of the reporting period. There were no significant transfers between levels during the years ended December 31, 2013 or 2012.

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Notes to the Consolidated Financial Statements (Continued)

Note 18. Fair Value Measurements (Continued)

        The carrying amount and estimated fair value of the Company's financial instruments that are recorded at fair value on a recurring basis for the periods presented are as follows:

 
   
  As of December 31, 2013  
 
   
   
  Estimated Fair Value Measurements  
(In thousands)
  Statement of Financial Position
Location
  Carrying
Value
  Quoted
Prices In
Active
Markets
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial Assets:

                             

Deferred compensation trust assets

  Long-term marketable securities   $ 12,476   $ 12,476   $   $  

Investments in marketable securities

  Marketable securities and Long-term marketable securities     136,156     60,753     75,403      

Fuel swap contracts:

                             

Current

  Prepaid expenses and other assets     963             963  
                       

Total financial assets

      $ 149,595   $ 73,229   $ 75,403   $ 963  
                       
                       

 

 
   
  As of December 31, 2012  
 
   
   
  Estimated Fair Value Measurements  
(In thousands)
  Statement of Financial Position
Location
  Carrying
Value
  Quoted
Prices In
Active
Markets
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

Financial Assets:

                             

Deferred compensation trust assets

  Long-term marketable securities   $ 11,987   $ 11,987   $   $  

Investments in marketable securities

  Marketable securities and Long-term marketable securities     133,816     45,152     88,664      

Fuel swap contracts:

                             

Current

  Prepaid expenses and other assets     1,957             1,957  
                       

Total financial assets

      $ 147,760   $ 57,139   $ 88,664   $ 1,957  
                       
                       

Financial Liabilities:

                             

Fuel swap contracts:

                             

Current

  Other accrued liabilities   $ 113   $   $   $ 113  

Interest rate swap contracts

  Other accrued liabilities(1)     7,349         7,349      
                       

Total financial liabilities

      $ 7,462   $   $ 7,349   $ 113  
                       
                       

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Notes to the Consolidated Financial Statements (Continued)

Note 18. Fair Value Measurements (Continued)

        The carrying amount and estimated fair value of the Company's assets that were recorded at fair value on a nonrecurring basis during 2013 are as follows:

 
   
  As of December 31, 2013  
 
   
   
  Estimated Fair Value Measurements  
(In thousands)
  Statement of Financial Position
Location
  Carrying
Value
  Quoted
Prices In
Active
Markets
(Level 1)
  Significant
Other
Observable
Inputs
(Level 2)
  Significant
Unobservable
Inputs
(Level 3)
 

TruGreen Trade Name(1)

  Intangible assets, primarily trade names, service marks and trademarks, net   $ 351,000   $   $   $ 351,000  

TruGreen Goodwill(2)

  Goodwill                  

(1)
In 2013, the Company recognized a non-cash impairment charge of $255.8 million to reduce the carrying value of the TruGreen trade name to its fair value of $351.0 million. See Note 1 for further information regarding the factors that led to the completion of the interim impairment analysis along with a description of the methodology, assumptions and significant unobservable inputs used to estimate the fair value of the TruGreen trade name.

(2)
In 2013, the Company recognized a non-cash impairment charge of $417.5 million to reduce the carrying value of TruGreen's goodwill to its implied fair value of zero. See Note 1 for further information regarding the factors that led to the completion of the interim impairment analysis along with a description of the methodology, assumptions and significant unobservable inputs used to estimate the fair value of TruGreen's goodwill.

        A reconciliation of the beginning and ending fair values of financial instruments valued using significant unobservable inputs (Level 3) on a recurring basis is presented as follows:

(In thousands)
  Fuel Swap
Contract
(Liabilities) Assets
 

Balance as of December 31, 2011

  $ (733 )

Total gains (losses) (realized and unrealized):

       

Included in earnings

    1,944  

Included in accumulated other comprehensive income

    2,577  

Settlements, net

    (1,944 )
       

Balance as of December 31, 2012

    1,844  

Total gains (realized and unrealized):

       

Included in earnings

    1,472  

Included in accumulated other comprehensive income

    (881 )

Settlements, net

    (1,472 )
       

Balance as of December 31, 2013

  $ 963  
       
       

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Notes to the Consolidated Financial Statements (Continued)

Note 18. Fair Value Measurements (Continued)

        The following table presents information relating to the significant unobservable inputs of our Level 3 financial instruments as of December 31, 2013 and 2012:

Item
  Fair Value as of
December 31, 2013
(in thousands)
  Valuation Technique   Unobservable Input   Range   Weighted Average  

Fuel swap contracts

  $ 963   Discounted Cash Flows   Forward Unleaded Price per Gallon(1)   $3.20 - $3.87   $ 3.60  

 

Item
  Fair Value as of
December 31, 2012
(in thousands)
  Valuation Technique   Unobservable Input   Range   Weighted
Average
 

Fuel swap contracts

  $ 1,844   Discounted Cash Flows   Forward Unleaded Price per Gallon(1)   $3.36 - $3.73   $ 3.55  

            Forward Diesel Price per Gallon(1)   $3.88 - $3.96   $ 3.90  

(1)
Forward price per gallon for unleaded and diesel were derived from third-party market data providers. A decrease in the forward price would result in a decrease in the fair value of the fuel swap contracts.

        The Company uses derivative financial instruments to manage risks associated with changes in fuel prices and has in the past used, and may in the future use, derivative financial instruments to manage risks associated with changes in interest rates. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. In designating its derivative financial instruments as hedging instruments under accounting standards for derivative instruments, the Company formally documents the relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives to forecasted transactions. The Company assesses at the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsetting the projected changes in cash flows of the associated forecasted transactions. All of the Company's designated hedging instruments are classified as cash flow hedges.

        The Company has historically hedged a significant portion of its annual fuel consumption. The Company has historically used approximately 20 million gallons of fuel on an annual basis, with Terminix using approximately 11 million gallons. The Company has also historically hedged the interest payments on a portion of its variable rate debt through the use of interest rate swap agreements, although the Company has no interest rate swap agreements outstanding as of December 31, 2013. All of the Company's fuel swap contracts and interest rate swap contracts are classified as cash flow hedges, and, as such, the hedging instruments are recorded on the consolidated statements of financial position as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in accumulated other comprehensive income (loss). Any change in the fair value of the hedging instrument resulting from ineffectiveness, as defined by accounting standards, is recognized in current period earnings. Cash flows related to fuel and interest rate derivatives are classified as operating activities on the consolidated statements of cash flows, other than cash flows related to one amended interest rate swap which are classified as financing activities.

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Notes to the Consolidated Financial Statements (Continued)

Note 18. Fair Value Measurements (Continued)

        The effect of derivative instruments on the consolidated statements of operations and comprehensive (loss) Income and accumulated other comprehensive income (loss) on the consolidated statements of financial position is presented as follows:

 
  Effective Portion of
Gain Recognized in
Accumulated Other
Comprehensive
Income (Loss)
  Effective Portion of
Gain (Loss) Reclassified
from Accumulated Other
Comprehensive Income
(Loss) into Earnings
   
(In thousands)
Derivatives designated as
Cash Flow Hedge
Relationships
  Location of Gain (Loss)
included in Earnings
  Year ended December 31, 2013

Fuel swap contracts

  $ (881 ) $ 1,472   Cost of services rendered and products sold

Interest rate swap contracts

  $ 4,631   $ (4,731 ) Interest expense

 

 
  Effective Portion of
Gain Recognized in
Accumulated Other
Comprehensive
Income (Loss)
  Effective Portion of
Gain (Loss) Reclassified
from Accumulated Other
Comprehensive Income
(Loss) into Income
   
Derivatives designated as
Cash Flow Hedge
Relationships
  Location of (Loss) Gain
included in Income
  Year ended December 31, 2012

Fuel swap contracts

  $ 2,577   $ 1,944   Cost of services rendered and products sold

Interest rate swap contracts

  $ 17,114   $ (21,898 ) Interest expense

        Ineffective portions of derivative instruments designated in accordance with accounting standards as cash flow hedge relationships were insignificant during the year ended December 31, 2013. As of December 31, 2013, the Company had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $26.0 million, maturing through 2014. Under the terms of its fuel swap contracts, the Company is required to post collateral in the event that the fair value of the contracts exceeds a certain agreed upon liability level and in other circumstances required by the counterparty. As of December 31, 2013, the Company had posted $2.5 million in letters of credit as collateral under its fuel hedging program, none of which were posted under the Company's Revolving Credit Facility.

