FRANCHISE DISCLOSURE DOCUMENT - …franservesupport.com/files/FDD/Merry Maids.pdf · MM FDD 4-1-2012, amended 9-10-2012 1 FRANCHISE DISCLOSURE DOCUMENT MERRY MAIDS LIMITED PARTNERSHIP

MM FDD 4-1-2012, amended 9-10-2012

1

FRANCHISE DISCLOSURE DOCUMENT

MERRY MAIDS LIMITED PARTNERSHIP 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125

800-798-8000 [email protected]

www.merrymaids.com

We grant franchises for house and window cleaning services for residential customers who do not have the time nor the desire to clean regularly. The total investment necessary to begin operation of a Merry Maids franchise is based on the size of the market offered: Full-Sized Market total investment is from $59,350 to $78,450 which includes $40,500 to $50,500 (depending on the number of Qualified Households in the market) that must be paid to the franchisor. Mid-Sized Market total investment is from $59,350 to $68,450 which includes $40,500 that must be paid to the franchisor. Small-Sized Market total investment is from $55,350 to $64,450 which includes $36,500 that must be paid to the franchisor. This disclosure document summarizes certain provisions of your franchise agreement and other information in plain English. Read this disclosure document and all agreements carefully. You must receive this disclosure document at least 14 calendar-days before you sign a binding agreement or make any payment in connection with the proposed franchise sale. Note, however, that no governmental agency has verified the information contained in this document. You may wish to receive your disclosure document in another format that is more convenient for you. To discuss the availability of disclosures in different formats, contact Dinah Coopwood at 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125, or at 901-597-7527. The terms of your franchise agreement will govern your franchise relationship. Don’t rely on the disclosure document alone to understand your franchise agreement. Read all of your franchise agreement carefully. Show your franchise agreement and this disclosure document to an advisor, like a lawyer or an accountant. Buying a franchise is a complex investment. The information in this disclosure document can help you make up your mind. More information of franchising, such as “A Consumer’s Guide to Buying a Franchise,” which can help you understand how to use this disclosure document, is available from the Federal Trade Commission. You can contact the FTC at 1.877.FTC.HELP or by writing to the FTC at 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. You can also visit the FTC’s home page at www.ftc.gov for additional information. In addition, there may also be laws on franchising in your state. Ask your state agency or visit your public library for other sources of information on franchising. The issuance date of this disclosure document is: April 1, 2012, amended September 10, 2012

MM FDD 4-1-2012, amended 9-10-2012

2

STATE COVER PAGE Your state may have a franchise law that requires a franchisor to register or file with a state franchise administrator before offering or selling in your state. REGISTRATION OF A FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS THE FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT. Call the state franchisor administrator listed in Exhibit C for information about the franchisor or about franchising in your state. MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW UNCONDITIONALLY AFTER THE INITIAL TERM EXIRES. YOU MAY HAVE TO SIGN A NEW AGREEMENT WITH DIFFERENT TERMS AND CONDITIONS IN ORDER TO CONTINUE TO OPERATE YOUR BUSINESS. BEFORE YOU BUY, CONSIDER WHAT RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF ANY, AND WHAT TERMS YOU MIGHT HAVE TO ACCEPT IN ORDER TO RENEW. Please consider the following RISK FACTORS before you buy this franchise:

1. THE FRANCHISE AGREEMENT PERMITS THE FRANCHISEE TO SUE ONLY IN TENNESSEE. OUT-OF-STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO SUE MERRY MAIDS IN TENNESSEE THAN IN YOUR HOME STATE. THIS PROVISION IN THE FRANCHISE AGREEMENT MAY BE SUPERSEDED BY CERTAIN STATE LAWS. PLEASE REVIEW THE STATE-SPECIFIC ADDENDUM ATTACHED AS AN EXHIBIT TO THIS DISCLOSURE DOCUMENT FOR MORE INFORMATION.

2. THE FRANCHISE AGREEMENT STATES THAT TENNESSEE LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTION AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.

3. YOU WILL BE REQUIRED TO MAINTAIN A WEEKLY GROSS SALES LEVEL TO

MAINTAIN AND RENEW YOUR FRANCHISE AGREEMENT.

4. PLEASE NOTE THAT 79.8% OF THE SERVICEMASTER COMPANY ASSETS ARE INTANGIBLE. YOU MAY WANT TO CONSIDER THIS WHEN MAKING A DECISION TO PURCHASE THIS FRANCHISE OPPORTUNITY.

5. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

State Effective date: see next page

MM FDD 4-1-2012, amended 9-10-2012

3

The following states require that the Franchise Disclosure Document be registered or filed with the state, or be exempt from registration:

State Effective Date California April 1, 2012 Hawaii pending Illinois exempt Indiana exempt Maryland pending Michigan February 4, 2011 Minnesota pending New York exempt North Dakota April 2, 2012 Rhode Island exempt South Dakota April 3, 2012 Virginia pending Washington pending Wisconsin pending In all other states, the effective date of this Franchise Disclosure Document is the issuance date of April 1, 2012, amended September 10, 2012.

MM FDD 4-1-2012, as amended 9-10-2012 4

THIS MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.

NOTICE REQUIRED BY STATE OF MICHIGAN

THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU. Each of the following provision is void and unenforceable if contained in any documents relating to a franchise: (a) A prohibition on the right of a franchisee to join an association of franchisees. (b) A requirement that a franchisee assent to a release assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protections provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims. (c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure. (d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee’s inventory, supplies, equipment, fixtures and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies of the franchise business are not subject to compensation. This subsection applies only if: (i) The term of the franchise is less than five (5) years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least six (6) months advance notice of the franchisor’s intent to renew the franchise. (e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.

THIS MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.

(f) A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state. (g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right to first refusal to purchase the franchise. Good cause shall include, but is not limited to:

MM FDD 4-1-2012, as amended 9-10-2012 5

(i) The failure of the proposed transferee to meet the franchisor’s then current reasonable qualification or standards. (ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor. (iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations. (iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer. (h) A provision that requires the franchise to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c). (i) A provision which permits the franchisor to directly or indirectly convey, assign, or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services. THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENTDATION, OR ENDORSEMENT BY THE ATTORNEY GENERAL. Any questions regarding this notice should be directed to: Michigan Department of Attorney General Consumer Protection Division 670 G. Mennen Williams Building 525 West Ottawa Lansing, Michigan 48913 (517) 373-7117

MM FDD 4-1-2012, as amended 9-10-2012 6

TABLE OF CONTENTS PAGE Item 1: The Franchisor, and Any Parents, Predecessors, and Affiliates ............................................ 7 Item 2: Business Experience .............................................................................................................. 9 Item 3: Litigation ............................................................................................................................. 11 Item 4: Bankruptcy .......................................................................................................................... 14 Item 5: Initial Fees ........................................................................................................................... 14 Item 6: Other Fees ............................................................................................................................ 17 Item 7: Estimated Initial Investment ................................................................................................ 20 Item 8: Restrictions on Sources of Products and Services ............................................................... 23 Item 9: Franchisee’s Obligations ..................................................................................................... 24 Item 10: Financing ............................................................................................................................ 26 Item 11: Franchisor’s Assistance, Advertising, Computer Systems, and Training .......................... 29 Item 12: Territory .............................................................................................................................. 35 Item 13: Trademarks ......................................................................................................................... 36 Item 14: Patents, Copyrights and Proprietary Information ............................................................... 37 Item 15: Obligation To Participate in the Actual Operation of the Franchise Business ................... 38 Item 16: Restrictions on What the Franchisee May Sell ................................................................... 39 Item 17: Renewal, Termination, Transfer, and Dispute Resolution ................................................. 39 Item 18: Public Figures ..................................................................................................................... 43 Item 19: Financial Performance Representations ............................................................................. 44 Item 20: Outlets and Franchisee Information ................................................................................... 44 Item 21: Financial Statements ........................................................................................................... 58 Item 22: Contracts ............................................................................................................................. 59 Item 23: Receipts .............................................................................................................................. 59 Exhibits A. Franchise Agreement B. Financial Statements C. State Franchise Agencies and Agents for Service of Process D. Franchisee List E. List of Franchisees Who Left the System F. State Specific Addenda (where applicable) G. Opening Inventory Package H. Principal Trademarks I. The Operations Manual Table of Contents J. SMAC Financing Documents K. Amendment to Franchise Agreement—Ad Fund and Local Digital Marketing Program L. Receipts

MM FDD 4-1-2012, Amended 9-10-2012

7

Item 1: The Franchisor, and Any Parents, Predecessors, and Affiliates The Franchisor In this disclosure document, "we" or "Merry Maids" means Merry Maids Limited Partnership, the franchisor. "You" means the person who buys a franchise. If you are a corporation, partnership, or other entity, "you" includes your owners. Merry Maids is a Delaware limited partnership formed on July 5, 1988. Our principal business address is 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125. We do business under the name Merry Maids. Our business is limited to franchising residential cleaning businesses under the Merry Maids trademark and operating company-owned residential cleaning businesses throughout the United States. We do not offer franchises or engage in any other line of business, nor have we done so prior to the date of this disclosure document. Our agents for service of process are listed in Exhibit C. Parents, Predecessors and Affiliates Merry Maids incorporated under the laws of the State of Nebraska on February 4, 1980, under the name Merry Maids, Inc. and began selling franchises under the name "Merry Maids" in 1980. On July 5, 1988, The ServiceMaster Company Limited Partnership (SMLP) purchased its business and assets. On that same day Merry Maids, Inc. restructured into the Merry Maids Limited Partnership, a Delaware limited partnership. From the restructuring until December 31, 2002, ServiceMaster Consumer Services Limited Partnership (Consumer Services), a Delaware limited partnership, had a 99% ownership interest in Merry Maids and Merry Maids, Inc., a Delaware corporation owned by SMLP and its managing general partner, held the remaining 1% ownership interest. As of December 31, 2002, the general partner of Merry Maids was changed from a corporation to MM Maids L.L.C. MM Maids L.L.C. is a Delaware limited liability company. The address for MM Maids L.L.C. is 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125. MM Maids L.L.C. has no franchising history and does not provide products or services to franchisees. At all times, SMLP owned 100% of ServiceMaster Consumer Services, Inc. Consumer Services’ address is 860 Ridge Lake Boulevard, Memphis, TN 38120 SMLP converted to corporate form in December 1997 and is named The ServiceMaster Company, (ServiceMaster) a Delaware corporation. ServiceMaster’s address is 860 Ridge Lake Boulevard, Memphis, Tennessee 38120. On March 18, 2007, ServiceMaster entered into a definitive merger agreement to be acquired by an investment group led by Clayton, Dubilier & Rice (CD&R), based in New York, New York. On July 24, 2007, the merger was completed and the ultimate parent of ServiceMaster became ServiceMaster Global Holdings, Inc. (Global Holdings), located at 860 Ridge Lake Boulevard, Memphis, Tennessee 38120. Various private investment funds managed by CD&R hold a majority of the shares of Global Holdings. As an active private equity investment firm, CD&R (and entities affiliated with CD&R) may from time to time hold and/or acquire interests, including controlling interests, in other entities whose businesses include offering franchises or providing products or services to our franchisees. Merry Maids affiliated companies currently offering franchises or services to franchisees include: (1) ServiceMaster Residential/Commercial Services Limited Partnership (ServiceMaster Clean), a Delaware limited partnership, is a franchisor of cleaning franchises. ServiceMaster Clean’s cleaning franchises offer heavy duty and disaster cleaning for homes and businesses, office cleaning and, in some cases, the cleaning of homes like the homes cleaned by Merry Maids and its franchisees. The franchise businesses operating under the ServiceMaster and ServiceMaster Clean trade names/trademarks are not intended to be, but may be, competitive with or similar to the franchise described in this disclosure

MM FDD 4-1-2012, Amended 9-10-2012

8

document. ServiceMaster Clean is also a subsidiary of Consumer Services. ServiceMaster Clean’s address is 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125. Currently, ServiceMaster Clean has 3,208 franchises operating in the United States and Canada. ServiceMaster Clean and its predecessors have been offering heavy-duty cleaning franchises since 1948. Neither ServiceMaster Clean nor its predecessors have ever offered franchises for other businesses except for a period from late 1996 through mid 1998 when it offered and sold approximately 14 franchises in home companionship under the name ServiceMaster Caring Companions. (2) The Terminix International Company Limited Partnership (Terminix), a Delaware limited partnership, is a franchising/operating company which offers franchises for and operates termite and pest control services in and around residential homes and commercial buildings. It is a subsidiary of Consumer Services. The address for Terminix is 860 Ridge Lake Boulevard, Memphis, Tennessee 38120. Terminix has approximately 108 franchise operations worldwide and operates -286 company owned service offices. Terminix and its predecessors have granted franchises for termite and pest control services since 1927. Terminix stopped licensing new franchises in the mid 1970's, but began selling franchises again in 1992, and stopped again in March 2002. Neither Terminix nor its predecessors have ever offered franchises for other businesses. (3) TruGreen Limited Partnership (TruGreen), a Delaware limited partnership, is a franchising/operating company operating as TruGreen which offers franchises for and operates commercial and residential lawn care services including landscaping, lawn care and maintenance, and tree and shrub care and maintenance, all utilizing chemical and/or non-chemical methods. Since 1996, TruGreen also distributes fertilizer and other lawn care products to retail outlets across the United States. It is also a subsidiary of Consumer Services. The address for TruGreen is 860 Ridge Lake Boulevard, Memphis, TN 38120. TruGreen began business in 1974 began offering franchises in 1994. TruGreen operates 197 TruGreen LawnCare company-owned lawn, tree and shrub care branches in the U.S. and 11 in Canada. In the U. S., 192 branches operate under the name "TruGreen." The other five (5) U. S. branches operate under the following trade names: “AgroLawn,” “Bay Country Lawn,” “Leisure Lawn,” “Professional Turf Services,” and “Entomological Pest Management (EPM)”. Some of the TruGreen branches sell lawn services under the trade names: “Barefoot Grass,” “Grassroots by TruGreen,” “Heritage Lawns,” and “Nature’s Pro of Long Island,” and “Evergreen by TruGreen.” There are 41 TruGreen franchisees that operate under the "TruGreen" trade name, one franchisee operates under the "ServiceMaster Lawn Care" trade name in the U.S., and four (4) franchises operate under the “ServiceMaster LawnCare” trade name in Canada. From 1992 to 2009 TruGreen operated under and offered franchises under the names “Chem-Lawn” and “TruGreen-ChemLawn.” Neither TruGreen nor its predecessors have ever offered franchises for other unrelated businesses.

(4) AmeriSpec, Inc. (AmeriSpec), a leading franchisor of home inspection services, began offering franchises in 1988. In February 1996 American Home Shield (AHS), a Delaware corporation and a subsidiary of ServiceMaster Holding Corporation (SVM Holding), a subsidiary of ServiceMaster, acquired AmeriSpec. Effective January 1, 2007, SVM Holding acquired 100% ownership of AmeriSpec. AHS has never offered franchises of any kind. AmeriSpec franchises, under the name “AmeriSpec,” provide building inspection services and other residential inspection services and related products such as property inspection, carbon monoxide and radon testing, water analysis, energy assessment, termite inspection, and a variety of ancillary services to homebuyers, home sellers, home owners, and real estate professionals. AmeriSpec currently has 305 franchises throughout the United States and Canada. AmeriSpec has never offered franchises for other unrelated businesses. AmeriSpec’s address is 3839 Forest Hill-Irene Road, Memphis, TN 38125. (5) Furniture Medic Limited Partnership (Furniture Medic), a Delaware limited partnership, has been a subsidiary of Consumer Services since July 1996. Furniture Medic offers franchises for furniture restoration, repair and refinishing. Its predecessor, Furniture Medic, Inc., a Georgia corporation, began offering the same

MM FDD 4-1-2012, Amended 9-10-2012

9

kind of franchises in August 1992. Furniture Medic currently has 218 franchises in the United States. Furniture Medic’s address is 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125. Neither Furniture Medic nor its predecessor, Furniture Medic, Inc., has ever offered franchises for other unrelated businesses. (6) The ServiceMaster Acceptance Company Limited Partnership (SMAC), a Delaware limited partnership, is a wholly owned financing subsidiary of ServiceMaster. SMAC offers financing to Merry Maids franchisees, as described in Item 10 of this disclosure document. SMAC is located at 860 Ridge Lake Boulevard, Memphis, Tennessee 38120. (7) Merry Maids, along with its affiliated companies, participates in an internal program operated by ServiceMaster Brands Management, LLC (SBM), a Delaware Limited Liability Company. The principal address for SBM is 860 Ridge Lake Boulevard, Memphis, Tennessee 38120. SBM provides customers with one resource for all their home services and maintenance needs through the 1-888-WE SERVE telephone number and ServiceMaster.com website. The operators at 1-888-WE SERVE and ServiceMaster.com direct customer calls to our ServiceMaster affiliated companies and our franchisees. SBM’s Yellow Page Marketing Group (YPMG) provides Yellow Page ad placement services and produces our approved Yellow Page ads. The Franchise Offering A Merry Maids franchise business provides affordable, efficient cleaning for the person who does not have the time or the desire to clean regularly. While the Merry Maids system provides thorough residential cleaning even for a customer desiring only a one-time visit, the system is not for disaster restoration or extraordinary cleaning projects. The Merry Maids system utilizes a regular cleaning concept composed of a certain number of integral parts, all of which are necessary for a successful operation and are described in this disclosure document and the Operations Manual. The Merry Maids system is designed and best suited for residential customers. Your competitors include live-in providers of in-home cleaning services, other national and regional companies who franchise similar businesses and their franchisees, and individuals, companies and partnerships of varying sizes and scopes who offer cleaning services. We also extend this offering to those persons wishing to convert their existing residential cleaning business to a Merry Maids franchised business (Conversion Franchise). Our offering for the Conversion Franchise differs slightly from our other offerings described above to the extent that certain considerations are made to enable a smooth transition of the business operations. These considerations are described throughout this disclosure document. Merry Maids knows of no specific federal industry specific regulations which would govern the operation of the franchise. You will be responsible for contacting your local and state government agencies regarding restrictions of the operation of the Franchised Business and for complying with any federal, state, or local laws and regulations.

Item 2: Business Experience President: Thomas J. Coba From November 29, 2011, to present, Mr. Coba has been President of Merry Maids in Memphis, Tennessee. He is also President of our affiliates, ServiceMaster Clean, AmeriSpec, and Furniture Medic, each in Memphis, Tennessee, since November 29, 2011, to present. Mr. Coba oversees the franchise and branch operations of these franchisors. Prior to joining Merry Maids he was Chief Operations Officer of Subway Restaurants at their headquarters in Milford, Connecticut, from November 2004 to November 2011.

MM FDD 4-1-2012, Amended 9-10-2012

10

Chief Operating Officer: Brent A. Armstrong From January 11, 2011, to present, Mr. Armstrong has been Chief Operating Officer of Merry Maids in Memphis, Tennessee. From April 2008 to January 2011, he was Vice President and General Manager of our affiliate, AmeriSpec, in Memphis, Tennessee. From July 2005 to January 2011, Mr. Armstrong was Vice President of FM, an affiliate, in Memphis, Tennessee, and Vice President Residential Services of ServiceMaster Clean, an affiliate, also in Memphis, Tennessee. Vice President of Operations: Micah A. Newhouse From March 2012 to present Mr. Newhouse has been Vice President of Operations for Merry Maids in Memphis, Tennessee. From December 2006 to March 2012 Mr. Newhouse was the Vice President Continuous Improvement and Training for Merry Maids in Memphis, Tennessee. Vice President - Marketing: Stefan K. Figley From December 2009 to present, Mr. Figley has been Vice President of Marketing for Merry Maids in Memphis, Tennessee. He had been Director of Marketing for our affiliate, Terminix, from September 2006 through November 2009 in Memphis, Tennessee. . Vice President, Market Expansion: David D. Messenger Mr. Messenger has had management responsibilities for franchise sales of Merry Maids, in Memphis, Tennessee, from March 2011 to present and previously from January 2008 through December 2009. Mr. Messenger has been Vice President, Market Expansion of ServiceMaster Clean, in Memphis, Tennessee, from May 2000 to present. He is also Vice President, Market Expansion for Furniture Medic, another affiliate, in Memphis, Tennessee, from May 2000 to present. Mr. Messenger also has management responsibilities for franchise sales for AmeriSpec, an affiliate, in Memphis, Tennessee, from January 2007 to present. Vice President Finance: Charles E. Daniel From August 1, 2011, to present, Mr. Daniel has been Vice President Finance for Merry Maids in Memphis, Tennessee. He has been Vice President Finance for Merry Maids affiliates, ServiceMaster Clean, AmeriSpec, and Furniture Medic, each in Memphis, Tennessee, from August 1, 2011, to present. Before this time, Mr. Daniel was Vice President of Finance for TruGreen LandCare, another SMC affiliate, in Memphis, Tennessee, from April 2002 through July 2011. Vice President, Secretary and General Counsel: Mark C. Dely

From March 2008 to present, Mr. Dely has been Vice President, Secretary and General Counsel of Merry Maids and our affiliate AmeriSpec, each in Memphis, Tennessee. From July 2007 to present he has been with ServiceMaster in Memphis, Tennessee, as Vice President, Secretary and General Counsel of our affiliates, ServiceMaster Clean and Furniture Medic, each also in Memphis, Tennessee. Prior to joining ServiceMaster, Mr. Dely served as Lead Counsel of Delta and Pine Land Company in Cordova, Tennessee, from August 2004 To July 2007. Marketing Expansion Manager: Vickie Alexander

MM FDD 4-1-2012, Amended 9-10-2012

11

From March 2012 to present, Ms. Alexander has been Market Expansion Manager for Merry Maids in Memphis, Tennessee. She was Marketing Expansion Specialist for Merry Maids in Memphis, Tennessee, from March 2011 to March 2012. She was also Marketing Expansion Specialist for ServiceMaster Clean, AmeriSpec, and Furniture Medic, our affiliates, in Memphis, Tennessee, from January 2011 to March 2012. Prior to this, she was an Audit/Collection Specialist for ServiceMaster Clean in Memphis, Tennessee (from January 2010 through December 2010). From January 2007 through December 2009, Ms. Alexander was Franchise Sales Manager for Merry Maids in Memphis, Tennessee.

Item 3: Litigation

Parent Litigation Matthew D. Smith, on behalf of himself and other similarly situated v. The ServiceMaster Company, J. Patrick Spainhour, et al (Delaware Chancery Court, Case No. NIL0700029754) The named plaintiff, a shareholder of ServiceMaster, filed a stockholders’ class action complaint on April 27, 2007, against ServiceMaster, its Chairman of the Board and Chief Executive Officer J. Patrick Spainhour, other Board members, CDRSVM Topco, Inc., CDRSVM Acquisition Company, Inc., Clayton Dubilier & Rice, Inc., BAS Capital Funding Corporation, 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., CGI CPE LLC, Clayton, Dubilier & Rice fund VII (Co-Investment), L.P. and J.P. Morgan Ventures Corporation. In the complaint, as amended, the plaintiff raises allegations of unjust enrichment, breach of fiduciary duties, artificial price depletion by failure to explore alternatives to the proposed stock purchase by defendants CD&R, and disclosure violation claims with respect to ServiceMaster’s April 16, 2007, preliminary proxy statement. Plaintiffs seek: (i) class certification; (ii) injunction of the buyout implementation of procedural/price safeguards; (iii) declaratory relief as to defendants’ breach of fiduciary duties in agreeing to the buyout; (iv) rescission of any aspect of the buyout already in progress; (v) imposition of a constructive trust in favor of plaintiff; and (vi) attorneys’ fees and costs. On May 9, 2007, plaintiff filed a motion for expedited discovery and for the scheduling of a preliminary injunction hearing to enjoin the defendants from proceeding with the proposed acquisition (subsequently made). On May 18, 2007, the parties reached an agreement in principle to settle the class action, and subsequently entered into a Memorandum of Understanding reflecting that agreement. The Memorandum of Understanding provided that ServiceMaster include in the final proxy statement certain disclosures, including the maximum reduction in the fee payable to Morgan Stanley and Goldman Sachs in connection with the retention of a third investment bank, and the intention of the board of directors concerning payment of ServiceMaster’s regular quarterly cash dividend (subsequently included). The Memorandum of Understanding further provided that CD&R reduce the termination fee from $100 million to $90.8 million (subsequently reduced) Confirmatory discovery completed, on July 21, 2008, the Stipulation of Settlement was filed with the Court. On September 29, 2008, the Court approved the settlement, and awarded plaintiffs $500,000 in plaintiffs’ attorneys’ fees. The judgment was final and non-appealable by the end of October 2008. ServiceMaster paid plaintiffs’ attorneys’ fees in November, 2008, and the matter is closed. Vernon T. Squires, on behalf of himself and all similarly situated persons and entities v The ServiceMaster Company and Clayton, Dubilier & Rice, Inc., (Tennessee Chancery Court, Case No. CH-08-0471-2)

The named plaintiff, a former employee and shareholder of SMC, filed a stockholders’ class action complaint on March 11, 2008, against ServiceMaster and CD&R. In the complaint, the plaintiff raises allegations of breach of contract and breach of implied duty of fair dealing, procurement of breach of

MM FDD 4-1-2012, Amended 9-10-2012

12

contract, common law inducement to breach of contract, conversion and declaratory judgment in order to remedy the defendant’s wrongful unilateral cancellation of thousands of stock options held by thousands of individuals in connections with defendant CD&R’s acquisition of defendant SMC. The plaintiff alleges CD&R, in order to accomplish the merger, cancelled thousands of unexpired, out of the money stock options that had been granted to the class members pursuant to certain stock option plans. Plaintiff seeks: (i) class certification; (ii) compensatory damages for class members; (iii) treble damages against CD&R; (iv) punitive damages against CD&R; (v) attorney’s fees and costs; and (vi) pre-and post-judgment interest. No specific monetary demand has been asserted. ServiceMaster filed a motion to dismiss the Squires litigation. On December 12, 2008, the court denied the defendants’ motion to dismiss. On January 5, 2010, the Court preliminarily approved a settlement agreement that calls for the Company to pay $999,000 into a settlement fund that will be used to pay all claims asserted, or arising, from cancellation of the stock options, including claims for attorney fees related thereto. The Court granted final approval on this settlement agreement on March 30, 2010.

Affiliate Litigation TruGreen Zulima V. Farber, Attorney General of the State of new Jersey, and Kimberly S. Ricketts, Director of the New Jersey Division of Consumer Affairs v. TruGreen Limited Partnership d/b/a TruGreen Chemlawn, and TruGreen Landcare, L.L.C., Jane and John Does 1-20, individually and as owners, officers, directors, shareholders, founders, managers, agents, servants, employees and/or representatives of TruGreen Limited Partnership d/b/a TruGreen Chemlawn, and TruGreen Landcare, L.L.C. and XYZ Corporations 1-20, Superior Court of New Jersey, Chancery Division: Middlesex County, Docket No. C-22-06: A Final Consent Judgment was entered into on August 3, 2006 in response to claims against TruGreen for alleged violations of the New Jersey Consumer Fraud Act (ACT). TruGreen voluntarily cooperated and consented to entry of the Final Consent Judgment without having admitted any violation of law or finding of fact. The Consent Order provides (1) TruGreen shall not engage in any unfair and/or deceptive acts or practices with the meaning of the ACT, (2) that TruGreen shall not utilize any type, size, location, lighting, illustration, etc. which would obscure any material fact, (3) TruGreen shall honor all consumer’s request not to renew a contract and will not renew a cancelled Service Agreement without the consumer’s written or oral consent, (4) TruGreen shall add certain disclosures to advertising of its 14 Point Analysis advertising, (5) provides consumers with written confirmation of contract cancellation and (6) TruGreen paid $80,000 to Division.

State of Wisconsin v. TruGreen Limited Partnership, d/b/a TruGreen Chemlawn, Circuit Court, Waukesha County, Case No. 04-C1-1241: A Stipulation and Consent Judgment was entered on May 27, 2004, in response to allegations of telephone solicitation violations. Without admitting any liability, TruGreen apologized for any telephone solicitations it may have inadvertently made to Wisconsin consumers on the no-call list. The Consent Judgment provides that TruGreen shall comply with Wisconsin statutes regulating telephone solicitations and TruGreen paid $10,728 in fines and penalties.

Commonwealth of Pennsylvania, Acting by Attorney General D. Michael Fisher v. TruGreen Limited Partnership, d/b/a TruGreen Chemlawn, TruGreen, Inc., General Partner of TruGreen Limited Partnership, and TruGreen Holding L.L.C., Limited Partner of TruGreen Limited Partnership, In the Commonwealth Court of Pennsylvania, Civil Action – Equity as Case No. 655-MD-2003: An amended Assurance of Voluntary Compliance was entered on October 2, 2003, in response to an investigation alleging violation of certain provisions of the Unfair Trade Practices and Consumer Protection Law. The violations alleged TruGreen wrongfully charged consumers a $1.00 fuel surcharge for each delivery of lawn and shrub care services from July 13, 2000, to December 31, 2000, without providing notice prior to the first invoice to these consumers. TruGreen willingly entered into the AVC and categorically denied any violations of the Act. Pursuant to the AVC, TruGreen agreed to (1) refrain from collecting an increased price for lawn and

MM FDD 4-1-2012, Amended 9-10-2012

13

shrub care services performed for Pennsylvania residential customers without notifying those customers of the increased prices prior to charging the price for services performed, (2) provide consumer restitution to consumers who paid the fuel surcharge during the specified time period, (3) submit a report to the Commonwealth of the payments made to consumers, (4) take steps necessary to assure full compliance with section 201-7 of the consumer Protection Law, and (5) TruGreen paid $40,000 to the Commonwealth as costs of investigation.

State of Indiana, County of Marion, In RE: TruGreen Limited Partnership d/b/a TruGreen Chemlawn, in the Marion Circuit Court, Cause No. A9C010212M1003332: A Petition for Approval of Assurance of Voluntary Compliance (AVC) was filed on December 16, 2002, in response to allegations deemed to be in violation of Indiana code 24-4.7-4, regulating the Telephone Solicitation of Consumers law (Act). By entering into the AVC, TruGreen admitted no wrong doing while agreeing to establish, implement and maintain systems and procedures to ensure compliance with the Act, including requiring third party telephone solicitors with whom it does business to comply with the Act, and paid a fine of $1,350.

State of Washington, In the Matter of TruGreen ChemLawn

In 2006, two TruGreen employees in the Spokane, Washington, branch received deposition subpoenas duces tecum to testify and produce documents relative to an allegation by a disgruntled former employee concerning fraud with regard to customer credit balances. The subpoenas were followed by a Civil Investigative Demand regarding the same matter. TruGreen immediately investigated and discovered that TruGreen’s Spokane branch was converting credit balances to revenue by falsifying customer invoices for services that were never performed, rather than returning the money to the customer, or in the alternative escheating the money to the state. TruGreen expanded the investigation to all Washington branches and found that this activity was confined to the Spokane branch. TruGreen shared its findings with the Washington Office of the Attorney General and volunteered to contact all affected customers of the Spokane branch and refund the credit balances directly to them, or if the customer did not reply or could not be found, TruGreen would properly escheat the money to the state.

As this matter was being concluded, an employee of the Washington Attorney General’s office who was a TruGreen customer complained that although he tried numerous times to cancel services, TruGreen refused to enter the cancellation and continue to provide services and bill him without his authorization. Investigation revealed records that conflicted with the facts reported by the state employee, but in an effort to resolve this matter and close the investigation, TruGreen agreed to formalize its cancellation policy and procedure by instituting cancellation numbers and other steps to ensure that cancellations were properly entered. Both issues were fully and finally resolved by the entry of an Assurance of Discontinuance dated August 2007. TruGreen contacted customers concerning refunds and money was refunded and/or escheated to the state as agreed.

Missouri Circuit Court, Twenty-Second Judicial Circuit, St. Louis City, Missouri. State of Missouri, ex rel. Jeremiah W. (Jay) Nixon, Attorney General v. TruGreen Limited Partnership dba TruGreen LawnCare, Case No. 0822-cc-01011

An Assurance of Voluntary Compliance was entered on March 25, 2008, following a brief investigation into alleged violations of the Missouri Do Not Call Law. TruGreen admitted no liability for the allegations, many of which dated back five years. As a part of this AVC, TruGreen and the State agreed that TruGreen would (1) comply with Missouri law, (2) establish a postcard retention policy for consumer inquiries received through TruGreen’s direct mail marketing efforts, and (3) contact the Attorney General’s office each month to inquire about complaints received by his office, and thereby be afforded an opportunity to investigate allegations on a more timely basis. TruGreen paid a mandatory contribution in the sum of $45,000 to the Merchandising Practices Revolving Fund. In addition, TruGreen provided additional training for its

MM FDD 4-1-2012, Amended 9-10-2012

14

branches operating in the State of Missouri, including visits to the two branches responsible for the alleged violations. The TruGreen Legal Department again visited the two branches in the St. Louis area in February 2009 to review procedures and retrain branch employees as a follow-up to the 2008 order, and have contacted the Missouri Attorney General’s office each month as agreed.

The Governor’s Office of Consumer Affairs for the State of Georgia served a Civil Investigative Demand on TruGreen, Inc., on September 8, 2008, initiating an investigation of potential violations of the Georgia Fair Business Practices Act. TruGreen cooperated fully with this investigation and in September 2009, settled and resolved all issues in a Letter of Understanding, without any admission of liability and without the payment of any fines or penalties, except a mandatory payment of $1,500 to the State for administrative expenses. As a part of this Letter of Understanding, TruGreen was required to contact the eighteen consumers and notify them of the resolution of their individual complaints, and also to modify TruGreen’s cancellation procedure by providing cancellation numbers to all customers when service is canceled.

State of New York, Office of the Attorney General. On December 16, 2009, the State of New York Office of the Attorney General notified TruGreen that it has commenced an investigation into TruGreen’s use of “continuous service agreements.” The Assistant Attorney General advised that her office had received complaints from New York consumers over the past four years alleging that they were TruGreen customers in the prior year, but did not authorize service in the subsequent year and/or that they canceled service, but TruGreen returned to their property and provided service without permission. The notification from the Attorney General’s office specifically lists 14 such complaints. TruGreen investigated the 14 complaints and found that the customers signed continuous service contracts, and unless the customer canceled, TruGreen was authorized to provide service year after year. However, New York pesticide regulations require a company applying pesticides (such as TruGreen) obtain signed consent on “application dates” each and every year. Without the signature for the application dates, such company can only provide non-pesticide services, such as fertilizer applications. TruGreen believes this situation is the basis of the alleged confusion on the part of the consumer, although TruGreen provides numerous reminders to customers about the continuous service feature in the TruGreen contracts. TruGreen entered into an Assurance of Discontinuance with the Attorney General’s office in May 2010 and paid a penalty in the amount of $55,000.

Franchisor:

During our most recently completed fiscal year 2011, Merry Maids was not involved in any litigation against any franchisees.

Other than these actions, no litigation is required to be disclosed in this disclosure document.

Item 4: Bankruptcy

No bankruptcy information is required to be disclosed in this Item.

Item 5: Initial Fees

The initial fees for the franchises offered in this disclosure document are listed in the chart below. The initial fees for the Conversion Franchise are listed in the following chart.

MM FDD 4-1-2012, Amended 9-10-2012

15

Initial Fee and Available Discounts

Full-Sized Market2

Mid-Sized Market2

Small-Sized Market2

Initial Franchise Fee1 $37,500 to $47,500

$37,500 $33,500

Military Discount3 15% off the initial fee

15% off the initial fee


Minority Discount4 10% off the initial fee



1) The initial franchise fee for Full-Sized, Mid-Sized, and Small-Sized Markets includes the initial training program for one person and the opening inventory package. The training program must be completed within six months after the effective date of your Franchise Agreement. A sample of the Franchise Agreement is attached to this disclosure document as Exhibit A. The opening inventory package is contained in Exhibit G to the disclosure document. The initial franchise fee and On-Line Marketing Fund deposit of $2,000 (see Item 7) are payable in one lump sum at the signing of the Franchise Agreement and are nonrefundable. In addition to the initial fee, or if this is a transfer of an existing license or a Conversion Franchise, you must pay a $1,000 Seminar Attendance Fee. Your Seminar Attendance Fee will be refunded to you if you attend the first Merry Maids National Seminar held after execution of the Franchise Agreement. If you do not attend this Seminar, you will forfeit this deposit.

2) A Full-Sized Market contains a minimum of 15,000 to 35,000 Qualified Households; Mid-Sized contains a minimum of 8,000 to 15,000 Qualified Households; and Small-Sized contains up to 8,000 Qualified Households. “Qualified Households” are households with an average annual income of $75,000 or higher. We utilize census-based demographics data provided by SRC, LLC located in Orange, California. The Initial Fee of a Full-Sized market is $37,500 plus a Territory Fee of $0.50 per each Qualified Household over 15,000 to 35,000.

3) We offer a 15% discount off the initial fee to honorably discharged veterans of the United States Armed Forces who served on active duty after 1990, who do not currently own a Merry Maids franchise and who otherwise meet our requirements to purchase a license. We are a member of the International Franchise Association (IFA) and participate in IFA’s VetFran program.

4) We also offer a 10% discount off the initial fee to minority applicants. A “minority” means any

individual who is a citizen of the United States or who is legal to work in the United States and who is African American, Hispanic, Native American, Asian or other similar minority race designation.

Before you sign the Franchise Agreement, but at least fourteen calendar days (or 10 business days as required in some states) after you receive this disclosure document, Merry Maids will allow you to make a partial payment of $4,500 for the Small-Sized Market, $5,400 for the Mid-Sized Market, and $6,600 for the Full-Sized Market, to reserve the availability of a specific market. The partial payment is non-refundable due to the fact that we reserve the market from other potential buyers once you have made your partial payment. This partial payment differs from the “down payment” amounts set forth in Footnote 1 of Item 7. We will apply the partial payment to the remainder of the initial fee when the Franchise Agreement is executed. At any given time, we may offer incentives or giveaways of cash, equipment, materials, supplies or other

MM FDD 4-1-2012, Amended 9-10-2012

16

related items, which will, in effect, lower the initial fee or investment to prospective franchisees. During 2012, our Franchise Award Program will award franchises to qualified candidates who are an honorably discharged U. S. Veteran, a woman, or a minority (as defined above). The award includes waiving the Initial Franchise Fee for a franchise in a designated territory (a value of $33,500 to $47,500) and travel costs (a value of $250 to $800) for one person to attend the Merry Maids Training Academy in Memphis, Tennessee. If you are an existing franchisee, if you are approved to buy an additional franchise, if you or your manager are not required to attend training and if you do not need an additional opening inventory package or computer, you pay a reduced Initial Fee which is $6,000 less than the initial fees described above. You are not required to pay the Seminar Attendance Fee deposit and the On-Line Marketing Fund. And, we are not required to add $1,000 to your On-Line Marketing Fund. (See Item 7.) You pay no other fees or payments to us or our affiliates for goods or services prior to the opening of the franchised business. Conversion Franchise Initial Fees

We currently offer business owners the opportunity to convert their existing business to a Merry Maids franchised business. The minimum guidelines for such conversions are as follows:

Conversion Franchise

Full-Sized Market

Minimum Annual Revenue

Mid-Sized Market and

Small Market Minimum Annual Revenue

Initial Fee

$175,000 -$275,000

$100,000 - $200,000

30% off

initial fee

$275,001 - $400,000

$200,000 - $300,000

50% off initial fee

More than $400,001

More than $300,000

70% off

initial fee Except as described below in Item 7, the initial fee is payable in one lump sum at the signing of the Franchise Agreement. Our affiliate, SMAC, offers financing for up to 80% of the initial fee as disclosed in Item 10. Initial fees are not refundable. Merry Maids is also registered on the Franchise Registry, which provides expedited SBA loan processing for franchise businesses.

MM FDD 4-1-2012, Amended 9-10-2012

17

Item 6: Other Fees

OTHER FEES

Type of Fee Amount Due Date Remarks

Service Fee1 7% of Gross Sales 2 5% above $500K

Paid weekly Paid via electronic funds transfer

Software Lease1, 4

CIS: $22.40/week if $3,000 or below in weekly Gross Sales RightNow: $35 per license per month

CIS: Paid weekly with Service Fee RightNow: Paid quarterly, one quarter in advance

Paid via electronic funds transfer

Software:4

Quick Books – Accounting Quick Books – Payroll

$175 for 3 years $300 annually

Invoiced Paid to vendor

Remote data back-up4

$34 per month Invoices Paid to vendor

Training for Additional Persons1: 1 person, no hotel 1 person, 1 king suite 2 persons, 1 king suite

$660 $1,775 $2,435

Prior to training

Training and accommodation fees are subject to change. All travel expenses will be your responsibility.

On-Site Training and Emergency Response Service1

$500/day + expenses Invoiced We provide on-site training and emergency response service at your request. These fees are subject to change.

Transfer Fee1

$7,500 for the first license transferred and then $3,000 for each additional license transferred Transfer to a child of current owner is $3,750 for first license and $1,500 for each subsequent license

At Closing Payable by you or the buyer when you sell your franchise. No transfer fee is charged if transferring to spouse.

Lead Fee6 $5,000 At Closing A lead fee will be charged should ServiceMaster refer to an existing franchise owner a qualified lead (See Note 6 below) of someone who buys the owner’s

MM FDD 4-1-2012, Amended 9-10-2012

18

OTHER FEES

Type of Fee Amount Due Date Remarks

franchise business within an 18-month period from the time the lead is passed to the existing owner.

Training Fee for Transfers1

$1,775 per person (includes hotel)

At Closing For training of new franchisees who purchase an existing franchise. Training fees for transfers are subject to change. All travel expenses and additional hotel rooms are your responsibility.

Audit1 Cost of audit 3 Invoiced Payable only if an audit shows an under-statement of at least 2% of Gross Sales for any month.

National Ad Fund (“Ad Fund”)5

1.3% of total gross sales per week

Paid weekly

Paid via electronic funds transfer

Local Digital Marketing Fee5

0.7% of total gross sales per week

As incurred Franchisee is required to use Franchisor approved vendors. Payable to vendor.

Franchise Agreement Change Fees -- Adding/deleting/changing

$400 - adding or deleting owner name, other than spouse $400 – changing business structure (after first year of original license term) $400 – changing business entity name

Upon approval

When you add or delete or change the owners, the business entity, or change your business structure from what is on your Franchise Agreement, you must have approval from Merry Maids prior to the change. Once approved, a change fee is paid to Merry Maids.

Employee Drug Screening

Generally $20.00 - $25.00 per test

Invoiced

Payable to vendor

Employee Background Check

Generally $12.00 - $13.00 per test

Invoiced

Payable to vendor

Notes to Item 6:

1Unless otherwise indicated, all fees are imposed by and are payable to Merry Maids. The weekly Service Fee is payable on Friday of each week for the preceding weekly report period by automatic funds transfer

MM FDD 4-1-2012, Amended 9-10-2012

19

from Franchisee’s bank account. The Software Lease fees for CIS are also payable weekly at the same time as the Service Fees. (See Note 4 below.) All fees are non-refundable. Right Now license fees are payable quarterly, one quarter in advance, and are subject to change based on the then-current price charged by the third-party vendor. A transfer is any change in ownership that gives a single owner or a group of owners 50% or greater ownership. 2”Gross Sales” means all of your billings, whether collected or not, including cash sales and sales on account, monies billed for maid cleaning services whether performed by you or subcontracted, monies billed in connection with trade or barter agreements, or monies billed for any other cleaning and/or maintenance of any structure, interior or exterior, excluding sales tax or use tax. 3Interest is calculated at an annual rate of 18% or the maximum rate permitted by law, whichever is less, from the date of the underpayment.

4The Software Lease is part of the Franchise Agreement (Franchise Agreement, Paragraph 9.E.) and is subject to change. The software included is the customer information management software (CIS), the customer relationship management software (Right Now), and the customer satisfaction measurement system (Right Now/Listen360). You are required to use the standard Merry Maids customer information system, customer relationship management system, and customer satisfaction measurement system. You will receive one (1) user identification (at no additional charge) for mmConnect which is our customer referral management system. Quick Books Accounting and Quick Books Payroll are recommended. You may use other comparable systems; however, Quick Books is compatible with the Merry Maids Operating System. Remote data back-up with 100GB is recommended to back up your computer system. Your initial franchise fee includes the first six months of remote data back-up as well as the first six months fee for Right Now, Full Application. After this initial start-up period, you will need to order the software directly from the software providers. The transition to the replacement software for CIS and Right Now, the Merry Maids Operating System, is expected to begin during the third quarter 2012. This system is a licensed-based application. The cost of the standard license is approximately $30 per seat per month and approximately $12 per seat per month for the Mobile license. License seats are role based specific and not generic; therefore, licenses must not be shared. (See also Item 11.) 5 The Ad Fund Program fee rate is 1.3% of total weekly gross sales and is paid to the Ad Fund. The Local Digital Marketing Program fee is 0.7% of total weekly gross sales. Franchisee works directly with Franchisor-approved vendors to place local digital marketing. Franchisor will require Franchisee to submit reports showing their local digital marketing activity and amount spent. Existing franchisees are offered an incentive to sign an addendum to their present franchise agreement, prior to renewal, amending their Agreement(s) with the new fee rates for the Ad Fund Program and Local Digital Marketing Program. Amendments to Franchise Agreement are included in Exhibit K of this Disclosure. 6 A qualified lead is defined as someone who has passed our screening process, our national background check, a credit check, and at a minimum a phone interview of the prospect. The lead fee also covers our advertising and marketing costs and administrative costs of such information sharing and gathering. The lead fee is not a transfer fee. You are responsible for notifying Merry Maids Home Office that you desire to transfer (sell) your franchise business and to be added to our list of existing businesses for sale.

MM FDD 4-1-2012, Amended 9-10-2012

20

Item 7: Estimated Initial Investment

YOUR ESTIMATED INITIAL INVESTMENT

Type of Expense

Amount

Payment

When Due

To Whom Payment Is To Be Made

Full-Sized Market Initial Fee (Note 1)

$37,500 to

$47,500

Lump Sum

At Signing of

Franchise Agreement

Merry Maids

Mid-Sized Market Initial Fee (Note 1)

$37,500

Lump Sum

At Signing of

Franchise Agreement

Merry Maids

Small-Sized Market Initial Fee (Note 1)

$33,500

Lump Sum

At Signing of

Franchise Agreement

Merry Maids

New Owner Training (Note 2)

Included in Initial Franchise

Fee

N/A N/A N/A

Travel Expenses While Training (Note 2)

$600-$1,000

As Incurred

During training

Vendors

Real Estate and Improvements (Note 3)

$2,000-$4,000

(Note 3)

(Note 3)

(Note 3)

Computer Hardware and Software (Note 4)

Included in Initial Franchise

Fee

N/A N/A N/A

Equipment (Note 4)

$5,250 - $6,850

Lump Sum

Prior to Operating

Vendors

Insurance (Note 5)

$600 - $2,100

As Incurred Prior to Operating Vendors

Miscellaneous

$1,400 to $2,500

As Incurred

As Incurred

Vendors

MM FDD 4-1-2012, Amended 9-10-2012

21

YOUR ESTIMATED INITIAL INVESTMENT

Type of Expense

Amount

Payment

When Due To Whom Payment Is

To Be Made Opening Costs (Note 5)

Opening Inventory Package (Note 6)

Included in

Initial Franchise Fee

N/A

N/A

N/A

Advertising (3 Months) (Note 7)

$5,000 - $6,000

As Incurred

As Incurred

Merry Maids or

Vendors

Additional Funds (3 Months) (Note 8)

$4,000 - $5,500

As Incurred

As Incurred

Employees, Suppliers,

Utilities

Seminar Attendance Fee (Note 9)

$1,000

Lump sum

At Signing of

Franchise Agreement

Merry Maids

On-Line Marketing Fund (Note 10)

$2,000

Lump Sum

At Signing of

Franchise Agreement

Merry Maids

Total: (Note 1) Full-Sized Market Mid-Sized Market Small-Sized Market

$59,350 to $78,450 $59,350 to $68,450 $55,350 to $64,450

Notes to Item 7: 1. A Full-Sized Market Initial Fee is $37,500 plus a territory fee of $0.50 per each Qualified Household

within the territory having over 15,000 to 35,000. We offer discounts off the initial fee as follows: a 10% Military Discount and a 10% Minority Discount. (See Item 5 for details about these discounts.) Our affiliate, SMAC, offers financing to you, with approved credit, for up to 80% of each initial franchise fee charged. SMAC charges a fixed annual interest rate on the outstanding principal balance at the then current prime interest rate as published by The Wall Street Journal, plus 5% (subject to a floor of 8%). (See Item 10 for more details about SMAC financing.) The minimum

MM FDD 4-1-2012, Amended 9-10-2012

22

down payment is $8,700 for the Full-Sized Market, $7,500 for the Mid-Sized Market, and $6,700 for the Small-Sized Market which includes any partial payment you may have made to reserve your territory. (See Item 5.)

2. We will provide some meals and the lodging expense incurred for one person while at the New Owner Training Program. You will be responsible for travel and personal expenses while training. Franchisee or a manager approved by Franchisor must attend training within six months of signing franchise agreement.

3. If you do not own adequate office space, you must lease an office. Typical locations are light industrial and commercial areas. The typical Merry Maids office occupies 450 to 1,800 square feet. We estimate rent will be between $6,000 and $12,000 per year, depending on factors such as the size of your franchise and the location of the leased premises. The range in the table is only for the first three month's rent, security deposit and leasehold improvements.

4. You may need to purchase office furniture, office fixtures, a washer and dryer, and office decorations. A laptop computer with software is included in your initial fee. See Item 11 for the minimum requirements of computer systems and software that are required for your franchise business. The first six months software license for Right Now, Full Application and for remote data back-up is included in your Initial Franchise Fee. (See Item 6 also.) You will need to purchase a wireless mobile device for pricing. You must bring this device with you to the New Owner Training Program and Sales Training. An iPad is recommended and it is compatible with Merry Maids pricing application. Cost of an iPad ranges from $300-$450 used and $500-$900 new. (See Item 11.) We will provide you the Merry Maids pricing application for your wireless mobile device (iPad).

5. You will incur various miscellaneous costs to open your business. These costs include your business license, security deposits, utilities, an insurance deposit and incorporation fee (if you incorporate). Required insurance policies include comprehensive general liability insurance, including product liability coverage, with minimum limits of $500,000 per person and $1,000,000 per occurrence for bodily injury, business automobile liability coverage for owned, leased, hired and non-owned vehicles, with minimum limits of $500,000 per person/$1,000,000 per occurrence for bodily injury, and $100,000 for property damage liability, third party fidelity bond coverage, worker's compensation, and any other insurance required by the laws of the state in which the franchise is operated. We strongly recommend care, custody and control coverage including coverage for damage to property in your employees’ control or property they are directly working on, with minimum limits of $150,000 per occurrence to adequately protect the operation of the business. Merry Maids shall be named as a certificate holder and as an additional insured on such policy or policies (except that Merry Maids need not be named as an additional insured for worker’s compensation and third party crime bonds). You must provide proof of insurance before opening for business. We estimate the cost for all insurance during the first year of operation will be $2,400 to $8,400. All insurance must be procured prior to attending New Owner Training or before the commencement of business in transfer situations. You must also have high speed access to the Internet at your office location. (See Item 11.) Fees for internet access providers will vary but should be approximately $100 per month. You will incur costs of stationery items, pre-printed customer agreement forms, marketing and advertising collateral. We estimate the cost for a three-month supply to be approximately $1,000.

6. A complete list of inventory, equipment, cleaning supplies and similar items, including cleaning equipment, and related items, is outlined in Exhibit G to this disclosure document.

7. Your advertising costs will probably include such items as promotional materials, advertisements, and local digital marketing used to generate sales. You may purchase promotional items from us, if you choose. You must work directly with Franchisor-approved vendors for your local digital marketing. You will also pay a percentage of your weekly gross sales into a National Ad Fund as explained in Item 11. The costs shown here do not include Yellow Page advertising nor National Ad Fund fees.

MM FDD 4-1-2012, Amended 9-10-2012

23

8. These expenses include payroll costs. These figures are estimates, and Merry Maids cannot guarantee that you will not have additional expenses starting your business. Your costs will depend on factors such as: how closely you adhere to Merry Maids methods and procedures; your management skills, experience and business acumen; local economic conditions; the local market for our product; the prevailing wage rate; competition; and the sales level reached during the initial period.

9. If this is the purchase of a new license, or a transfer, the Seminar Attendance Fee will be refunded to you if you attend the first National Seminar which occurs after execution of your franchise agreement. If you do not attend this Seminar, you will forfeit this deposit. This Seminar Attendance Fee does not apply to an existing franchisee purchasing another territory. See Item 5.

10. This amount will be placed in a fund to be used for On-Line Marketing in your territory. Merry Maids will place an additional $1,000 of your initial franchise fee or transfer fee into this fund. Merry Maids will assist you in using these funds during the first year of operation of your franchise, at times mutually agreed upon. Any portion of this fund not utilized during your first year of operation may be, at Merry Maids’ sole discretion, applied to offset your accounts with Merry Maids or its affiliates. If you are an existing franchisee purchasing another territory, this On-Line Marketing fund does not apply to you, and we are not required to add any money to such a fund for you. See Item 5.

The chart contains estimated ranges for the expenses listed, in part because the expenses vary according to the Market size sold. We have based our estimates on the average costs for the entire Merry Maids system and have relied on our almost 30 years of experience to compile these costs. Your actual costs are likely to vary. With the exception of the Seminar Attendance Fee, all other payments to Franchisor including the initial franchise fee are non-refundable except at the sole discretion of Franchisor.

Item 8: Restrictions on Sources of Products and Services

You must purchase or lease certain items to operate your franchise and to render housecleaning services effectively and economically. Your purchases and leases will include cleaning products, equipment, computer software and various supplies, all pursuant to specifications set forth in our confidential Merry Maids Operations Manual (Operations Manual). These specifications include standards for customer satisfaction and performance and are subject to change from time to time. Our specifications require primarily that you render services which meet or exceed any given customer's reasonable expectations for maid cleaning services. While our specifications are general in nature and are designed to assure that you meet our goal of total customer satisfaction, we do specifically require that you clean rooms in accordance with the checklists contained in our confidential Operations Manual and that you abide by all laws and regulations applicable to the cleaning supplies and equipment you choose to use. You may purchase your cleaning products, equipment and supplies from us or from any vendor who meets our specifications. We have negotiated special franchise pricing with some of these vendors. For some purchases, we and you may receive volume discounts in the form of manufacturer and wholesaler rebates, based on the total purchases by the Merry Maids system. We do not provide any special benefit or incentive to you for your purchases from these vendors. If you wish to use any cleaning products, equipment and supplies, and software we have not previously approved. You may request approval by letter and provide a sample of the item you would like us to consider. Our review typically takes 30 days or more. We do not derive revenue from your purchases or leases from other vendors, although, as noted above, we may receive rebates on our own purchases that result from volume discounts that are measured by purchases of the entire system We do derive revenue from your purchase of equipment, cleaning products, and supplies from us based on the amount at which these items are sold to you minus our cost. For the fiscal year ending December 31,

MM FDD 4-1-2012, Amended 9-10-2012

24

2011, Merry Maids’ revenue from the sale of equipment, cleaning products and supplies and the lease of computer software to our franchisees and branches was $4,503,000 or 5.6% of our total revenue of $80,986,000 for the year. We estimate the costs of cleaning products and supplies you must purchase in accordance with specifications will be a nominal percentage of your total purchases in connection with the establishment of your franchise because these products and supplies are included in the opening inventory package you receive with your license. In the first months of operating your business, these purchases will be approximately 3% of your total purchases in operating the franchise. We estimate the cost of equipment you must purchase in accordance with specifications will be approximately 3% of your total purchases in connection with the establishment and operation of your franchise due to your required purchase of a computer and printer that meets our specifications set forth in Item 11. We estimate the costs of computer software in accordance with specifications will be less than 5% of your total purchases in connection with the establishment and operation of your franchise. Our affiliate, SMAC, derives revenue in the form of interest should you decide to lease or finance equipment through SMAC. For the year ended December 31, 2011, SMAC revenue on franchisee financing was $294,113 or 5.21% of SMAC’s total revenue of $5,641,890. And our affiliate, SMB derives revenue from Yellow Pages ad placement in the amount of $312,018 or 3.97% of SBM total revenue of $7,856,393 for the year ended December 31, 2011. Merry Maids derives no revenue from these two affiliates, and it is your option to choose to use either. You are required to purchase local digital marketing or with the approval of Franchisor other local marketing/advertising through Franchisor-approved vendors. You are required to spend 0.7% of your weekly gross sales on this type of marketing. The Franchisor-approved vendors are listed in the Operations Manual. Merry Maids currently derives no revenue from these vendors. As of April 1, 2012, we do not have any purchasing or distribution cooperatives. Our officers do not have any ownership in any approved suppliers.

Item 9: Franchisee’s Obligations

FRANCHISEE’S OBLIGATIONS

This table lists your principal obligations under the franchise and other agreements. It will help you find more detailed information about your obligations in these agreements and in other items of this

disclosure document.

Obligation Section in Agreement

Item in Disclosure Document

a. Site selection and

acquisition/lease Sections 1.A. and 1.C of Franchise Agreement

Item 11

b. Pre-opening purchases/leases Sections 9.E and 13 of Franchise

Agreement

Items 7 and 8

MM FDD 4-1-2012, Amended 9-10-2012

25






c. Site development and other pre-opening requirements

Sections 1 and 5.A of Franchise Agreement

Items 7 and 11

d. Initial and ongoing training Section 5 of Franchise Agreement

Item 11

e. Opening 2.D of Franchise Agreement

Item 11

f. Fees Sections 6 and 12 of Franchise Agreement

Items 5 and 6

g. Compliance with standards

and policies/Operating Manual

Sections 7, 8, 9 and 10 of Franchise Agreement

Item 11

h. Trademarks and proprietary

information Sections 4, 6 and 8 of Franchise Agreement

Items 13 and 14

I. Restrictions on

products/services offered Sections 1.C and 10.I of Franchise Agreement

Items 8, 9 and 16

j. Warranty and customer

service requirements Section 10.F of Franchise Agreement

Item 11

k. Territorial development and

sales quotas Section 12 of Franchise Agreement

Item 12

l. Ongoing product/service

purchases Sections 9.E and 10.H of Franchise Agreement

Item 8

m. Maintenance, appearance

and remodeling requirements

N/A Item 11

n. Insurance Section 13 of the Franchise Agreement

Item 7

o. Advertising Section 6 of Franchise Agreement;

Amendment to Franchise Agreement

Items 6, 7 and 11; Exhibit K

p. Indemnification Section 16.B of Franchise Agreement

N/A

q. Owner's participation/

management/staffing Section 1.D and Section 10.A of Franchise Agreement

Item 15

r. Records and reports Section 9 of Franchise Agreement

Item 6

s. Inspections and audits Section 9.D of Franchise Agreement

Items 6 and 11

MM FDD 4-1-2012, Amended 9-10-2012

26






t. Transfer Section 10.L(4) & (6) and Section 14.I-L of Franchise Agreement

Item 17

u. Renewal Sections 3.B and 14. A(C) of Franchise

Agreement

Item 17

v. Post-termination obligations Section 14.G of Franchise Agreement

Item 17

w. Non-competition covenants Sections 14.G(5) and 15 of Franchise

Agreement

Item 17

x. Dispute resolution Section 24 of Franchise Agreement Item 17

y. Other (describe) None None

Item 10: Financing

We do not offer direct financing. Our affiliate, SMAC, does offer financing for the initial franchise fee. If you are interested in obtaining a loan guaranteed through the United States Small Business Administration, we are listed on their Franchise Registry which provides expedited loan processing for franchise businesses. Please visit the Franchise Registry’s website at www.franchiseregistry.com for additional information.

Summary of financing offered through SMAC: TYPE OF FRANCHISE

SMALL-SIZED

MARKET

MID-SIZED MARKET

FULL-SIZED MARKET

Initial Franchise Fee1 $33,500 $37,500 $37,500 - $47,500

Down Payment Min. of $6,700 Min. of $7,500 Min of $7,500 or $9,500

Amount Financed1

$26,800

$30,000

$30,000 - $38,000

Term1

7 years

7 years

7 years

Interest Rate1

8.25%

8.25%

8.25%

MM FDD 4-1-2012, Amended 9-10-2012

27

Est. Initial Monthly Payment3, 5

$205

$235

$235 - $290

Prepay Penalty

None

None

None

Security Required4

Franchise Business

Assets/Personal, Corporate or Secured

Guaranty/UCC-1 Financing

Statement/Business Owner(s)

Guaranty/Other Collateral Upon Request

Franchise Business





Franchise Business





Liability Upon Default5

Loss of Franchise and

Other Franchises/Acceleration

of Loan Balance(s)/Attorney

Fees/Max. Lawful Rate of Interest (Business

Note)/ Court Costs/Any Other

Related Expenses






Related Expenses






Related Expenses

Loss of Legal Right7 On Default

Waive Notice, Demand, Choice of Forum/ Loss of Defenses

Waive Notice/Choice of Forum/

Loss of Defenses

Waive Notice/Choice of Forum/

Loss of Defenses

Summary of financing offered for the Conversion Franchise through SMAC: TYPE OF FRANCHISE

MID-SIZED MARKET

FULL-SIZED MARKET

Initial Franchise Fee1, 6 $26,250 $26,250 - $33,250

Down Payment $0 $0

Amount Financed1

$26,250

$26,250 - $33,250

Term1

7 years

7 years

Interest Rate1

8.0%

8.0%

MM FDD 4-1-2012, Amended 9-10-2012

28

Est. Initial Monthly Payment3, 5

$185

$185-$230

Prepay Penalty4

None

None

Security Required4

Franchise Business

Assets/Personal, Corporate or Secured Guaranty/UCC-1

Financing Statement/Business Owner(s) Guaranty/Other Collateral Upon Request

Franchise Business

Assets/Personal, Corporate or Secured Guaranty/UCC-1

Financing Statement/Business Owner(s) Guaranty/Other Collateral Upon Request

Liability Upon Default5

Loss of Franchise and Other

Franchises/Acceleration of Loan Balance(s)/Attorney Fees/Max.

Lawful Rate of Interest (Business Note)Court Costs/Any Other

Related Expenses

Loss of Franchise and Other

Franchises/Acceleration of Loan Balance(s)/Attorney Fees/Max.

Lawful Rate of Interest (Business Note)

Court Costs/Any Other Related Expenses

Loss of Legal Right On Default7

Waive Notice/ Loss of Defenses

Waive Notice/ Loss of Defenses

Notes to financing: 1 With your approved credit, SMAC will finance up to 80% of the initial franchise fee up to a seven-year period. If you are a conversion with your approved credit, SMAC will finance up to 100% of the Initial Franchise Fee up to a seven-year period. An application for financing must be completed and signed by all applicants. Upon approval, a business Note and Security Agreement (”Note”)) with Personal Guaranties and, in some cases, Secured or Corporate Guaranties (Exhibit J) must be signed along with a pledge of the assets of the Franchise (UCC-1 Financing Statement). Copies of drivers’ licenses of all signatories must be provided to SMAC. Merry Maids does not receive payment for the placement of your financing with SMAC. Neither Merry Maids nor any employee, salesperson nor agent of Merry Maids has any express or implied authority to act as an agent of SMAC. The rates and terms offered are authorized solely by SMAC. Merry Maids does not arrange financing from sources other than SMAC.

2 SMAC charges annual interest on the outstanding principal balance at the then current prime interest rate as reported in The Wall Street Journal (March 22, 2012, the prime rate is verified to be 3.25%), plus 5% (subject to a floor of 8.25%). Conversion Franchisees will be charged prime plus 3% (subject to a floor of 8.00%). SMAC retains the right to change the rate of interest charged and, at any given time, may offer financing arrangements that differ from those disclosed here for the purchase of the franchise, subject to restrictions. SMAC may sell the Note to a third party. 3 Your first payment is due three months after the date of the Note. Interest begins to accrue in the first month and your first payment is due in the third month. Your first payment may be higher than payments

MM FDD 4-1-2012, Amended 9-10-2012

29

two through twelve due to interest accruals; payments two through twelve will be an amount slightly above the accrued interest. These payment amounts are estimated in the charts above. Beginning with your thirteenth payment, your payment amount will increase and will represent payment of both principal and interest. Monthly payments will be automatically transferred from your bank account (Exhibit J). Should SMAC agree to accept payments in any form other than by automatic transfer, a fee may be charged to the borrower. If any payment is returned for any reason, a maximum fee of $25 will be charged. Any payment not received by the tenth day after its due date is subject to a late charge in the amount of 5% of the payment or $25 (whichever is greater).

4 SMAC requires a Personal Guaranty of the Note by all applicants, by all outstanding owners of the business, and may request additional Personal, Corporate, or Secured Guarantees as deemed appropriate. SMAC requires a pledge of the assets of the Franchise (UCC-1 Financing Statement) and any and all other collateral required by SMAC. You may prepay the Note at any time without penalty.

5 If you do not make payments when due, SMAC may demand immediate payment of the full outstanding balance of this loan and any other outstanding loans you may have with SMAC. We also have the right to terminate your franchise and any other franchise you may have with Merry Maids if you do not make your Note payments on time. In the case of default, interest will accrue at the fixed rate of eighteen percent (18%).

6 The payment amounts listed in the chart for the Conversion Franchise are based upon your receiving a discount of 30% off the Initial Franchise Fee as described in Item 5 for Conversion Franchise sales. If you qualify for a larger discount, your payments will be lower. Likewise, if you qualify for a smaller discount, your payments will be higher. To be eligible for this financing, all principal business partners must meet the minimum credit requirements of SMAC. You must also have verification of at least $100,000 in annual revenue, and produce prepared financial statements that are current within three months of your application, and update as requested. 7 In addition to the above listed waivers and losses, the Guaranty also includes waiver of right of action against the borrower until the debt is paid in full and waiver of the right for SMAC to sue borrower or any other guarantor.

Item 11: Franchisor’s Assistance, Advertising, Computer Systems, and Training Except as listed below, Merry Maids is not required to provide you with any assistance. Before you open your business, Merry Maids will:

a) Designate your exclusive market (Franchise Agreement - Exhibit A);

b) At your request, provide input regarding the site of your business office. You must operate your business from a retail office, industrial park or other commercial location within your designated Market. You must also abide by all local codes, laws, restrictions and statutes in your area, including obtaining all necessary businesses licenses (Franchise Agreement - Section 1.C.). We do not review your construction, remodeling or decorating plans;

c) Deliver the opening inventory package listed in Exhibit G of this disclosure document once

you have established an office location and are ready to commence business. See Item 8 for details on the purchase of equipment. (Franchise Agreement - Section N/A);

d) Furnish an Initial Training Program for one person for all license types. If this is a new sale,

there is no tuition fee for one attendee of the Initial Training Program if you attend training

MM FDD 4-1-2012, Amended 9-10-2012

30

within six (6) months of signing your Franchise Agreement. You or your manager must complete the Initial Training Program in Memphis, Tennessee, or at such other location as we may designate. You will be responsible for travel and personal expenses in connection with the Initial Training Program. (See Item 6 and Item 7 and Franchise Agreement – Section 5.A). We will provide some meals and one hotel room for one person during the Initial Training Program. You must begin operation of your Merry Maids business within 30 days after completion of the Initial Training Program. (Franchise Agreement - Section 2.D.);

e) Give you access to our password protected franchisee intranet site (“mmlink”) which

contains the Operations Manual with both mandatory and suggested specifications, standards and procedures. (Franchise Agreement - Section 7) The Operations Manual is confidential and remains our property. We may modify the Operations Manual or any medium that replaces it at any time. The modifications will not alter your status and rights under the Franchise Agreement, but you must conduct your Merry Maids business in accordance with the modifications. (Franchise Agreement - Section 7.C.) The Table of Contents of the Operations Manual (which has a total of 85 pages) is listed in Exhibit I.

During the operation of your Merry Maids franchise, Merry Maids will:

a) Continue to develop new products and/or procedures to offer to your customers and provide you with information about these developments (Franchise Agreement - Section 11); and

b) Organize and hold annually the Merry Maids National Seminar. You are required, unless

this is a renewal agreement, to attend the first Merry Maids National Seminar scheduled subsequent to the execution of the Franchise Agreement. (Franchise Agreement – Sections 2.B and 5.B.);

c) Hold annual and regional instructional training meetings for you and other franchisees.

(Franchise Agreement – Section 5.B.)

d) Provide training to you regarding the hiring and training of your employees. We spend approximately three hours during training explaining to you the hiring procedures set forth in the Operations Manual. We train you on the written forms, tools and programs we recommend for attracting prospective employees; setting the application appointment; the application and interview process; and screening and selection. (Franchise Agreement – Section 10.A.1) In addition, to training you in the training procedures for an employee, we spend six hours during training explaining our products, equipment and procedures to you in the same manner as you would train an employee, which includes going into a test home to demonstrate. We spend another four hours reviewing the Operations Manual provisions regarding training procedures, employee relations, retention and disciplinary procedures; this training covers various forms, tools and programs we recommend as the foundation for properly training a new employee.

e) Provide advisory service as reasonably requested which shall include consultation on

promotional, business and operational problems and an analysis of your marketing and financial data. (Franchise Agreement - Section 5.D.)

f) From time to time, provide promotional materials, newsletters and/or bulletins describing

new marketing developments, equipment, products and techniques. (Franchise Agreement – Section 5.E.)

MM FDD 4-1-2012, Amended 9-10-2012

31

Training

TRAINING PROGRAM

Subject

Hours of Classroom Training

Hours of On-the-Job

Training Location Pre-Operations Training1

Merry Maids Telephone Skills, Modules 1-4

2 At your location

RightNow Lead Training, Modules 1-5 1.5 At your location RightNow Incidents Training, Modules 6-10

1 At your location

RightNow Analytics Training .25 At your location Listen360 Webinar 1 At your location Merry Maids Pricing App .5 At your location Totals – Pre-Operations Training 6.25 Operations Training Memphis, TN Introduction to Franchise Intranet 1.0 Home Office, Memphis, TN OSHA and Safety 2.5 Home Office, Memphis, TN Cleaning 101 3.0 3.0 Home Office and Residence,

Memphis, TN Customer Service 2.0 Home Office, Memphis, TN Office Administration 0.75 Home Office, Memphis, TN Service Scorecard 1.25 Home Office, Memphis, TN Vacuum Maintenance 0.75 Resource Center, Memphis, TN Proportioner Set-up 0.75 Resource Center, Memphis, TN Employee Selection 1.0 Home Office, Memphis, TN Interview/Hire Process 3.0 Home Office, Memphis, TN Employee Handbook 1.5 Home Office, Memphis, TN Employee Coach/Discipline 1.0 Home Office, Memphis, TN Employee Ride-Alongs 1.0 Home Office, Memphis, TN Professional Telephone Skills 0.75 Home Office, Memphis, TN Marketing 3.0 Home Office, Memphis, TN Net Promoter Score/Listen360 1.0 Home Office, Memphis, TN Customer Information System 2.0 Home Office, Memphis, TN mmLink and mmConnect 3.0 Home Office, Memphis, TN Payroll 1.5 Home Office, Memphis, TN Quick Books 1.5 Home Office, Memphis, TN Taxes 1.25 Home Office, Memphis, TN Insurance 1.25 Home Office, Memphis, TN Sales/Merry Maids Advantage 12.0 Home Office, Memphis, TN In-Home Pricing2 3.0 Residence, Memphis, TN Right Now 1.5 Home Office, Memphis, TN Goal Setting 1.0 Home Office, Memphis, TN Total – Operations Training 49.25 6.0 TOTALS 55.5 6.0

MM FDD 4-1-2012, Amended 9-10-2012

32

Notes to Training Program: 1Before attending Operations Training in Memphis, you are required to successfully complete Pre-

Operations Training from your location. These self-study, on-line courses are available through ServiceMaster University and mmConnect. Depending on your own self-study skills, successful completion times may vary.