        The effective portion of the gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments is recorded in accumulated other comprehensive income (loss). These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement or the fuel settlement affects earnings. The amount expected to be reclassified into earnings during the next 12 months includes unrealized gains and losses related to open fuel hedges. Specifically, as the underlying forecasted transactions occur during the next 12 months, the hedging gains and losses in accumulated other comprehensive income (loss) expected to be recognized in earnings is a gain of $0.6 million, net of tax, as of December 31, 2013. The amounts that are ultimately reclassified into earnings will be based on actual fuel prices at the time the positions are settled and may differ materially from the amount noted above.

Note 19. Earnings Per Share

        Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been

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Notes to the Consolidated Financial Statements (Continued)

Note 19. Earnings Per Share (Continued)

outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options and restricted stock units are reflected in diluted net income (loss) per share by applying the treasury stock method.

        A reconciliation of the amounts included in the computation of basic (loss) earnings per share from continuing operations and diluted (loss) earnings per share from continuing operations is as follows:

 
  Year Ended December 31,  
(In thousands, except per share data)
  2013   2012   2011  

(Loss) earnings from continuing operations

  $ (505,669 ) $ (713,743 ) $ 72,728  
               
               

Weighted average common shares outstanding

    137,369     137,884     137,953  

Effect of dilutive securities(1):

                   

RSUs

            151  

Stock options(2)

            358  
               

Weighted average common share outstanding—assuming dilution

    137,369     137,884     138,462  
               
               

Basic (loss) earnings per share from continuing operations

  $ (3.68 ) $ (5.18 ) $ 0.53  
               
               

Diluted (loss) earnings per share from continuing operations

  $ (3.68 ) $ (5.18 ) $ 0.53  
               
               

(1)
Securities are not included in the table in periods when antidilutive. For 2013 and 2012, weighted average potentially dilutive shares from stock options of 0.8 million and 2.3 million, respectively, with a weighted average exercise price per share of $10.12 and $10.16, respectively, and weighted average potentially dilutive shares from RSUs of 0.2 million and 0.3 million, respectively, were excluded from the diluted earnings per share calculation due to the antidilutive effect such shares would have on net loss per common share.

(2)
Options to purchase 2.0 million, 1.0 million and 2.7 million shares for the years ended December 31, 2013, 2012 and 2011, respectively, were not included in the computation because either their exercise price or proceeds per share exceeded the average market price of the Company's common stock for each respective reporting date.

Note 20. Subsequent Events

        On January 14, 2014, the Company completed the TruGreen Separation Transaction resulting in the spin-off of the assets and certain liabilities of the TruGreen Business through a tax-free, pro rata dividend to the stockholders of the Company. As a result of the completion of the TruGreen Separation Transaction, New TruGreen operates the TruGreen Business as a private independent company.

        The Company historically incurred the cost of certain corporate-level activities which it performed on behalf of the TruGreen Business. Such corporate costs include: accounting and finance, legal, human resources, information technology, insurance, operations, real estate, tax services and other costs. These costs will be transitioned to New TruGreen through a combination of (1) immediate transfers of certain activities to New TruGreen and (2) payments to the Company by New TruGreen under transition services agreements.

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Notes to the Consolidated Financial Statements (Continued)

Note 20. Subsequent Events (Continued)

        In February 2014, American Home Shield ceased efforts to deploy a new operating system that had been intended to improve customer relationship management capabilities and enhance its operations. This decision will allow us to more effectively focus our energy and resources on driving growth and serving our customers. Important factors that led to this decision include:

    the ongoing operational costs of the new operating system are high;

    enhancements to our existing operating system enabled it to support our needs;

    certain planned benefits of the new operating system can be achieved through other means; and

    we will now be able to invest our resources in areas that will allow us to focus on growing our business.

Quarterly Operating Results (Unaudited)

        Quarterly operating results for the last two years in operating revenue, gross profit, (loss) income from continuing operations, (loss) income from discontinued operations, net of income taxes, and net (loss) income are shown in the table below.

 
  2013  
(In thousands, except per share data)
  First
Quarter
  Second
Quarter
  Third
Quarter
  Fourth
Quarter
  Year  

Operating Revenue

  $ 608,107   $ 938,662   $ 928,822   $ 713,244   $ 3,188,835  

Gross Profit

    234,932     387,354     394,017     266,478     1,282,781  

(Loss) Income from Continuing Operations(1)

    (22,942 )   (510,051 )   45,476     (18,152 )   (505,669 )

Loss from Discontinued Operations, net of income taxes(2)

    (165 )   (231 )   (679 )   (60 )   (1,135 )

Net (Loss) Income(1)(2)

    (23,107 )   (510,282 )   44,797     (18,212 )   (506,804 )

Basic and diluted (loss) earnings per share:

                               

(Loss) income from continuing operations

    (0.17 )   (3.71 )   0.33     (0.13 )   (3.68 )

(Loss) income from discontinued operations, net of income taxes

    (0.00 )   (0.00 )   (0.00 )   (0.00 )   (0.01 )

Net (loss) income

    (0.17 )   (3.71 )   0.33     (0.13 )   (3.69 )

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Notes to the Consolidated Financial Statements (Continued)

Note 20. Subsequent Events (Continued)

 

 
  2012  
(In thousands, except per share data)
  First
Quarter
  Second
Quarter
  Third
Quarter
  Fourth
Quarter
  Year  

Operating Revenue

  $ 654,689   $ 962,165   $ 900,693   $ 675,734   $ 3,193,281  

Gross Profit

    268,101     429,211     386,044     248,256     1,331,612  

(Loss) Income from Continuing Operations(1)

    (29,101 )   21,882     (704,366 )   (2,158 )   (713,743 )

(Loss) Income from Discontinued Operations, net of income taxes(2)

    (924 )   838     (203 )   89     (200 )

Net (Loss) Income(1)(2)

    (30,025 )   22,720     (704,569 )   (2,069 )   (713,943 )

Basic and diluted (loss) earnings per share:

                               

(Loss) income from continuing operations

    (0.21 )   0.16     (5.11 )   (0.02 )   (5.18 )

(Loss) income from discontinued operations, net of income taxes

    (0.01 )   0.01     (0.00 )   0.00     (0.00 )

Net (loss) income

    (0.22 )   0.16     (5.11 )   (0.01 )   (5.18 )

(1)
The results for the second quarter of 2013 include pre-tax non-cash impairment charges of $673.3 million ($521.0 million, net of tax) to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name. The results for the second and third quarters of 2012 include pre-tax non-cash impairment charges of $67.7 million ($41.4 million, net of tax) and $845.2 million ($724.7 million, net of tax), respectively, to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name. Additionally, the results for the fourth quarter of 2012 include a favorable goodwill impairment adjustment of $4.0 million ($2.4 million, net of tax). See Note 1 for further details.

The results include restructuring charges primarily related to a branch optimization project at Terminix, a reorganization of field leadership and a restructuring of branch operations at TruGreen, a reorganization of leadership at American Home Shield and ServiceMaster Clean, the transaction to separate TruGreen from the Company and an initiative to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters. The table below summarizes the pre-tax and after-tax restructuring charges, by quarter, for 2013 and 2012.

 
  2013  
(In thousands)
  1st Quarter   2nd Quarter   3rd Quarter   4th Quarter   Year  

Pre-tax

  $ 3,277   $ 298   $ 5,756   $ 11,509   $ 20,840  

After-tax

  $ 2,006   $ 182   $ 5,179   $ 9,033   $ 16,400  

 

 
  2012  
(In thousands)
  1st Quarter   2nd Quarter   3rd Quarter   4th Quarter   Year  

Pre-tax

  $ 3,990   $ 5,026   $ 3,322   $ 5,839   $ 18,177  

After-tax

  $ 2,442   $ 3,076   $ 2,033   $ 3,577   $ 11,128  

    The results for the first and third quarters of 2012 include a $39.2 million ($25.0 million, net of tax) loss and a $16.4 million ($10.4 million, net of tax) loss, respectively, on extinguishment of debt related to the redemption of the remaining $996 million aggregate principal amount of the 2015 Notes and repayment of $276 million of outstanding borrowings under the Term Facilities.

(2)
During 2012, upon finalization of certain post-closing adjustments and disputes related to the sale of TruGreen LandCare in 2011, the Company recorded an additional $1.3 million loss on sale ($0.5 million gain, net of tax).

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                    Shares

LOGO

ServiceMaster Global Holdings, Inc.

Common Stock



J.P. Morgan   Credit Suisse   Goldman, Sachs & Co.   Morgan Stanley



, 2014

        Through and including                    , 2014 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

   


Table of Contents


PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.    Other Expenses of Issuance and Distribution.

        The following table sets forth the estimated expenses payable by us in connection with the sale and distribution of the securities registered hereby, other than underwriting discounts or commissions. All amounts are estimates except for the SEC registration fee and the Financial Industry Regulatory Authority filing fee.

SEC Registration Fee

  $ 12,880  

FINRA Filing Fee

  $ 15,500  

Stock Exchange Listing Fee

      *

Printing Fees and Expenses

      *

Accounting Fees and Expenses

      *

Legal Fees and Expenses

      *

Blue Sky Fees and Expenses

      *

Transfer Agent Fees and Expenses

      *

Miscellaneous

      *
       

Total:

  $   *
       
       

*
To be filed by amendment.

Item 14.    Indemnification of Directors and Officers.

ServiceMaster Global Holdings, Inc. is incorporated under the laws of the State of Delaware.

        Section 145(a) of the General Corporation Law of the State of Delaware, or the "DGCL," provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful.

        Section 145(b) of the DGCL provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of

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liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem proper.

        Section 145(c) of the DGCL provides that to the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of Section 145 of the DGCL, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.

        Section 145(e) of the DGCL provides that expenses (including attorneys' fees) incurred by an officer or director of the corporation in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in Section 145 of the DGCL. Such expenses, including attorneys' fees, incurred by former directors and officers or other employees and agents of the corporation or by persons serving at the request of the corporation as directors, officers, employees or agents of another corporation, partnership, joint venture, trust or other enterprise may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.

        Section 145(g) of the DGCL specifically allows a Delaware corporation to purchase liability insurance on behalf of its directors and officers and to insure against potential liability of such directors and officers regardless of whether the corporation would have the power to indemnify such directors and officers under Section 145 of the DGCL.

        Section 102(b)(7) of the DGCL permits a Delaware corporation to include a provision in its certificate of incorporation eliminating or limiting the personal liability of directors to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. This provision, however, may not eliminate or limit a director's liability (1) for breach of the director's duty of loyalty to the corporation or its stockholders, (2) for acts or omissions not in good faith or involving intentional misconduct or a knowing violation of law, (3) under Section 174 of the DGCL, which provides for liability of directors for unlawful payments of dividends or unlawful stock purchases or redemptions, or (4) for any transaction from which the director derived an improper personal benefit.

        Our Second Amended and Restated Certificate of Incorporation will contain provisions permitted under Delaware General Corporation Law relating to the liability of directors. These provisions will eliminate a director's personal liability for monetary damages resulting from a breach of fiduciary duty, except in circumstances involving:

    any breach of the director's duty of loyalty;

    acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law;

    under Section 174 of the Delaware General Corporation Law (unlawful dividends); or

    any transaction from which the director derives an improper personal benefit.

        Our Second Amended and Restated Certificate of Incorporation and our Second Amended and Restated By-laws will require us to indemnify and advance expenses to our directors and officers to the fullest extent not prohibited by the Delaware General Corporation Law and other applicable law, except in the case of a proceeding instituted by the director without the approval of our board of directors. Our Second Amended and Restated Certificate of Incorporation and our Second Amended and Restated By-laws will provide that we are required to indemnify our directors and officers, to the fullest extent permitted by law, for all judgments, fines, settlements, legal fees and other expenses

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incurred in connection with pending or threatened legal proceedings because of the director's or officer's positions with us or another entity that the director or officer serves at our request, subject to various conditions, and to advance funds to our directors and officers to enable them to defend against such proceedings. To receive indemnification, the director or officer must have been successful in the legal proceeding or have acted in good faith and in what was reasonably believed to be a lawful manner in our best interest and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.

Indemnification Agreements

        We and SvM are parties to indemnification agreements with certain of the Equity Sponsors, pursuant to which we and SvM indemnify such entities and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities arising out of performance of the consulting agreements described above under "Certain Relationships and Related Party Transactions—Consulting Agreements" and certain other claims and liabilities, including liabilities arising out of financing arrangements and securities offerings.

        Prior to the completion of this offering, we will enter into indemnification agreements with our directors. The indemnification agreements will provide the directors with contractual rights to the indemnification and expense advancement rights provided under our amended and restated by-laws, as well as contractual rights to additional indemnification as provided in the indemnification agreements.

Directors' and Officers' Liability Insurance

        Prior to the offering we will have obtained directors' and officers' liability insurance which insures against certain liabilities that our directors and officers and the directors and officers of our subsidiaries may, in such capacities, incur.

Item 15.    Recent Sales of Unregistered Securities.

        On February 22, 2011, we issued 172,727 shares of our common stock to one of our officers in exchange for approximately $1.9 million in cash.

        On April 8, 2011, we issued 22,816 shares of our common stock to three of our employees in exchange for approximately $0.3 million in cash.

        On April 29, 2011, we issued 50,000 shares of our common stock pursuant to the exercise of stock options to one of our employees in exchange for approximately $0.5 million in cash.

        On June 22, 2011, we issued 450,000 shares of our common stock pursuant to the exercise of stock options to one of our officers in exchange for approximately $4.5 million in cash.

        On December 16, 2011, we issued 199,996 shares of our common stock to six of our officers and employees in exchange for approximately $2.2 million in cash.

        On March 21, 2012, we issued 42,853 shares of our common stock to five of our officers and employees in exchange for approximately $0.6 million in cash.

        On March 30, 2012, we issued 20,000 shares of our common stock pursuant to the exercise of stock options to one of our employees in exchange for approximately $0.2 million in cash.

        On June 1, 2012, we issued 9,999 shares of our common stock to two of our employees in exchange for approximately $0.2 million in cash.