2For pricing, you must bring a wireless mobile device that is compatible with the Merry Maids pricing software. An iPad is recommended. More information about such a device is discussed below in “Computer System Requirements.”

The Training Program table above outlines the subjects, class hours, on-the-job training, and location for our initial Operations Training and Pre-Operations Training. Our Operations Training is held approximately four (4) times a year in Memphis, Tennessee, at our Home Office and Resource Center and led by our Training Manager, Debra Johnson, who has over 14 years experience with Merry Maids—five years working in a branch and over three years as branch manager. She is assisted by our Home Office Staff throughout the program, namely: Jeff Fendley, Director of Training, who has worked for Merry Maids for 17 years and before that worked in public education; Mark Marcuzzo, Regional Support Director, a member of Home Office Staff for over 21 years with eight years as Training Manager, and prior to that a manager of a Merry Maids franchise business; Micah Newhouse, Vice President of Operations, who has worked for Merry Maids over 14 years; and other Home Office staff who are viewed as subject-matter experts. We usually hold an annual three-day National Seminar at a hotel/convention center near our headquarters or at another designated location. The Seminar program includes at least 15 hours of training sessions for franchise owners and managers. You must attend, at your own expense, the first national seminar scheduled after you have signed the Franchise Agreement at which time the $1,000 Seminar Attendance Fee will be refunded to you. (Franchise Agreement - Section 2.B.) If you fail to attend this national seminar, you will forfeit this attendance fee deposit. We also hold Regional Meetings one or more times per year, at hotels in various cities. These meetings include at least ten (10) hours of training for franchise owners and managers. Either a member of our staff or one of our Regional Coordinators will conduct the Regional Meetings. You or a designated officer or manager of the franchisee must attend at least two (2) of the meetings offered each year, which includes the National Seminar and Regional Meetings. (Franchise Agreement -Section 5.B.) Additional training through podcasts and webinars are available throughout the year on topics which we believe will be of interest to franchise businesses. During your first twelve (12) weeks of business operations, we will provide business coaching consisting of weekly telephone calls. Site Selection and Business Opening You will select your own business site within your Market. We do not generally participate in site selection, but may, if asked, provide input regarding possible sites. (Franchise Agreement - Section N/A) Merry Maids franchises typically open for business within 30 to 90 days after execution of the Franchise Agreement. Factors that affect this time usually include obtaining a satisfactory office location, financing arrangements, successful completion of the Initial Training Program, and hiring and training employees. (Franchise Agreement - Section 2.D) Advertising and Promotion You must pay into a National Ad Fund (Fund) on a weekly basis. The contribution is 1.3% of weekly gross sales. Currently, each company-owned branch of Merry Maids contributes to the Fund on the same basis as franchisees; however, this may change at our sole discretion. The Fund will be maintained and administered by a Committee nominated and elected by the Franchise Regional Coordinators and made up exclusively of

MM FDD 4-1-2012, Amended 9-10-2012

33

franchisees who are in compliance with the Franchise Agreement. Merry Maids retains the right to approve or disapprove the decisions of the Committee. A financial review of the operation of the Fund will be performed annually by an independent certified public accountant selected by the Committee and this financial report will be made available to you upon request. The Fund will be used for media placement, co-operative advertising, targeted marketing, fees and administration and such other costs and expenses as the Committee reasonably deems appropriate and in the best interest of all or any franchisees. In 2011 the Fund was spent on broadcast (44%), public relations (9%), strategic alliances (1%), online search and advertising (40%), and call center (6%). All sums paid by franchisees to the Fund shall be maintained in a separate account from our other funds and will not be used to defray any of our general operating expenses unless approved by the Committee. Franchisee is required to spend at least 0.7% of weekly gross sales on local digital marketing, or, with the approval of the Franchisor, other local marketing/advertising. Franchisee must use Franchisor-approved vendors to place the local digital marketing or other local marketing/advertising. A list of Franchisor-approved vendors is contained in the Operations Manual. Franchisor may request Franchisee to submit an accurate accounting of local marketing expenditures. Should Franchisee spend more than the required amount, Franchisee may not use any spend in excess of the required 0.7% on this type of marketing as an offset against required contributions to the Ad Fund or any future digital marketing required spend. We have no obligation to spend any amount on advertising in your market. (Franchise Agreement - Section 6) For more details on the terms of your obligations, see Item 6 and Item 9.

We participate in national strategic alliances to enhance recognition of the Merry Maids name and services our businesses offer.

Merry Maids has no obligation to provide advertising materials and/or services to you. Merry Maids in-house marketing department produces advertising and communication materials which you may use in your marketing program. A proprietary web site containing approved Merry Maids artwork and logos is available to you. This site is updated regularly. We will provide to you, marketing materials suggestions for advertising and promoting Merry Maids maid cleaning services in our Operations Manual or on-line. Certain marketing materials such as door hangers and sales brochures are available for purchase from proprietary websites or the Merry Maids Resource Center. If you develop your own materials, you must submit samples of your advertising to us in advance for our approval. Merry Maids occasionally will employ an outside public relations agency to develop periodic press releases for distribution to newspapers in your Market on your behalf. In addition, a division of our affiliate SBM, known as YPMG, is responsible for producing our Yellow Page ads. You must have a listing continually in the printed Yellow Pages directory of the main provider which encompasses your territory and any other directory published by that provider covering your territory, as determined by Merry Maids. If distribution of the Yellow Pages publication in which you plan to list or advertise covers more than one of our Markets, you must consolidate your listing or advertisement with the other businesses in that area to create one Merry Maids advertisement displaying the telephone number of all Merry Maids offices serving that area. The resolution of any disputes between businesses regarding directory selection coverage, or payments of advertising will be determined by Merry Maids (Franchise Agreement - Section 6.B.) Other than this situation, we do not require cooperatives to be formed, changed, dissolved or merged by franchisees. Computer System Requirements A laptop computer with software is included in the initial franchise fee. Should you need an additional computer in your business, you must purchase and install computer equipment to run our proprietary Merry

MM FDD 4-1-2012, Amended 9-10-2012

34

Maids software and other required software programs. A computer with the required software would cost approximately $3,000 to purchase and approximately $250 per month to lease. Computer hardware and software recommended minimum requirements are as follows:

1. Single core with 1.5GHZ processor 2. 1 GB of RAM (4 GB recommended) 3. 10 GB of available hard drive space and a 5400 RPM Drive 4. SVGA color monitor set to 1024 x 768 or higher 5. DVD Drive 6. Eight-page per minute or faster black and white Laser printer. 7. Windows XP (Service Pack 3) or Windows Vista 32 or 64 or Windows 7 32 or 64

8. Microsoft Office 2010 Standard version 9. Norton Antivirus 2012 10. Quick Books Premier 2012 11. High speed Internet Service Provider, dsl or cable 12. Internet Explorer 7 or 8, Firefox, or Google Chrome (for use with software replacing CIS) 13. Remote data back-up (See Item 7) 14. Right Now Technology, Full Application (includes both Customer Relationship

Management and Customer Satisfaction Measurement software) See also Item 7. 15. Wireless mobile device that is compatible with the Merry Maids pricing software 16. Quick Books Accounting and Payroll, or comparable payroll provider (for use with software

replacing CIS) We provide an application to price homes while in the field which requires a wireless mobile device. We recommend using an iPad. You are required to purchase such a wireless mobile device and bring it to the New Owner Training Program and Sales Training. This pricing application may be migrated to additional or different devices in the future. (See Item 7.) The proprietary software program, Merry Maids Customer Information System (CIS), is a fully integrated computer program for scheduling, and for customer and associate information. Cumulative business reports and goal setting capacities are other features of this system. We continually evaluate for possible upgrades and/or replacement to meet the changing needs of the Merry Maids business. The software updates will be provided at no additional cost to you, and we may substitute some software at our discretion, which may have additional costs. The software replacing CIS is a web-based system, and you must use it after it is rolled out. The transition to the replacement for CIS and Right Now, the Merry Maids Operating System, is expected to begin during the third quarter 2012. This system is a licensed-based application. The cost of the standard license is approximately $30 per seat per month and approximately $12 per seat per month for the Mobile license. License seats are role based specific and not generic; therefore, licenses must not be shared. Quick Books payroll package, or a comparable payroll provider, and Quick Books Accounting package must be used with this replacement software. If you are not already using Basic Quick Books Payroll software, the cost of the software is approximately $300 for a single user copy. (See Item 6.) Any future enhancements such as Microsoft Windows, Microsoft Office, or Quick Books Accounting, or Quick Books Payroll must be purchased and setup by you. The software systems run on the recommended hardware listed above. We have no obligation to upgrade your hardware. You have no contractual obligation to upgrade hardware components, but you should upgrade your individual systems if you wish to take full advantage of the speed and improvements of the software package. We have no obligation to provide or to assist you in obtaining the hardware or any software other than the software included in the Merry Maids Software Lease. See Item 6 for a description of the Software Lease terms. (Franchise Agreement - Section 9.E.) We independently have access to the information and data generated by our proprietary software described above. We have the right to access the

MM FDD 4-1-2012, Amended 9-10-2012

35

information and data and will do so from time to time. We may provide you with an internet electronic mail (e-mail) address and internet website and website address (URL/domain name) for use in operating the Franchised Business. This e-mail address and website and website address will be the only e-mail address, website and website address used by you in operating the Franchised Business. At our request, you will enter into one or more license agreements in the form we require under which you will receive a license to use the designated e-mail address, website and website address. (Franchise Agreement – Section 4.G)

Item 12: Territory

You will receive a territory (Market) with a minimum of 15,000 to 35,000 Qualified Households for a Full-Sized Market, a minimum of 8,000 to 15,000 Qualified Households for a Mid-Sized Market, and up to 8,000 Qualified Households for a Small-Sized Market. A Qualified Household is a household with an average annual income of $75,000 or higher. In addition to Qualified Households, we also consider total population and relative affluence in designating each Market, utilizing census data from SRC, LLC located in Orange, California. We will describe your Market in writing in Exhibit A of the Franchise Agreement and also, when available, depict the Market by a map. The map and the written description are of equal force; neither prevails over the other in the event of a controversy regarding boundaries of the Market. While your Franchise Agreement is in effect, we will not establish or license another to establish any other Merry Maids franchise within your Market. Except when advertising cooperatively with appropriate franchisees (See Item 11), you cannot advertise or solicit sales or accept orders outside your Market. You do not receive a right of first refusal to acquire additional franchises within your Market or contiguous territories; however, additional territories may be purchased with the approval of us. You will operate from one office location within the Market and must notify us before relocating. You may face competition from other franchisees, from company-owned businesses, or from other channels of distribution or competitive brands that we control. For example, our affiliate, ServiceMaster Clean, targets a different segment of the market, it does provide upholstery, carpet and other cleaning services in the home through franchises operating under the ServiceMaster trade name and ServiceMaster Clean trademark and may compete with your Merry Maids franchise to some degree. ServiceMaster Clean franchisees may operate their franchises within your Market and vice versa, and they may accept and/or solicit customer orders within your Market. We cannot restrict ServiceMaster Clean’s ability to establish other franchises, company-owned outlets or other channels of distribution selling or leasing similar products or services. Merry Maids Home Office is in the same building as ServiceMaster Clean in Memphis, Tennessee. While Merry Maids is not able to require ServiceMaster Clean or its franchisees to stay out of your Market, we encourage you to contact us about any marketing practices of ServiceMaster Clean franchisees that you believe are unfair. We will communicate with you and ServiceMaster Clean to attempt to resolve any disputes which may arise, although we cannot promise you that we will be able to resolve any complaints you may have about ServiceMaster Clean or its franchisees to your satisfaction. The continuation of your exclusivity from other Merry Maids businesses in your Market is contingent upon your maintaining the minimum weekly gross sales levels set forth below, beginning with the month of commencement of your business.

MM FDD 4-1-2012, Amended 9-10-2012

36

For Full-Sized Markets:

Period from Commencement Minimum Weekly of Franchised Business Gross Sales Months 1 - 12 No Minimum Months 13 - 24 $2,000 Months 25 - 47 $3,000 Months 48 - 59 $4,500 Month 60 and thereafter $6,000*

For Mid-Sized Markets:

Period from Commencement Minimum Weekly of Franchised Business Gross Sales

Months 1 - 12 No Minimum Months 13 - 24 $2,000 Months 25 - 47 $3,500 Months 48 - Thereafter $5,000*

For Small-Sized Markets:

Period from Commencement Minimum Weekly of Franchised Business Gross Sales

Months 1 - 12 No Minimum Months 13 - 24 $1,500 Months 25 - 47 $2,250 Months 48 - Thereafter $3,000*

* Beginning with the sixtieth (60th) month of operation of the Franchised Business, you must maintain the Minimum Weekly Gross Sales requirement listed above during the term of this Agreement and all subsequent renewal agreements or extensions of your Franchise Agreement. In addition, you must achieve a sales growth CAGR (compounded annual growth rate) of at least two percent (2%) over the term of the Franchise Agreement, any renewal agreement or any extension. This CAGR is measured on a calendar basis beginning in the year your renewal agreement is signed. Merry Maids may reduce the size of your Market or terminate your Franchise Agreement if you fail to maintain the foregoing sales level requirements, except in the event that local economic conditions and/or extenuating circumstances materially affect growth potential which, in our sole discretion, affects your ability to meet such sales growth levels, or if you fail to service all of the customers throughout the entire Market in a fair and equitable manner. (Franchise Agreement – Sections 1.E and 14.F) The amount of weekly gross sales requirement shall not be construed or otherwise interpreted to be an earnings claim or a statement or projection of the gross revenues for any Merry Maids franchised business.

Item 13: Trademarks

Merry Maids grants you the right to operate a franchise under the name MERRY MAIDS. You may also use such other current or future trademarks as we may designate to identify Merry Maids business. By trademark, Merry Maids means trade names, trademarks, service marks and logos used to identify your business. Merry Maids, or our parent, ServiceMaster, or a subsidiary company has registered the trademarks

MM FDD 4-1-2012, Amended 9-10-2012

37

listed in Exhibit H to this disclosure document on the Principal Register of the United States Patent and Trademark Office (PTO) and filed all necessary affidavits and renewals.

Mark Registration No. Date of Registration MERRY MAIDS (word mark) 1,343,329 June 18, 1985 MERRY MAIDS (design mark) 1,343,330 June 18, 1985 ONE LESS THING TO WORRY ABOUT (word mark) 2,222,834 February 9, 1999 RELAX. IT’S DONE. (word mark) 3,091,639 May 9, 2006 MERRY MAIDS RELAX. IT’S DONE. (word mark) 3,091,640 May 9, 2006 MERRY MAIDS FOR SMALL SPACES (word mark) 3,721,719 December 8, 2009

Mark Serial No. Application DateMERRY MAIDS ADVANTAGE (word mark) 85/464,385 November 4, 2011 There are no effective determinations of the PTO, the Trademark Trial and Appeals Board, the trademark administrator of this state, or any court involving our principal trademarks. There are no pending interference, opposition or cancellation proceedings and no pending material litigation involving the principal trademarks. You must follow our rules when you use these marks. You cannot use any name or mark as part of a corporate name or with any prefix, suffix, or other modifying words, terms, symbols or designs except for those which Merry Maids licenses to you. You may not use the Merry Maids registered name in connection with the sale of an unauthorized product or service or in a manner not authorized in writing by Merry Maids. There are no agreements currently in effect which significantly limit the right of Merry Maids to use or license franchises to use the trademarks listed in Exhibit H. You must not directly or indirectly contest our right to our trademarks, trade secrets or business techniques that are part of our business. You must notify Merry Maids immediately if you learn about an infringement of, challenge to, or unfair competition by others involving our trademarks. Merry Maids will take whatever action, if any, we deem appropriate. Merry Maids has no contractual obligation to defend you or to prosecute any legal action against others with respect to any infringement, unfair competition or other claim in any way related to our trade name or trademark. There are no infringing uses actually known to Merry Maids which could materially affect your use of our principal trademarks in this state or any other state in which your franchised business may be located. If Merry Maids requires you to modify or discontinue use of a trademark as a result of a proceeding or settlement, Merry Maids will reimburse you for your tangible costs of compliance (i.e., changing signs).

Item 14: Patents, Copyrights and Proprietary Information

There are no patents material to the purchase of a franchise, and we do not have any pending patent applications material to the franchise. We do claim copyright protection of our Merry Maids CIS software and of our manuals, advertising and promotional materials, forms and related materials that we produce, although these materials may not have been registered with the Copyright Office of the Library of Congress. The materials are proprietary and confidential and are considered our property. You may use them only as long as you are a franchisee, and only as provided in the franchise agreement.

MM FDD 4-1-2012, Amended 9-10-2012

38

ServiceMaster has registered copyrights with the U. S. Copyright Office of the Library of Congress that you may use as long as you are a franchisee, namely:

Registration No. Copyright Registration Date ExpiresTX0001019971 The Objectives of

ServiceMaster November 30, 1982 January 16, 2069

TX0006993613 ServiceMaster Corporate Objectives

April 7, 2009 April 7, 2103

TX0007275326 Merry Maids Cleaning Tips July 1, 2010 November 29, 2100

TX0007385324 The ServiceMaster Commitment and Core Objectives

April 5, 2011 March 15, 2105

There are currently no effective determinations of the Copyright Office of the Library of Congress or any court regarding any of our copyrighted materials. There are no agreements in effect that significantly limit our right to use or license the copyrighted materials. We are not aware of any infringing uses of these materials that could materially affect your use of these materials. We are not required by any agreement to protect or defend our copyrights.

We will be disclosing to you certain information we believe to be confidential or proprietary information and trade secrets. This will include information contained in our manuals, and in materials separately provided to you. You may use these materials, in the manner we approve, in the operation of your business during the term of the Franchise Agreement. However, you may not use these materials in any other way for your own benefit, or communicate or disclose them to, or use them for the benefit of any other person or entity. These materials include any trade secrets, knowledge or know-how, confidential information, advertising, marketing, designs, plans, or methods of operation. This includes information about our sources of supply, and our recommendations on pricing. You may disclose this information to your employees, but only to the extent necessary to operate your business, and then only while the Franchise Agreement is in effect.

Item 15: Obligation To Participate in the Actual Operation of the Franchise Business

Merry Maids recommends, but does not require, that you personally supervise the franchised business. If you do not personally supervise the business, or if you are a corporation, partnership, or limited liability company, you must employ a manager who will be responsible for direct, on-premises supervision of the business. The manager must have successfully completed the Merry Maids training program, but need not have an ownership interest if you are a corporation, partnership, or limited liability company. The manager must sign a written agreement to maintain confidentiality of the proprietary information described in Item 14 and to comply with a covenant not to compete, similar to that described in Item 17. If you are a corporation, partnership, or limited liability company, we will require all officers, shareholders, partners, or members, and their spouses, to sign the Guaranty of Franchisee’s Obligations attached to the Franchise Agreement. In addition to providing a personal guarantee, each officer, shareholder, partner, or member, and their spouses, will be required to sign the Item 23 Receipt of the disclosure document prior to executing the Franchise Agreement.

MM FDD 4-1-2012, Amended 9-10-2012

39

Item 16: Restrictions on What the Franchisee May Sell

You must offer and provide all the services we require. We have the right to change the authorized services without limitation. You must not actively solicit sales or accept orders from customers outside of your defined Market; see Item 12 for further details. Merry Maids restricts the type of goods or services that you may offer. See Item 8 and Item 9 for further details. You are prohibited from providing services not described in the Franchise Agreement.

Item 17: Renewal, Termination, Transfer, and Dispute Resolution

THE FRANCHISE RELATIONSHIP This table lists certain important provisions of the franchise and related agreements. You should read these provisions in the agreements attached to this disclosure document.

Provision

Section in franchise or

other agreement

Summary

a. Length of the franchise

term

Franchise Agreement: Section 3A

5 years

b. Renewal or extension of the term

Franchise Agreement: Section 3B

If you have complied with the Franchise Agreement and maintain the business in accordance with the Operations Manual, you will have the option of renewing the Franchise for additional periods of 5 years each.

c. Requirements for

franchisee to renew or extend

Franchise Agreement: Section 3B

You must notify us of your intent to renew 90 days before expiration and you must be meeting or exceeding all requirements of your Franchise Agreement. At the time of renewal, you must sign our then-current form of Franchise Agreement.

d. Termination by franchisee

Franchise Agreement: Section 14D

You may terminate without cause on 120 days written notice if you pay all outstanding amounts due to us and sign a release.

e. Termination by franchisor without cause

None

N/A

f. Termination by franchisor with cause

Franchise Agreement: Section 14E

Merry Maids can terminate you only if you are in default.

g. "Cause" defined - curable defaults


Unless prohibited by applicable law (see * note below), Franchisor may terminate Agreement if Franchisee:

1) Assigns agreement for benefit of creditors or an

MM FDD 4-1-2012, Amended 9-10-2012

40


Provision


other agreement

Summary

and 14F SMAC Business Notes: Section 9.0 SMAC Security Agreement: Section 3.0

admission of inability to pay franchise obligations when they are due; or

2) Fails to pay amounts owed to Franchisor, including service fees; or

3) Fails to submit reports or financial data as required; or

4) Files voluntary bankruptcy or a judge or court decides you are bankrupt or insolvent (see ** note below); or

5) Willfully violates any regulation, ordinance, statute or administrative ruling related to the franchise business; or

6) Makes an unauthorized assignment or transfer of or encumbers this Agreement; or

7) Willfully violates any provision of Agreement or any other agreement with Franchisor; or

8) Is convicted of a felony or is declared insane; or 9) Has misrepresented gross sales receipts as

required to make to Franchisor; or 10) Failed to meet the minimum gross sales levels as

specified in Agreement; or 11) Failed to adhere to any material specification,

standard or operations procedure prescribed by Franchisor; or

12) Is involved in any act or conduct or uses the Proprietary Marks in any way which materially impairs the goodwill associated with the Marks or Franchisor’s business operations.

In addition, after commencement of business, if Franchisee fails to operate the franchise business for more than 14 consecutive calendar days, Franchisor may terminate Agreement. SMAC agreements defaults include failure to maintain a current basis on any account with any ServiceMaster affiliated company and default for failure to cure within applicable grade periods any breach in the Franchise Agreement.

h. "Cause" defined - non-curable defaults

Franchise Agreement:

The defaults in the Franchise Agreement include an assignment by you for your creditors' benefit, your failure to pay us any amount, your failure to submit reports to us,

MM FDD 4-1-2012, Amended 9-10-2012

41


Provision


other agreement

Summary

Section 14E your bankruptcy (see **note below), your willful violation of any laws applicable to your business, an unauthorized assignment of your Franchise Agreement, your willful violation of the Franchise Agreement, your conviction for a felony or a determination judicially that you are insane, a financial misrepresentation by you to us, your failure to achieve your minimum gross sales, or your failure to adhere to our material procedures, standards or specifications.

I. Franchisee’s obligations on termination /non-renewal

Franchise Agreement: Section 14G

Obligations include complete de-identification and payment of amounts due (also, see r. below).

j. Assignment of contract by franchisor

Franchise Agreement: Section 14J

Merry Maids has the right to sell or assign the Franchise Agreement in whole or in part.

k. "Transfer" by franchisee – defined

Franchise Agreement: Section 14I

Includes transfer of Franchise Agreement, the Franchise, or any part of the ownership interest of the franchisee. Ownership interest means voting stock, securities, proprietorship and general partnership interests

l. Franchisor approval of transfer by franchisee


Merry Maids has the right to approve all transfers, but will not unreasonably withhold approval, if conditions are satisfied (see m. below).

m. Conditions for franchisor approval of transfer


Prior to purchase, prospective franchisee must visit the Merry Maids home office, complete a written character and personality assessment, submit to a criminal background check and be interviewed by officers and other employees of the company. New franchisee must qualify, pay current transfer fee and complete the required training . You must sign a release; and the then-current agreement must be signed by new franchisee (also, see r. below). If transferring to a corporation, franchisee or manager must be approved by Franchisor and must devote full, exclusive time to the day-to-day operation of the Merry Maids franchise; corporation is confined exclusively as a Franchisee under the Agreement; corporation signs

MM FDD 4-1-2012, Amended 9-10-2012

42


Provision


other agreement

Summary

document approved by Franchisor agreeing to become a party to and be bound by all the provision of the Agreement; Franchisee executes personal guarantee; and all stock certificates bear a legend that they are subject to the terms of the franchise agreement. If transferring less than one-half interest: the new owner(s) enter into a written agreement assuming and/or guaranteeing all of Franchisee’s obligations under the Agreement; any defaults on the part of the Franchisee have been remedied; any other reasonable conditions required by Franchisor have been satisfied; and new owner(s) meet Franchisor’s then-current standards for Merry Maids franchisees. If transferring one-half interest or more: all obligations of Franchisee have been assumed by new owner; all ascertained or liquidated debts of Franchisee in connection with Franchisor have been paid; Franchisee is not in default of Agreement; new owner has completed training; new owner has signed the then-current Agreement for a full term; Franchisee or new owner has paid the then-current transfer fee; Franchisee and all officers, directors and shareholders to which Agreement has been assigned sign a general release; and new owner meets Franchisor’s then-current standards for Merry Maids franchisees.

n. Franchisor‘s right of first refusal to acquire franchisee’s business


You may not sell, transfer, assign, lease or sublease any interest in your Franchised Business without first offering the same to Merry Maids, in writing, at a stated price and terms which Merry Maids may accept in writing at any time within 30 days of the receipt of your written offer.

o. Franchisor’s option to purchase franchisee's business

None

N/A

p. Death or disability of franchisee

Franchise Agreement: Section 14L

Your (or your shareholders') heirs or legacies must meet Merry Maids' approval, attend training, and personally manage the franchise.

q. Non-competition

Franchise

You and your spouse may have no involvement in

MM FDD 4-1-2012, Amended 9-10-2012

43


Provision


other agreement

Summary

covenants during the term of the franchise

Agreement: Section 15

competing business or engage in marketing or selling maid cleaning services or products.

r. Non-competition covenants after the franchise is terminated or expires

Franchise Agreement: Section 14G(5)

You and your spouse may have no involvement for one year in competing businesses or engage in marketing or selling cleaning services within 75 miles of the outermost boundary where you conducted business.

s. Modification of the agreement

Franchise Agreement: Section 3A

The Franchise Agreement may be amended by mutual written consent. We have the right to change the confidential Operations Manual.

t. Integration/merger clause

Franchise Agreement: Section 21

The Franchise Agreement, attached exhibits, and representations made in the Franchise Disclosure Document constitute the entire agreement between you and Merry Maids. Other promises may not be enforceable.

u. Dispute resolution by arbitration or mediation


All disputes, except those listed in the agreement, must be resolved by arbitration except where prohibited by your state’s law.*

v. Choice of forum

Franchise Agreement: Sections 24 and 25

Action must be brought in Tennessee Courts.*

w. Choice of law


Tennessee law applies.*

*Some states have statutes which address jurisdiction, venue and governing law and other areas which may supersede the Franchise Agreement. If applicable, additional disclosure will be furnished in the attached state addendum (See Exhibit F). **Termination upon the bankruptcy of your business may not be enforceable under federal bankruptcy law [11 U.S.C. Section 101 et seq.].

Item 18: Public Figures

Merry Maids does not use any public figure to promote its franchises.

MM FDD 4-1-2012, Amended 9-10-2012

44

Item 19: Financial Performance Representations

The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances. We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s management by contacting Sherry Campbell, Merry Maids, 901-597-8100, the Federal Trade Commission, and the appropriate state regulatory agencies.

Item 20: Outlets and Franchisee Information

Table No. 1 Systemwide Outlet Summary for years 2009-2011

Outlet Type Year Outlets at the Start of the Year

Outlets at the End of the Year

Net Change

Franchise 2009 721 711 -10

2010 711 686 -25

2011 686 725 39

Company-Owned

2009 229 242 13

2010 242 257 15

2011 257 219 -38

Total Outlets 2009 950 953 3

2010 953 943 -10

2011 943 944 1

MM FDD 4-1-2012, Amended 9-10-2012

45

Table No. 2

Transfers of Franchised Outlets for years 2009-2011

State Year Number of

Transfers

State Year Number of Transfers


AL 2009 2 KY 2009 0 ND 2009 0

2010 0 2010 0 2010 0

2011 0 2011 0 2011 0

AK 2009 0 LA 2009 0 OH 2009 0

2010 0 2010 0 2010 0

2011 0 2011 2 2011 0

AZ 2009 0 ME 2009 1 OK 2009 0

2010 0 2010 0 2010 0

2011 0 2011 0 2011 0

AR 2009 0 MD 2009 0 OR 2009 0

2010 0 2010 1 2010 0

2011 0 2011 0 2011 0

CA 2009 6 MA 2009 0 PA 2009 0

2010 5 2010 0 2010 0

2011 2 2011 0 2011 0

CO 2009 0 MI 2009 0 RI 2009 0

2010 1 2010 0 2010 0

2011 0 2011 0 2011 0

CT 2009 0 MN 2009 0 SC 2009 0

2010 0 2010 0 2010 0

2011 0 2011 1 2011 0

DE 2009 0 MS 2009 0 SD 2009 0

2010 0 2010 0 2010 0

2011 0 2011 0 2011 0

DC 2009 0 MO 2009 0 TN 2009 0

2010 0 2010 0 2010 0

2011 0 2011 0 2011 0

FL 2009 0 MT 2009 0 TX 2009 1

2010 5 2010 0 2010 1

2011 3 2011 1 2011 0

GA 2009 3 NE 2009 0 UT 2009 0

2010 0 2010 0 2010 0

2011 0 2011 0 2011 0

HI 2009 0 NV 2009 0 VT 2009 0

2010 0 2010 4 2010 0

2011 0 2011 0 2010 0

MM FDD 4-1-2012, Amended 9-10-2012

46

Table No. 2

Transfers of Franchised Outlets for years 2009-2011

State Year Number of

Transfers



ID 2009 2 NH 2009 0 VA 2009 0

2010 0 2010 0 2010 1

2011 0 2011 0 2011 0

IL 2009 0 NJ 2009 0 WA 2009 0

2010 2 2010 0 2010 0

2011 0 2011 0 2011 2

IN 2009 0 NM 2009 0 WV 2009 0

2010 0 2010 1 2010 0

2011 0 2011 1 2011 0

IA 2009 0 NY 2009 0 WI 2009 0

2010 0 2010 2 2010 0

2011 1 2011 0 2011 0

KS 2009 0 NC 2009 0 WY 2009 0

2010 0 2010 0 2010 0

2011 0 2011 0 2011 0

Totals 2009 15

2010 23

2011 13

Table No. 3

Status of Franchised Outlets for Years 2009-2011

State Year Outlets at Start of Year

Outlets Opened

Terminations Non-Renewals

Reacquired by

Franchisor

Ceased Operations-

Other Reasons

Outlets at End of Year

AL 2009 7 0 0 0 0 0 7

2010 7 0 0 0 0 0 7

2011 7 0 0 0 0 0 7

AK 2009 2 0 0 0 0 0 2

2010 2 0 0 0 0 0 2

2011 2 0 0 0 0 0 2

AZ 2009 27 0 0 0 0 0 27

MM FDD 4-1-2012, Amended 9-10-2012

47

Table No. 3



Outlets Opened


Reacquired by

Franchisor

Ceased Operations-

Other Reasons


2010 27 0 0 0 0 0 27

2011 27 0 0 0 0 0 27

AR 2009 1 0 0 0 0 0 1

2010 1 0 0 0 0 0 1

2011 1 0 0 0 0 0 1

CA 2009 132 0 0 0 1 0 131

2010 131 0 0 0 0 0 131

2011 131 0 0 0 0 0 131

CO 2009 18 0 0 0 0 0 18

2010 18 0 2 0 0 0 16

2011 16 0 0 0 0 0 16

CT 2009 13 0 0 0 0 0 13

2010 13 0 0 0 0 0 13

2011 13 0 0 0 0 0 13

DE 2009 4 0 0 0 0 0 4

2010 4 0 0 0 0 0 4

2011 4 0 0 0 0 0 4

DC 2009 1 0 0 0 0 0 1

2010 1 0 0 0 0 0 1

2011 1 0 0 0 0 0 1

FL 2009 40 0 0 0 2 0 38

2010 38 1 0 0 0 0 39

2011 39 10 2 0 0 0 47

GA 2009 10 0 0 0 0 0 10

2010 10 0 0 0 0 0 10

2011 10 2 0 0 0 0 12

HI 2009 1 0 0 0 0 0 1

2010 1 0 0 0 0 0 1

2011 1 0 0 0 0 0 1

ID 2009 4 0 0 0 0 0 4

2010 4 0 0 0 0 0 4

2011 4 1 0 0 0 0 5

MM FDD 4-1-2012, Amended 9-10-2012

48

Table No. 3



Outlets Opened


Reacquired by

Franchisor

Ceased Operations-

Other Reasons


IL 2009 34 1 0 0 0 0 35

2010 35 0 2 0 4 0 29

2011 29 0 1 0 0 0 28

IN 2009 18 0 0 0 0 0 18

2010 18 0 1 0 0 0 17

2011 17 1 0 0 0 0 18

IA 2009 7 0 0 0 0 0 7

2010 7 0 1 0 0 0 6

2011 6 0 0 0 0 0 6

KS 2009 5 0 0 0 0 0 5

2010 5 0 0 0 0 0 5

2011 5 0 0 0 0 0 5

KY 2009 2 0 0 0 0 0 2

2010 2 0 0 0 0 0 2

2011 2 0 0 0 0 0 2

LA 2009 10 0 0 0 0 0 10

2010 10 0 1 0 0 0 9

2011 9 0 0 0 0 0 9

ME 2009 1 0 0 0 0 0 1

2010 1 0 0 0 0 0 1

2011 1 0 0 0 0 0 1

MD 2009 24 2 0 0 0 3 23

2010 23 0 0 0 0 0 23

2011 23 1 0 0 0 0 24

MA 2009 28 0 0 0 0 0 28

2010 28 0 0 0 3 0 25

2011 25 0 0 0 0 0 25

MI 2009 14 0 0 0 0 0 14

2010 14 0 0 0 0 0 14

2011 14 0 0 1 0 0 13

MN 2009 14 0 0 0 3 0 11

2010 11 0 0 0 0 0 11

MM FDD 4-1-2012, Amended 9-10-2012

49

Table No. 3



Outlets Opened


Reacquired by

Franchisor

Ceased Operations-

Other Reasons


2011 11 0 0 0 0 0 11

MS 2009 1 0 0 0 0 0 1

2010 1 0 0 0 0 0 1

2011 1 0 0 0 0 0 1

MO 2009 14 0 0 0 2 0 12

2010 12 0 1 0 0 0 11

2011 11 1 0 0 0 0 12

MT 2009 3 0 0 0 0 0 3

2010 3 0 0 0 0 0 3

2011 3 1 0 0 0 0 4

NE 2009 3 0 0 0 1 0 2

2010 2 0 0 0 0 0 2

2011 2 1 0 0 0 0 3

NV 2009 8 0 0 0 0 0 8

2010 8 0 0 0 0 0 8

2011 8 0 0 0 0 0 8

NH 2009 2 0 0 0 0 0 2

2010 2 0 0 0 0 0 2

2011 2 0 0 0 0 0 2

NJ 2009 19 0 0 0 0 0 19

2010 19 0 0 0 0 0 19

2011 19 0 0 0 0 0 19

NM 2009 6 0 0 0 0 0 6

2010 6 0 0 0 0 0 6

2011 5 0 0 0 0 0 5

NY 2009 21 0 0 0 0 0 21

2010 21 0 0 0 1 0 20

2011 20 7 0 0 0 0 27

NC 2009 17 0 0 0 0 0 17

2010 17 0 0 0 0 0 17

2011 17 1 0 0 0 0 18

ND 2009 2 0 0 0 0 0 2

MM FDD 4-1-2012, Amended 9-10-2012

50

Table No. 3



Outlets Opened


Reacquired by

Franchisor

Ceased Operations-

Other Reasons


2010 2 0 0 0 0 0 2

2011 2 0 0 0 0 0 2

OH 2009 21 0 0 0 1 0 20

2010 20 0 0 0 2 0 18

2011 18 1 0 0 0 0 19

OK 2009 11 0 0 0 0 0 11

2010 11 0 0 0 0 0 11

2011 11 0 0 0 0 0 11

OR 2009 15 0 0 0 0 0 15

2010 15 0 0 0 0 0 15

2011 15 0 0 0 0 0 15

PA 2009 28 0 0 0 2 0 26

2010 26 0 0 0 1 0 25

2011 25 5 0 0 0 0 30

RI 2009 3 0 0 0 0 0 3

2010 3 0 0 0 0 0 3

2011 3 1 0 0 0 0 4

SC 2009 10 0 0 0 0 0 10

2010 10 0 0 0 0 0 10

2011 10 2 0 0 0 0 12

SD 2009 2 0 0 0 0 0 2

2010 2 0 0 0 0 0 2

2011 2 1 0 0 0 0 3

TN 2009 6 0 0 0 0 0 6

2010 6 1 0 0 0 0 7

2011 7 1 0 0 0 0 8

TX 2009 29 0 0 0 0 0 29

2010 29 1 2 0 0 0 28

2011 28 0 0 0 0 0 28

UT 2009 3 0 0 0 0 0 3

2010 3 0 1 0 0 0 2

2011 2 5 0 0 0 0 7

MM FDD 4-1-2012, Amended 9-10-2012

51

Table No. 3



Outlets Opened


Reacquired by

Franchisor

Ceased Operations-

Other Reasons


VT 2009 0 0 0 0 0 0 0

2010 0 0 0 0 0 0 0

2011 0 0 0 0 0 0 0

VA 2009 30 0 0 0 2 0 28

2010 28 0 0 0 0 0 28

2011 28 2 0 0 0 0 30

WA 2009 24 0 0 0 0 0 24

2010 24 0 0 0 0 0 24

2011 24 0 0 0 0 0 24

WV 2009 1 0 0 0 0 0 1

2010 1 0 0 0 0 0 1

2011 1 0 0 0 0 0 1

WI 2009 18 0 0 0 0 0 18

2010 18 0 0 0 0 0 18

2011 18 0 0 0 0 0 18

WY 2009 3 0 0 0 0 0 3

2010 3 0 1 0 0 0 2

2011 2 0 0 0 0 0 2

Totals 2009 721 3 0 0 13 0 711

2010 711 2 4 8 15 0 686

2011 686 43 3 1 0 0 725

Table No. 4

Status of Company-Owned for Years 2009-2011


Offices Opened

Outlets Reaquired

from Franchisee

Outlets Closed

Outlets sold to

Franchisee


AL 2009 8 0 0 0 0 8

2010 8 0 0 0 0 8

2011 8 0 0 5 0 3

MM FDD 4-1-2012, Amended 9-10-2012

52

Table No. 4



Offices Opened

Outlets Reaquired

from Franchisee

Outlets Closed

Outlets sold to

Franchisee


AK 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

AZ 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

AR 2009 4 1 0 0 0 5

2010 5 0 0 0 0 5

2011 5 0 0 0 0 5

CA 2009 11 0 0 0 0 11

2010 11 0 5 0 0 16

2011 16 0 0 1 0 15

CO 2009 5 0 0 0 0 5

2010 5 0 0 0 0 5

2011 5 0 0 0 0 5

CT 2009 3 1 0 0 0 4

2010 4 0 0 0 0 4

2011 4 0 0 0 0 4

DE 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

DC 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

FL 2009 7 0 2 0 0 9

2010 9 0 1 0 0 10

2011 10 0 0 0 6 4

GA 2009 11 0 0 0 0 11

2010 11 0 0 0 0 11

2011 11 0 0 0 0 11

HI 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

MM FDD 4-1-2012, Amended 9-10-2012

53

Table No. 4



Offices Opened

Outlets Reaquired

from Franchisee

Outlets Closed

Outlets sold to

Franchisee


2011 0 0 0 0 0 0

ID 2009 2 0 0 0 0 2

2010 2 0 0 0 0 2

2011 2 0 0 0 2 0

IL 2009 20 0 0 0 0 20

2010 20 0 2 0 0 22

2011 22 0 0 0 0 22

IN 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

IA 2009 5 0 0 0 0 5

2010 5 0 0 0 0 5

2011 5 0 0 0 0 5

KS 2009 6 2 0 0 0 8

2010 8 0 0 0 0 8

2011 8 0 0 0 0 8

KY 2009 9 0 0 0 0 9

2010 9 0 0 0 0 9

2011 9 0 0 0 0 9

LA 2009 7 0 0 0 0 7

2010 7 0 0 0 0 7

2011 7 0 0 5 0 2

ME 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

MD 2009 2 0 0 0 0 2

2010 2 0 0 0 0 2

2011 2 0 0 0 0 2

MA 2009 6 0 2 0 0 8

2010 8 0 3 0 0 11

2011 11 0 0 0 0 11

MI 2009 11 0 1 0 0 12

MM FDD 4-1-2012, Amended 9-10-2012

54

Table No. 4



Offices Opened

Outlets Reaquired

from Franchisee

Outlets Closed

Outlets sold to

Franchisee


2010 12 0 0 0 0 12

2011 12 0 0 0 0 12

MN 2009 4 0 3 0 0 7

2010 7 0 0 0 0 7

2011 7 0 0 0 0 7

MS 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

MO 2009 9 0 2 0 0 11

2010 11 0 0 0 0 11

2011 11 0 0 1 0 10

MT 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

NE 2009 5 0 1 0 0 6

2010 6 0 0 0 0 6

2011 6 0 0 0 2 4

NV 2009 2 0 0 0 0 2

2010 2 0 0 0 0 2

2011 2 0 0 0 0 2

NH 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

NJ 2009 12 0 0 0 0 12

2010 12 0 0 0 0 12

2011 12 0 0 3 0 9

NM 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

NY 2009 7 0 0 0 0 7

2010 7 0 1 0 0 8

2011 8 0 0 0 3 5

MM FDD 4-1-2012, Amended 9-10-2012

55

Table No. 4



Offices Opened

Outlets Reaquired

from Franchisee

Outlets Closed

Outlets sold to

Franchisee


NC 2009 5 0 0 0 0 5

2010 5 0 0 0 0 5

2011 5 0 0 0 0 5

ND 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

OH 2009 7 0 1 0 0 8

2010 8 0 2 0 0 10

2011 10 0 0 0 0 10

OK 2009 3 0 0 0 0 3

2010 3 0 0 0 0 3

2011 3 0 0 0 0 3

OR 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

PA 2009 5 0 2 0 0 7

2010 7 0 1 0 0 8

2011 8 0 0 0 3 5

RI 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

SC 2009 2 0 0 0 0 2

2010 2 0 0 0 0 2

2011 2 0 0 0 2 0

SD 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

TN 2009 11 0 1 0 0 12

2010 12 0 0 0 0 12

2011 12 0 0 0 0 12

TX 2009 26 0 3 0 0 29

2010 29 0 0 0 0 29

MM FDD 4-1-2012, Amended 9-10-2012

56

Table No. 4



Offices Opened

Outlets Reaquired

from Franchisee

Outlets Closed

Outlets sold to

Franchisee


2011 29 0 0 0 0 29

UT 2009 5 0 0 0 0 5

2010 5 0 0 0 0 5

2011 5 0 0 0 5 0

VT 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

VA 2009 0 0 2 0 0 2

2010 2 0 0 0 0 2

2011 2 0 0 0 0 2

WA 2009 2 0 0 0 0 2

2010 2 0 0 0 0 2

2011 2 0 0 0 0 2

WV 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

WI 2009 7 0 0 0 0 7

2010 7 0 0 0 0 7

2011 7 0 0 0 0 7

WY 2009 0 0 0 0 0 0

2010 0 0 0 0 0 0

2011 0 0 0 0 0 0

Totals 2009 229 0 13 0 0 242

2010 242 0 15 0 0 257

2011 257 0 0 15 23 219

MM FDD 4-1-2012, Amended 9-10-2012

57

Table No. 5 Projected Openings As of December 31, 2011

State Franchise Agreements Signed But

Outlet Not Open

Projected New Franchised

Outlet In The Next Fiscal Year

Projected Company-Owned Outlet in Next

Fiscal Year

Alabama 0 1 0

Arizona 0 0 0

Arkansas 0 0 0

California 0 3 0

Colorado 0 0 0

Connecticut 0 1 0

District of Columbia 0 0 0 Florida 0 1 0

Georgia 0 0 0

Hawaii 0 0 0

Illinois 0 1 0

Indiana 0 0 0

Kentucky 0 1 0

Louisiana 0 0 0

Massachusetts 0 1 0

Maine 0 1 0

Maryland 0 0 0

Michigan 0 0 0

Minnesota 0 0 0

Mississippi 0 0 0

Missouri 0 0 0

Montana 0 0 0

Nebraska 0 0 0

Nevada 0 0 0

New Jersey 0 2 0 New York 0 3 0 New Mexico 0 0 0

North Carolina 0 1 0

Ohio 0 1 0

Oklahoma 0 0 0

Oregon 0 0 0

Pennsylvania 0 0 0

South Carolina 0 1 0

Tennessee 0 1 0

MM FDD 4-1-2012, Amended 9-10-2012

58

Table No. 5 Projected Openings As of December 31, 2011

State Franchise Agreements Signed But

Outlet Not Open

Projected New Franchised

Outlet In The Next Fiscal Year

Projected Company-Owned Outlet in Next

Fiscal Year

Texas 0 1 0

Utah 0 0 0

Vermont 0 0 0

Virginia 0 1 0

Washington 0 0 0

West Virginia 0 0 0

Wisconsin 0 0 0

Wyoming 0 0 0

Totals 0 21 0

For the purposes of the tables in this Item 20, an outlet is defined as territories or markets as explained in Item 12 above. The name, business address, and business telephone number of each current franchisee as of March 5, 2012, is attached to this disclosure document as Exhibit D. The name, last known address, and telephone number of every franchisee who has had a franchise terminated, cancelled, not renewed, or otherwise voluntarily or involuntarily ceased to do business under the Franchise Agreement during the most recent fiscal year or has not communicated with us within ten (10) weeks of April 1, 2012, is attached as Exhibit E. Please note, if you buy this franchise, your contact information may be disclosed to other buyers when you leave the franchise system. We are not offering any existing franchised outlets to prospective franchisees, including those that either have been reacquired by us or are still being operated by current franchisees pending a transfer. In the event that we begin to offer any such outlet, specific information about the outlet will be provided to you in a separate Addendum to this disclosure document. In some instances, current and former franchisees sign provisions restricting their ability to speak openly about their experiences with Merry Maids. You may wish to speak with current and former franchisees, but be aware that not all such franchisees will be able to communicate with you. We have not created, sponsored or endorsed any trademark-specific franchisee organization associated with our franchise system. No independent franchise organization has requested to be included in our disclosure document.

Item 21: Financial Statements ServiceMaster has absolutely and unconditionally guaranteed to assume the duties and obligations of Merry Maids to you under the Franchise Agreement should Merry Maids become unable to perform its duties and obligations. The Guarantee of Performance is included in Exhibit B.

MM FDD 4-1-2012, Amended 9-10-2012

59

The following financial statements are attached as Exhibit B:

The ServiceMaster Company and subsidiaries audited consolidated financial statements for the years ended December 31, 2011, 2010, and 2009. The ServiceMaster Company and subsidiaries unaudited consolidated financial statements for the Second Quarter ended June 30, 2012.

Item 22: Contracts

A copy of the Merry Maids Franchise Agreement is attached as Exhibit A. Attached as Exhibit J are the financing documents required by SMAC if you choose to finance with SMAC. Amendments regarding Ad Fund and Local Digital Marketing are attached as Exhibit K.

Item 23: Receipts

Two copies of an acknowledgement of your receipt of this disclosure document are included at the end of this disclosure document (Exhibit L). You should keep one copy for your file and return the second copy to us.

EXHIBIT A

Merry Maids L.P. Franc Agmt 9-10-2012

1

MERRY MAIDS FRANCHISE AGREEMENT THIS MERRY MAIDS AGREEMENT (this “Agreement”) is signed this_______ day of _____________________, 20____, and effective this _______ day of ___________________, 20____, by and between

MERRY MAIDS LIMITED PARTNERSHIP

A Delaware limited partnership

by its general partner

MM Maids L.L.C. 3839 Forest Hill-Irene Road Memphis, Tennessee 38125

(“Merry Maids” or “Franchisor”)

and

____________________

______________________

___________________________

doing business as a _________________ under the name

Merry Maids No. ________

(“Franchisee”)

WITNESSETH

WHEREAS, Franchisor, as the result of significant time, skill, effort and money, has acquired and developed a unique management and business system for providing residential maid cleaning services performed under the name "Merry Maids" (hereinafter called "the System"). The System includes the trademark Merry Maids®, other trademarks, trade names, service marks, commercial announcements (slogans) and related insignia (logos) Franchisor owns (hereinafter called “the Marks”) for which Franchisor has the right to license in connection with the System. The Marks and the System together hereinafter are referred to as "the Franchise"; WHEREAS, Franchisor operates and franchises others to operate a Merry Maids maid cleaning service business using the System, including the Marks; WHEREAS, Franchisee desires to establish and operate a maid cleaning service business (hereinafter called the "Franchised Business") using the Franchise; and WHEREAS, Franchisee has completed the pre-purchase requirements of Franchisor, including the home office visit, written character and personality assessment, background check and credit evaluation testing and has been interviewed by the officers and directors of Franchisor; and WHEREAS, Franchisee understands and acknowledges the importance of Franchisor's high and uniform standards of quality and service and the necessity of operating the Franchised Business in conformity with Franchisor's standards and specifications; and

EXHIBIT A


2

WHEREAS, Franchisee hereby acknowledges having personally received and reviewed this Agreement and Franchisor's Franchise Disclosure Document (hereinafter “the FDD”) and has had enough time to consult with a lawyer, accountant, or other professional advisor of Franchisee’s choosing. Franchisee hereby attests to understanding and accepting the terms, conditions and covenants contained in this Agreement and the FDD as being reasonably necessary to maintain Franchisor's high standards of quality and service and the uniformity of those standards and thereby to protect and preserve the goodwill of the Marks. WHEREAS, Franchisee acknowledges no employee, agent, or representative of Merry Maids, or of any of our Affiliates, has made any oral, written or visual representation or projections of actual or potential sales, earnings, or net or gross profits. Franchisee also acknowledges no employee, agent, or representative of Merry Maids, or of any of our Affiliates, has made any statements that are contrary to, or different from, the information in the FDD, including but not limited to any statements about advertising, marketing, media support, media penetration, training, locations, support services and assistance, or the costs to establish or operate a Merry Maids Franchised Business, except for any statements written by Franchisee in Section 26.3. WHEREAS, Franchisee represents to understanding the risks of owning a business and specifically the risks of owning a Merry Maids® franchised business and warrants to being able to bear such risks. Franchisee acknowledges the success of the Franchised Business will depend primarily on Franchisee’s own efforts and abilities and those of its employees, and Franchisee will have to work hard and use best efforts to operate the Franchised Business. NOW THEREFORE, the parties hereto intending to be legally bound, in consideration of the mutual agreements, covenants and promises contained herein, do hereby agree as follows: 1. GRANT OF FRANCHISE A. Franchisor hereby grants to Franchisee a license to use the Franchise in the geographical area specified in Exhibit "A" attached hereto and made a part hereof (the "Market"). The maid cleaning services to be performed pursuant to the Franchise are generally cleaning and housekeeping services for homes, apartments and other residences, as more fully defined in the confidential Merry Maids Operations Manual (“Operations Manual”) as that term is defined in Section 7 herein. Franchisee acknowledges that the boundaries of the Market are delineated by a combination of boundary streets, highways, city limits, county lines, riverbanks and other prominent geographic features. Franchisee also acknowledges, if this is a first time purchase, that Franchisor selects Markets for franchises based upon population, household income and geographic size. Each Full-Sized Market consists of 15,000 to 35,000 Qualified Households. Each Mid-Sized Market consists of 8,000 to 15,000 Qualified Households. Each Small-Sized Market consists of up to 8,000 Qualified Households. "Qualified Households" are defined as the foregoing stated number of households with an average annual income of $75,000 or higher at the time of this Agreement. Each Market is further defined based upon population and relative affluence utilizing the then current census-based demographics data as provided by SRC, LLC, located in Orange, California. Franchisee acknowledges that this Market is a _____________ -Sized Market. B. Franchisor will not, so long as this Agreement is in full force and effect and Franchisee is not in default under any of the terms hereof, establish, or license another to perform, residential maid cleaning services utilizing the System or the Marks within Franchisee's designated area. C. Franchisee must operate the Franchised Business in a retail office, industrial park or other commercial location within the Market. Franchisee understands and agrees to abide by all of the local codes, laws, restrictions and statutes for the location of the Franchised Business. Franchisee is limited to providing maid cleaning services. D. The Franchised Business must at all times be under the direct, on-premises supervision of a manager (who may be Franchisee) who is known to Merry Maids, has completed the Initial Training Program as defined in Section 5 herein and who devotes full-time and attention during business hours to the management of the Franchised Business. Such manager may not have any interest as an owner, employee, director, officer, salesperson, representative, agent or in any other capacity in any business competitive with Merry Maids. E. Franchisee must be willing to service customers throughout the entire geographical area comprising the Market and must offer services to all customers within the Market at equitable prices.

EXHIBIT A


3

F. Franchisee expressly acknowledges and agrees that this license relates solely to the System and solely to the Territory specified in Exhibit A, and does not grant the Franchisee any rights under any other program of the Franchisor. Except as specifically described in this Agreement, all other programs performed under the Proprietary Marks by the Franchisor and the Franchisor’s affiliates, including but not limited to such other programs as may be developed or acquired by the Franchisor in the future are specifically excluded from this license and specifically reserved for use by the Franchisor. The Franchisee understands and agrees and understands that one or more of the other programs may utilize the confidential information from the System, and from the Operations Manual, and that other franchisees have been and will be licensed to operate businesses under the System that utilize the System and the Proprietary Marks within the Territory and elsewhere. 2. FRANCHISE FEE AND DEVELOPMENT SCHEDULE A. Franchise Fee. As consideration for the grant of the Franchise for the Market, Franchisee will initially pay to Franchisor a franchise fee of ________________, payable upon the execution of this Agreement. B. Seminar Attendance Fee. If this is the purchase of a new license, or transfer by an existing Merry Maids Franchisee to a new Franchisee, the new Franchisee shall pay to Franchisor, at the time of purchase, the Seminar Attendance Fee in the amount of One Thousand Dollars ($1,000) which shall be refunded in full if Franchisee attends the first National Seminar occurring after execution of the Franchise Agreement. C. Marketing Fund Fee. If this is the purchase of a new license, or transfer by an existing Merry Maids Franchisee to a new Franchisee, the new Franchisee shall pay Franchisor, at the time of purchase, the Marketing Fund Fee of Two Thousand Dollars ($2,000). Franchisor shall place this fee, along with One Thousand Dollars ($1,000) of Franchisee’s Initial Franchise Fee or Transfer Fee, into a Marketing Fund which shall be utilized during the first year of Franchisee’s operation of the Franchised Business to target households in the Market through on-line advertising or, with Franchisor’s prior approval by using the services of a third-party direct marketing vendor. Any portion not used in the first year of operation shall be forfeited and will become property of the Franchisor. The franchise fee and all other payments to Franchisor pursuant to this Agreement are non-refundable under any conditions except at the sole discretion of Franchisor. D. Development Schedule. Franchisee agrees to commence the operation of the Franchised Business within thirty (30) days after completion of the Initial Training Program as defined in Section 5 of this Agreement. 3. TERM AND RENEWAL A. The initial term of this Agreement is for five (5) years from the effective date. While this Agreement may be amended or modified by the mutual consent of Franchisor and Franchisee in writing, no other agreement shall affect the term hereof. B. Subject to the terms in Paragraph C, Section 14 of this Agreement, upon the expiration of the term of this Agreement, the parties shall have the option to renew this Agreement for additional periods of five (5) years by the execution of the then current Franchise Agreement, which Agreement may differ materially from those presently in use by Franchisor, provided: 1. Franchisee sends to Franchisor its written intent to renew and such renewal franchise agreement is executed at least ninety (90) days prior to the expiration of this Agreement; and 2. Franchisee is then meeting or exceeding the minimum weekly gross sales as set forth in Section 12 below. In the event such minimum weekly gross sales are not being met or exceeded by Franchisee, Franchisor may, in its sole discretion, renew Franchisee and it is understood and agreed that any renewal franchise agreement to be entered into between the parties may result in a reduction in the size of the Market. 3. Franchisee is not in default of any provision of this Agreement or any other agreement between Franchisee and Franchisor. C. In the event Franchisee fails to execute a renewal franchise agreement in strict accordance with Paragraph B of this Section 3, subject to the terms of Section 14 herein, this Agreement shall expire at the end of the term

EXHIBIT A


4

hereof without further notice by either party. In such event, Franchisee shall have all the rights and duties as set forth in Section 14 below. 4. PROPRIETARY MARKS A. It is understood and agreed that this Agreement permits the use of Franchisor's Marks only for the performance of maid cleaning services in connection with the operation of the Franchised Business in the Market and includes such Marks as are now or may hereafter be designated by Franchisor in writing for use by Franchisee, and does not include any other Marks of Franchisor now existing or yet to be developed or acquired by Franchisor or its affiliates. Franchisee agrees to operate and advertise the Franchised Business only under the Marks designated by Franchisor in the Identity Manual for that purpose. B. Franchisee acknowledges Franchisor's right, title and interest in and to the Marks, the identification schemes, standards, specifications, operating procedures and other concepts embodied by the Marks. Except as expressly provided by this Agreement, Franchisee acquires no right, title or interest in the Marks; any and all goodwill associated with the Franchise and the Marks shall inure exclusively to Franchisor's benefit; and upon the expiration or termination of this Agreement, no monetary amount shall be assigned as attributable to the goodwill associated with Franchisee's use of the Franchise or Marks. Franchisee accordingly agrees that any unauthorized use of the Marks is and shall be deemed an infringement of Franchisor's rights. C. Franchisee acknowledges that the use of the Marks outside the scope of this Agreement, without Franchisor's prior written consent, including the performance of services other than maid cleaning services as defined in Paragraph A of Section 1 above, is an infringement of Franchisor's exclusive right, title and interest in and to the Marks, and Franchisee expressly covenants that during the term of this Agreement, and after the expiration or termination hereof, Franchisee shall not, directly or indirectly, commit an act of infringement or contest or aid in contesting the validity or ownership of Franchisor's Marks, or take any other action in derogation thereof. D. Franchisee shall promptly notify Franchisor of any use by any person or legal entity, other than Franchisor or another of its franchises, of any Marks licensed hereunder, any colorable variation thereof, or any other mark in which Franchisor has or claims a proprietary interest. Franchisee further agrees to notify Franchisor promptly of any litigation instituted by any person or legal entity against Franchisor or Franchisee involving the Marks, in which event Franchisor may in its sole discretion take such action as it deems appropriate or no action. Franchisor is not required to defend or prosecute any legal action on behalf of Franchisee with respect to any infringement, unfair competition or other claim in any way related to Franchisee's use of any Marks or other name or mark. In the event Franchisor, in its sole discretion, undertakes the defense or prosecution of any litigation relating to the Marks, Franchisee agrees to execute and convey to Franchisor any and all documents, and to render such assistance as may, in the opinion of Franchisor's counsel, be reasonably necessary to carry out such defense or prosecution. Franchisor makes no warranty, express or implied, as to the use, validity or enforceability of the Marks. E. Franchisor hereby grants to Franchisee the right to use the words "Merry Maids" but only in conjunction with the Franchised Business. Franchisee may not use the words "Merry Maids", or the names and marks of any other ServiceMaster company, as its primary business or corporate name, but shall duly file a fictitious business name statement or similar document whereby Franchisee is indicated as doing business as: "Merry Maids No. _______". F. Franchisee shall not, without Franchisor's prior written consent, use the Marks, or the names and marks of any other ServiceMaster company, as part of Franchisee's corporate or other legal name, nor hold out or otherwise employ the Marks to perform any activity or to incur any obligation or indebtedness, in such a manner as could reasonably result in making Franchisor liable therefore. G. Franchisor may provide Franchisee with an internet electronic mail (e-mail) address, internet website and website address (URL/domain name) for use in operating the Franchised Business. This e-mail address and website and website address shall be the only e-mail address, website and website address used by Franchisee in operating the Franchised Business. Franchisee agrees to enter into one or more license agreements in the form Franchisor requires, under which Franchisee will receive a license to use the designated e-mail address, website and website address. Franchisee shall not establish an e-mail address or website on the internet using any domain name or address containing the Merry Maids registered trademarks, ServiceMaster trademarks or any variation thereof. Franchisor shall have the right to review the substance and content of Franchisee’s web page and Franchisee agrees to immediately delete any materials which improperly use Franchisor’s trademarks or logos, or contain, in Franchisor’s sole discretion, derogatory or

EXHIBIT A


5

inappropriate materials. Franchisor also retains the right to pre-approve Franchisee’s use of linking and framing between Franchisee’s web pages and all other websites. Franchisee shall, within five (5) days, dismantle any frames and links between Franchisee’s web pages and any other websites, if and as requested by Franchisor. Should Franchisee, in the sole discretion of Franchisor, be in compliance with the then current identity requirements for web pages, Franchisor will allow Franchisee to link to Franchisor’s website(s) and dealer locator-page. H. Franchisee and Franchisor expressly acknowledge and agree that the grant to use the Marks in this Agreement is exclusive, so that the parties also agree and acknowledge as follows: 1. Franchisor will not locate, establish or license another to establish any other Merry Maids franchise within Franchisee's Market. Franchisee is prohibited from soliciting sales or accepting orders outside of the designated Market. 2. Franchisor has not established and will not establish a Merry Maids outlet using the Marks in Franchisee's Market. 3. Under different trade name/trademarks ServiceMaster or ServiceMaster Clean, an affiliate company of Franchisor, ServiceMaster Residential/Commercial Services Limited Partnership, presently operates and franchises the operation of cleaning businesses specializing in: 1) janitorial services, both short and long term, for the cleaning of office buildings, schools, retail centers, or any other institutions that require cleaning on a daily, weekly, or monthly basis, which services include the cleaning and maintaining of general office areas, floors, walls, restrooms and public areas; and 2) the cleaning of carpeting, upholstery, floors, walls, and other heavy cleaning projects in homes and commercial buildings, including work with homeowners, building managers, contractors and insurance adjusters in the restoration of homes and buildings damaged by fire, smoke or water. The franchise businesses operating under the ServiceMaster or ServiceMaster Clean trade names/trademarks are not intended to be, but may be competitive with or similar to the Franchise described in this Agreement, and such ServiceMaster franchisees may be located and/or solicit sales and accept orders within the Market for any given Merry Maids franchise. Franchisee, its shareholders and officers are prohibited from providing the services described in this Section H (3). I. Franchisee understands and acknowledges that each and every detail of the Franchise is important to Franchisee and Franchisor in order to develop and maintain high and uniform standards of quality and service and hence to protect and enhance the reputation and goodwill of Franchisor. Franchisee accordingly agrees: 1. Except as provided under Paragraph E of this Section 4, to refrain from using any of the Marks in conjunction with any other word or symbol without Franchisor's prior written consent. 2. To adopt and use the Marks solely in the manner prescribed by Franchisor. 3. To observe all such requirements with respect to service mark, trademark and copyright notices, fictitious name registrations, and the display of the legal name or other identifications of Franchisee as Franchisor may direct in writing from time to time. All outside signage displayed on Franchisee’s office location must conform with the trademark identity requirements which have been established by Franchisor. If any service mark or trademark is displayed incorrectly, Franchisor may require Franchisee to correct such display. Franchisee will be responsible for the costs of any required corrections. 4. To execute and convey all documents required by Franchisor or its counsel that are necessary to obtain protection for the Marks or to maintain their continued validity or enforceability thereof. 5. To follow the operational and marketing programs outlined by Franchisor during training, in the confidential Operations Manual, as defined in Section 7 of this Agreement, and in any updates, revisions, or other communications from Franchisor, including participating, at Franchisee’s cost, in regularly recurring customer satisfaction measurement tools as may be reasonably required by Franchisor from time to time. 5. TRAINING AND ASSISTANCE

A. Prior to the commencement of the Franchised Business by Franchisee, Franchisor shall furnish a training program for Franchisee for one (1) person of up to eight days consisting of instruction in all areas of the Franchise including, but not limited to, office procedures; telephone usage; forms and functions; promotion and

EXHIBIT A


6

advertising; insurance and bonding; equipment and supplies; maintenance; employee hiring and management; employee training and conduct; cleaning procedures; the team concept; binding and sales; service problems and solutions; financial accounting and reporting; computer software systems; and field support (hereinafter called the “Initial Training Program”). Franchisee, or a manager approved by Franchisor, must attend training within six (6) months of execution of this Agreement. You cannot provide services until you have completed training. New franchise owners who have purchased an existing franchise, agree to pay the then current fee for the Initial Training Program and attend training within six (6) months of assuming ownership of the business. The Initial Training Program shall be held in Memphis, Tennessee, or at such other location as Franchisor may designate. Franchisee will be responsible for all travel and personal expenses in connection with the Initial Training Program. Franchisor will provide the initial lodging for one person during the Initial Training Program. Franchisee or Franchisee's manager is required to complete the Initial Training Program to the reasonable satisfaction of Franchisor. Upon successful completion by Franchisee or Franchisee's manager of the Initial Training Program, Franchisor will issue to Franchisee a certificate indicating the date of successful completion of the Initial Training Program. Franchisee shall commence operation of the Franchised Business within thirty (30) days after completion of the Initial Training Program. B. Franchisee, or if Franchisee is a corporation, one officer or manager of Franchisee, designated by Franchisee and approved by Franchisor, shall be required to attend the first Merry Maids National Seminar scheduled subsequent to the execution of this Agreement unless this is a renewal agreement. Furthermore, it is also required that Franchisee, or a designated officer or manager of Franchisee, shall attend two (2) of the Merry Maids meetings offered each year which shall include the Merry Maids National Seminar and Regional meetings. C. Upon the request of Franchisee, Franchisor will offer an emergency response service, at Franchisee's place of business and at Franchisee's expense, and will dispatch one of Franchisor's employees or a manager or technical aide to assist with the operation of the Franchised Business. Franchisee agrees to pay the then current rate per day, plus any expenses incurred. D. Franchisor shall provide advisory services as reasonably requested by Franchisee, which shall include, consultation on promotional, business and operational problems and an analysis of Franchisee's marketing and financial data. E. Franchisor shall, from time to time when available, send to Franchisee promotional materials, newsletters and/or bulletins describing new marketing developments, equipment, products and techniques, if any. F. Additional training shall be available at the request of Franchisee. Personnel of Franchisor, for the then current rate, plus expenses, including but not limited to travel, lodging and meals, will train at the sole discretion of Franchisor. 6. ADVERTISING AND MARKETING Recognizing that advertising is a necessary and integral part of the Franchised Business and recognizing the value of advertising and the importance of the standardization of advertising and promotion to the furtherance of the goodwill and public image of all Franchises, Franchisee agrees: A. To submit to Franchisor or its designated agency, for Franchisor's prior approval, all sales promotion materials and advertising to be used by Franchisee, including, but not limited to, fliers, direct mailings and newspaper, radio and television advertising and internet homepages and/or websites. In the event Franchisee does not receive written or oral disapproval of said advertising and/or promotional material from Franchisor or its designated agency within 15 days from the date such material is received by Franchisor, said materials shall be deemed approved. Franchisee's failure to conform to the provisions herein and a subsequent non-action by Franchisor with respect to any such non-conformity of Franchisee shall not be deemed as a waiver of any further or additional non-conformity. The submission of advertising to Franchisor for approval shall not alter Franchisee's right to determine the prices at which Franchisee sells its services. B. Franchisee shall maintain a full-time telephone with a 24-hour answering service or voice mail message system or such other system as Franchisor may require and shall continually have a listing in the printed Yellow Pages directory of the main service provider or any other appropriate directory in Franchisee’s Market, as determined by Franchisor, using a listing approved in advance by Franchisor. If distribution of the Yellow Pages publication in which

EXHIBIT A


7

Franchisee lists covers more than one Merry Maids Market, Franchisee shall consolidate their listing or advertisement with the other Merry Maids businesses licensed to service those areas to create one Merry Maids listing or advertisement displaying the telephone numbers of all Merry Maids’ offices serving that area. C. Franchisor is not obligated to furnish any advertising or signs for Franchisee. D. Franchisee shall not advertise or use the Marks in any advertisement or any other form of promotion without appropriate registration marks and in accordance with Identity Guidelines. E. Franchisor has established a National Advertising Fund (“Ad Fund”). Franchisee shall pay into the Ad Fund on a weekly basis. The contribution to the Ad Fund shall be an amount equal to 1.3% of the weekly Gross Sales of the Franchised Business.

The Ad Fund contribution shall be paid in the same manner as Service Fees as set forth in Section 12 of this Agreement. Failure to pay this contribution in a timely manner shall subject Franchisee to the interest provisions of Section 12 and the termination and nonrenewal provisions of Section 14.

Franchisor shall have the right, in its sole discretion, to discontinue the Ad Fund. The Ad Fund shall be

maintained and administered by a “Committee” elected by franchisees and made up exclusively of franchisees that are in compliance with their Franchise Agreement(s). 1. The Committee shall develop all advertising programs with primary discretion over the creative concepts, materials and media used in such advertising programs and the placement and allocation of advertising subject to the final approval of Franchisor. Franchisee agrees and acknowledges that the Ad Fund is intended to maximize general public recognition and acceptance of the Proprietary Marks for the benefit of the Franchise and that Franchisor and the Committee undertake no obligation in administering the Ad Fund to make expenditures for Franchisee which are equivalent or proportionate to its contributions, or to ensure that any particular franchise benefits directly or pro rata from the placement of advertising. 2. The Ad Fund may, upon approval by the Committee, be used to meet any and all costs of maintaining, administering and preparing advertising and promoting the franchise and the products and services offered by franchisees including, without limitation, the cost of preparing and conducting television, radio, magazine and newspaper advertising campaigns and other sales, marketing, promotional, public and other relations activities and materials; employing advertising agencies; the costs relating to toll free numbers maintained by Franchisor and used in advertising and marketing campaigns; and such other costs and expenses as Franchisor and the Committee reasonably deems appropriate and in the best interests of all or any franchisees. Any reasonable travel, meeting and other costs and expenses incurred by the Committee in connection with carrying out their duties related to the Ad Fund may also be reimbursed by the Ad Fund should the Committee deem them appropriate. All sums paid by franchisees to the Ad Fund shall be maintained in a separate account from the other funds of Franchisor and shall not be used to defray any of Franchisor’s general operating expenses, except for such reasonable administrative costs if any, as Franchisor may incur, with the express approval of the Committee, in activities reasonably related to the administration of the Ad Fund and advertising programs including, without limitation, collecting and accounting for assessments for the Ad Fund. 3. A financial review of the operation of the Ad Fund shall be prepared annually by an independent certified public accountant selected by the Committee and shall be made available to Franchisee upon request. The cost of the financial review shall be charged to the Ad Fund.

F. Local Digital Marketing Program. Franchisee agrees to spend at a minimum an amount equal to 0.7% of the weekly Gross Sales of the Franchised Business on local digital marketing or, with approval from Franchisor, on other local marketing or advertising (“Local Digital Marketing Program”). Franchisee is required to use Franchisor-approved vendors of local digital marketing. The approved vendors, contained in the Operations Manual, meet all of Franchisor’s specifications and standards. If Franchisee’s annual Local Digital Marketing spend exceeds the minimum required amount, Franchisee may not apply the excess spend as an offset against required contributions to the Ad Fund or future required amounts of the Local Digital Marketing Program.