        On September 28, 2012, we issued 70,001 shares of our common stock to four of our officers and employees in exchange for approximately $1.1 million in cash. On September 28, 2012, we also issued

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35,625 shares of our common stock pursuant to the exercise of stock options to two of our employees for approximately $0.4 million in cash.

        On October 5, 2012, we issued 95,000 shares of our common stock pursuant to the exercise of stock options to one of our employees in exchange for approximately $1.0 million in cash.

        On October 31, 2012, we issued 47,500 shares of our common stock pursuant to the exercise of stock options to one of our employees in exchange for approximately $0.5 million in cash.

        On November 2, 2012, we issued 40,000 shares of our common stock pursuant to the exercise of stock options to one of our employees in exchange for approximately $0.4 million in cash.

        On November 30, 2012, we issued 62,500 shares of our common stock pursuant to the exercise of stock options to one of our employees in exchange for approximately $0.6 million in cash.

        On December 27, 2012, we issued 20,000 shares of our common stock pursuant to the exercise of stock options to one of our employees in exchange for approximately $0.2 million in cash.

        On December 28, 2012, we issued 60,000 shares of our common stock pursuant to the exercise of stock options to one of our employees in exchange for approximately $0.6 million in cash.

        On September 13, 2013, we issued 367,750 shares of our common stock to 21 of our officers and employees in exchange for approximately $3.7 million in cash.

        On December 11, 2013, we issued 288,702 shares of our common stock to seven of our directors, officers and employees in exchange for approximately $3.0 million in cash.

        On December 26, 2013, we issued 80,000 shares of our common stock pursuant to the exercise of stock options to one of our employees in exchange for approximately $0.8 million in cash.

        On March 18, 2014, we issued 725,795 shares of our common stock to 66 of our officers and employees in exchange for approximately $5.8 million in cash in two separate transactions.

        The sales of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(2) of the Securities Act or Regulation D or Rule 701 promulgated thereunder, as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701. There were no underwriters employed in connection with any of the transactions set forth in this Item 15.

Item 16.    Exhibits and Financial Statement Schedules.

        The Exhibits to this Registration Statement on Form S-1 are listed in the Exhibit Index which follows the signature pages to this Registration Statement and is herein incorporated by reference.

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Financial Statement Schedules

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
ServiceMaster Global Holdings, Inc.
Memphis, Tennessee

        We have audited the consolidated financial statements of ServiceMaster Global Holdings, Inc., and subsidiaries (the "Company") as of December 31, 2013 and 2012, and for each of the three years in the period ended December 31, 2013, and have issued our report thereon dated March 24, 2014; such consolidated financial statements and report are included elsewhere in this Registration Statement. Our audits also included the consolidated financial statement schedules of the Company listed in Item 16. These consolidated financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audit. In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.

/s/ Deloitte & Touche LLP
Memphis, Tennessee
March 24, 2014

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SCHEDULE I
SERVICEMASTER GLOBAL HOLDINGS, INC. (PARENT)
CONDENSED FINANCIAL INFORMATION
CONDENSED STATEMENTS OF INCOME
(In thousands)

 
  Year ended December 31,  
 
  2013   2012   2011  

Operating Revenue

  $   $   $  

Selling and administrative expenses

    861     766     277  

Interest expense

    358         (217 )

Interest and net investment (income) loss

    (9 )   (31 )   (6,859 )

Loss on extinguishment of debt

            (774 )
               

Loss from Continuing Operations before Income Taxes

    (1,210 )   (735 )   7,573  

Benefit for income taxes

    (345 )   (335 )   2,682  
               

Loss from Continuing Operations

    (865 )   (400 )   4,891  

Equity in earnings of subsidiaries (net of tax)

    (505,939 )   (713,543 )   40,821  
               

Net (Loss) Income

  $ (506,804 ) $ (713,943 ) $ 45,712  
               
               

Total Comprehensive (Loss) Income

  $ (506,759 ) $ (701,165 ) $ 56,871  
               
               

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SERVICEMASTER GLOBAL HOLDINGS, INC. (PARENT)
CONDENSED FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
(In thousands)

 
  As of December 31,  
 
  2013   2012  

Assets

             

Current Assets:

             

Cash and cash equivalents

  $ 8,081   $ 5,905  

Prepaid expenses and other assets

        802  

Total Current Assets

        6,707  
           

Other Assets:

             

Investments in and advances to subsidiaries

    52,425     554,650  
           

Total Assets

  $ 60,506   $ 561,357  
           
           

Liabilities and Shareholders' Equity Current Liabilities:

             

Accrued liabilities:

             

Payroll and related expenses

  $ 77   $ 314  

Accrued interest payable

    358      

Other

        2,864  
           

Total Current Liabilities

    435     3,178  
           

Long-Term Debt

    13,958      

Other Long-Term Liabilities:

             

Deferred taxes

    22,919     23,049  
           

Total Other Long-Term Liabilities

    22,919     23,049  
           

Shareholders' Equity

    23,194     535,130  
           

Total Liabilities and Shareholders' Equity

  $ 60,506   $ 561,357  
           
           

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SERVICEMASTER GLOBAL HOLDINGS, INC. (PARENT)
CONDENSED FINANCIAL INFORMATION
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)

 
  As of December 31,  
 
  2013   2012   2011  

Cash and Cash Equivalents at Beginning of Period

  $ 5,905   $ 9,757   $ 11,992  
               

Net (Loss) Income Before Equity in Net Income of Subsidiary

    (865 )   (400 )   4,891  

Amortization of debt issuance costs

            (217 )

Loss on extinguishment of debt

            (774 )

Deferred income tax (benefit) provision

    (130 )   (279 )   5,697  

Change in working capital, net of acquisitions:

                   

Current income taxes

    (214 )   (58 )   (3,015 )

Receivables

    (2,650 )   2,547     103  

Inventories and other current assets

    802     (802 )    

Accrued liabilities

    (237 )   314     3,204  

Other, net

    358          
               

Net Cash (Used for) Provided from Operating Activities from Continuing Operations

    (2,936 )   1,322     9,889  
               

Cash Flows from Financing Activities from Continuing Operations:

                   

Borrowings of debt

    13,958          

Payments of debt

            65,000  

Repurchase of common stock and payments of restricted stock share withholdings

    (16,355 )   (10,780 )   (87,574 )

Net intercompany advances

    7,509     5,606     10,450  
               

Net Cash Provided From (Used for) Financing Activities from Continuing Operations

    5,112     (5,174 )   (12,124 )
               

Cash Increase (Decrease) During the Period

    2,176     (3,852 )   (2,235 )
               

Cash and Cash Equivalents at End of Period

  $ 8,081   $ 5,905   $ 9,757  
               
               

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Notes to ServiceMaster Global Holdings, Inc. (Parent) Condensed Financial Statements

1.     Basis of Presentation

        The condensed financial statements of ServiceMaster Global Holdings, Inc. ("Parent") are required as a result of the restricted net assets of Parent's consolidated subsidiaries exceeding 25% of Parent's consolidated net assets as of December 31, 2013. All consolidated subsidiaries of Parent are wholly owned. The primary source of income for Parent is equity in its subsidiaries' earnings.

        Pursuant to rules and regulations of the SEC, the unconsolidated condensed financial statements of Parent do not reflect all of the information and notes normally included with financial statements prepared in accordance with GAAP. Therefore, these condensed financial statements should be read in conjunction with the consolidated financial statements and related notes included in this Registration Statement on Form S-1.

        Parent has accounted for its subsidiaries under the equity method in the unconsolidated condensed financial statements.