Franchisor may request Franchisee to submit, in a specified format on a periodic basis, an accurate accounting of amounts spent as part of the Local Digital Marketing Program. If Franchisee fails to provide an accurate accounting or fails to spend the minimum amount on its Local Marketing Program in any calendar year, in addition to any

EXHIBIT A


8

other remedies available to Franchisor, Franchisee will be required to pay Franchisor the difference between the minimum amount on its Local Marketing Program and what was actually spent by Franchisee for approved digital marketing plus late fees and interest due. The payment of this difference will be added to the Ad Fund; Franchisor may, but has no obligation to, assign these funds for digital marketing in Franchisee’s market. Failure by Franchisee to meet this local digital marketing requirement will be considered a material breach of this Agreement, and Agreement may be terminated in accordance with Paragraph 14.D of this Agreement.

7. CONFIDENTIAL OPERATIONS MANUAL A. For purposes of this Agreement, the Operations Manual shall be all those manuals, documents, booklets, guides and related materials containing the specifications, standards, procedures and rules applicable to the Franchise prescribed from time to time by Franchisor. In order to protect the reputation and goodwill associated with the Marks and to maintain the uniform standards of operation thereunder, Franchisee shall conduct its Franchised Business in strict accordance with Franchisor’s Operations Manual. The Operations Manual shall include but not be limited to Franchisor's so-called Operations Manual, Marketing Manual, Customer Information Systems Manual, Identity Manual, software programs, and such other programs, materials and training aids designated as confidential and from time to time revised by Franchisor. B. Franchisee shall at all times treat as confidential, and require its employees and agents to treat as confidential and shall not at any time disclose, copy, duplicate, record or otherwise reproduce, in whole or in part, for whatever reason or otherwise make available to any unauthorized person or source, the contents of the Operations Manual. C. Franchisor shall have the right, but not the obligation, from time to time, to add to or modify the Operations Manual, and Franchisee agrees to be bound by and to conduct the Franchised Business in accordance with such revisions to the Operations Manual. 8. CONFIDENTIAL INFORMATION AND IMPROVEMENTS BY THE FRANCHISEE

A. Franchisee acknowledges that its entire knowledge of Merry Maids processes, services, all proprietary information and know-how and the operation of the Franchise is derived from information disclosed by Merry Maids pursuant to this Agreement and is proprietary, confidential and a trade secret of Merry Maids. Franchisee further agrees that during the term of this Agreement and at all times following the termination of this Agreement for any cause whatsoever, it will not directly or indirectly communicate or divulge to or for any person, firm, partnership, association or corporation any trade secrets, business methods or processes, prices or customer information, or requirements, confidential data or information or names or addresses of customers or suppliers of Franchisor, including but not limited to the contents of the Operations Manual described in Section 7 above. Franchisee further agrees that during the term of this Agreement and at all times thereafter, it will not directly or indirectly use in competition with Franchisor any trade secrets or confidential information which are the property of Franchisor. Franchisee shall divulge any such confidential information only to those employees that must have access to it in order to operate the Franchised Business. Any and all information, knowledge, and know-how, and other data, which Franchisor designates as confidential, shall be deemed confidential for purposes of this Agreement, except information which Franchisee can demonstrate came to its attention prior to disclosure thereof by Franchisor; or which, at the time of disclosure by Franchisor to Franchisee, had become a part of the public domain through publication or communication by others; or which, after disclosure to Franchisee by Franchisor, becomes a part of the public domain through publication or communication by others.

B. Franchisee acknowledges and agrees that all writings and other original works of authorship, regardless of form, including, but not limited to, Proprietary Software programs, trademarks, copyrightable works, Internet Web pages or any other documents or information pertaining or relating to the Franchised Business or the System of Operation produced or authored by Franchisee during the Term of the Franchise shall be deemed by the parties to be works made for hire and the property of the Franchisor. The Franchisor shall have the absolute right to obtain and hold, in its own name, rights of copyright, trademark and/or other similar protections which may be available in the documents or works. Franchisee hereby agrees to cooperate and execute all documents necessary to perfect such rights in the Franchisor.

C. Franchisee hereby assigns to the Franchisor its entire right, title and interest in any invention, technique, process, device, discovery, improvement or know-how hereafter made or conceived by Franchisee, his agents or employees, during the Term of the Franchise which in any way relates to the actual or anticipated present or future

EXHIBIT A


9

business of the Franchisor or as suggested by or results from any activities performed by the Franchisee during the Term of the Franchise. Franchisee shall disclose any such invention, technique, process, device, discovery, improvement or know-how promptly to the Franchisor. Franchisee shall, upon request, promptly execute all documents necessary to assign Franchisee’s right, title and interest in and to any such invention technique, process, device, discovery, improvement or know-how to the Franchisor and cooperate and take all steps necessary to enable the Franchisor to secure patent, trademark, copyright or any other proprietary rights in the United States, Canada or foreign countries.

9. ACCOUNTING AND RECORDS A. During the term of this Agreement and for at least five (5) years thereafter, Franchisee agrees to keep and preserve full complete and accurate books and records for the Franchised Business in accordance with generally accepted accounting principles and in the form and manner prescribed by the Franchisor. B. At the request of Franchisor, Franchisee shall, at its sole expense, submit to Franchisor within ninety (90) days after the end of Franchisee's fiscal year for each fiscal year or portion thereof that this Agreement is in force, a complete financial statement for the preceding fiscal year, including both an income statement and a balance sheet. At the request of Franchisor, Franchisee shall also provide a copy of the tax return and/or tax schedules reflecting all income and expenses of the Franchised Business for the fiscal year covered by the aforementioned financial statements. C. Franchisee shall also submit to Franchisor, for review, survey, auditing or other contact such other files, forms, reports, records, information, data and the Customer Information System database (as described in Section 9.E herein) as Franchisor may reasonably request from time to time. Franchisee specifically acknowledges that Franchisor may request the Customer Information System database when previously open territory that is adjacent to the geographic area comprising Franchisee’s Market is sold for purposes that include, but are not limited to determining whether any of Franchisees customers are outside the Territory. D. Franchisor's representatives shall have the right at all reasonable times to inspect or audit Franchisee's books, computer information, tax returns, cash control devices or system and other pertinent financial data and records. In connection therewith, Franchisee agrees to execute such forms as Franchisor may request to obtain confirmation of the data being inspected and/or audited. If Franchisee fails to fully cooperate with any reasonable request by Franchisor for an audit or inspection, Franchisee shall reimburse Franchisor for any and all costs and expenses of conducting an audit or inspection including, without limitation, travel costs, and any reasonable accounting and attorneys’ fees. If such inspection reveals that the gross sales reported by Franchisee to Franchisor are less than the gross sales ascertained by such inspection, then Franchisee shall immediately pay to Franchisor the amount owing to Franchisor in accordance with the corrected gross sales report. Upon the discovery of a discrepancy in the report of gross sales of two percent (2%) or more, Franchisee shall pay and reimburse Franchisor for any and all expenses connected with said inspection, including, but not limited to, reasonable accounting and attorney fees, as well as interest on the unreported receipts at eighteen percent (18%) per annum or the maximum rate permitted by law, whichever is less. Such payments are without prejudice to any other remedies Franchisor may have under this Agreement. For purposes of this Agreement, "gross sales" shall mean all billings of the Franchise, whether or not collected, including but not limited to cash sales and sales on account, monies billed for maid cleaning services whether performed by Franchisee or subcontracted, monies billed in connection with trade or barter agreements, or monies billed for any other cleaning and/or maintenance of any structure, interior or exterior. E. Franchisor hereby leases to Franchisee for the term of this Agreement the standard Merry Maids Customer Information System, customer relationship management, and customer satisfaction measurement software, ("Software"). Franchisor may from time to time provide to Franchisee changes, modifications or enhancements to the Software as Franchisor may deem necessary for the benefit of Franchisee, all of which changes, modification and enhancements shall be deemed a part of the Software. It is understood and agreed that Franchisee acquires no proprietary interest in the Software. Franchisee agrees to use the Software in conjunction with the operation of the Franchised Business. Franchisee further agrees not to change or modify the Software in any manner. Franchisee recognizes that Franchisor is the only source of the Software to be used by Franchisee in the Franchised Business. The Software is leased by Merry Maids to all franchisees. Franchisee agrees to pay a Software Fee that has been established by Franchisor for the provision of the Software. The Software Fee is subject to change in Franchisor’s sole discretion upon reasonable notice. The Software Fee is paid weekly by automatic funds transfer as hereunder described in Section 12 of this Agreement or in such other intervals as Franchisor may require. The minimum computer hardware and software requirements are available on MMLink or in the Operations Manuals and are subject to change from time to time.

EXHIBIT A


10

10. STANDARDS OF QUALITY In order to maintain the high quality and consistent standards associated with the Marks and Franchise System, Franchisee shall: A. Devote full time and best efforts or designate someone employed by Franchisee who has successfully completed the Initial Training Program to devote full time and best efforts to establish, develop, and operate the Franchised Business. Franchisor reserves the right to approve of the qualifications of the individual so designated by Franchisee and such approval shall not be unreasonably withheld. Franchisor reserves the right to require designee to attend the Initial Training Program, at Franchisee’s expense, prior to approval. B. Promote the Franchised Business using the advertising, operational and promotional materials developed from time to time by Franchisor and made available to Franchisee. C. Complete and submit to Franchisor, on a timely basis, the then current forms and reports listed in the Operations Manual. D. Use and display the Marks only in such a manner as is contemplated within this Agreement or provided for within this Agreement, the Operations Manual and/or the Identity Manual. E. Comply at all times with all federal, state and municipal laws, regulations, ordinances, orders, and rulings; obtain applicable permits or business licenses; and pay any and all taxes, assessments, fees, fines and penalties imposed on Franchisee. F. Promptly respond to any and all customer inquiries or complaints and achieve customer satisfaction of reasonable complaints by refunding fees or recleaning to any complaining customer's satisfaction as may be appropriate. Should Franchisee fail to respond or satisfy any reasonable customer complaint, then Merry Maids has the right to resolve the matter and charge Franchisee for any expense incurred in doing so. G. Adhere to and abide by all the requirements and standards for the Franchise as specified in this Agreement and in the Operations Manual, as said Operations Manual may, from time to time be modified by Franchisor. H. 1. Purchase the approved equipment, supplies, uniforms and products required for the operation of the Franchised Business from Franchisor, as listed in the Operations Manual, or from manufacturers, suppliers or distributors who shall with respect to such equipment, supplies or products, meet all of Franchisor's specifications and standards, which may be contained in part in the Operations Manual, and who shall adequately demonstrate their capacity and facilities to supply Franchisee's needs, at all times, in the quantities and with the reliability requisite to an efficient operation. 2. If Franchisee proposes to purchase any products, equipment and supplies not theretofore approved by Franchisor as meeting its specifications, Franchisee shall first notify Franchisor and Franchisor may require submission of sufficient specifications, photographs, drawings and/or other information and samples to determine whether such items meet its specifications. Franchisor will advise Franchisee within a reasonable time whether such equipment or supplies meet its specifications. 3. For purposes of the foregoing paragraph, specifications may include minimum standards for performance, warranties, design, quality, safety, efficiency, uniformity, appearance and other restrictions. In the event Franchisor rejects Franchisee's intended purchase of new equipment, supplies, uniforms, or products, Franchisor must, within one hundred twenty (120) days of the receipt of Franchisee's notice, notify Franchisee in writing of its rejection. Said "Notice of Rejection" must list in detail how and in what respects the intended supplier fails to meet Franchisor's specifications and standards or other requirements as contained herein. Failure to so notify Franchisee within such time period shall constitute a waiver of any and all objections by Franchisor to Franchisee's purchase of intended new item(s).

EXHIBIT A


11

4. Franchisee understands and agrees that the identification of the Franchised Business is important to Franchisee, Franchisor and the Franchise and that strict control of the identification of the business can only be maintained through compliance with the standards and specifications established by Franchisor for such products. I. Offer and provide all the services to its customers as required by Franchisor and refrain from offering and providing any services not specifically authorized by Franchisor. J. Franchisee agrees that all services licensed under this Agreement shall be performed solely by Franchisee’s employees, including leased and/or temporary employees, and/or Franchisee. Franchisee and all employees of Franchisee, while engaged in performance of all the services provided pursuant to the Franchise, shall wear uniforms conforming in color and design to the specifications designated by Franchisor in the Operations Manual or otherwise in writing. Franchisee and all employees of Franchisee shall at all times while on duty present a neat and clean appearance and render competent, sober, courteous and trustworthy service to the customers of the Franchised Business. K. Allow Franchisor physical access for the purpose of observation of the business operations. L. Franchisee agrees that its authorization to operate as a corporation or limited liability company shall be conditioned on the following requirements: 1. Its shareholders and/or members, their spouses and its principal executive officers and their spouses shall at all times be personally bound by the terms of this Agreement. 2. Each stock certificate of Franchisee shall have conspicuously endorsed upon its face a statement in the form satisfactory to Franchisor that it is held subject to this Agreement, and that any assignment or transfer of the stock certificate is subject to all restrictions imposed upon assignments by this Agreement. 3. Certified copies of Franchisee’s Articles of Incorporation or Organization, By-Laws or Operating Agreement, and other governing documents, including the resolutions of the Board of Directors authorizing entry into this Agreement, shall be promptly furnished to Franchisor. 4. If Franchisee is an individual or a partnership and wishes to incorporate, Franchisee shall obtain prior written approval of Franchisor for transfer of the rights and duties under this Agreement to the new corporation and Franchisor shall transfer this Agreement and the Franchised Business at no additional monetary consideration for the remainder of the term of this Agreement, at Franchisor’s discretion, in accordance with the provisions of Section 14.I of this Agreement, provided that the corporate entity assumes all duties of Franchisee and that Franchisee and all officers and Directors of the corporation, and their spouses, remain personally bound by the terms of this Agreement. 5. If Franchisee is a corporation or limited liability company, then the individuals named in 26.2 of this Agreement shall remain the owners of not less than sixty-six percent (66%) of the total voting capital stock of the corporate Franchisee during the entire term of this Agreement, with the effective unencumbered right to vote the capital stock. The loss or surrender of the ownership or effective unencumbered right to vote the capital stock, by any means whatever, shall constitute a breach of the terms of this Agreement.

6. Franchisee will not sell, assign or transfer this Agreement, any interest in Franchisee or Franchised Business, or any assets or accounts, including, but not limited to, the customer list, of Franchisee or Franchised Business to any person, partnership, corporation or entity that owns, operates, franchises, develops, consults with, manages, is involved in, or controls any business that is in any way competitive with Franchisor or the Franchised Business. If Franchisor refuses to permit an assignment or transfer based upon this provision, Franchisee’s only remedy will be to have a court of competent jurisdiction determine whether the proposed assignee is a competitor of Franchisor.

EXHIBIT A


12

11. MODIFICATION OF THE SYSTEM Franchisee acknowledges that the System must continue to evolve in order to reflect changing market conditions and to meet new and changing consumer demands. Therefore, variations and additions to the System may be required from time to time in order to preserve and enhance the public image of the System and to enhance the continuing operational efficiency of all franchisees. Accordingly, Franchisee agrees that Franchisor may from time to time, upon notice, add to, subtract from or otherwise change the System, including, without limitation, the adoption and use of new or modified trademarks, products, services, equipment and new techniques and methodologies relating to the sale, operation, promotion and marketing of services. Franchisee agrees to promptly accept, implement, use and display in the operation of the Franchised Business all such additions, modifications and changes at its sole cost and expense. 12. SERVICE FEES AND OTHER PAYMENTS Beginning with the first week of service to customers, Franchisee shall pay a weekly service fee based upon the weekly gross sales of the Franchise (the "Service Fee"). The Service Fee is 7% of the gross sales of the Franchise until such time as the gross sales of the Franchise in a calendar year exceed $500,000. The Service Fee for gross sales in a calendar year (as defined by the weekly report period below) in excess of $500,000 is 5%. In the case of a transfer of an existing franchise permitted under this Agreement, the gross sales generated by franchisee selling the franchise shall be, up to the date of transfer, credited to the seller for purposes of determining which Service Fee (5% or 7%) is applicable. The Service Fee for each week shall be paid to Franchisor in the following manner: Franchisee shall transmit electronically, its weekly statement of gross sales for each weekly report period during the term of this Agreement. (The "weekly report period" shall be defined as each Sunday-Saturday period of seven (7) days which transpires during the course of this Agreement.) In a case where Franchisee owns 100% of more than one franchise, the gross sales of all such franchises will be combined for purposes of calculating the Service Fee. The weekly report shall be transmitted on the Monday following the close of each weekly report period. Payment of the Service Fee will be made on the Friday of each week for the preceding weekly report period by automatic funds transfer from Franchisee's bank account. The Authorization for Electronic Transfer of Funds which Franchisee must sign for Service Fee payment is attached as Exhibit D. If Franchisee fails to have sufficient funds available to pay any weekly Service Fee within fifteen (15) days after the close of the weekly report period, Franchisee shall pay interest on the amount due not to exceed .3462% per week (which equates to 18% per year) for each and every week the amount is not paid. In addition, Franchisee agrees to pay any expense incurred by Franchisor, including costs and attorney's fees, for the collection of such Service Fees. Franchisee's right to continue operating in the Market is dependent on maintaining the minimum weekly gross sales levels set forth below for the size of the Market purchased by Franchisee hereunder as stated in Section 1A hereof, beginning with the month of commencement of business, as that term is defined in Sections 14 and 2D herein: For Full-Sized Markets: Period from Commencement Minimum Weekly of Franchised Business Gross Sales Months 1 - 12 No Minimum Months 13 - 24 $2,000 Months 25 - 47 $3,000 Months 48 - 59 $4,500 Month 60 - thereafter $6,000

EXHIBIT A


13

For Mid-Sized Markets: Period from Commencement Minimum Weekly of Franchised Business Gross Sales Months 1 - 12 No Minimum Months 13 - 24 $2,000 Months 25 - 47 $3,500 Months 48 - Thereafter $5,000 For Small-Sized Markets: Period from Commencement Minimum Weekly of Franchised Business Gross Sales Months 1 - 12 No Minimum Months 13 - 24 $1,500 Months 25 - 47 $2,250 Months 48 - Thereafter $3,000

Franchisee must achieve and maintain the above minimum Weekly Gross Sales during the term of this Agreement and all subsequent extensions or renewals thereof. In addition, beginning with the sixtieth (60th) month of operation of the Franchised Business (whether during this Agreement or any extension or renewal thereof), the Franchised Business must achieve a sales growth CAGR (Compounded Annual Growth Rate) of at least two percent (2%) over the term of the Franchise Agreement, and an additional two percent (2%) CAGR for each subsequent renewal agreement or any extension. The sales growth CAGR requirement will be based on the calendar year beginning January 1 and ending December 31 during the Term and beginning the effective date noted herein. The Franchisor may terminate the Franchise Agreement or reduce the Market size if the Franchisee fails to maintain the foregoing sales levels, but may take into account local economic conditions and/or extenuating circumstances that materially affect growth potential which, in the sole discretion of Franchisor, affects Franchisee’s ability to meet such sales growth levels. The amount of weekly gross sales requirement shall not be construed or otherwise interpreted to be an earnings claim or a statement or projection of the gross revenues for any Merry Maids franchised business. 13. INSURANCE A. Franchisee shall procure, before attending the training program or before commencement of business in the case of a transfer of an existing franchise (where Franchisor may permit Franchisee to begin operating prior to attending the training program), and maintain in full force and effect during the entire term of this Agreement, at Franchisee's sole expense, an insurance policy or policies protecting Franchisee and Franchisor and their officers and employees against any loss, liability or expense whatsoever arising or occurring by reason of Franchisee's operation of the Franchised Business licensed hereunder. Franchisor shall be named as a certificate holder and as an additional insured on such policy or policies (except that Franchisor need not be named as an additional insured for Worker's Compensation and third party crime bond). B. Such policy or policies shall be written by an insurance company satisfactory to Franchisor in accordance with the standards and specifications set forth in the Operations Manual or otherwise in writing and shall include, at a minimum (except as additional coverage and higher policy limits may reasonably be specified for all Franchisees from time to time by Franchisor in the Operations Manual or otherwise in writing) the following: 1. Comprehensive general liability insurance, including automobile liability coverage for any personal, leased, hired and non-owned vehicles, with minimum coverage of $1,000,000 per occurrence; 2. Worker's Compensation and employer's liability insurance as well as such other insurance as may be required by statute or rule of the state(s) in which the Franchised Business is located and operated;

3. Third party crime bond coverage in the minimum amount of $25,000 to protect your business in the event of employee theft from a customer

EXHIBIT A


14

4. Further, Merry Maids strongly recommends that Franchisee obtain care, custody and control insurance, including coverage for damage to property in your employees’ control or property they are directly working on, with minimum limits of $150,000 per occurrence, to adequately protect the operation of the business. C. Upon obtaining the insurance required by this Agreement, and on each policy renewal date thereafter, Franchisee shall promptly submit evidence of satisfactory insurance and proof of payment therefore to Franchisor, together with, upon request, copies of all policies and policy amendments. The evidence of insurance shall include a statement by the insurer that the policy or policies will not be canceled or materially altered without at least thirty (30) days prior written notice to Franchisor. 14. TERMINATION AND NON-RENEWAL OF THE FRANCHISE; ASSIGNMENT; MODIFICATION; POST TERMINATION OBLIGATIONS A. In the event Franchisee fails to execute a renewal franchise agreement in strict accordance with Paragraph B, Section 3 of this Agreement, the Agreement shall expire at the end of its indicated term without further notice by either party. In such event, Franchisee shall have all the rights and duties as set forth in Paragraph G of this Section 14. C. Even if Franchisee gives notice of intent to renew pursuant to Paragraph B of Section 3 of this Agreement, Franchisor has the right to refuse to renew or extend this Agreement if Franchisee has been cited by Franchisor in writing three or more times for failure to comply with the terms hereof in whole or in part. Franchisor may also refuse to renew or extend the term of this Agreement under the following conditions where/when Franchisee: 1. makes an assignment for the benefit of creditors or an admission of an inability to pay Franchisee's obligations, as they relate to the Franchise, as they become due; or 2. has failed at any time to pay any amount owed to Franchisor or its affiliate(s) after notification that the amount is legally due, including but not limited to Service Fees; or 3. fails to submit reports or financial data which Franchisor requires under the Agreement; or 4. with leave of the applicable court, files a voluntary petition in bankruptcy or any pleading seeking any arrangement, composition or adjustment with creditors or similar relief under any law, or admitting or failing to contest the material allegations of such pleading filed against Franchisee; or is adjudicated as bankrupt or insolvent. (The provisions concerning bankruptcy may or may not be enforceable under the Bankruptcy Reform Act of 1978); or 5. willfully violates any regulation, ordinance, statute or administrative ruling related to the Franchised Business; or 6. makes an unauthorized assignment or transfer of or encumbers this Agreement; or 7. willfully violates any provision of this Agreement or any other agreement between Franchisor and Franchisee; or 8. is convicted of a felony or is declared incompetent under a judicial verdict or by civil or criminal court system; or 9. has failed to meet the minimum gross sales levels as specified in this Agreement and outlined in Section 12 above; or 10. is involved in any act or conduct or uses the Proprietary Marks in any way which materially impairs the goodwill, including the Merry Maids name and reputation, associated with the Proprietary Marks or Franchisor’s business operations and Franchisee fails to correct the breach within twenty-four (24) hours of receipt of written notice from Franchisor of the specific breach; or 11. has otherwise failed to adhere to any material specification, standard or operating procedure prescribed by Franchisor.

EXHIBIT A


15

D. Franchisee may terminate this Agreement at any time upon written notice to Franchisor at least one-hundred twenty (120) days before the termination is to take place. Any outstanding fees or debts at the time of a termination requested by Franchisee will be due and payable before said termination of the Agreement takes effect. Franchisee and, if applicable, all officers, directors and shareholders shall also execute a general release and comply with all post-termination obligations set forth in this Agreement. E. Franchisor shall have the right, unless precluded by applicable law, to terminate this Agreement effective immediately and without other cause or further notice upon delivery of notice of termination to Franchisee, where Franchisee: 1. makes an assignment for the benefit of creditors or an admission of an inability to pay Franchisee's obligations, as they relate to the Franchise, as they become due; or 2. fails to pay any amount owed to Franchisor or its affiliates(s) after notification that the amount is legally due, including service fees; or 3. fails to submit reports or financial data which Franchisor requires under this Agreement; or 4. with leave of the applicable court, files a voluntary petition in bankruptcy or any pleading seeking any arrangement, composition or adjustment with creditors or similar relief under any law, or admitting or failing to contest the material allegations of such pleading filed against Franchisee; or is adjudicated as bankrupt or insolvent. (The provisions concerning bankruptcy may or may not be enforceable under the Bankruptcy Reform Act of 1978); or 5. willfully violates any regulation, ordinance, statute or administrative ruling related to the franchised business; or 6. makes an unauthorized assignment or transfer of or encumbers this Agreement; or 7. willfully violates any provision of this Agreement or any other agreement between Franchisee and Franchisor or 8. is convicted of a felony or is declared incompetent under a judicial verdict or by civil or criminal court system; or 9. as the result of any inspection of Franchisee's records, has misrepresented the accounting of gross sales receipts, which Franchisee is required to make to Franchisor, as described in Section 12 of this Agreement; or 10. has failed to meet the minimum gross sales levels as specified in this Agreement and outlined in Section 12 above; or 11. has otherwise failed to adhere to any material specification, standard or operating procedure prescribed by Franchisor. 12. is involved in any act or conduct or uses the Proprietary Marks in any way which materially impairs the goodwill, including the Merry Maids name and reputation, associated with the Proprietary Marks or Franchisor’s business operations and Franchisee fails to correct the breach within twenty-four (24) hours of receipt of written notice from Franchisor of the specific breach. In the event Franchisee commits any of the breaches set forth in Paragraph 14 E (1-12) above, and Franchisor is precluded by applicable law from immediately terminating this Agreement, Franchisor may, in its sole discretion, give Franchisee a written notice of the breach and Franchisee will have the number of days prescribed by applicable law to correct the alleged breach. In the event applicable law does not specify a time period to correct an alleged breach, then Franchisee will have thirty (30) days after the date of the notice of breach to correct the alleged breach, except where the written notice states that Franchisee is delinquent in the payment of any financial obligation contained in this Agreement, in which case Franchisee will have ten (10) days after the date of the written notice to correct the breach by making full payment (including interest).

EXHIBIT A


16

Additionally, after commencement of business, Franchisee shall operate the Franchised Business in the Market continuously during the term hereof in accordance with the days and hours of operation customarily employed by a Merry Maids franchisee. In the event Franchisee fails to operate for more than fourteen (14) consecutive calendar days, Franchisor may terminate this Agreement by notifying Franchisee of its election to do so, and this Agreement shall terminate on the tenth (10th) day after such notice. This right of termination shall be in addition to, and not in exclusion of, any other rights or remedies which Franchisor may have, including the right to payment in full of all amounts due from Franchisee. "Commencement of business" shall be defined as that date required by Section 2.D of this Agreement. F. If Franchisee fails to meet any of the requirements stated in Paragraph E of Section 1( or Section 12 of this Agreement related to sales levels, then in addition to any right Franchisor may have to terminate or not renew this Agreement, Franchisor shall also have the option to reduce the size of the Market and shall have the right to license another party or establish a Franchisor owned branch location in the area eliminated from Franchisee’s Market. G. The obligations of Franchisee after either the termination or the expiration of this Agreement by either party are all of the following: 1. Franchisee is obligated to pay within seven (7) days all Service or other fees and charges owed to Franchisor plus damages for the right to receive Service Fees for each year or portion thereof remaining in the original term of this Agreement, together with any other damages suffered by Franchisor.. 2. Franchisee shall not hold itself out as a Franchisee and shall cease doing business as Merry Maids and cease the use of all trademarks, processes, materials, methods, or promotional materials provided by Franchisor. 3. Franchisee shall take all necessary steps to disassociate from Franchisor, including assigning all telephone number(s) and listing(s) used by Franchisee to Franchisor or its assignee, the destruction of all letterhead and promotional material, the removal of all identification of the "Merry Maids" name and Marks and the discontinuance of all advertising. 4. Franchisee shall return to Franchisor all software programs, video tapes, CDs, DVDs, materials, equipment and training and promotional aids. Franchisee shall remain responsible for and agrees to compensate Merry Maids for any outstanding gift certificates presented for redemption or other outstanding obligations of the Franchised Business. 5. Franchisee agrees that for a period of one (1) year following the termination or expiration of this Agreement for any cause whatsoever, within the Market and seventy-five (75) miles from the outermost boundaries thereof where Franchisee conducts business he or she will not, on his or her own account, or as a partner, employee, agent, advisor, consultant, or in any other capacity of or for or on account of any person, firm, partnership, association or corporation, or as an officer or director or stockholder (except a passive stockholder holding less than one percent (1%) of the stock of a publicly held corporation), or otherwise directly or indirectly engage in any business, enterprise or activity competitive with Franchisor or engage in the marketing or selling of cleaning services, or directly or indirectly engage in any of the following activities: a. solicitation of customers; business patronage or teaching, assistance, participation in, or association with any program or matter revealed to Franchisee; or promotion, sale or dealing financially or otherwise in any services, materials or products or substantially similar services, materials or products to those handled, sold, distributed, offered or processed by Franchisor presently or at any time during the term of this Agreement; b. attempting to hire or entice away any employee or representative of Franchisor or inducing any employee or representative to terminate their employment with Franchisor. The foregoing restrictive covenants of Franchisee shall be deemed separable and the invalidity of any covenant shall not affect the validity or enforceability of any other covenant. If any period of time or limitation of geographical area stated herein is longer or greater than the maximum period or geographical area permitted by applicable law, then the period of time or geographical area stated herein shall be deemed to be such maximum permissible period of time or geographical area, as the case may be. The existence of any claim or cause of action of Franchisee against Franchisor, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Franchisor of the covenants described above. Exemption to, or modification of, any or all of the aforementioned restrictive covenants

EXHIBIT A


17

between Franchisee and Franchisor must be mutually agreed to in writing at least thirty (30) days prior to the termination of this Agreement. 6. Franchisee must immediately notify all telephone company and listing agencies of the termination or expiration of Franchisee's right to use all telephone numbers and all classified and other directory listings associated with Merry Maids and assign all such telephone numbers to Franchisor. 7. If Franchisee retains possession of the Franchised Business premises, Franchisee will make such necessary modifications in the exterior and interior decor to eliminate its identification as Merry Maids. 8. Franchisee is obligated to fulfill all financing obligations incurred by him/her in connection with ServiceMaster Acceptance Company Limited Partnership. H. Franchisee shall relinquish all interest of every kind and description in the Franchise upon termination or expiration of this Agreement, including any goodwill established prior to or during the operation of the Franchise. Franchisee agrees and acknowledges the customer list of the Franchised Business is an intangible asset which exists only in connection with the Franchise and, as such, reverts to Franchisor upon termination or expiration of this Agreement or any renewal agreement. Consequently, Franchisee shall turn over the customer list and the Customer Information System database to Franchisor within twenty-four (24) hours of termination or expiration of the Agreement. I. Neither this Agreement, the Franchise, or any part of the ownership of Franchisee (which shall mean and include voting stock, securities, convertible thereto, proprietorship and general partnership interests) may be voluntarily, involuntarily, directly or indirectly assigned or otherwise transferred or encumbered by Franchisee or its owners (including without limitation by will, declaration of or transfer in trust or the laws of intestate succession) except as provided therein without the prior written approval of Franchisor, and any such assignment, transfer or encumbrance without such approval constitutes a breach of this Agreement. Franchisor will not, however, unreasonably withhold consent to an assignment if the conditions specified below are met. Pursuant to Section 10.L., this Agreement may be assigned to a corporation in which Franchisee owns all of the issued and outstanding capital stock provided that: (1) Franchisee or a manager approved by Franchisor actively manages the corporation and continues to devote best efforts and full and exclusive time to the day-to-day operation and development of the Franchise and the business of Merry Maids; (2) the corporation is newly organized in its activities or confined exclusively to acting as a Franchisee under this Agreement; (3) the corporation executes a document in such form as shall be approved by Franchisor in which it agrees to become a party to and be bound by all of the provisions of this Agreement; (4) Franchisee remains personally liable in all respects under this Agreement and Franchisee executes on a form approved by Franchisor a personal guaranty and agreement not to sell, assign, pledge, mortgage or otherwise transfer or encumber the stock; and, (5) all stock certificates representing shares in the corporation bear a legend that they are subject to the terms of this Agreement. Consent by Franchisor to an assignment of less than one-half (1/2) of the beneficial interest in the Franchised Business shall not be unreasonably withheld, provided such assignment is not part of a series of assignments intended to evade this provision, and further provided: (1) The assignee shall enter into a written agreement with Franchisor, in a form satisfactory to Franchisor, assuming and/or guaranteeing all of Franchisee’s obligations hereunder; (2) Any defaults under this Agreement on the part of the Franchisee have been remedied; (3) Such other reasonable conditions as may be required by Franchisor in connection with the assignment have been satisfied; and (4) assignee shall demonstrate to Franchisor’s satisfaction that it meets Franchisor’s then-current standards for Merry Maids franchisees. If an assignment, alone or together with other previous, simultaneous, or proposed assignments, would have the effect of assigning one-half (1/2) or more of the beneficial interest in the Franchised Business, Franchisor shall not unreasonably withhold its consent to the assignment if all of the following conditions and requirements have been satisfied: (1) all obligations of Franchisee in connection with Franchisor have been assumed by assignee; (2) all ascertained or liquidated debts of Franchisee in connection with Franchisor have been paid; (3) Franchisee is not in default under any provision of this Agreement; (4) the assignee has completed the training program required of new franchisees; (5) the assignee has executed the then current franchise agreement for a full term as provided therein; (6) Franchisee or assignee has paid Franchisor’s then current transfer fee, (7) Franchisee and all officers, directors and shareholders to which this Agreement has been assigned must execute a general release; and (8) assignee shall demonstrate to Franchisor’s satisfaction that it meets Franchisor’s then-current standards for Merry Maids franchisees.

EXHIBIT A


18

Franchisor also has a right of first refusal whenever Franchisee seeks to assign all or any interest in the Franchise to a third party. Franchisee may not sell, transfer or assign any interest in the Franchised Business, without first offering the same to Franchisor, in writing, at a stated price and terms. When offering the Franchised Business or the assets thereof to Franchisor, Franchisee shall provide Franchisor with a bona fide written offer from a third party containing the terms of the offer, and also the Franchised Business’s financial information, including, (1) any audited financials for the last two years; (2) income statements for the two most recently completed calendar years, and for the current year to date; (3) income tax returns for the two most recently completed calendar years; (4) Weekly Business Summaries for the final week of the two most recently completed calendar years and for the most recently completed week of the current year. Franchisee shall also provide other reasonably requested information within 3 business days of Franchisor making the request. Franchisor may accept in writing at any time within thirty (30) days from receipt of the written offer and required accompanying information by Franchisee. If Franchisor declines, or does not accept the offer within thirty (30) days, Franchisee may thereafter sell or dispose of the Franchise under the terms of the third party offer provided to Franchisor, but not at a lower price nor on more favorable terms than have been offered to Franchisor, in writing and subject to Franchisor’s right to approve the buyer. If Franchisee wants to sell the Franchised Business on different terms than previously presented to Franchisor, the Franchisee shall again present the new terms under the process herein outlined. J. Franchisor has the right to sell or assign this Agreement in whole or in part at its discretion which shall inure to the benefit of any assignee or other legal successor to the interest of Merry Maids. K. This Agreement may be modified only if Franchisor and Franchisee agree in writing to the modification, subject, however, to the right of Franchisor to modify its Operations Manual and procedures unilaterally under any conditions and to any extent which Franchisor, in its sole discretion, deems necessary. L. Upon the death or incapacity of Franchisee, or if Franchisee is a corporation, upon the death of any officer, director or principal shareholder, Franchisee may, with the express written consent of Franchisor, transfer the respective ownership interest to an heir or legacy. The heirs or legacies who are entitled under controlling local law to the deceased's franchised interest in the Merry Maids business may take the interest, provided that Franchisor is satisfied that the heirs or legacies meet the standards for Merry Maid franchisees, and provided that they attend training and personally manage the Franchise. If the heir or legacy is a current Merry Maids franchisee, then Franchisor will consent to the transfer so long as the heir or legacy is a franchisee in good standing with Merry Maids. In no event shall Franchisor unreasonably withhold consent to the transfer of the franchise to the heir or legacy, provided the above conditions are met. 15. IN-TERM COVENANTS NOT TO COMPETE A. The covenants of Franchisee not to compete during the term of this Agreement are as follows: Franchisee agrees that during the term of this Agreement Franchisee will not, for Franchisee's own account, or as a partner, employee, agent, advisor, consultant, or in any other capacity of or for or on account of any person, firm, partnership, association or corporation or as an officer, director or stockholder of any of the foregoing (except a passive stockholder holding less than one percent (1%) of the stock of a publicly held corporation), or otherwise, directly or indirectly: 1. Engage in any business, enterprise or activity competitive with Franchisor, or engage in the marketing or selling of maid cleaning services, material or products, or materials or products substantially similar to those handled, sold, distributed, offered or processed by Franchisor during the term of this Agreement or any extension or renewal thereof. 2. Divert or attempt to divert any business or customer of the Franchised Business to any competitor, by direct or indirect inducement, or otherwise. 3. Hire or attempt to hire or entice away any employee, representative, or franchisee of Franchisor or induce any employee, representative or Franchisee to terminate his respective contractual relationship with Franchisor. B. The foregoing restrictive covenants of Franchisee shall be deemed separable and the invalidity of any covenant shall not affect the validity of enforceability of any other covenant. If any period of time or limitation of geographical area stated herein is longer or greater than the maximum period or geographical area permitted by applicable

EXHIBIT A


19

law, then the period of time or geographical area stated herein shall be deemed to be such maximum permissible period of time or geographical area, as the case may be. The existence of any claim or cause of action of Franchisee against Franchisor, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by Franchisor of these covenants mentioned above. 16. INDEPENDENT CONTRACTOR A. This Agreement does not constitute Franchisee as an agent, legal representative, joint venturer, partner, employee, or servant of Franchisor for any purpose whatsoever; and it is understood between the parties hereto that Franchisee shall be an independent contractor. This Agreement does not create a fiduciary relationship between the parties. Franchisee is not authorized to make any contract, agreement, warranty or representation on behalf of Franchisor or to create any obligation, express or implied, on behalf of Franchisor. B. Under no circumstances shall Franchisor be liable for any act, omission, debt, or any other obligation of Franchisee. Franchisee shall indemnify and save Franchisor harmless against any such claim and all other fines, suits, proceedings, claims or demands which arise, directly or indirectly, as a result of or in connection with the operation of the Franchised Business, including costs and attorneys fees. 17. FRANCHISEE MAY NOT WITHHOLD PAYMENTS Franchisee shall not withhold any payments whatsoever due to Franchisor as long as Franchisor has performed its obligations under this Agreement. No endorsement or statement on any check or payment of any sum less than the full sum due to Franchisor shall be construed as an acknowledgment of payment in full or an accord and satisfaction, and Franchisor may accept and cash such check or payment without prejudice to its right to recover the balance due or pursue any other remedy provided herein or by law. Franchisor may apply any payments made by Franchisee for any reason whatsoever against any past due indebtedness of Franchisee as Franchisor may see fit. Franchisor may set off against any sums payable to Franchisee hereunder any unpaid debts from Franchisee to Franchisor. 18. NOTICES All notices to be given under and in accordance with the terms of this Agreement shall be in writing and shall be (i) delivered personally; or (ii) mailed, postage prepaid, by a reputable courier, delivery confirmation requested, to the other party at the address given on the first page of this Agreement or such other address given in accordance with the terms hereof. 19. WAIVERS AND CUMULATIVE RIGHTS AND REMEDIES A. No waiver of any breach of any of the covenants, agreements or provisions herein contained shall be construed as a waiver of any subsequent breach of the same or any other covenant or provision. B. All rights and remedies herein conferred upon or reserved to the parties shall be cumulative and concurrent and shall be in addition to every other right or remedy given to the parties herein or at law or in equity or by statute and are not intended to be exclusive of any other right or remedy. The termination or expiration of this Agreement shall not deprive either of the parties of any of its rights or remedies against the other to enforce at law or in equity any of the rights or remedies of the parties hereunder. 20. LIABILITY FOR BREACH In the event of any default on the part of either party hereto, the party in default shall pay to the aggrieved party all amounts due and all damages, costs and expenses, including reasonable attorneys' fees, incurred by the aggrieved party as a result of any such default.

EXHIBIT A


20

21. ENTIRE AGREEMENT This Agreement, the attached Exhibits hereto, and the documents referred to herein, shall be construed together and constitute the entire, full and complete agreement between Franchisor and Franchisee concerning the subject matter hereof, and supersedes all prior agreements, not disclaiming the representations made to you in the Franchise Disclosure Document that Franchisor furnished to you. No other representations have induced Franchisee to execute this Agreement, and there are no representations, inducements, promises, or agreements, oral or otherwise, between the parties not embodied herein, which are of any force or effect with reference to this Agreement or otherwise. No amendment, change or variance from this Agreement shall be binding on either party unless executed in writing. 22. SEVERABILITY AND CONSTRUCTION A. Each section, part, term and/or provision of this Agreement shall be considered severable, and if, for any reason, any section, part, term and/or provision herein is determined to be invalid and contrary to, or in conflict with, any existing or future law or regulation, such shall not impair the operation of or affect the remaining portions, sections, parts, terms and/or provisions of this Agreement, and the latter will continue to be given full force and effect and bind the parties hereto; and said invalid sections, parts, terms and/or provisions shall be deemed not to be a part of this Agreement; provided, however, that if Franchisor determines that said finding of illegality adversely affects the basic consideration of this Agreement, Franchisor may at its option, terminate this Agreement. The foregoing notwithstanding, it is agreed that the provisions set forth in Section 24 below shall control where applicable. B. Anything to the contrary herein notwithstanding, nothing in this Agreement is intended, nor shall be deemed, to confer upon any person or legal entity other than Franchisor or Franchisee and such of their respective successors and assigns as may be contemplated by this Agreement, any rights or remedies under or by reason of this Agreement. C. Franchisee expressly agrees to be bound by any promise or covenant imposing the maximum duty permitted by law which is subsumed within the terms of any provision hereof, as though it were separately articulated in and made a part of this Agreement, that may result from striking from any of the provisions hereof any portion or portions which a court may hold to be unreasonable and unenforceable in a final decision to which Franchisor is a party, or from reducing the scope of any promise or covenant to the extent required to comply with such a court order. D. All captions herein are intended solely for the convenience of the parties, and none shall be deemed to affect the meaning or construction of any provision hereof. 23. SUCCESSORS This Agreement shall inure to the benefit of and be binding upon the heirs, successors, personal representatives and assigns of the parties. Notwithstanding the foregoing, Franchisee shall have no right to transfer or assign this Agreement except in accordance with the terms of Section 14 above. 24. ARBITRATION A. Unless explicitly exempted otherwise herein, any controversy or claim arising out of or relating to this Agreement or with regard to its interpretation, formation or breach, including allegations of fraud, misrepresentation and violation of any state or federal laws or regulations will be subject to and resolved exclusively by arbitration conducted in accordance with the commercial arbitration rules of the American Arbitration Association and the Federal Arbitration Act. The Franchisor, the Franchisee and their officers, directors, shareholders, and personal guarantors, if any, do hereby agree that all arbitration hearings will take place exclusively in Memphis, Tennessee. B. The party alleging the dispute must provide the other party with written notice setting forth the alleged dispute in detail. The party who receives written notice alleging the dispute will have thirty (30) days after receipt of the written notice to attempt to informally resolve the dispute specified in the written notice. If the written notice alleges that the Franchisee is delinquent in the payment of any fees or other payments payable to the Franchisor, the Franchisee will have ten (10) days to make full payment, including interest as provided for herein, to the Franchisor.

EXHIBIT A


21

C. If the dispute alleged by either party has not been corrected, settled or compromised within the time period provided for in this Agreement, then either party may commence arbitration by sending written demand for arbitration to the other party and the American Arbitration Association invoking the binding arbitration provisions of this Agreement. The American Arbitration Association will provide each party with a written list of proposed arbitrators. Each party will have fourteen (14) days from the date of mailing by the American Arbitration Association of the written list of proposed arbitrators within which to return the written list of proposed arbitrators with their choice of arbitrator to the American Arbitration Association. The arbitrator selected by the Franchisor and the arbitrator selected by the Franchisee will select the third arbitrator. The parties further consent to the jurisdiction of any appropriate court to enforce the provisions of this Paragraph and/or to confirm any award rendered by the panel of arbitrators. D. The authority of the arbitrators will be limited to making a decision and award relating to the interpretation of or adherence to the written provisions of this Agreement. The Federal Rules of Evidence will apply to all arbitration hearings and the introduction of all evidence, testimony, records, affidavits, documents and memoranda in any arbitration hearing. The arbitrators will have no authority to add to, delete or modify in any manner the terms or provisions of this Agreement. The arbitrators will not have the right or authority to award punitive damages to either the Franchisor or the Franchisee or their officers, directors, shareholders, if any, and the parties expressly waive their right to plead or seek punitive damages. E. The following disputes between the Franchisor and the Franchisee will not be subject to arbitration:

1. Any dispute involving the Proprietary Marks or which arises under the Lanham Act, 15 U.S.C. § 1051, et seq.;

2. Any dispute involving the Franchisor's right to immediately terminate this Agreement pursuant to Paragraph 14 of this Agreement;

3. Any dispute involving enforcement of covenants contained in Paragraphs 15 of this

Agreement;

4. Any dispute involving the sale, transfer, assignment or renewal of this Agreement. F. No arbitration finding, conclusion or award may be used to collaterally estop either the Franchisor or the Franchisee from raising any like or similar issue or defense in any subsequent arbitration, litigation, court hearing or other proceeding involving third parties, including other franchisees. It is the intent of the parties that any arbitration proceeding between the Franchisor and the Franchisee will be of their individual claim and that no claims subject to arbitration will be arbitrated on a class-wide basis. The Franchisor and the Franchisee waives its right to a jury trial of any claims they may have against each other arising out of or relating to this Agreement or the relationship between the parties, including claims of fraud and the inducement. G. If the arbitrators award either party damages (including actual damages costs and attorneys' fees) in excess of $100,000 in any arbitration proceeding commenced pursuant to this Agreement, either party will have the right to a de novo action on the merits by filing a court action in accordance with the provisions of this Agreement. If either party commences such a court action, then neither party will have the right to introduce the arbitrators' decision or findings in any court action and the arbitrators' decision and findings will be of no force and effect and will not be final or binding on either party. If either party fails to commence such a court action within thirty (30) days after receiving the arbitrators' written award, then the arbitrators' findings, judgment, decision and award will be final and binding on the Franchisor, the Franchisee and all other parties and may be entered as a final decree and judgment in any court of competent jurisdiction by any party. H. All evidence, testimony, records, documents and information disclosed in any arbitration hearing between the Franchisor and the Franchisee will be secret and confidential in all respects. Neither party will disclose any evidence, testimony, records, documents or information from the arbitration proceedings to any other person or entity except as requited by law. I. The Franchisor and the Franchisee will fully comply with all of the terms and conditions of this Agreement and will fully perform their respective obligations under this Agreement during the entire time of the arbitration process.

EXHIBIT A


22

25, APPLICABLE LAW A. This Agreement takes effect upon its acceptance and execution by the Franchisor in the State of Tennessee, and except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. § 1051 et seq.) and the Federal Arbitration Act with respect to Section 24, shall be interpreted and construed in accordance with the laws of the State of Tennessee. The foregoing notwithstanding, to the extent that the provisions of this Franchise Agreement provide for periods of notice less than those required by applicable law, or provide for termination, cancellation, non-renewal or the like other than in accordance with applicable law, said provisions shall not be effective, and Franchisor shall comply with applicable law in connection with each of these matters. B. No right or remedy conferred upon or reserved to the Franchisor or the Franchisee by this Agreement is intended to be, nor shall be deemed, exclusive of any other right or remedy herein or by law or equity provided or permitted, but each shall be cumulative of every other right or remedy. C. Nothing contained in this Agreement, including the provisions of Paragraph 24, shall bar the Franchisor's right to obtain injunctive relief against threatened conduct that will cause it loss or damage, under the usual equity rules, including the applicable rules for obtaining restraining orders and preliminary injunctions. D. Unless the law applied in accordance with Paragraph A of this Agreement provides otherwise, all litigation, court proceedings, arbitration proceedings, mediation proceedings, lawsuits, court hearings and other hearings initiated by the Franchisor or the Franchisee must and will be venued exclusively in Memphis, Tennessee. The Franchisee, each of its officers, directors and shareholders, if any, and the personal guarantors, if any, do hereby agree and submit to personal jurisdiction in the State of Tennessee for the purposes of any suit, proceeding or hearing brought to enforce or construe the terms of this Agreement or to resolve any dispute or controversy arising under, as a result of, or in connection with the Agreement or the parties' relationship. The parties do hereby agree and stipulate that any such suits, proceedings and hearings will be exclusively venued and held in Memphis, Tennessee. The Franchisee and each of its officers, directors and shareholders, if any, and the personal guarantors, if any, waive any rights to contest such venue and jurisdiction and any claims that such venue and jurisdiction are invalid. 26. REPRESENTATIONS BY FRANCHISEE 26.1 Significant Dates. Franchisee hereby certifies that the following information and dates are true and correct and the undersigned understands that Franchisor is relying on these statements in consideration of entering into this Agreement. (1)____________ The date on which Franchisee received an FDD with all exhibits. (Must be same date as date

entered on Item 23 Receipt Page.) (2)____________ The date of Franchisee’s first personal meeting with a Marketing Representative to discuss the

possible purchase of the Franchise. (Does not apply to renewals; write N/A) Name of all individuals involved in Sales Process: _______________________, _________________________________, _____________________________, ________________________________, _____________________________ (3)____________ The date Franchisee received a completed copy (except for signature) of this Agreement that

was later signed. (4)____________ The date on which Franchisee signed this Agreement. (5)____________ The date on which Franchisee delivered the first deposit, down payment, purchase price or

other payment in the form of cash, check, or other consideration. (Does not apply to renewals. Write N/A)

EXHIBIT A


23

26.2 Officers, Shareholders or Partners of Franchisee. If Franchisee is a Corporation, Partnership or Limited

Liability Company, set forth below is a list of all officers, shareholders, partners or members of Franchisee and their respective holdings. Name Percentage (Total must =100%) Office Held ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ 26.3 Representations. Franchisee acknowledges no employee, agent, or representative of Merry Maids, or our affiliates, has made any representations to Franchisee, and Franchisee has not relied on any representations, except for the representations contained in this Agreement, the FDD, and our advertising materials, and except those Franchisee has written in below: ______________________________________________________________________________________________ ______________________________________________________________________________________________ ______________________________________________________________________________________________ _________________________________________________________. If none, please write none. IN WITNESS THEREOF, the parties hereto have caused this instrument to be executed the day and year first written above. MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., its General Partner WITNESS By_______________________________ ____________________________ FRANCHISEE FRANCHISEE WITNESS By_______________________________ Individually/Partner/Officer ____________________________ By_______________________________ Individually/Partner/Officer

EXHIBIT A


24

EXHIBIT A TO THE FRANCHISE AGREEMENT

Attached is a map depicting the Market in which Franchisee is authorized to operate the Franchised Business which shall constitute a part of this Exhibit A. Inserted on the following lines is a written description of the Market: _________________________________________________________________________________________ _________________________________________________________________________________________ _________________________________________________________________________________________ _________________________________________________________________________________________ To the extent there is any controversy regarding the construction of the foregoing written description and any attached map, the map and the written description are to be construed together and neither shall prevail over the other. Franchisee has no authority or right, either under this Agreement or otherwise, to conduct the Franchised Business outside the limits of the area described above and as may be depicted on the attached map. The parties hereto have caused this instrument to be executed the day and year first written above. MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., Its General Partner WITNESS By:______________________________ ___________________________ FRANCHISEE FRANCHISEE WITNESS By:______________________________ Individually/Partner/Officer ___________________________ By:______________________________ Individually/Partner/Officer

EXHIBIT A


25

EXHIBIT B TO THE FRANCHISE AGREEMENT

If Franchisee is a general or limited partnership, the following information is required: ________________________________________________________________________________________ ________________________________________________________________________________________ ________________________________________________________________________________________ NAME OF PARTNERSHIP:_________________________________________________________________ DOING BUSINESS AS: ___________________________________________________________________ PRINCIPAL OFFICE OR PLACE OF BUSINESS _______________________________________________ ________________________________________________________________________________________ Telephone ( )_______________ If Franchisee is a general or limited partnership, Franchisee shall provide Franchisor with a copy of the currently effective partnership agreement which shall be certified by a partner or a general partner as being true and complete. Such partnership agreement must provide that the purpose for which the partnership was formed is consistent with the obligations of Franchisee hereunder and must disclose the authority of the partner or general partner who is acting on behalf of the partnership in connection with the Franchise Agreement. The receipt of this completed Exhibit "B" is a condition precedent to any obligation of Franchisor in regard to the Franchise Agreement. Signatures of the partners: _________________________________________ _________________________________________ _________________________________________ Date of signing: __________________ Date of receipt by Franchisor:____________________

EXHIBIT A


26

EXHIBIT C

TO THE FRANCHISE AGREEMENT If Franchisee is a corporation or a limited liability company (hereinafter "LLC"), the following information is required: NAME OF CORPORATION/LLC: ________________________________________________________________________________________ ADDRESS OR LOCATION OF PRINCIPAL OFFICE OR PLACE OF BUSINESS: ________________________________________________________________________________________ Telephone: ( )_________________ STATE OF INCORPORATION: ________________________________________________________________________________________ If incorporated under the laws of a state other than where it will carry on the Franchised Business, the corporation/LLC will provide to Franchisor a certificate of qualification or authority to do business in the state(s) shown in Exhibit A, dated no more than thirty (30) days prior to the execution of the Franchise Agreement. The receipt of the above and the following information is a condition precedent to any obligation of Franchisor in regard to the Franchise Agreement. ATTACHMENTS: a) certified copy of your Articles of Incorporation and all amendments thereto and restatements thereof,

duly certified by the Secretary of State (of the state in which it is incorporated) dated no more than thirty (30) days prior to the execution of the Franchised Agreement;

b) certificate of good standing of the corporation/LLC from the Secretary of State under the same

conditions as a) above; c) a listing of names and addresses of all stockholders (1% or more), officers and directors of the

corporation with the amount of stock owned by each stockholder; d) a certified corporate resolution by the board of directors authorizing the corporation/LLC to enter into

the Franchise Agreement with Merry Maids Limited Partnership and designating the name of the officer authorized to execute the Franchise Agreement on behalf of the corporation/LLC;

e) a written personal guaranty in the form attached hereto from all of the officers, shareholders, directors

or managers of the corporation/LLC and their spouses, providing for the personal guaranty of all of the obligations of Franchisee under the Franchise Agreement; and

f) a written document stating the name of the officer, director, or other principal person or manager

responsible for the regular operation of the Franchised Business. Submitted this________ day of _______________________, 20_____ ___________________________________________________________________________ Franchisee

EXHIBIT A


27

GUARANTY OF FRANCHISEE'S OBLIGATION In consideration of, and as an inducement to, the execution of the above Franchise Agreement (the “Agreement”) by Merry Maids Limited Partnership, Franchisee and Spouse, and if Franchisee is a corporation or limited liability company (“LLC”), each of the principal officers of the corporation or LLC and their spouse, and each owner of a one percent (1%) or greater beneficial interest in the Franchise and their spouse, in their individual capacities do jointly and severally hereby personally and unconditionally guarantee to Merry Maids Limited Partnership and its successors and assigns, for the terms of the Agreement and thereafter as provided in the Agreement that they shall punctually pay and perform each and every undertaking, agreement, obligation and covenant set forth in the Agreement and any ServiceMaster Acceptance Company Limited Partnership Promissory Note executed in connection therewith. Each of the undersigned waives: 1. Acceptance and notice of acceptance by Merry Maids Limited Partnership of the foregoing undertakings: 2. Notice of demand for payment, if any, of indebtedness or non-performance of any obligations hereby guaranteed; 3. Any right the undersigned may have to require that an action be brought against Franchisee or any person or entity as a condition of liability; and Each of the undersigned consents and agrees that: 1. His direct and immediate liability under this guarantee shall be joint and several; 2. That he shall render any payment or performance required under the Agreement upon demand if Franchisee fails or refuses punctually to do so; 3. That such liability shall not be contingent or conditioned upon pursuit by Merry Maids Limited Partnership of any remedies against Franchisee or any other person; and 4. That such liability shall not be diminished, relieved, or otherwise affected by any extension of time, credit or other indulgence which Merry Maids Limited Partnership may from time to time grant to Franchisee or to any person, including without limitation, the acceptance of any partial payment or performance, or the compromise or release of any claims, none of which shall in any way modify or amend this guarantee, which shall be continuing and irrevocable during the term of the Agreement. IN WITNESS WHEREOF each of the undersigned has hereunto affixed his signature on the same day and year as the Agreement was executed. _________________________________, individually __________________________________________ Home Address __________________________________________ City, State, Zip

_________________________________, individually _____________________________________________ Home Address _____________________________________________ City, State, Zip

_________________________________, individually ____________________________________________ Home Address ____________________________________________ City, State, Zip

__________________________________, individually _____________________________________________ Home Address _____________________________________________ City, State, Zip

EXHIBIT A


28

EXHIBIT D TO THE FRANCHISE AGREEMENT

AUTHORIZATION FOR ELECTRONIC TRANSFER OF FUNDS

The form below is an authorization that allows for electronic transfer of funds from your checking account for the payment of amounts owed, and other authorized payments. ============================================================================

AUTHORIZATION FOR AUTOMATIC PAYMENTS I authorize MERRY MAIDS LIMITED PARTNERSHIP and the bank named below to initiate variable entries to my checking account for payment of weekly service fees and other authorized payments. ____________________________________________________________________________________ (Name of Financial Institution) ____________________________________________________________________________________ (Address of Financial Institution) ____________________________________________________________________________________ (Franchisee's Name) please print (Franchise #) ___________________________________________________________________________________ (Franchisee’s Signature) (Date) Bank Routing #____________________ Ckng. Acct. #___________________________ This authority will remain in effect until I notify you or the bank in writing to cancel it in such time as to afford the bank a reasonable opportunity to act on it. I can stop payment of any entry by notifying you or my bank 3 days before my account is charged. I can have the amount of an erroneous charge immediately credited to my account up to 15 days following issuance of my bank statement or 46 days after posting, whichever occurs first. A check marked "void" must be attached to this form.

EXHIBIT A


29

REQUEST FOR SUPERSEDURE

In Connection with Application for Telephone Service for Telephone Number ______________________ , the (Telephone Company) is hereby requested to assign to Merry Maids Limited Partnership, or its assignee, effective upon the date this form is received properly signed, unless another date is agreed upon as shown below, the telephone number shown above. The undersigned agrees to hold the Telephone Company free and harmless of and from any loss, damage and liability which may result from such assignment. In consideration of the Telephone Company's compliance with this request, the undersigned Merry Maids Limited Partnership, or its assignee, agrees to pay all unpaid charges and to assume all obligations of the Franchise Owner in connection with this service existing on the date of assignment, including any charges and obligations for advertising. EFFECTIVE DATE OF ASSIGNMENT: Present Customer: __________________________________ Name ________________________/__________ Signature Date Merry Maids Limited Partnership or its assignee Name ____________________ Address ____________________ _____________________ Signature Title

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors ofThe ServiceMaster CompanyMemphis, Tennessee

We have audited the accompanying consolidated statements of financial position of TheServiceMaster Company and subsidiaries (the ‘‘Company’’) as of December 31, 2011 and 2010,and the related consolidated statements of operations, shareholder’s equity and cash flows for eachof the three years in the period ended December 31, 2011. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on thefinancial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principlesused and significant estimates made by management, as well as evaluating the overall financialstatement 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, thefinancial position of The ServiceMaster Company and subsidiaries as of December 31, 2011 and2010, and the results of their operations and their cash flows for each of the three years in theperiod ended December 31, 2011, in conformity with accounting principles generally accepted inthe United States of America.

We have also audited, in accordance with the standards of the Public Company AccountingOversight Board (United States), the Company’s internal control over financial reporting as ofDecember 31, 2011, based on the criteria established in Internal Control—Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission and our reportdated March 6, 2012, expressed an unqualified opinion on the Company’s internal control overfinancial reporting.

/s/ Deloitte & Touche LLPMemphis, TennesseeMarch 6, 2012

69

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

*Source: The ServiceMaster Company 10-K, YE 12-31-2011

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 1 of 53

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD EXHIBIT B - FINANCIAL STATEMENTS*

SCampbell

Typewritten Text

Consolidated Statements of Operations

(In thousands)

Year Ended December 31,2011 2010 2009

Operating Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,205,872 $3,127,394 $2,977,885Operating Costs and Expenses:Cost of services rendered and products sold . . . . . . . . . . . 1,813,706 1,777,304 1,691,251Selling and administrative expenses . . . . . . . . . . . . . . . . . 880,492 895,950 830,747Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,352 136,000 158,771Trade name impairment . . . . . . . . . . . . . . . . . . . . . . . . . . 36,700 — 26,600Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,162 11,448 26,682

Total operating costs and expenses . . . . . . . . . . . . . . . . . . 2,830,412 2,820,702 2,734,051

Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375,460 306,692 243,834Non-operating Expense (Income)Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,123 286,933 299,333Interest and net investment income . . . . . . . . . . . . . . . . . . (10,886) (9,358) (7,079)Loss (gain) on extinguishment of debt . . . . . . . . . . . . . . . . 774 — (46,106)Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 700 733 748

Income (Loss) from Continuing Operations beforeIncome Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,749 28,384 (3,062)

Provision (benefit) for income taxes . . . . . . . . . . . . . . . . . . 43,912 10,945 (9,204)

Income from Continuing Operations . . . . . . . . . . . . . . . . 67,837 17,439 6,142(Loss) income from discontinued operations, net of income

taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27,016) (31,998) 7,353

Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,821 $ (14,559) $ 13,495

See accompanying Notes to the Consolidated Financial Statements.

70

SCampbell

Typewritten Text

Page 2 of 53

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Consolidated Statements of Financial Position

(In thousands, except share data)

As of December 31, 2011 2010

Assets:Current Assets:Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 328,930 $ 252,698Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,026 30,406Receivables, less allowances of $20,362 and $16,709, respectively . . . . . . . . . . . . . . . . . . 374,200 352,094Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,643 54,732Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,295 40,864Deferred customer acquisition costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,403 34,377Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,609 11,558Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 51,004

Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 934,123 827,733

Property and Equipment:At cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 541,817 440,049Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (235,058) (173,151)

Net Property and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 306,759 266,898

Other Assets:Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,161,980 3,125,293Intangible assets, primarily trade names, service marks and trademarks, net . . . . . . . . . . . . 2,543,539 2,653,511Notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,322 22,550Long-term marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,456 110,177Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,846 7,164Debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,798 52,366Assets of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 32,398

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,146,823 $7,098,090

Liabilities and Shareholder’s Equity:Current Liabilities:Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 81,641 $ 72,645Accrued liabilities:

Payroll and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,346 85,647Self-insured claims and related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,071 81,278Accrued interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,011 69,645Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,103 83,114

Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473,242 449,647Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 805 16,300Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,838 49,412

Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903,057 907,688

Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,824,032 3,899,075Other Long-Term Liabilities:Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,036,693 934,971Liabilities of discontinued operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,070 4,848Other long-term obligations, primarily self-insured claims . . . . . . . . . . . . . . . . . . . . . . . . 133,052 163,981

Total Other Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,171,815 1,103,800

Commitments and Contingencies (See Note 9)Shareholder’s Equity:Common stock $0.01 par value, authorized 1,000 shares; issued 1,000 shares . . . . . . . . . . — —Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,464,293 1,455,881Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (210,162) (250,983)Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,212) (17,371)

Total Shareholder’s Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,247,919 1,187,527

Total Liabilities and Shareholder’s Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $7,146,823 $7,098,090


71

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 3 of 53

Consolidated Statements of Shareholder’s Equity

(In thousands)

AccumulatedAdditional Retained Other

Common Paid-in Earnings ComprehensiveStock Capital (Deficit) Income (Loss) Total Equity

Balance December 31, 2008 . . . . . $— $1,438,432 $(249,919) $(56,154) $1,132,359

Net income . . . . . . . . . . . . . . . . . . 13,495 13,495Other comprehensive income, net of

tax:Net unrealized gain on securities . 4,598 4,598Net unrealized gain on derivative

instruments . . . . . . . . . . . . . . . 22,744 22,744Foreign currency translation . . . . . 5,038 5,038

Total comprehensive income . . . . . . 13,495 32,380 45,875Stock-based employee

compensation—contribution fromHoldings . . . . . . . . . . . . . . . . . . . 8,097 8,097


Net loss . . . . . . . . . . . . . . . . . . . . . (14,559) (14,559)Other comprehensive income, net of

tax:Net unrealized gain on securities . 1,583 1,583Net unrealized gain on derivative

instruments . . . . . . . . . . . . . . . 2,634 2,634Foreign currency translation . . . . . 2,186 2,186

Total comprehensive (loss) income . (14,559) 6,403 (8,156)Stock-based employee



Net income . . . . . . . . . . . . . . . . . . 40,821 40,821Other comprehensive income, net of

tax:Net unrealized loss on securities . (695) (695)Net unrealized gain on derivative

instruments . . . . . . . . . . . . . . . 13,314 13,314Foreign currency translation . . . . . (1,460) (1,460)

Total comprehensive income . . . . . . 40,821 11,159 51,980Stock-based employee


Balance December 31, 2011 . . . . . $— $1,464,293 $(210,162) $ (6,212) $1,247,919


72

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 4 of 53

SCampbell

Typewritten Text

FDD

Consolidated Statements of Cash Flows

(In thousands)

Year Ended December 31,2011 2010 2009

Cash and Cash Equivalents at Beginning of Period . . . . . . . . . . . . . . . $ 252,698 $ 255,356 $ 407,347Cash Flows from Operating Activities from Continuing Operations:Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,821 (14,559) 13,495

Adjustments to reconcile net income (loss) to net cash provided fromoperating activities:

Loss (income) from discontinued operations . . . . . . . . . . . . . . . . . . . . 27,016 31,998 (7,353)Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,084 60,625 56,021Amortization expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,352 136,000 158,771Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . 14,061 14,503 14,639Loss (gain) on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . 774 — (46,106)Deferred income tax provision (benefit) . . . . . . . . . . . . . . . . . . . . . . . 35,048 4,455 (19,106)Stock-based compensation expense . . . . . . . . . . . . . . . . . . . . . . . . . 8,412 9,352 8,097Trade name impairment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,700 — 26,600Restructuring charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,162 11,448 26,682Cash payments related to restructuring charges . . . . . . . . . . . . . . . . . (7,530) (10,789) (23,601)

Change in working capital, net of acquisitions:Current income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,856) (6,757) 10,245Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,992) (32,914) (13,300)Inventories and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,538 (238) 1,375Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,581 11,899 (17,936)Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,134 (1,928) 4,186Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,642) 2,427 (35,382)Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,338 7,022 11,005

Net Cash Provided from Operating Activities from ContinuingOperations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295,001 222,544 168,332

Cash Flows from Investing Activities from Continuing Operations:Property additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (96,540) (134,234) (56,004)Sale of equipment and other assets . . . . . . . . . . . . . . . . . . . . . . . . . 4,605 1,355 1,654Acquisition of The ServiceMaster Company . . . . . . . . . . . . . . . . . . . . (35) (2,245) (1,695)Other business acquisitions, net of cash acquired . . . . . . . . . . . . . . . . (44,365) (57,941) (32,647)Purchase of other intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,900) (2,500) —Notes receivable, financial investments and securities, net . . . . . . . . . . 3,009 20,427 6,151

Net Cash Used for Investing Activities from Continuing Operations . . . (135,226) (175,138) (82,541)

Cash Flows from Financing Activities from Continuing Operations:Borrowings of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 15,000 —Payments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (105,905) (61,333) (252,885)Debt issuance costs paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (267) (30) (426)

Net Cash Used for Financing Activities from Continuing Operations . . . (102,172) (46,363) (253,311)

Cash Flows from Discontinued Operations:Cash (used for) provided from operating activities . . . . . . . . . . . . . . . . (5,888) 6,776 21,426Cash provided from (used for) investing activities:

Proceeds from sale of businesses . . . . . . . . . . . . . . . . . . . . . . . . . 26,134 — —Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,617) (10,477) (5,897)

Net Cash Provided from (Used for) Discontinued Operations . . . . . . . . 18,629 (3,701) 15,529

Cash Increase (Decrease) During the Period . . . . . . . . . . . . . . . . . . . 76,232 (2,658) (151,991)

Cash and Cash Equivalents at End of Period . . . . . . . . . . . . . . . . . . . $ 328,930 $ 252,698 $ 255,356


73

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 5 of 53

SCampbell

Typewritten Text

FDD

Notes to the Consolidated Financial Statements

Note 1. Significant Accounting Policies

The Consolidated Financial Statements include the accounts of ServiceMaster and its majority-owned subsidiary partnerships, limited liability companies and corporations. All consolidatedServiceMaster subsidiaries are wholly owned. Intercompany transactions and balances have beeneliminated.

Summary: The preparation of the Consolidated Financial Statements requires management tomake 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 revenuerecognition; the allowance for uncollectible receivables; accruals for self-insured retention limitsrelated to medical, workers’ compensation, auto and general liability insurance claims; accruals forhome service contracts and termite damage claims; the possible outcome of outstanding litigationand other disputes; accruals for income tax liabilities as well as deferred tax accounts; the deferraland amortization of customer acquisition costs; useful lives for depreciation and amortizationexpense; the valuation of marketable securities; and the valuation of tangible and intangible assets.In 2011, there have been no changes in the significant areas that require estimates or in theunderlying methodologies used in determining the amounts of these associated estimates.

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

The Company carries insurance policies on insurable risks at levels which it believes to beappropriate, including workers’ compensation, auto and general liability risks. The Companypurchases insurance from third-party insurance carriers. These policies typically incorporatesignificant deductibles or self-insured retentions. The Company is responsible for all claims that fallwithin the retention limits. In determining the Company’s accrual for self-insured claims, theCompany uses historical claims experience to establish both the current year accrual and theunderlying provision for future losses. This actuarially determined provision and related accrualinclude both known claims, as well as incurred but not reported claims. The Company adjusts itsestimate of accrued self-insured claims when required to reflect changes based on factors such aschanges in health care costs, accident frequency and claim severity.

Accruals for home service contract claims in the American Home Shield business are madebased on the Company’s claims experience and actuarial projections. Termite damage claimaccruals are recorded based on both the historical rates of claims incurred within a contract yearand the cost per claim. Current activity could differ causing a change in estimates. The Companyhas 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 andsuch costs can be reasonably estimated. Any resulting adjustments, which could be material, arerecorded in the period identified.

The Company records deferred income tax balances based on the net tax effects of temporarydifferences between the carrying value of assets and liabilities for financial reporting purposes andincome tax purposes. The Company records its deferred tax items based on the estimated value ofthe tax basis. The Company adjusts tax estimates when required to reflect changes based onfactors such as changes in tax laws, relevant court decisions, results of tax authority reviews andstatutes of limitations. The Company records a liability for unrecognized tax benefits resulting from

74

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 6 of 53

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Notes to the Consolidated Financial Statements (Continued)

Note 1. Significant Accounting Policies (Continued)

uncertain tax positions taken or expected to be taken in a tax return. The Company recognizespotential 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 andfumigation termite applications, are recognized as the services are provided. The Companyeradicates 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 protectioncontracts, as well as home service contracts, are frequently sold through annual contracts for aone-time, upfront payment. Direct costs of these contracts (service costs for termite contracts andclaim costs for home service contracts) are expensed as incurred. The Company recognizesrevenue over the life of these contracts in proportion to the expected direct costs. Those costs beara direct relationship to the fulfillment of the Company’s obligations under the contracts and arerepresentative of the relative value provided to the customer (proportional performance method).The Company regularly reviews its estimates of direct costs for its termite bait and home servicecontracts and adjusts the estimates when appropriate.