2.     Related Party Transactions

        On April 19, 2013, Parent entered into a revolving promissory note with SvM with a maximum borrowing capacity of $25.0 million that is scheduled to mature on April 18, 2018. Amounts outstanding under this agreement shall bear interest at the rate of 5.0 percent per annum. As of December 31, 2013, Parent had borrowed $14.0 million under this note. The funds borrowed under this note are used by Parent to repurchase shares of its common stock from associates who have left SvM.

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SCHEDULE II
SERVICEMASTER GLOBAL HOLDINGS, INC.
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

 
  Balance at
Beginning of
Period
  Additions
Charged to
Costs and
Expenses
  Deductions(1)   Balance at
End of
Period
 

AS OF AND FOR THE YEAR ENDING DECEMBER 31, 2013

                         

Continuing Operations—

                         

Allowance for doubtful accounts

                         

Accounts receivable

  $ 18,522   $ 60,742   $ 47,760   $ 31,504  

Notes receivable

    2,825     1,080     333     3,572  

Income tax valuation allowance

    6,013     1,638     327     7,324  

AS OF AND FOR THE YEAR ENDING DECEMBER 31, 2012

                         

Continuing Operations—

                         

Allowance for doubtful accounts

                         

Accounts receivable

  $ 17,895   $ 40,729   $ 40,102   $ 18,522  

Notes receivable

    2,467     1,097     739     2,825  

Income tax valuation allowance

    6,276     171     434     6,013  

AS OF AND FOR THE YEAR ENDING DECEMBER 31, 2011

                         

Continuing Operations—

                         

Allowance for doubtful accounts

                         

Accounts receivable

  $ 14,380   $ 39,081   $ 35,566   $ 17,895  

Notes receivable

    2,329     519     381     2,467  

Income tax valuation allowance

    15,437     48     9,209     6,276  

(1)
Deductions in the allowance for doubtful accounts for accounts and notes receivable reflect write-offs of uncollectible accounts. Deductions for the income tax valuation allowance in 2013 are primarily attributable to the reduction of net operating loss carryforwards related to their expiration. Deductions for the income tax valuation allowance in 2012 are primarily attributable to the reduction of net operating loss carryforwards related to the dissolution of certain subsidiaries. Deductions for the income tax valuation allowance in 2011 are primarily attributable to the reduction of net operating loss carryforwards and other tax attributes related to the dissolution of certain subsidiaries.

Item 17.    Undertakings.

        (a)   The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

        (b)   Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling

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person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

        (c)   The undersigned registrant hereby undertakes that:

        (1)   For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

        (2)   For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

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SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, ServiceMaster Global Holdings, Inc. has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Memphis, State of Tennessee, on March 24, 2014.

    SERVICEMASTER GLOBAL HOLDINGS, INC.

 

 

By:

 

/s/ ROBERT J. GILLETTE

        Name:   Robert J. Gillette
        Title:   Chief Executive Officer


POWER OF ATTORNEY

        KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Robert J. Gillette, Alan J. M. Haughie and James T. Lucke, and each of them, his or her true and lawful attorney-in-fact and agent, acting alone, with full power of substitution and resubstitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any or all amendments to this Registration Statement, including post-effective amendments and registration statements filed pursuant to Rule 462(b) and otherwise, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as such person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

        Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed on March 24, 2014 by the following persons in the capacities indicated.

Signature
 
Title

 

 

 
/s/ JOHN KRENICKI, JR.

John Krenicki, Jr.
  Director, Chairman of the Board

/s/ ROBERT J. GILLETTE

Robert J. Gillette

 

Chief Executive Officer and Director
(Principal Executive Officer)

/s/ ALAN J. M. HAUGHIE

Alan J. M. Haughie

 

Senior Vice President and Chief Financial Officer (Principal Financial Officer)

/s/ JOHN P. MULLEN

John P. Mullen

 

Vice President, Controller and Chief Accounting Officer (Principal Accounting Officer)

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Signature
 
Title

 

 

 
/s/ DARREN M. FRIEDMAN

Darren M. Friedman
  Director

/s/ SARAH KIM

Sarah Kim

 

Director

/s/ STEPHEN J. SEDITA

Stephen J. Sedita

 

Director

/s/ DAVID H. WASSERMAN

David H. Wasserman

 

Director

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EXHIBIT INDEX

            Note Regarding Reliance on Statements in Our Contracts: In reviewing the agreements included as exhibits to this Registration Statement on Form S-1, please remember that they are included to provide you with information regarding their terms and are not intended to provide any other factual or disclosure information about ServiceMaster Global Holdings, Inc., its subsidiaries or affiliates, or the other parties to the agreements. The agreements contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties have been made solely for the benefit of the other parties to the applicable agreement and (i) should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement; (iii) may apply standards of materiality in a way that is different from what may be viewed as material to investors; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments. Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time. Additional information about ServiceMaster Global Holdings, Inc., its subsidiaries and affiliates may be found elsewhere in this Registration Statement on Form S-1.

Exhibit
Number
  Description
  1.1 ** Form of Underwriting Agreement.
        
  2.1   Agreement and Plan of Merger, dated as of December 31, 2013, by and between The ServiceMaster Company and The ServiceMaster Company, LLC, is incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  2.2   Separation and Distribution Agreement, dated as of January 14, 2014, by and among ServiceMaster Global Holdings, Inc., The ServiceMaster Company, TruGreen Holding Corporation and TruGreen Limited Partnership, is incorporated by reference to Exhibit 2.2 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  2.3   Employee Matters Agreement, dated as of January 14, 2014, by and among ServiceMaster Global Holdings, Inc., The ServiceMaster Company, LLC, TruGreen Limited Partnership and TruGreen Holding Corporation, is incorporated by reference to Exhibit 2.3 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  2.4   Tax Matters Agreement, dated as of January 14, 2014, by and among ServiceMaster Global Holdings, Inc., The ServiceMaster Company, LLC, TruGreen Holding Corporation and TruGreen Limited Partnership, is incorporated by reference to Exhibit 2.4 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  2.5   Transition Services Agreement, dated as of January 14, 2014, by and between The ServiceMaster Company, LLC and TruGreen Limited Partnership, is incorporated by reference to Exhibit 2.5 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  3.1 ** Form of Second Amended and Restated Certificate of Incorporation of ServiceMaster Global Holdings, Inc.
        
  3.2 ** Form of Second Amended and Restated By-Laws of ServiceMaster Global Holdings, Inc.
 
   

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Exhibit
Number
  Description
  4.1   Indenture, dated as of August 15, 1997, between The ServiceMaster Company (as successor to ServiceMaster Limited Partnership and The ServiceMaster Company Limited Partnership) and the Harris Trust and Savings Bank, as trustee, is incorporated by reference to Exhibit 4.1 to the Registration Statement on Form S-3 of The ServiceMaster Company, filed August 6, 1997.
        
  4.2   First Supplemental Indenture dated as of August 15, 1997 between The ServiceMaster Company (as successor to ServiceMaster Limited Partnership and The ServiceMaster Company Limited Partnership) and the Harris Trust and Savings Bank, as trustee, is incorporated by reference to Exhibit 4.4 to the Annual Report on Form 10-K for the year ended December 31, 1997 of The ServiceMaster Company, filed March 27, 1998.
        
  4.3   Second Supplemental Indenture dated as of January 1, 1998 between The ServiceMaster Company and the Harris Trust and Savings Bank, as trustee, is incorporated by reference to Exhibit 2 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 26, 1998.
        
  4.4   Third Supplemental Indenture dated as of March 2, 1998 between The ServiceMaster Company and the Harris Trust and Savings Bank, as trustee, is incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of the ServiceMaster Company, filed February 27, 1998.
        