The Company has franchise agreements in its TruGreen, Terminix, ServiceMaster Clean,AmeriSpec, Furniture Medic and Merry Maids businesses. Franchise revenue (which in theaggregate represents approximately four percent of annual consolidated revenue from continuingoperations) consists principally of continuing monthly fees based upon the franchisee’s customerlevel revenue. Monthly fee revenue is recognized when the related customer level revenue is earnedby the franchisee and collectability is reasonably assured. Franchise revenue also includes initialfees resulting from the sale of a franchise. These fees are fixed and are recognized as revenuewhen collectability is reasonably assured and all material services or conditions relating to the salehave been substantially performed. Total profits from the franchised operations were $74.1 million,$70.9 million and $66.5 million for the years ended December 31, 2011, 2010 and 2009,respectively. Consolidated operating income from continuing operations was $375.5 million,$306.7 million and $243.8 for the years ended December 31, 2011, 2010 and 2009, respectively.The Company evaluates the performance of its franchise businesses based primarily on operatingprofit before corporate general and administrative expenses, interest expense and amortization ofintangible assets. The portion of total franchise fee income related to initial fees received from thesale of a franchise was immaterial to the Company’s Consolidated Financial Statements for allperiods.

Revenues are presented net of sales taxes collected and remitted to government taxingauthorities in the accompanying Consolidated Statements of Operations.

The Company had $473.2 million and $449.6 million of deferred revenue as of December 31,2011 and 2010, respectively. Deferred revenue consists primarily of payments received for annualcontracts relating to home service contracts, termite baiting, termite inspection, pest control andlawn care services.

Deferred Customer Acquisition Costs: Customer acquisition costs, which are incrementaland direct costs of obtaining a customer, are deferred and amortized over the life of the relatedcontract in proportion to revenue recognized. These costs include sales commissions and directselling costs which can be shown to have resulted in a successful sale. Deferred customeracquisition costs amounted to $30.4 million and $34.4 million as of December 31, 2011 and 2010,respectively.

75

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 7 of 53

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit B



Interim Reporting: TruGreen has significant seasonality in its business. In the winter andspring, this business sells a series of lawn applications to customers which are rendered primarilyin March through October (the production season). This business incurs incremental sellingexpenses at the beginning of the year that directly relate to successful sales for which the revenuesare recognized in later quarters. On an interim basis, TruGreen defers these incremental sellingexpenses, pre-season advertising costs and annual repairs and maintenance procedures that areperformed primarily in the first quarter. These costs are deferred and recognized in proportion tothe contract revenue over the production season and are not deferred beyond the calendaryear-end. Other business segments of the Company also defer, on an interim basis, advertisingcosts incurred early in the year. These pre-season costs are deferred and recognized approximatelyin proportion to revenue over the balance of the year and are not deferred beyond the calendaryear-end.

Advertising: As discussed in the ‘‘Interim Reporting’’ note above, certain pre-seasonadvertising costs are deferred and recognized approximately in proportion to the revenue over theyear. Certain other advertising costs are expensed when the advertising occurs. The cost of direct-response advertising at Terminix and TruGreen, consisting primarily of direct-mail promotions, iscapitalized and amortized over its expected period of future benefits. Advertising expense for theyears ended December 31, 2011, 2010 and 2009 was $155.1 million, $152.5 million and$149.8 million, respectively.

Inventory: Inventories are recorded at the lower of cost (primarily on a weighted average costbasis) or market. The Company’s inventory primarily consists of finished goods to be used on thecustomers’ premises or sold to franchisees.

Property and Equipment, Intangible Assets and Goodwill:

Property and equipment consist of the following:

EstimatedBalance as of UsefulDecember 31, Lives(In millions) 2011 2010 (Years)

Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22.9 $ 22.9 N/ABuildings and improvements . . . . . . . . . . . . . . . . . 76.0 75.8 10 - 40Technology and communications . . . . . . . . . . . . . 207.0 152.4 3 - 7Machinery, production equipment and vehicles . . . 216.7 170.2 3 - 9Office equipment, furniture and fixtures . . . . . . . . . 19.2 18.7 5 - 7

541.8 440.0Less accumulated depreciation . . . . . . . . . . . . . . . (235.0) (173.1)

Net property and equipment . . . . . . . . . . . . . . . . . $ 306.8 $ 266.9

Depreciation of property and equipment, including depreciation of assets held under capitalleases, was $72.1 million, $60.6 million and $56.0 million for the years ended December 31, 2011,2010 and 2009, respectively.

Intangible assets consisted primarily of goodwill in the amount of $3.162 billion and$3.125 billion, indefinite-lived trade names in the amount of $2.334 billion and $2.370 billion, and

76

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 8 of 53



other intangible assets in the amount of $210.0 million and $283.3 million as of December 31, 2011and 2010, respectively.

Fixed assets and intangible assets with finite lives are depreciated and amortized on astraight-line basis over their estimated useful lives. These lives are based on the Company’sprevious experience for similar assets, potential market obsolescence and other industry andbusiness data. As required by accounting standards for the impairment or disposal of long- livedassets, the Company’s long-lived assets, including fixed assets and intangible assets (other thangoodwill), are tested for recoverability whenever events or changes in circumstances indicate thattheir carrying amounts may not be recoverable. If the carrying value is no longer recoverable basedupon the undiscounted future cash flows of the asset, an impairment loss would be recognizedequal to the difference between the carrying amount and the fair value of the asset. Changes in theestimated useful lives or in the asset values could cause the Company to adjust its book value orfuture expense accordingly.

As required under accounting standards for goodwill and other intangibles, goodwill is notsubject to amortization, and intangible assets with indefinite useful lives are not amortized until theiruseful lives are determined to no longer be indefinite. Goodwill and intangible assets that are notsubject to amortization are subject to assessment for impairment by applying a fair-value based teston an annual basis or more frequently if circumstances indicate a potential impairment. TheCompany adopted the provisions of ASU 2011-8, ‘‘Testing Goodwill for Impairment,’’ in the fourthquarter of 2011. This ASU gives entities the option of performing a qualitative assessment beforecalculating the fair value of a reporting unit in Step 1 of the goodwill impairment test. If entitiesdetermine, on the basis of qualitative factors, that the fair value of a reporting unit is more likelythan not greater than its carrying amount, the two-step impairment test would not be required. Forthe 2011 annual goodwill impairment review performed as of October 1, 2011, the Companyperformed qualitative assessments on the Terminix, American Home Shield and ServiceMasterClean reporting units. Based on these assessments, the Company determined that, more likely thannot, the fair values of Terminix, American Home Shield and ServiceMaster Clean were greater thantheir respective carrying amounts. As a result, the two-step goodwill impairment test was notperformed for Terminix, American Home Shield and ServiceMaster Clean in 2011.

As permitted under accounting standards for goodwill and other intangibles prior to theadoption of ASU 2011-08, the Company carried forward a reporting unit’s valuation from the mostrecent valuation under the following conditions: the assets and liabilities of the reporting unit havenot changed significantly since the most recent fair value calculation, the most recent fair valuecalculation resulted in an amount that exceeded the carrying amount of the reporting unit by asubstantial margin and, based on the facts and circumstances of events that have occurred sincethe last fair value determination, the likelihood that a current fair value calculation would result in animpairment would be remote. For the 2010 annual goodwill impairment review performed as ofOctober 1, 2010, the Company carried forward the valuations of the Terminix and ServiceMasterClean reporting units completed as of October 1, 2009. The Company did not carry forward thevaluations for any trade names for the 2011 or 2010 annual trade name impairment reviews. For the2009 annual goodwill and trade name impairment reviews performed as of October 1, 2009, theCompany did not carry forward the valuations of any reporting units or trade names.

Goodwill impairment is determined using a two-step process. The first step involves acomparison of the estimated fair value of each of the Company’s reporting units to its carrying

77

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 9 of 53

SCampbell

Typewritten Text

SCampbell

Typewritten Text



amount, including goodwill. In performing the first step, the Company determines the fair value of areporting unit using a combination of a DCF analysis, a market-based comparable approach and amarket-based transaction approach. Determining fair value requires the exercise of significantjudgment, including judgment about appropriate discount rates, terminal growth rates, the amountand timing of expected future cash flows, as well as relevant comparable company earningsmultiples for the market-based comparable approach and relevant transaction multiples for themarket-based transaction approach. The cash flows employed in the DCF analyses are based onthe Company’s most recent budget and, for years beyond the budget, the Company’s estimates,which are based on assumed growth rates. The discount rates used in the DCF analyses areintended to reflect the risks inherent in the future cash flows of the respective reporting units. Inaddition, the market-based comparable and transaction approaches utilize comparable companypublic trading values, comparable company historical results, research analyst estimates and,where available, values observed in private market transactions. If the estimated fair value of areporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and thesecond step of the impairment test is not necessary. If the carrying amount of a reporting unitexceeds its estimated fair value, then the second step of the goodwill impairment test must beperformed. The second step of the goodwill impairment test compares the implied fair value of thereporting unit’s goodwill with its goodwill carrying amount to measure the amount of impairment, ifany. The implied fair value of goodwill is determined in the same manner as the amount of goodwillrecognized in a business combination. In other words, the estimated fair value of the reporting unitis allocated to all of the assets and liabilities of that unit (including any unrecognized intangibleassets) as if the reporting unit had been acquired in a business combination and the fair value ofthe reporting unit was the purchase price paid. If the carrying amount of the reporting unit’sgoodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amountequal to that excess.

The impairment test for other intangible assets not subject to amortization involves acomparison of the estimated fair value of the intangible asset with its carrying value. If the carryingvalue of the intangible asset exceeds its fair value, an impairment loss is recognized in an amountequal to that excess. The estimates of fair value of intangible assets not subject to amortization aredetermined using a DCF valuation analysis. The DCF methodology used to value trade names isknown as the relief from royalty method and entails identifying the hypothetical cash flowsgenerated by an assumed royalty rate that a third party would pay to license the trade names anddiscounting them back to the valuation date. Significant judgments inherent in this analysis includethe selection of appropriate discount rates and hypothetical royalty rates, estimating the amountand timing of estimated future cash flows attributable to the hypothetical royalty rates andidentification of appropriate terminal growth rate assumptions. The discount rates used in the DCFanalyses are intended to reflect the risk inherent in the projected future cash flows generated by therespective intangible assets.

Goodwill and indefinite-lived intangible assets, primarily the Company’s trade names, areassessed annually for impairment during the fourth quarter or earlier upon the occurrence of certainevents or substantive changes in circumstances. The Company’s 2011, 2010 and 2009 annualimpairment analyses, which were performed as of October 1 of each year, did not result in anygoodwill impairments. The Company’s annual trade name impairment analyses, which wereperformed as of October 1 of each year, resulted in pre-tax non-cash impairments of $36.7 millionand $26.6 million in 2011 and 2009, respectively. The Company’s 2010 trade name impairment

78

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 10 of 53

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text



analysis did not result in any impairment. The impairment charges by business segment for theyears ended December 31, 2011, 2010 and 2009, as well as the remaining value of the tradenames not subject to amortization by business segment as of December 31, 2011 and 2010 are asfollows:

American OtherHome ServiceMaster Operations &

(In thousands) TruGreen Terminix Shield Clean Headquarters(1) Total

Balance at Dec. 31,2008 . . . . . . . . . . $783,600 $875,100 $140,400 $152,600 $445,100 $2,396,800

2009 Impairment . . . (21,400) — — — (5,200) (26,600)

Balance at Dec. 31,2009 and 2010 . . 762,200 875,100 140,400 152,600 439,900 2,370,200

2011 Impairment . . . (36,700) — — — — (36,700)

Balance at Dec. 31,2011 . . . . . . . . . . $725,500 $875,100 $140,400 $152,600 $439,900 $2,333,500

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

The impairment charge in 2011 was primarily attributable to the use of higher discount rates inthe DCF valuation analyses as compared to the discount rates used in the 2010 impairmentanalyses. Although the projected future growth in cash flows in 2011 were slightly higher than in the2010 valuation, the increase in the discount rates more than offset the improved cash flows. Theincrease in the discount rates is primarily attributable to changes in market conditions whichindicated a lower risk tolerance in 2011 as compared to 2010. This lower risk tolerance is exhibitedthrough the marketplace’s desire for higher returns in order to accept market risk. The aggregateimpairment charge in 2009 was primarily attributable to the use of lower projected future cash flowsrelated to the hypothetical royalty rates utilized in the DCF valuation analyses as compared to theprojected future cash flows used in the 2008 impairment analysis. Although the Company projectedfuture growth in cash flows, such growth was lower than that estimated at the time the trade nameswere tested for impairment in 2008. The terminal growth rates used in the analyses for theOctober 1, 2011, 2010 and 2009 impairment tests were the same and in line with historical U.S.gross domestic product growth rates. Had the Company used a discount rate in assessing theimpairment of its trade names that was one percent higher across all business segments (holdingall other assumptions unchanged), the Company would have recorded an additional impairmentcharge of approximately $114.8 million in 2011.

As a result of the trade name impairment taken in 2011, the carrying value of the TruGreentrade name was adjusted to its estimated fair value as of October 1, 2011. Further, the October 1,2011 estimated fair value of the trade name at the ServiceMaster Clean business segment was notsignificantly in excess of its carrying value. Consequently, any further decline in the estimated fairvalues of these trade names will result in additional trade name impairments. It is possible that suchimpairments, if required, could be material and may need to be recorded prior to the fourth quarterof 2012 (i.e., during an interim period) if the Company’s results of operations or other factorsrequire such assets to be tested for impairment at an interim date.

79

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 11 of 53



Fair Value of Financial Instruments and Credit Risk: See Note 19 for information relating tothe 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 tradeddebt and common equity securities. The Company periodically reviews its portfolio of investmentsto determine whether there has been an other than temporary decline in the value of theinvestments from factors such as deterioration in the financial condition of the issuer or themarket(s) in which it competes. The majority of the Company’s receivables have little concentrationof credit risk due to the large number of customers with relatively small balances and theirdispersion across geographical areas. The Company maintains an allowance for losses based uponthe expected collectability of receivables.

Income Taxes: The Company is included in the consolidated U.S. federal income tax return ofHoldings. State and local returns are filed both on a separate company basis and on a combinedunitary basis with Holdings. Current and deferred income taxes are provided for on a separatecompany basis. The Company accounts for income taxes using an asset and liability approach forthe expected future tax consequences of events that have been recognized in the Company’sfinancial statements or tax returns. Deferred income taxes are provided to reflect the differencesbetween the tax bases of assets and liabilities and their reported amounts in the financialstatements. Valuation allowances are established when necessary to reduce deferred income taxassets to the amounts expected to be realized.

The Company records a liability for unrecognized tax benefits resulting from uncertain taxpositions taken or expected to be taken in its tax return. The Company recognizes potential interestand penalties related to its uncertain tax positions in income tax expense.

Stock-Based Compensation: The Company accounts for stock-based compensation underaccounting standards for share based payments, which require that stock options, restricted stockunits and share grants be measured at fair value and this value is recognized as compensationexpense over the vesting period.

Newly Issued Accounting Statements and Positions:

In September 2009, the Financial Accounting Standards Board (‘‘FASB’’) issued ASU 2009-13,‘‘Multiple-Deliverable Revenue Arrangements,’’ which amends the multiple-element arrangementguidance under ASC 605, ‘‘Revenue Recognition.’’ This standard amends the criteria for separatingconsideration received for products or services in multiple-deliverable arrangements. This standardestablishes a selling price hierarchy for determining the selling price of a deliverable, eliminates theresidual method of allocation, and requires that total arrangement consideration be allocated at theinception of the arrangement to all deliverables using the relative selling price method. In addition,this standard significantly expands required disclosures related to a vendor’s multiple-deliverablerevenue arrangements. This standard is effective prospectively for revenue arrangements enteredinto or materially modified in fiscal years beginning on or after June 15, 2010 (calendar year 2011).The Company adopted the required provisions of this standard during the first quarter of 2011. Theadoption of this standard did not have a material impact on the Company’s consolidated financialstatements.

80

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 12 of 53

SCampbell

Typewritten Text

FDD



In May 2011, the FASB issued ASU 2011-04, ‘‘Amendments to Achieve Common Fair ValueMeasurement and Disclosure Requirements in U.S. GAAP and IFRS.’’ This ASU is the result of jointefforts by the FASB and the International Accounting Standards Board to develop convergedguidance on how to measure fair value and what disclosures to provide about fair valuemeasurements. The ASU is largely consistent with existing fair value measurement principles inU.S. GAAP; however, it expands existing disclosure requirements for fair value measurements andmakes other amendments, many of which eliminate unnecessary wording differences betweenU.S. GAAP and IFRS. This ASU is effective for interim and annual periods beginning afterDecember 15, 2011 (calendar year 2012). The Company does not expect the adoption of thisstandard to have a material effect on its consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, ‘‘Presentation of Comprehensive Income,’’ toeliminate the option to present components of other comprehensive income as part of thestatement of changes in stockholders’ equity and require that all non-owner changes instockholders’ equity be presented either in a single continuous statement of comprehensive incomeor in two separate but consecutive statements. In both options, an entity is required to present eachcomponent of net income along with total net income, each component of other comprehensiveincome along with a total for other comprehensive income, and a total amount for comprehensiveincome. In December 2011, the FASB issued ASU 2011-12, ‘‘Comprehensive Income,’’ to effectivelydefer the changes from ASU 2011-05 that relate to the presentation of reclassification adjustmentsout of accumulated other comprehensive income. The amendments will be temporary to allow theBoard time to redeliberate the presentation requirements for reclassifications out of accumulatedother comprehensive income for annual and interim financial statements. This standard is effectivefor fiscal years, and interim periods within those years, beginning after December 15, 2011(calendar year 2012) and must be applied retrospectively to all periods upon adoption. TheCompany anticipates that the adoption of this standard will change the presentation of itsconsolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, ‘‘Testing Goodwill for Impairment,’’ whichgives entities testing goodwill for impairment the option of performing a qualitative assessmentbefore calculating the fair value of a reporting unit in Step 1 of the goodwill impairment test. Ifentities determine, on the basis of qualitative factors, that the fair value of a reporting unit is morelikely than not greater than its carrying amount, the two-step impairment test would not be required.Otherwise, further testing would be needed. This ASU is effective for interim and annual periodsbeginning after December 15, 2011 (calendar year 2012). Early adoption is permitted. TheCompany adopted the provisions of this standard during the fourth quarter of 2011. The adoption ofthis standard did not have a material impact on the Company’s consolidated financial statements.

Note 2. Acquisition of ServiceMaster

On the Closing Date, ServiceMaster was acquired pursuant to the Merger, and, immediatelyfollowing the completion of the Merger, all of the outstanding common stock of Holdings, theultimate parent company of ServiceMaster, was owned by investment funds sponsored by, oraffiliated with, the Equity Sponsors.

81

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 13 of 53

SCampbell

Typewritten Text

FDD


Note 2. Acquisition of ServiceMaster (Continued)

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) borrowingsunder a then new $2.650 billion senior secured term loan facility, and (iii) cash on hand atServiceMaster, were used, among other things, to finance the aggregate Merger consideration, tomake payments in satisfaction of other equity-based interests in ServiceMaster under the Mergeragreement, to settle existing interest rate swaps, to redeem or provide for the repayment of certainof the Company’s existing indebtedness and to pay related transaction fees and expenses. Inaddition, letters of credit issued under a new $150.0 million pre-funded letter of credit facility wereused to replace and/or secure letters of credit previously issued under a ServiceMaster credit facilitythat was terminated as of the Closing Date. On the Closing Date, the Company also entered into,but did not then draw under, the Revolving Credit Facility.

In connection with the Merger and the related transactions (the ‘‘Transactions’’), ServiceMasterretired certain of its existing indebtedness, including ServiceMaster’s $179.0 million, 7.875 percentnotes due August 15, 2009 (the ‘‘2009 Notes’’). On the Closing Date, the 2009 Notes were calledfor redemption and they were redeemed on August 29, 2007. Additionally, the Company utilized aportion of the proceeds from the Term Facilities to repay at maturity ServiceMaster’s $49.2 million,6.95 percent notes due August 15, 2007 (the ‘‘2007 Notes’’).

The Interim Loan Facility matured on July 24, 2008. On the maturity date, outstanding amountsunder the Interim Loan Facility were converted on a one-to-one basis into the 2015 Notes. The 2015Notes were issued pursuant to a refinancing indenture. In connection with the issuance of the 2015Notes, ServiceMaster entered into the Registration Rights Agreement, pursuant to whichServiceMaster filed with the SEC a registration statement with respect to the resale of the 2015Notes, which was declared effective on January 16, 2009. ServiceMaster deregistered the 2015Notes in accordance with the terms of the Registration Rights Agreement, and the effectiveness ofthe registration statement was terminated on November 19, 2009. See Note 12 for a description ofthe Company’s indebtedness.

Upon consummation of the Merger, ServiceMaster de-listed its shares of common stock fromthe New York Stock Exchange (the ‘‘NYSE’’) and deregistered under Section 12 of the SecuritiesExchange Act of 1934. The last day of trading of ServiceMaster common stock on the NYSE wasJuly 24, 2007.

Note 3. Business Segment Reporting

The business of the Company is conducted through five reportable segments: TruGreen,Terminix, American Home Shield, ServiceMaster Clean and Other Operations and Headquarters.

In accordance with accounting standards for segments, the Company’s reportable segmentsare strategic business units that offer different services. The TruGreen segment provides residentialand commercial lawn care services. The Terminix segment provides termite and pest controlservices to residential and commercial customers. The American Home Shield segment provideshome service contracts to consumers that cover heating, ventilation, air conditioning, plumbing andother home systems and appliances. The ServiceMaster Clean segment provides residential andcommercial disaster restoration and cleaning services primarily under the ServiceMaster andServiceMaster Clean brand names, on-site furniture repair and restoration services primarily underthe Furniture Medic brand name and home inspection services primarily under the AmeriSpecbrand name. The Other Operations and Headquarters segment includes the franchised and

82

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 14 of 53


Note 3. Business Segment Reporting (Continued)

Company-owned operations of Merry Maids, which provides house cleaning services. The OtherOperations and Headquarters segment also includes SMAC, our financing subsidiary exclusivelydedicated to providing financing to our franchisees and retail customers of our operating units, andthe Company’s headquarters operations, which provide various technology, marketing, finance,legal and other support services to the business units.

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 UnitedStates with less than two percent generated in foreign markets. Operating expenses of the businessunits consist primarily of direct costs. Identifiable assets are those used in carrying out theoperations of the business unit and include intangible assets directly related to its operations.

Segment information for continuing operations is presented below:

Year Ended Dec. 31,(In thousands) 2011 2010 2009

Operating Revenue:TruGreen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,100,741 $1,096,667 $1,048,936Terminix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,193,075 1,157,346 1,089,072American Home Shield . . . . . . . . . . . . . . . . . . . . . . . . . 686,737 656,572 630,251ServiceMaster Clean . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,691 132,132 125,614Other Operations and Headquarters . . . . . . . . . . . . . . . . 86,628 84,677 84,012

Total Operating Revenue . . . . . . . . . . . . . . . . . . . . . . . . . $3,205,872 $3,127,394 $2,977,885

Operating Income (Loss):(1)(2)(3)TruGreen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 129,324 $ 112,312 $ 64,897Terminix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220,622 199,750 184,131American Home Shield . . . . . . . . . . . . . . . . . . . . . . . . . 94,869 68,380 70,253ServiceMaster Clean . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,674 55,450 50,456Other Operations and Headquarters . . . . . . . . . . . . . . . . (127,029) (129,200) (125,903)

Total Operating Income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 375,460 $ 306,692 $ 243,834

Identifiable Assets:TruGreen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,087,055 $2,103,341 $2,108,908Terminix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,601,869 2,615,388 2,584,937American Home Shield . . . . . . . . . . . . . . . . . . . . . . . . . 954,599 956,089 977,217ServiceMaster Clean . . . . . . . . . . . . . . . . . . . . . . . . . . . 370,526 385,287 388,847Other Operations and Headquarters . . . . . . . . . . . . . . . . 1,132,757 954,583 950,593

Total Identifiable Assets(4) . . . . . . . . . . . . . . . . . . . . . . . . $7,146,806 $7,014,688 $7,010,502

83

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 15 of 53

SCampbell

Typewritten Text

FDD




Depreciation & Amortization Expense:TruGreen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 41,929 $ 66,069 $ 87,726Terminix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,347 67,761 63,277American Home Shield . . . . . . . . . . . . . . . . . . . . . . . . . 27,331 42,259 41,728ServiceMaster Clean . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,150 7,106 8,243Other Operations and Headquarters . . . . . . . . . . . . . . . . 12,679 13,430 13,818

Total Depreciation & Amortization Expense(5) . . . . . . . . . . $ 163,436 $ 196,625 $ 214,792

Capital Expenditures:TruGreen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 44,714 $ 49,014 $ 28,792Terminix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,457 32,380 17,728American Home Shield . . . . . . . . . . . . . . . . . . . . . . . . . 17,529 8,031 1,820ServiceMaster Clean . . . . . . . . . . . . . . . . . . . . . . . . . . . 935 435 232Other Operations and Headquarters . . . . . . . . . . . . . . . . 9,905 44,374 7,432

Total Capital Expenditures . . . . . . . . . . . . . . . . . . . . . . . . $ 96,540 $ 134,234 $ 56,004

(1) Presented below is a reconciliation of segment operating income to income (loss) fromcontinuing operations before income taxes:


Total Segment Operating Income . . . . . . . . . . $375,460 $306,692 $243,834Non-operating Expense (Income):Interest expense . . . . . . . . . . . . . . . . . . . . . . . 273,123 286,933 299,333Interest and net investment income . . . . . . . . . (10,886) (9,358) (7,079)Loss (gain) on extinguishment of debt . . . . . . . 774 — (46,106)Other expense . . . . . . . . . . . . . . . . . . . . . . . . 700 733 748

Income (Loss) from Continuing Operationsbefore Income Taxes . . . . . . . . . . . . . . . . . . $111,749 $ 28,384 $ (3,062)

(2) As described in Note 1, includes pre-tax non-cash impairment charges of $36.7 million and$26.6 million recorded in the years ended December 31, 2011 and 2009, respectively, toreduce the carrying value of trade names as a result of the Company’s annual impairmenttesting of goodwill and indefinite-lived intangible assets. There were no similar impairmentcharges included in continuing operations in 2010. See Note 1 for a summary of the tradename impairment charges by segment.

(3) Includes restructuring charges related to a reorganization of field leadership and a restructuringof branch operations at TruGreen, a branch optimization project at Terminix, informationtechnology outsourcing and an initiative to enhance capabilities and reduce costs in ourcenters of excellence at Other Operations and Headquarters, Merger related charges and other

84

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 16 of 53

SCampbell

Typewritten Text

FDD



restructuring costs. Presented below is a summary of restructuring charges (credits) bysegment:


Restructuring charges (credits):TruGreen . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,115 $ 6,922 $ 8,717Terminix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,560 3,491 3,390American Home Shield . . . . . . . . . . . . . . . . . . . . . — (127) 147ServiceMaster Clean . . . . . . . . . . . . . . . . . . . . . . . 36 71 —Other Operations and Headquarters . . . . . . . . . . . . 3,451 1,091 14,428

Total restructuring charges . . . . . . . . . . . . . . . . . . . $8,162 $11,448 $26,682

(4) Assets of discontinued operations are not included in the business segment table.

(5) There are no adjustments necessary to reconcile total depreciation and amortization aspresented in the business segment table to the consolidated totals. Amortization of debt issuecosts is not included in the business segment table.

The Other Operations and Headquarters segment includes the operations of Merry Maids, aswell as the Company’s headquarters function. The Merry Maids operations reported revenue of$81.0 million, $78.6 million and $78.0 million for the years ended December 31, 2011, 2010 and2009, respectively. The Merry Maids operations reported operating income of $18.0 million,$16.9 million and $8.4 million for the years ended December 31, 2011, 2010 and 2009, respectively.

See Note 4 for information relating to segment goodwill.

Note 4. Goodwill and Intangible Assets

In accordance with applicable accounting standards, goodwill and intangible assets that arenot amortized are subject to assessment for impairment by applying a fair-value based test on anannual basis or more frequently if circumstances indicate a potential impairment. As described inNote 1, the 2011 and 2009 results include pre-tax non-cash impairment charges of $36.7 millionand $26.6 million, respectively, to reduce the carrying value of trade names as a result of theCompany’s annual impairment testing of goodwill and indefinite-lived intangible assets. There wereno similar impairment charges included in continuing operations in 2010.

During the years ended December 31, 2011 and 2010, the increase in goodwill and otherintangible assets related primarily to tuck-in acquisitions completed throughout the period byTerminix, TruGreen and Merry Maids.

85

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 17 of 53

SCampbell

Typewritten Text

FDD


Note 4. Goodwill and Intangible Assets (Continued)

The table below summarizes the goodwill balances by segment for continuing operations:

American OtherHome ServiceMaster Operations &

(In thousands) TruGreen Terminix Shield Clean Headquarters Total

Balance atDec. 31, 2009 . . $1,178,436 $1,361,698 $348,010 $135,713 $51,996 $3,075,853

Acquisitions . . . . . 12,655 36,287 — — 1,214 50,156Other(1) . . . . . . . . (20) (571) (227) 181 (79) (716)

Balance atDec. 31, 2010 . . 1,191,071 1,397,414 347,783 135,894 53,131 3,125,293

Acquisitions . . . . . 11,682 27,789 — — — 39,471Other(1) . . . . . . . . (831) (685) (210) (217) (841) (2,784)

Balance atDec. 31, 2011 . . $1,201,922 $1,424,518 $347,573 $135,677 $52,290 $3,161,980

(1) Reflects the impact of the amortization of tax deductible goodwill and foreign exchange ratechanges. For 2011, the amount shown in the Other Operations & Headquarters column alsoreflects $0.8 million related to the sale of certain Merry Maids company-owned branches toexisting and new franchisees.

There were no accumulated impairment losses as of December 31, 2011.

The table below summarizes the other intangible asset balances for continuing operations:

December 31, 2011 December 31, 2010Accumulated Accumulated

(In thousands) Gross Amortization Net Gross Amortization Net

Trade names(1) . . $2,333,500 $ — $2,333,500 $2,370,200 $ — $2,370,200Customer

relationships . . . 683,324 (539,638) 143,686 668,649 (464,056) 204,593Franchise

agreements . . . . 88,000 (42,406) 45,594 88,000 (35,272) 52,728Other . . . . . . . . . . 58,471 (37,712) 20,759 55,024 (29,034) 25,990

Total . . . . . . . . . . $3,163,295 $(619,756) $2,543,539 $3,181,873 $(528,362) $2,653,511

(1) Not subject to amortization.

Amortization expense of $91.4 million, $136.0 million and $158.8 million was recorded in theyears ended December 31, 2011, 2010 and 2009, respectively. For the existing intangible assets,the Company anticipates amortization expense of $63.5 million, $50.1 million, $43.0 million,$23.4 million and $5.0 million in 2012, 2013, 2014, 2015 and 2016, respectively.

86

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 18 of 53

SCampbell

Typewritten Text

FDD


Note 5. Income Taxes

As of December 31, 2011, 2010 and 2009, the Company had $9.0 million, $13.7 million and$15.4 million, respectively, of tax benefits primarily reflected in state tax returns that have not beenrecognized for financial reporting purposes (‘‘unrecognized tax benefits’’). At December 31, 2011and 2010, $9.0 million and $13.7 million, respectively, of unrecognized tax benefits would impactthe effective tax rate if recognized. A reconciliation of the beginning and ending amount of grossunrecognized tax benefits is as follows:

Year Ended Dec. 31,(In millions) 2011 2010 2009

Gross unrecognized tax benefits at beginning of period . . $13.7 $15.4 $14.2Increases in tax positions for prior years . . . . . . . . . . . . . 1.1 0.3 3.3Decreases in tax positions for prior years . . . . . . . . . . . . . (2.1) (1.9) (3.3)Increases in tax positions for current year . . . . . . . . . . . . 1.1 1.0 2.6Lapse in statute of limitations . . . . . . . . . . . . . . . . . . . . . (4.8) (1.1) (1.4)

Gross unrecognized tax benefits at end of period . . . . . . . $ 9.0 $13.7 $15.4

Up to $1.6 million of the Company’s unrecognized tax benefits could be recognized within thenext 12 months. As of December 31, 2010, the Company believed that it was reasonably possiblethat a decrease of up to $8.0 million in unrecognized tax benefits would have occurred during theyear ended December 31, 2011. During the year ended December 31, 2011 unrecognized taxbenefits actually decreased by $6.9 million as a result of the closing of certain federal and stateaudits and the expiration of statutes of limitation.

The Company files consolidated and separate income tax returns in the United States federaljurisdiction and in many state and foreign jurisdictions. The Company has been audited by theUnited States Internal Revenue Service (‘‘IRS’’) through its year ended December 31, 2009, and isno longer subject to state and local or foreign income tax examinations by tax authorities for yearsbefore 2001.

In the ordinary course of business, the Company is subject to review by domestic and foreigntaxing authorities. For U.S. federal income tax purposes, the Company participates in the IRS’sCompliance Assurance Process whereby its U.S. federal income tax returns are reviewed by the IRSboth prior to and after their filing. The U.S. federal income tax returns filed by the Company throughthe year ended December 31, 2009 have been audited by the IRS. In the third quarter of 2010, theIRS completed the audits of the Company’s tax returns for the year ended December 31, 2009 withno adjustments or additional payments. The Company’s tax returns for the year endedDecember 31, 2010 are under audit, which is expected to be completed during the second quarterof 2012. The IRS commenced examinations of the Company’s U.S. federal income tax returns for2011 in the first quarter of 2011. The examination is anticipated to be completed by the secondquarter of 2013. Eight state tax authorities are in the process of auditing state income tax returns ofvarious subsidiaries.

87

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 19 of 53

SCampbell

Typewritten Text

FDD


Note 5. Income Taxes (Continued)

The Company’s policy is to recognize potential interest and penalties related to its tax positionswithin the tax provision. During the years ended December 31, 2011 and 2010, the Companyreversed interest expense of $1.7 million and $0.6 million, respectively, through the tax provision.During the year ended December 31, 2009, the Company recognized interest expense of$0.6 million through the tax provision. During the year ended December 31, 2011, the Companyreversed penalties of $0.3 million through the tax provision. No tax penalties were recorded throughthe provision during the years ended December 31, 2010 or 2009. As of December 31, 2011 and2010, the Company had accrued for the payment of interest and penalties of $1.4 million and$3.5 million, respectively.

The components of our income from continuing operations before income taxes are as follows:

Year Ended Dec. 31,2011 2010 2009

U.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,603 22,877 (10,579)Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,146 5,507 7,517

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,749 28,384 (3,062)

The reconciliation of income tax computed at the U.S. federal statutory tax rate to theCompany’s effective income tax rate for continuing operations is as follows:

Year Ended Dec. 31,2011 2010 2009

Tax at U.S. federal statutory rate . . . . . . . . . . . . . . . . . . . 35.0% 35.0% 35.0%State and local income taxes, net of U.S. federal benefit . . 1.8 0.4 187.3Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.3) (9.2) 56.1Permanent items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 9.2 16.4Unremitted foreign earnings . . . . . . . . . . . . . . . . . . . . . . — 4.5 41.4Other, including foreign rate differences and reserves . . . . 3.3 (1.3) (35.6)

Effective rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.3% 38.6% 300.6%

In the effective tax rate reconciliation above, the state rate benefit for the year endedDecember 31, 2009 is primarily the result of a change in the state tax rates used to measuredeferred taxes.

The effective tax rate for discontinued operations for the years ended December 31, 2011, 2010and 2009, was a tax benefit of 42.3 percent, 35.9 percent and 35.9 percent, respectively.