  4.5   Fourth Supplemental Indenture dated as of August 10, 1999 between The ServiceMaster Company and the Harris Trust and Savings Bank, as trustee, is incorporated by reference to Exhibit 3 to the Current Report on Form 8-K filed of The ServiceMaster Company, filed August 16, 1999.
        
  4.6   Fifth Supplemental Indenture, dated as of January 14, 2014, among The ServiceMaster Company, LLC and The Bank of New York Mellon Trust Company, N.A. (as successor to Harris Trust and Savings Bank), as Trustee is incorporated by reference to Exhibit 4.3 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  4.7   Form of 7.45% Note due August 14, 2027 is incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-3 of The ServiceMaster Company, filed August 6, 1997.
        
  4.8   Form of 7.10% Note due March 1, 2018 is incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of the ServiceMaster Company, filed February 27, 1998.
        
  4.9   Form of 7.25% Note due March 1, 2038 is incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of the ServiceMaster Company, filed February 27, 1998.
        
  4.10   Indenture, dated as of February 13, 2012, among The ServiceMaster Company, the Subsidiary Guarantors named therein, and Wilmington Trust, National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 14, 2012.
        
  4.11   First Supplemental Indenture, dated as of February 13, 2012, among The ServiceMaster Company, the Subsidiary Guarantors named therein, and Wilmington Trust, National Association, as Trustee, is incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 14, 2012.
        
  4.12   Second Supplemental Indenture, dated as of February 16, 2012, among The ServiceMaster Company, the Subsidiary Guarantors named therein, and Wilmington Trust, National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 16, 2012.

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Exhibit
Number
  Description
  4.13   Third Supplemental Indenture, dated as of August 21, 2012, among The ServiceMaster Company, the Subsidiary Guarantors named therein, and Wilmington Trust, National Association, as Trustee, is incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed August 21, 2012.
        
  4.14   Fourth Supplemental Indenture, dated as January 14, 2014, among The ServiceMaster Company, LLC, the Subsidiary Guarantors named therein, and Wilmington Trust, National Association, as Trustee is incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  4.15   Fifth Supplemental Indenture, dated as January 14, 2014, among The ServiceMaster Company, LLC, the Subsidiary Guarantors named therein, and Wilmington Trust, National Association, as Trustee is incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  4.16   Form of 8% Senior Note maturing in 2020 is incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 14, 2012.
        
  4.17   Form of 7% Senior Note maturing in 2020 is incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 14, 2012.
        
  4.18 ** Form of Common Stock Certificate.
        
  5.1 ** Form of Opinion of Debevoise & Plimpton LLP.
        
  10.1   Term Loan Credit Agreement, dated as of July 24, 2007, among CDRSVM Acquisition Co., Inc., certain other Loan Parties (as defined therein), the lenders party thereto, and Citibank, N.A., as administrative agent (in such capacity, the "Term Loan Administrative Agent") and collateral agent (in such capacity, the "Term Loan Collateral Agent") and letter of credit facility issuing bank and JPMorgan Chase Bank, N.A., as syndication agent is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed July 30, 2007.
        
  10.2   Term Loan Assumption Agreement, dated as of July 24, 2007, between CDRSVM Acquisition Co., Inc. and The ServiceMaster Company is incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of The ServiceMaster Company, filed July 30, 2007.
        
  10.3   Term Loan Amendment Letter, dated as of July 30, 2007, among The ServiceMaster Company, the Commitment Letter Lenders and Joint Lead Arrangers (each as defined therein) parties thereto, and the other parties thereto is incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of The ServiceMaster Company, filed July 30, 2007.
        
  10.4   Term Loan Supplemental Agreement, dated as of August 13, 2008, made by TruGreen Companies L.L.C. in favor of CitiBank, N.A. is incorporated by reference to Exhibit 10.34 to the Registration Statement on Form S-1 of The ServiceMaster Company, filed October 22, 2008.
        
  10.5   Amendment No. 1 to the Credit Agreement, dated as of August 22, 2012, among the The ServiceMaster Company, certain other loan parties, the lenders thereto and Citibank, N.A., as administrative agent and collateral agent and JPMorgan Chase Bank, N.A. as syndication agent, is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed August 22, 2012.

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Table of Contents

Exhibit
Number
  Description
  10.6   Amendment No. 2 to the Credit Agreement, dated as of February 22, 2013, among the The ServiceMaster Company, certain other loan parties, the lenders thereto and Citibank, N.A., as administrative agent and collateral agent is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 25, 2013.
        
  10.7   Term Loan Credit Agreement Joinder Agreement, dated as of January 14, 2014, among The ServiceMaster Company, The ServiceMaster Company, LLC, Citibank, N.A., as administrative agent, and the other parties thereto is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  10.8   Assumption Agreement, dated as of January 14, 2014, by SMCS Holdco, Inc. and SMCS Holdco II, Inc., in favor of Citibank, N.A., as administrative agent and collateral agent for the banks and other financial institutions from time to time parties to the Credit Agreement referred to therein and the other Secured Parties (as defined therein) is incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  10.9   Guarantee and Collateral Agreement, dated as of July 24, 2007, made by the Company and the other Granting Parties (as defined therein), in favor of the Term Loan Administrative Agent and the Term Loan Collateral Agent is incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of The ServiceMaster Company, filed July 30, 2007.
        
  10.10   Security Agreement, dated as of July 24, 2007, made by The ServiceMaster Company and ServiceMaster Consumer Services Limited Partnership, in favor of the Term Loan Collateral Agent and Term Loan Administrative Agent is incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of The ServiceMaster Company, filed July 30, 2007.
        
  10.11   Revolving Credit Agreement, dated as of July 24, 2007, among The ServiceMaster Company, certain other Loan Parties (as defined therein), the lenders party thereto, and Citibank, N.A., as administrative agent (in such capacity, the "Revolving Administrative Agent"), collateral agent (in such capacity, the "Revolving Collateral Agent") and issuing bank and JPMorgan Chase Bank, N.A., as syndication agent is incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K of The ServiceMaster Company, filed July 30, 2007.
        
  10.12   Revolving Credit Supplemental Agreement, dated as of August 13, 2008, made by TruGreen Companies L.L.C. in favor of CitiBank, N.A. is incorporated by reference to Exhibit 10.37 to the Registration Statement on Form S-1 of The ServiceMaster Company, filed October 22, 2008.
        
  10.13   Amendment No. 1 to Revolving Credit Agreement, dated as of February 2, 2011, among The ServiceMaster Company, certain other loan parties, the lenders thereto and Citibank, N.A., as administrative agent and collateral agent, is incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K for the year ended December 31, 2010 of The ServiceMaster Company, filed March 28, 2011.
        
  10.14   Extension Amendment No. 1 to Revolving Credit Agreement, dated as of January 30, 2012, among The ServiceMaster Company, certain other loan parties, the lenders thereto and Citibank, N.A., as administrative agent and collateral agent, is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 14, 2012.
 
   

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Table of Contents

Exhibit
Number
  Description
  10.15   Increase Supplement, dated as of January 30, 2012, between JPMorgan Chase Bank, N.A., as increasing lender, and The ServiceMaster Company is incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 14, 2012.
        
  10.16   Amendment No. 3 to Revolving Credit Agreement, dated November 27, 2013 and effective as of January 14, 2014, among The ServiceMaster Company, certain other loan parties, the lenders thereto and Citibank, N.A., as administrative agent and collateral agent, is incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K for the year ended December 31, 2013 of The ServiceMaster Company, LLC, filed March 5, 2014.
        
  10.17   Revolving Credit Agreement Joinder Agreement, dated as of January 14, 2014, among The ServiceMaster Company, The ServiceMaster Company, LLC, Citibank, N.A., as administrative agent, and the other parties thereto is incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  10.18   Assumption Agreement, dated as of January 14, 2014, by SMCS Holdco, Inc. and SMCS Holdco II, Inc., in favor of Citibank, N.A., as administrative agent and collateral agent for the banks and other financial institutions from time to time parties to the Revolving Credit Agreement referred to therein and the other Secured Parties (as defined therein) is incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of The ServiceMaster Company, LLC, filed January 17, 2014.
        
  10.19   Intercreditor Agreement, dated as of July 24, 2007, between the Revolving Administrative Agent and Revolving Collateral Agent and the Term Loan Administrative Agent and Term Loan Collateral Agent is incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K of The ServiceMaster Company, filed July 30, 2007.
        
  10.20   Guarantee and Collateral Agreement, dated as of July 24, 2007, made by The ServiceMaster Company and the other Granting Parties (as defined therein), in favor of the Revolving Collateral Agent and the Revolving Administrative Agent is incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K of The ServiceMaster Company, filed July 30, 2007.
        
  10.21   Security Agreement, dated as of July 24, 2007, made by The ServiceMaster Company and ServiceMaster Consumer Services Limited Partnership, in favor of the Revolving Collateral Agent and Revolving Administrative Agent is incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K of The ServiceMaster Company, filed July 30, 2007.
        
  10.22   Amended and Restated Consulting Agreement, dated as of November 23, 2009, among The ServiceMaster Company; ServiceMaster Global Holdings, Inc.; and Clayton, Dubilier & Rice, LLC is incorporated by reference to Exhibit 10.10 to the Annual Report on Form 10-K for the year ended December 31, 2009 of The ServiceMaster Company, filed March 30, 2010.
        
  10.23   Form of Consulting Agreement entered into among The ServiceMaster Company; ServiceMaster Global Holdings, Inc.; Citigroup Alternative Investments LLC (assigned to StepStone Group LLC in 2010); BAS Capital Funding Corporation; and JPMorgan Chase is incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 of The ServiceMaster Company, filed August 14, 2009.
 
   

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Exhibit
Number
  Description
  10.24   Amendment to Consulting Agreement, dated December 22, 2011, by and among The ServiceMaster Company, ServiceMaster Global Holdings, Inc. and BAS Capital Funding Corporation is incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of The ServiceMaster Company, filed December 23, 2011.
        
  10.25   Amended and Restated Indemnification Agreement, dated as of November 23, 2009, among The ServiceMaster Company; ServiceMaster Global Holdings, Inc.; Clayton, Dubilier & Rice, Inc.; Clayton, Dubilier & Rice Fund VII, L.P.; Clayton, Dubilier & Rice Fund VII (Co-Investment), L.P.; CDR SVM Co-Investor L.P.; CD&R Parallel Fund VII, L.P.; Clayton, Dubilier & Rice, LLC; and Clayton, Dubilier & Rice Holdings, L.P is incorporated by reference to Exhibit 10.11 to the Annual Report on Form 10-K for the year ended December 31, 2009 of The ServiceMaster Company, filed March 30, 2010.
        
  10.26   Amended and Restated Indemnification Agreement, dated as of March 19, 2010, among The ServiceMaster Company and ServiceMaster Global Holdings, Inc. and Banc of America Capital Investors V, L.P., BAS Capital Funding Corporation, BACSVM, L.P., Banc of America Strategic Investments Corporation, Banc of America Capital Management V, L.P., BACM I GP, LLC and BA Equity Co-Invest GP LLC is incorporated by reference to Exhibit 10.12 to the Annual Report on Form 10-K for the year ended December 31, 2009 of The ServiceMaster Company, filed March 30, 2010.
        
  10.27   Amended and Restated Indemnification Agreement, dated as of March 19, 2010, among The ServiceMaster Company and ServiceMaster Global Holdings, Inc. and Citigroup Capital Partners II 2007 Citigroup Investment,  L.P., Citigroup Capital Partners II Employee Master Fund, L.P., Citigroup Capital Partners II Onshore, L.P., Citigroup Capital Partners II Cayman Holdings, L.P., CPE Co-Investment (ServiceMaster) LLC and Citigroup Private Equity LP is incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K for the year ended December 31, 2009 of The ServiceMaster Company, filed March 30, 2010.
        
  10.28   Amended and Restated Indemnification Agreement, dated as of March 19, 2010, among The ServiceMaster Company and ServiceMaster Global Holdings, Inc. and JP Morgan Chase Funding, Inc. is incorporated by reference to Exhibit 10.14 to the Annual Report on Form 10-K for the year ended December 31, 2009 of The ServiceMaster Company, filed March 30, 2010.
        
  10.29 # Employment Agreement, dated as of June 14, 2013, by and between Robert J. Gillette and ServiceMaster Global Holdings, Inc. is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed on June 18, 2013.
        
  10.30 # Amendment No. 1 to Employment Agreement, dated as of August 13, 2013, by and between Robert J. Gillette and ServiceMaster Global Holdings, Inc. is incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 of the ServiceMaster Company, filed August 14, 2013.
        
  10.31 # Amendment No. 2 to Employment Agreement, dated as of February 28, 2014, by and between Robert J. Gillette and ServiceMaster Global Holdings, Inc. is incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10-K for the year ended December 31, 2013 of The ServiceMaster Company, LLC, filed March 5, 2014.
        
  10.32 # Employment Agreement dated as of February 16, 2011, by and between Harry J. Mullany III and ServiceMaster Global Holdings, Inc. is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 22, 2011.
 
   

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Table of Contents

Exhibit
Number
  Description
  10.33 # Resignation Agreement and General Release, dated as of April 12, 2013, between Harry J. Mullany III and ServiceMaster Global Holdings, Inc. is incorporated by reference to Exhibit 10.50 to the Registration Statement on Form S-4 of The ServiceMaster Company, as amended, filed on April 16, 2013.
        
  10.34 # Offer Letter, dated as of August 26, 2013, by and between Alan J. M. Haughie and The ServiceMaster Company is incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of The ServiceMaster Company, filed on August 29, 2013.
        
  10.35 # Offer Letter, dated October 14, 2013, by and between William J. Derwin and The ServiceMaster Company is incorporated by reference to Exhibit 10.37 to the Annual Report on Form 10-K for the year ended December 31, 2013 of The ServiceMaster Company, LLC, filed March 5, 2014.
        
  10.36 # Offer Letter effective November 14, 2013, between The ServiceMaster Company and David W. Martin related to his appointment as Senior Vice President and Chief Financial Officer of TruGreen is incorporated by reference to Exhibit 10.38 to the Annual Report on Form 10-K for the year ended December 31, 2013 of The ServiceMaster Company, LLC, filed March 5, 2014.
        
  10.37 # Offer Letter dated April 29, 2011, between The ServiceMaster Company and David W. Martin related to his appointment as The ServiceMaster Company's Interim Chief Financial Officer is incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 of The ServiceMaster Company, filed May 16, 2011.
        
  10.38 # Offer Letter dated November 19, 2012, between The ServiceMaster Company and David W. Martin related to his appointment as The ServiceMaster Company's Interim Chief Financial Officer is incorporated by reference to Exhibit 10.30 to the Annual Report on Form 10-K for the year ended December 31, 2012 of The ServiceMaster Company, filed March 4, 2013.
        
  10.39 # Offer Letter dated December 9, 2012, between The ServiceMaster Company and R. David Alexander is incorporated by reference to Exhibit 10.41 to the Annual Report on Form 10-K for the year ended December 31, 2013 of The ServiceMaster Company, LLC, filed March 5, 2014.
        
  10.40 # Executive Officer Retention Agreement awarded to David W. Martin on May 21, 2013 is incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 of The ServiceMaster Company, filed August 14, 2013.
        
  10.41 # Cash Retention Agreement awarded to David W. Martin on May 21, 2013 is incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, filed August 14, 2013.
        
  10.42 # Employment Offer Letter dated July 30, 2012, between The ServiceMaster Company and Mark J. Barry related to his appointment as the President and Chief Operating Officer of American Home Shield is incorporated by reference to Exhibit 10.33 to the Annual Report on Form 10-K for the year ended December 31, 2012 of The ServiceMaster Company, filed March 4, 2013.
        
  10.43 # Severance Agreement, dated as of August 26, 2013, by and between Alan J. M. Haughie and The ServiceMaster Company is incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of The ServiceMaster Company, filed on August 29, 2013.
 
   

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Table of Contents

Exhibit
Number
  Description
  10.44 # Severance Agreement dated as of November 11, 2013, between The ServiceMaster Company and William J. Derwin is incorporated by reference to Exhibit 10.46 to the Annual Report on Form 10-K for the year ended December 31, 2013 of The ServiceMaster Company, LLC, filed March 5, 2014.
        
  10.45 # Severance Agreement dated as of January 15, 2013, between The ServiceMaster Company and David Alexander is incorporated by reference to Exhibit 10.36 of the Annual Report on Form 10-K for the year ended December 31, 2012 of The ServiceMaster Company, filed March 4, 2013.
        
  10.46 # Amended and Restated ServiceMaster Global Holdings, Inc. Stock Incentive Plan, as amended as of October 25, 2012 (the "MSIP"), is incorporated by reference to Exhibit 10 to the Current Report on Form 8-K of The ServiceMaster Company, filed October 26, 2012.
        
  10.47 # Form of Employee Stock Subscription Agreement under the MSIP is incorporated by reference to Exhibit 10.31 to the Annual Report on Form 10-K for the year ended December 31, 2007 of The ServiceMaster Company, filed March 28, 2008.
        
  10.48 # Form of Employee Stock Option Agreement under the MSIP is incorporated by reference to Exhibit 10.32 to the Annual Report on Form 10-K for the year ended December 31, 2007 of The ServiceMaster Company, filed March 28, 2008.
        
  10.49 # Form of Employee Deferred Share Unit Agreement under the MSIP is incorporated by reference to Exhibit 10.33 to the Annual Report on Form 10-K for the year ended December 31, 2007 of The ServiceMaster Company, filed March 28, 2008.
        
  10.50 # Form of Participation Agreement under the MSIP is incorporated by reference to Exhibit 10.34 to the Annual Report on Form 10-K for the year ended December 31, 2007 of The ServiceMaster Company, filed March 28, 2008.
        
  10.51 # Form of Employee Stock Subscription Agreement under the MSIP related to stock option exercises is incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 of The ServiceMaster Company, filed May 13, 2010.
        
  10.52 # Form of Employee Restricted Stock Unit Agreement under the MSIP is incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended September 30, 2010 of The ServiceMaster Company, filed November 15, 2010.
        
  10.53 # Form of Employee Performance Restricted Stock Unit Agreement under the MSIP is incorporated by reference to Exhibit 10.44 of the Annual Report on Form 10-K for the year ended December 31, 2012 of The ServiceMaster Company, filed March 4, 2013.
        
  10.54 # Form of Employee Stock Subscription Agreement for Robert J. Gillette is incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of The ServiceMaster Company, filed on June 18, 2013.
        
  10.55 # Form of Employee Restricted Stock Unit Agreement for Robert J. Gillette is incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of The ServiceMaster Company, filed on June 18, 2013.
        
  10.56 # Form of Employee Stock Option Agreement for Robert J. Gillette is incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of The ServiceMaster Company, filed on June 18, 2013.
 
   

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Table of Contents

Exhibit
Number
  Description
  10.57 # Director Stock Subscription Agreement for John Krenicki, Jr. dated December 11, 2013 is incorporated by reference to Exhibit 10.59 to the Annual Report on Form 10-K for the year ended December 31, 2013 of The ServiceMaster Company, LLC, filed March 5, 2014.
        
  10.58 # Form of Employee Stock Subscription Agreement for Harry J. Mullany III is incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 22, 2011.
        
  10.59 # Form of Employee Restricted Stock Unit Agreement for Harry J. Mullany III is incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 22, 2011.
        
  10.60 # Form of Employee (Superperformance) Stock Option Agreement for Harry J. Mullany III is incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 22, 2011.
        
  10.61 # Form of Employee Stock Option Agreement for Harry J. Mullany III is incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of The ServiceMaster Company, filed February 22, 2011.
        
  10.62 # Employee Restricted Stock Unit Agreement for David W. Martin dated as of May 21, 2013 is incorporated by reference to Exhibit 10.3 to the Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 of The ServiceMaster Company, filed August 14, 2013.
        
  10.63 ** Registration Rights Agreement among ServiceMaster Global Holdings, Inc. and the Stockholders party thereto.
        
  10.64 ** Amended and Restated Stockholders Agreement, dated as of January 14, 2014, among ServiceMaster Global Holdings, Inc. and the Stockholders party thereto.
        
  10.65 ** Form of Amendment to Amended and Restated Stockholders Agreement among ServiceMaster Global Holdings, Inc. and the Stockholders party thereto.
        
  10.66 ** Amendment No. 2 to Consulting Agreement, dated as of March 21, 2014, among The ServiceMaster Company, LLC, ServiceMaster Global Holdings, Inc., BAS Capital Funding Corporation and Ridgemont Partners Management, LLC.
        
  10.67 ** Termination of Indemnification Agreement, dated as of March 21, 2014, by Banc of America Capital Investors V, L.P., BAS Capital Funding Corporation, BACSVM, L.P., Banc of America Strategic Investments Corporation, Banc of America Capital Management V, L.P., BACM I GP, LLC and BA Equity Co-Invest GP LLC.
        
  10.68 ** Consulting Agreement, dated March 21, 2014, among The ServiceMaster Company, LLC, ServiceMaster Global Holdings, Inc. and Ridgemont Partners Management, LLC.
        
  10.69 ** Indemnification Agreement, dated as of March 21, 2014, among The ServiceMaster Company, LLC, ServiceMaster Global Holdings, Inc. and Ridgemont Partners Management, LLC.
        
  10.70 #** Form of Employee Stock Option Agreement for Mark J. Barry.
        
  10.71 ** Form of Director Indemnification Agreement.
        
  10.72 ** Form of Consulting Agreement Termination Agreement.
        
  10.73 #** Omnibus Stock Incentive Plan.
        
  10.74 #** Annual Bonus Plan.

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Table of Contents

Exhibit
Number
  Description
        
  10.75 #** ServiceMaster Deferred Compensation Plan.
        
  21.1 * List of Subsidiaries as of March 15, 2014.
        
  23.1 * Consent of Deloitte & Touche LLP.
        
  23.2 ** Consent of Debevoise & Plimpton LLP (included in Exhibit 5.1 hereto).
        
  24.1 * Powers of Attorney (contained on signature pages to the Registration Statement on Form S-1).

#
Denotes management contract or compensatory plan or arrangement.

*
Filed herewith.

**
To be filed by amendment.

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