88

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 20 of 53

SCampbell

Typewritten Text

FDD



Income tax expense from continuing operations is as follows:

2011(In thousands) Current Deferred Total

U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,103 $39,946 $42,049Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,284 (3,984) (700)State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,477 (914) 2,563

$8,864 $35,048 $43,912

2010Current Deferred Total

U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 574 $ 8,446 $ 9,020Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,847 259 2,106State and local . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,069 (4,250) (181)

$6,490 $ 4,455 $10,945

2009Current Deferred Total

U.S. federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(6,708) 3,589 $(3,119)Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,356 629 2,985State and local . . . . . . . . . . . . . . . . . . . . . . . . . . 14,254 (23,324) (9,070)

$ 9,902 $(19,106) $(9,204)

Deferred income tax expense results from timing differences in the recognition of income andexpense for income tax and financial reporting purposes. Deferred income tax balances reflect thenet tax effects of temporary differences between the carrying amounts of assets and liabilities forfinancial reporting and income tax purposes. The deferred tax asset primarily reflects the impact offuture tax deductions related to the Company’s accruals and certain net operating losscarryforwards. The deferred tax liability is primarily attributable to the basis differences related tointangible assets. Valuation allowances are recorded to reduce deferred tax assets when it is morelikely than not that a tax benefit will not be realized. The valuation allowance for deferred tax assetsas of December 31, 2011 was $6.3 million. The net change in the total valuation allowance for theyear ended December 31, 2011 was a decrease of $9.2 million and was primarily attributable to thereduction of net operating loss carryforwards and other tax attributes related to the dissolution ofcertain subsidiaries.

89

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 21 of 53

SCampbell

Typewritten Text

FDD



Significant components of the Company’s deferred tax balances are as follows:

December 31,(In thousands) 2011 2010

Deferred tax assets (liabilities):Current:

Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . $ (14,240) $ (21,182)Receivables allowances . . . . . . . . . . . . . . . . . . . . 13,343 12,446Accrued insurance expenses . . . . . . . . . . . . . . . . . 8,231 5,245Current reserves . . . . . . . . . . . . . . . . . . . . . . . . . . 5,398 5,986Accrued expenses and other . . . . . . . . . . . . . . . . . 27,337 9,091Net operating loss and tax credit carryforwards . . . 50,540 —Less valuation allowance . . . . . . . . . . . . . . . . . . . . — (28)

Total current asset . . . . . . . . . . . . . . . . . . . . . . . . . . 90,609 11,558

Long-Term:Intangible assets(1) . . . . . . . . . . . . . . . . . . . . . . . . (1,061,604) (1,043,910)Accrued insurance expenses . . . . . . . . . . . . . . . . . 4,640 5,770Net operating loss and tax credit carryforwards . . . 102,558 141,706Other long-term obligations . . . . . . . . . . . . . . . . . . (76,011) (23,128)Less valuation allowance . . . . . . . . . . . . . . . . . . . . (6,276) (15,409)

Total long-term liability . . . . . . . . . . . . . . . . . . . . . (1,036,693) (934,971)

Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . $ (946,084) $ (923,413)

(1) The deferred tax liability relates primarily to the difference in the tax versus book basisof intangible assets. The majority of this liability will not actually be paid unless certainbusiness units of the Company are sold.

As of December 31, 2011, the Company had deferred tax assets, net of valuation allowances,of $137.7 million for federal and state net operating loss and capital loss carryforwards which expireat various dates up to 2031. The Company also had deferred tax assets, net of valuationallowances, of $9.1 million for federal and state credit carryforwards which expire at various datesup to 2031.

The Company has historically determined that the undistributed earnings of foreign subsidiarieswill be repatriated to the U.S. There was no net deferred tax liability recorded as of December 31,2010, related to such undistributed earnings due to the existence of available foreign tax credits.For the year ended December 31, 2011, the Company reorganized certain foreign subsidiaries inconjunction with its international growth initiatives and evaluated its liquidity requirements in theU.S. and the capital requirements of its foreign subsidiaries. Based on these factors, the Companyhas determined that undistributed earnings of foreign subsidiaries will no longer be repatriated.Accordingly, the Company has not recorded deferred taxes for U.S. income or foreign withholdingtaxes on the excess of the amount for financial reporting over the tax basis of investments in foreignsubsidiaries that are essentially permanent in duration. This amount becomes taxable upon arepatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The amount ofsuch undistributed earnings totaled $22.0 million as of December 31, 2011 and any tax liability is

90

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 22 of 53

SCampbell

Typewritten Text

FDD



expected to be offset by available foreign tax credits. Determination of the amount of anyunrecognized deferred income tax liability on this temporary difference is not practicable due to thecomplexities of the hypothetical calculation.

Note 6. Acquisitions

Acquisitions have been accounted for using the acquisition method and, accordingly, theresults of operations of the acquired businesses have been included in the Company’sConsolidated Financial Statements since their dates of acquisition. The assets and liabilities of thesebusinesses were recorded in the financial statements at their estimated fair values as of theacquisition dates.

Current Year

During the year ended December 31, 2011, the Company completed several lawn care andpest control and termite acquisitions for a total net purchase price of $57.1 million. Related to theseacquisitions, the Company recorded goodwill of $39.5 million and other intangibles of $16.2 million.

Prior Years

During the year ended December 31, 2010 and 2009, the Company completed several lawncare and pest control and termite acquisitions, along with several Merry Maids’ franchiseacquisitions, for a total net purchase price of $70.9 million and $35.7 million, respectively. Relatedto these acquisitions, the Company recorded goodwill of $50.2 million and $28.8 million and otherintangibles of $17.6 million and $9.1 million in 2010 and 2009, respectively.

Cash Flow Information for Acquisitions

Supplemental cash flow information regarding the Company’s acquisitions, excluding theMerger, is as follows:

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

Purchase price (including liabilities assumed) . . . . $58,844 $73,142 $37,722Less liabilities assumed . . . . . . . . . . . . . . . . . . . . (1,700) (2,243) (2,070)

Net purchase price . . . . . . . . . . . . . . . . . . . . . . . $57,144 $70,899 $35,652

Net cash paid for acquisitions . . . . . . . . . . . . . . . $44,365 $57,941 $32,647Seller financed debt . . . . . . . . . . . . . . . . . . . . . . . 12,779 12,958 3,005

Payment for acquisitions . . . . . . . . . . . . . . . . . . . $57,144 $70,899 $35,652

Note 7. Discontinued Operations

In the first quarter of 2011, ServiceMaster concluded that TruGreen LandCare did not fit withinthe long-term strategic plans of the Company and committed to a plan to sell the business. OnApril 21, 2011, the Company entered into a purchase agreement to sell the TruGreen LandCarebusiness, and the disposition was effective as of April 30, 2011. As a result of the decision to sellthis business, a $34.2 million impairment charge ($21.0 million, net of tax) was recorded in loss

91

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 23 of 53

SCampbell

Typewritten Text

FDD


Note 7. Discontinued Operations (Continued)

from discontinued operations, net of income taxes, in the first quarter of 2011 to reduce thecarrying value of TruGreen LandCare’s assets to their estimated fair value less cost to sell inaccordance with applicable accounting standards. Upon completion of the sale, a $6.2 million losson sale ($1.9 million, net of tax) was recorded. The loss on the disposition of the TruGreenLandCare business continues to be subject to certain post-closing adjustments and disputes, andsuch adjustments could be significant to the sale price.

The carrying amounts of the major classes of assets and liabilities for TruGreen LandCare arepresented below.

As of December 31, 2011 2010

Assets:Receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $27,732Inventories and other current assets . . . . . . . . . . . . . . . . . . . . . — 23,245

Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 50,977

Net property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . — 22,498Goodwill and intangible assets, net . . . . . . . . . . . . . . . . . . . . . — 9,899

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ — $83,374

Liabilities:Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $268 $15,496Long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,952

Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $268 $17,448

In 2010 and 2009 the Company recorded pre-tax non-cash impairment charges of $46.9 million($28.7 million, net of tax) and $1.4 million ($0.9 million, net of tax), respectively, associated with thegoodwill and trade name at its TruGreen LandCare business in (loss) income from discontinuedoperations, net of income taxes.

92

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 24 of 53


Note 7. Discontinued Operations (Continued)

Financial Information for Discontinued Operations

(Loss) income from discontinued operations, net of income taxes, for all periods presentedincludes the operating results of TruGreen LandCare and the other previously sold businesses. Theoperating results of discontinued operations are as follows:


Operating Results:Operating revenue . . . . . . . . . . . . . . . . . . . . . $ 75,765 $238,508 $262,258

Operating (loss) income(1) . . . . . . . . . . . . . . . (40,620) (49,971) 11,468(Benefit) provision for income taxes(1) . . . . . . . (15,461) (17,973) 4,115

Operating (loss) income, net of income taxes(1) (25,159) (31,998) 7,353Loss on sale, net of income taxes . . . . . . . . . . (1,857) — —

(Loss) income from discontinued operations,net of income taxes(1) . . . . . . . . . . . . . . . . . $(27,016) $ (31,998) $ 7,353

(1) During 2011, a pre-tax non-cash impairment charge of $34.2 million ($21.0 million, netof tax) was recorded to reduce the carrying value of TruGreen LandCare’s assets totheir estimated fair value less cost to sell in accordance with applicable accountingstandards. Also includes goodwill and trade name impairments of $46.9 million($28.7 million, net of tax) and $1.4 million ($0.9 million, net of tax) in 2010 and 2009,respectively.

The table below summarizes the activity during the year ended December 31, 2011 for theremaining liabilities from operations that were discontinued in years prior to 2011. The remainingobligations primarily relate to long-term self-insurance claims. The Company believes that theremaining reserves continue to be adequate and reasonable.

CashBalance at Payments Expense/ Balance at

(In thousands) Dec. 31, 2010 or Other (Income) Dec. 31, 2011

Remaining liabilities of discontinued operations:ARS/AMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 219 $ 35 $ (26) $ 228LandCare Construction . . . . . . . . . . . . . . . . . . . 656 (612) (44) —LandCare utility line clearing business . . . . . . . . 771 (771) — —Certified Systems, Inc. and other . . . . . . . . . . . 1,905 (50) 245 2,100InStar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 31 99 279

Total liabilities of discontinued operations . . . . . . . $3,700 $(1,367) $274 $2,607

93

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 25 of 53

SCampbell

Typewritten Text

FDD


Note 8. Restructuring Charges

The Company incurred restructuring charges of $8.2 million ($5.0 million, net of tax),$11.4 million ($7.0 million, net of tax) and $26.7 million ($16.4 million, net of tax) for the yearsended December 31, 2011, 2010 and 2009, respectively. Restructuring charges were comprised ofthe following:


TruGreen reorganization and restructuring(1) . . . . $1,115 $ 6,922 $ 8,717Information technology outsourcing(2) . . . . . . . . . — — 9,861Terminix branch optimization(3) . . . . . . . . . . . . . . 3,560 2,352 3,219Centers of excellence initiative(4) . . . . . . . . . . . . 3,416 — —Merger related charges(5) . . . . . . . . . . . . . . . . . . — 1,208 2,321Other(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 966 2,564

Total restructuring charges . . . . . . . . . . . . . . . . . . . $8,162 $11,448 $26,682

(1) Represents restructuring charges related to a reorganization of field leadership and arestructuring of branch operations. For the year ended December 31, 2011 thesecharges included severance and lease termination costs of $0.8 million and$0.3 million, respectively. For the years ended December 31, 2010 and 2009, thesecharges included consulting fees of $4.7 million and $6.3 million, respectively andseverance, lease termination and other costs of $2.2 million and $2.4 million,respectively.

(2) On December 11, 2008, the Company entered into an agreement with IBM pursuant towhich IBM provides information technology operations and applications developmentservices to the Company. These services were phased in during the first half of 2009.For the year ended December 31, 2009, these charges included transition fees paid toIBM of $7.6 million, employee retention and severance costs of $1.3 million andconsulting and other costs of $1.0 million.

(3) Represents restructuring charges related to a branch optimization project. For the yearended December 31, 2011, these charges included severance and lease terminationcosts of $0.1 million and $3.5 million, respectively. For the year ended December 31,2010, these charges were comprised of lease termination costs. For the year endedDecember 31, 2009, these charges included lease termination costs of $2.9 millionand severance costs of $0.3 million.

(4) Represents restructuring charges related to an initiative to enhance capabilities andreduce costs in our centers of excellence. For the year ended December 31, 2011,these charges included consulting and severance costs of $1.5 million and$1.9 million, respectively.

(5) Included severance, retention, legal fees and other costs associated with the Merger.

(6) For the year ended December 31, 2011, these charges included reserve adjustments.For the year ended December 31, 2010, these charges included reserve adjustmentsof $0.6 million and severance and retention of $0.4 million. For the year endedDecember 31, 2009 these charges related to previous restructuring initiatives and

94

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 26 of 53

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD


Note 8. Restructuring Charges (Continued)

included adjustments to lease termination reserves of $0.3 million, employee retentionand severance costs of $0.6 million and consulting and other costs of $1.7 million.

The pretax charges discussed above are reported in the ‘‘Restructuring charges’’ line in theConsolidated Statements of Operations.

A reconciliation of the beginning and ending balances of accrued restructuring charges, whichare included in Accrued Liabilities—Other on the Consolidated Statements of Financial Position, ispresented as follows:

AccruedRestructuring

(In thousands) Charges

Balance as of December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,437Costs incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,448Costs paid or otherwise settled . . . . . . . . . . . . . . . . . . . . . . . . . . (15,343)

Balance as of December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . 3,542Costs incurred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,162Costs paid or otherwise settled . . . . . . . . . . . . . . . . . . . . . . . . . . (7,814)

Balance as of December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,890

Note 9. Commitments and Contingencies

The Company leases certain property and equipment under various operating leasearrangements. Most of the property leases provide that the Company pay taxes, insurance andmaintenance applicable to the leased premises. As leases for existing locations expire, theCompany expects to renew the leases or substitute another location and lease.

Rental expense for the years ended December 31, 2011, 2010 and 2009 was $76.7 million,$104.7 million and $106.9 million, respectively. Based on leases in place as of December 31, 2011,future long-term non-cancelable operating lease payments will be approximately $42.6 million in2012, $33.0 million in 2013, $23.0 million in 2014, $14.5 million in 2015, $9.9 million in 2016 and$20.8 million in 2017 and thereafter.

A portion of the Company’s vehicle fleet and some equipment are leased throughmonth-to-month operating leases, cancelable at the Company’s option. There are residual valueguarantees by the Company (ranging from 70 percent to 84 percent of the estimated terminal valueat the inception of the lease depending on the agreement) relative to these vehicles and equipment,which historically have not resulted in significant net payments to the lessors. The fair value of theassets under all of the fleet and equipment leases is expected to substantially mitigate theCompany’s guarantee obligations under the agreements. As of December 31, 2011, the Company’sresidual value guarantees related to the leased assets totaled $32.2 million for which the Companyhas recorded as a liability the estimated fair value of these guarantees of $0.7 million in theConsolidated Statements of Financial Position.

Certain of the Company’s assets, including a call center facility and equipment, are leasedunder capital leases with $12.2 million in remaining lease obligations as of December 31, 2011.Based on leases in place as of December 31, 2011, future lease payments under capital leases will

95

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 27 of 53

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD


Note 9. Commitments and Contingencies (Continued)

be approximately $4.1 million in 2012, $2.6 million in 2013, $2.8 million in 2014, $2.0 million in2015, $0.6 million in 2016 and $0.1 million in 2017 and thereafter.

In the normal course of business, the Company periodically enters into agreements thatincorporate indemnification provisions. While the maximum amount to which the Company may beexposed under such agreements cannot be estimated, the Company does not expect theseguarantees and indemnifications to have a material effect on the Company’s business, financialcondition, results of operations or cash flows.

The Company carries insurance policies on insurable risks at levels which it believes to beappropriate, including workers’ compensation, auto and general liability risks. The Companypurchases insurance policies from third party insurance carriers, which typically incorporatesignificant deductibles or self-insured retentions. The Company is responsible for all claims that fallbelow the retention limits. In determining the Company’s accrual for self-insured claims, theCompany uses historical claims experience to establish both the current year accrual and theunderlying provision for future losses. This actuarially determined provision and related accrualincludes known claims, as well as incurred but not reported claims. The Company adjusts itsestimate of accrued self-insured claims when required to reflect changes based on factors such aschanges in health care costs, accident frequency and claim severity.

A reconciliation of the beginning and ending accrued self-insured claims, which are included inAccrued liabilities—Self-insured claims and related expenses and Other long-term obligations,primarily self-insured claims on the Consolidated Statements of Financial Position, is presented asfollows:

AccruedSelf-insured

(In thousands) Claims

Balance as of December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . $130,932Provision for self-insured claims(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 31,378Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,618)

Balance as of December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . $121,692Provision for self-insured claims(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 26,052Cash payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,662)

Balance as of December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . $108,082

(1) For the years ending December 31, 2011, 2010 and 2009, provisions for uninsuredclaims of $1.8 million, $5.7 million and $6.7 million, respectively, are included in (loss)income from discontinued operations, net of income taxes in the ConsolidatedStatements of Operations.

Accruals for home service contract claims in the American Home Shield business are madebased on the Company’s claims experience and actuarial projections. Termite damage claimaccruals are recorded based on both the historical rates of claims incurred within a contract yearand the cost per claim. Current activity could differ causing a change in estimates. The Companyhas 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

96

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 28 of 53

SCampbell

Typewritten Text

FDD


Note 9. Commitments and Contingencies (Continued)

such costs can be reasonably estimated. Any resulting adjustments, which could be material, arerecorded in the period the adjustments are identified.

The Company has guarantees on certain bonds issued on behalf of divested companiesassociated with TruGreen LandCare, primarily performance type bonds. The maximum paymentsthe Company could be required to make if the buyer of the divested companies is unable to fulfilltheir obligations is approximately $11.9 million as of December 31, 2011. The TruGreen LandCarepurchase agreement requires that the buyer replace the bonds at the bond’s expiration date.Substantially all of the bonds are scheduled to expire prior to 2015, but may be extendeddepending on the completion of the related projects. The fair value of the Company’s obligationsrelated to these guarantees is not significant and no liability has been recorded.

In the ordinary course of conducting business activities, the Company and its subsidiariesbecome involved in judicial, administrative and regulatory proceedings involving both private partiesand governmental authorities. These proceedings include, on an individual, collective,representative and class action basis, regulatory, insured and uninsured employment, general andcommercial liability, wage and hour and environmental proceedings. The Company has entered intosettlement agreements in certain cases, including with respect to putative collective and classactions, which are subject to court approval. If one or more of the Company’s settlements are notfinally 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 itsreputation, business, financial position, results of operations or cash flows; however, the Companycan give no assurance that the results of any such proceedings will not materially affect itsreputation, business, financial position, results of operations and cash flows.

Note 10. Related Party Transactions

In connection with the Merger and the related transactions, the Company entered into aconsulting agreement with CD&R under which CD&R provided the Company with on-goingconsulting and management advisory services. The annual management fee payable under theconsulting agreement with CD&R is $6.25 million. Under this agreement, the Company recordedmanagement fees in each of the years ended December 31, 2011, 2010 and 2009 of $6.25 million,which is included in Selling and administrative expenses in the Consolidated Statements ofOperations. The consulting agreement also provides that CD&R may receive additional fees inconnection with certain subsequent financing and acquisition or disposition transactions. Theconsulting 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, each of which is an Equity Sponsor or an affiliate of an Equity Sponsor. Underthe consulting agreements, Citigroup, BAS and JPMorgan each provide the Company with on-goingconsulting and management advisory services through June 30, 2016 or the earlier termination ofthe existing consulting agreement between the Company and CD&R. On September 30, 2010,Citigroup transferred the management responsibility for certain investment funds that own shares ofcommon stock of Holdings to StepStone and Lexington Partners Advisors LP. Citigroup alsoassigned its obligations and rights under its consulting agreement to StepStone, and beginning inthe fourth quarter of 2010, the consulting fee otherwise payable to Citigroup became payable toStepStone. The Company paid annual management fees of $0.5 million, $0.5 million and$0.25 million to StepStone, BAS and JPMorgan, respectively. The Company recorded consulting

97

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 29 of 53

SCampbell

Typewritten Text

FDD


Note 10. Related Party Transactions (Continued)

fees related to these agreements in each of the years ended December 31, 2011, 2010 and 2009 of$1.25 million, which is included in Selling and administrative expenses in the ConsolidatedStatements of Operations. As of December 22, 2011, Holdings purchased from BAS 7.5 millionshares of capital stock of Holdings. Effective January 1, 2012, the annual management fee payableto BAS was reduced to $0.25 million.

In 2008 and 2009, Holdings completed open market purchases totaling $65.0 million in facevalue of the 2015 Notes for a cost of $21.4 million. On December 21, 2011, the Companypurchased from Holdings and retired $65.0 million in face value of the 2015 Notes for an aggregatepurchase price of $68.0 million, which included payment of accrued interest of $3.0 million. Duringthe years ended December 31, 2011, 2010 and 2009, the Company recorded interest expense of$6.8 million, $7.0 million and $6.9 million, respectively, related to 2015 Notes held by Holdings.During the years ended December 31, 2011, 2010 and 2009, the Company paid interest toHoldings in the amount of $10.0 million, $7.0 million and $6.5 million, respectively. Interest accruedby the Company and payable to Holdings as of December 31, 2010 amounted to $3.2 million. As aresult of the purchase of the 2015 Notes from Holdings, the Company did not have interest payableto Holdings as of December 31, 2011.

Note 11. Employee Benefit Plans

Effective January 2, 2007, the Company approved a long-term incentive plan (the ‘‘LTIP’’)designed to reward certain employees based on the accumulated three-year Company financialperformance against pre-tax income and revenue goals. Pursuant to the LTIP, the awards would bepaid out in cash at the end of a three-year performance period, if certain performance measureswere achieved. The costs of the awards were recognized over the performance period and wereincluded in selling and administrative expenses in the Consolidated Statements of Operations.During 2009, the Company determined that the three year financial performance measures had notbeen achieved and reversed reserves related to the Plan in the amount of $4.4 million. The LTIPwas terminated as of December 31, 2009.

Discretionary contributions to qualified profit sharing and non-qualified deferred compensationplans were made in the amount of $15.7 million, $13.9 million and $12.0 million for the years endedDecember 31, 2011, 2010 and 2009, respectively.

98

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 30 of 53

SCampbell

Typewritten Text

FDD


Note 12. Long-Term Debt

Long-term debt as of December 31, 2011 and December 31, 2010 is summarized in thefollowing table:

(In thousands) 2011 2010

Senior secured term loan facility maturing in 2014 . . . . $2,530,750 $2,557,25010.75% senior notes maturing in 2015 . . . . . . . . . . . . . 996,000 1,061,000Revolving credit facility maturing in 2017 . . . . . . . . . . . — —7.10% notes maturing in 2018(1) . . . . . . . . . . . . . . . . . 67,474 65,5497.45% notes maturing in 2027(1) . . . . . . . . . . . . . . . . . 153,225 150,5557.25% notes maturing in 2038(1) . . . . . . . . . . . . . . . . . 61,441 60,633Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,980 53,500Less current portion . . . . . . . . . . . . . . . . . . . . . . . . . . (51,838) (49,412)

Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . $3,824,032 $3,899,075

(1) The increase in the balance from 2010 to 2011 reflects the amortization of fair valueadjustments related to purchase accounting, which increases the effective interest ratefrom the coupon rates shown above.

In connection with the completion of the Transactions, the Company entered into (i) the seniorsecured term loan facility, (ii) the Interim Loan Facility, (iii) the Revolving Credit Facility and (iv) anew synthetic letter of credit facility in an aggregate principal amount of $150.0 million. Additionally,the Company repaid certain of its existing indebtedness, including the 2009 Notes. The 2009 Noteswere called for redemption on the Closing Date and were redeemed on August 29, 2007.Additionally, the Company utilized a portion of the proceeds from the Term Facilities described anddefined below to repay at maturity the 2007 Notes. The debt issuance costs related to the Mergerhave been capitalized and these costs are being amortized to interest expense over the terms ofthe underlying debt instruments.

Term Facilities

On the Closing Date, in connection with the completion of the Merger, ServiceMaster becameobligated under the Term Facilities. The Term Facilities consist of (i) the senior secured term loanfacility (‘‘Term Loan Facility’’) providing for term loans in an aggregate principal amount of$2.65 billion and (ii) a pre-funded synthetic letter of credit facility in an aggregate principal amountof $150.0 million. As of December 31, 2011, the Company had issued $130.3 million of letters ofcredit, resulting in unused commitments under the synthetic letter of credit facility of $19.7 million.

The Term Loan Facility and the guarantees thereof are secured by substantially all of thetangible and intangible assets of ServiceMaster and certain of our domestic subsidiaries, excludingcertain subsidiaries subject to regulatory requirements in various states, (‘‘Guarantors’’), includingpledges of all the capital stock of all direct domestic subsidiaries (other than foreign subsidiaryholding companies, which are deemed to be foreign subsidiaries) owned by ServiceMaster or anyGuarantor and of up to 65% of the capital stock of each direct foreign subsidiary owned byServiceMaster or any Guarantor. The Term Loan Facility security interests are subject to certainexceptions, including, but not limited to, exceptions for (i) equity interests, (ii) indebtedness or otherobligations of subsidiaries, (iii) real estate or (iv) any other assets, if the granting of a securityinterest therein would require that any notes issued under ServiceMaster’s indenture dated as of

99

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 31 of 53

SCampbell

Typewritten Text

FDD


Note 12. Long-Term Debt (Continued)

August 15, 1997 be secured. The Term Loan Facility is secured on a pari passu basis with thesecurity interests created in the same collateral securing the Revolving Credit Facility.

The Term Facilities will mature on July 24, 2014. The interest rates applicable to the loansunder the Term Facilities are based on a fluctuating rate of interest measured by reference to either,at ServiceMaster’s option, (i) an adjusted London inter-bank offered rate (adjusted for maximumreserves), plus a borrowing margin (2.50 percent as of December 31, 2011) or (ii) an alternate baserate, plus a borrowing margin (2.50 percent as of December 31, 2011). The borrowing margin, ineach case, will be adjusted from time to time based on the Consolidated Secured Leverage Ratio(as defined in the Term Facilities agreement) for the previous fiscal quarter.

The Company has entered into various interest rate swap agreements. Under the terms ofthese agreements, the Company pays a fixed rate of interest on the stated notional amount and theCompany receives a floating rate of interest (based on one month or three month LIBOR) on thestated notional amount. Therefore, during the term of the swap agreements, the effective interestrate on the portion of the term loans equal to the stated notional amount is fixed at the stated ratein the interest rate swap agreements plus the incremental borrowing margin (2.50 percent as ofDecember 31, 2011). The changes in interest rate swap agreements in effect for the years endedDecember 31, 2011, 2010 and 2009, as well as the cumulative interest rate swaps outstanding as ofDecember 31, 2011 and 2010 are as follows:

WeightedNotional Average Fixed

(In thousands) Amount Rate(1)

Interest rate swap agreements in effect as of December 31, 2008 . . . . . $1,430,000 3.89%Entered into effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Interest rate swap agreements in effect as of December 31, 2009 . . . . . 1,430,000 3.89%Entered into effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530,000Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (530,000)

Interest rate swap agreements in effect as of December 31, 2010 . . . . . 1,430,000 3.68%Entered into effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 450,000Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (450,000)

Interest rate swap agreements in effect as of December 31, 2011 . . . . . $1,430,000 2.84%

(1) Before the application of the incremental borrowing margin (2.50 percent as of December 31,2011).

100

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 32 of 53

SCampbell

Typewritten Text

FDD



Interest rate swap agreements in effect as of December 31, 2011 are as follows:

WeightedAverage

Effective Expiration Notional Fixed FloatingTrade Date Date Date Amount Rate(1) Rate

February 15, 2008 March 3, 2008 March 3, 2012 $250,000 3.48% Three month LIBORSeptember 15, 2008 October 1, 2008 October 1, 2012 200,000 3.53% One month LIBOR

April 20, 2009 September 1, 2011(2) August 1, 2013 530,000 1.51% One month LIBORJune 10, 2010 March, 3, 2011 March 1 ,2013 100,000 1.77% One month LIBORJune 10, 2010 September 1, 2011 September 1, 2013 50,000 2.25% One month LIBORJune 15, 2010 March 3, 2011 March 1, 2013 150,000 1.66% One month LIBORJune 15, 2010 September 1, 2011 September 1, 2013 150,000 2.21% One month LIBOR

(1) Before the application of the incremental borrowing margin (2.50 percent as of December 31, 2011).

(2) In August 2011, the Company amended the terms of a $530.0 million interest rate swap agreement enteredinto in April 2009. In connection with the amendment, which became effective as of September 1, 2011, theexpiration date of the agreement was extended from August 2012 to August 2013 and the fixed rate on theagreement was lowered from 2.55 percent to 1.51 percent.

In accordance with accounting standards for derivative instruments and hedging activities, andas further described in Note 19, these interest rate swap agreements are classified as cash flowhedges, and, as such, the hedging instruments are recorded on the Consolidated Statements ofFinancial Position as either an asset or liability at fair value, with the effective portion of the changesin fair value attributable to the hedged risks recorded in accumulated other comprehensive loss.

10.75% Senior Notes and 8% Senior Notes

On the Closing Date, in connection with the completion of the Merger, ServiceMaster becameobligated under the Interim Loan Facility. The Interim Loan Facility matured on July 24, 2008. Onthe maturity date, outstanding amounts under the Interim Loan Facility were converted on a one toone basis into 2015 Notes. The 2015 Notes were issued pursuant to a refinancing indenture. Inconnection with the issuance of 2015 Notes, ServiceMaster entered into the Registration RightsAgreement, pursuant to which ServiceMaster filed with the SEC a registration statement withrespect to the resale of the 2015 Notes, which was declared effective on January 16, 2009.ServiceMaster deregistered the 2015 Notes in accordance with the terms of the Registration RightsAgreement, and the effectiveness of the registration statement was terminated on November 19,2009.

During the first quarter of 2009, the Company completed open market purchases of$89.0 million in face value of the 2015 Notes for a cost of $41.0 million. The debt acquired by theCompany has been retired, and the Company has discontinued the payment of interest. TheCompany recorded a gain on extinguishment of debt of $46.1 million in its ConsolidatedStatements of Operations for the year ended December 31, 2009 related to these retirements.

During the fourth quarter of 2011, the Company purchased $65.0 million in face value of the2015 Notes from Holdings for a cost of $68.0 million, which included payment of accrued interest of$3.0 million. The debt acquired by the Company has been retired, and the Company hasdiscontinued the payment of interest. The Company recorded a loss on extinguishment of debt of

101

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 33 of 53

SCampbell

Typewritten Text

FDD



$0.8 million in its Consolidated Statements of Operations for the year ended December 31, 2011 forwrite-offs of unamortized debt issuance costs related to the extinguished debt.

In February 2012, the Company sold in transactions exempt from registration under theSecurities Act of 1933, as amended, $600 million aggregate principal amount of the 2020 Notes.The 2020 Notes will mature on February 15, 2020 and bear interest at a rate of 8 percent perannum. The 2020 Notes are guaranteed on a senior unsecured basis by certain domesticsubsidiaries of the Company. The Company used $400 million of the proceeds of the sale of the2020 Notes, together with available cash, to redeem $400 million in aggregate principal amount ofits outstanding 2015 Notes in February 2012 and intends to use the remainder of such proceeds,together with available cash, to redeem an additional $200 million aggregate principal amount ofthe 2015 Notes in March 2012.

After giving effect to the 2009 open market purchases and retirement of 2015 Notes by theCompany, the 2011 purchase and retirement of 2015 Notes from Holdings and the redemption of$600 million aggregate principal amount of 2015 Notes with proceeds from the 2020 Notes offering,$396 million aggregate principal amount of the 2015 Notes will remain outstanding.

The 2015 Notes and 2020 Notes are senior unsecured obligations of ours and rank equally inright of payment with all of our other existing and future senior unsecured indebtedness. The 2015Notes and 2020 Notes are jointly and severally guaranteed on a senior unsecured basis by theGuarantors. The subsidiary guarantees are general unsecured senior obligations of the subsidiaryguarantors and rank equally in right of payment with all of the existing and future senior unsecuredindebtedness of our non-guarantor subsidiaries. The 2015 Notes and 2020 Notes are effectivelyjunior to all of our existing and future secured indebtedness to the extent of the value of the assetssecuring such indebtedness.

Revolving Credit Facility

On the Closing Date, in connection with the completion of the Merger, ServiceMaster becameobligated under the Revolving Credit Facility. The Revolving Credit Facility provides for seniorsecured revolving loans and stand-by and other letters of credit. The Revolving Credit Facility limitsoutstanding letters of credit to $75.0 million. As of December 31, 2011 and 2010, there were norevolving loans or letters of credit outstanding under the Revolving Credit Facility. As ofDecember 31, 2011, the Company had $442.5 million of remaining capacity available under theRevolving Credit Facility.

On February 2, 2011, ServiceMaster entered into an amendment to its Revolving Credit Facility.Prior to the amendment, the facility was scheduled to mature on July 24, 2013 and provided formaximum borrowing capacity of $500.0 million with outstanding letters of credit limited to$75.0 million. The Company desired to extend the maturity date of the facility by one year, and asan inducement for such extension offered to allow any lenders in the syndicate group that werewilling to extend the maturity date by one year a 20 percent reduction of such lender’s loancommitment. As a result of the amendment, the Company had available borrowing capacity underits amended Revolving Credit Facility of $442.5 million through July 24, 2013 and $229.6 millionfrom July 25, 2013 through July 24, 2014.

On January 30, 2012, ServiceMaster entered into the Extension Amendment and the IncreaseSupplement to its Revolving Credit Facility, which provides for senior secured revolving loans and

102

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 34 of 53

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD



stand-by and other letters of credit. After effectiveness on February 13, 2012 of the ExtensionAmendment and the Increase Supplement, we have available borrowing capacity under theRevolving Credit Facility of $447.7 million through July 24, 2013, $324.2 million from July 25, 2013through July 24, 2014 and $265.2 million from July 25, 2014 through January 31, 2017. TheCompany 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 collateralsecuring the Term Loan Facility, on a pari passu basis with the security interests created in thesame collateral securing the Term Loan Facility.

The interest rates applicable to the loans under the Revolving Credit Facility will be based on afluctuating rate of interest measured by reference to either, at the borrower’s option, (1) an adjustedLondon inter-bank offered rate (adjusted for maximum reserves), plus a borrowing margin(2.50 percent as of December 31, 2011) or (2) an alternate base rate, plus a borrowing margin(2.50 percent as of December 31, 2011). The borrowing margin, in each case, will be adjusted fromtime to time based on the Consolidated Secured Leverage Ratio (as defined in the Revolving CreditAgreement) for the previous fiscal quarter.

The agreements governing the Term Facilities, the 2015 Notes, the 2020 Notes and theRevolving Credit Facility contain certain covenants that, among other things, limit or restrict theincurrence of additional indebtedness, liens, sales of assets, certain payments (including dividends)and transactions with affiliates, subject to certain exceptions. The Company was in compliance withthe covenants under these agreements at December 31, 2011.

As of December 31, 2011, future scheduled long-term debt payments are $51.8 million,$50.4 million, $2.487 billion, $1.002 billion and $2.1 million for the years ended December 31, 2012,2013, 2014, 2015 and 2016, respectively. The scheduled long-term debt payments in 2012 includethe repayment of $10.0 million transferred under the Company’s accounts receivable securitizationarrangement, as described in Note 14.

Note 13. Cash and Marketable Securities

Cash, money market funds and certificates of deposits, with maturities of three months or lesswhen purchased, are included in Cash and cash equivalents on the Consolidated Statements ofFinancial Position. As of December 31, 2011 and 2010, the Company’s investments consistprimarily of domestic publicly traded debt and certificates of deposit (‘‘Debt securities’’) andcommon equity securities (‘‘Equity securities’’). The amortized cost, fair value and gross unrealizedgains and losses of the Company’s short- and long-term investments in debt and equity securitiesas of December 31, 2011 and 2010 is as follows:

Gross Unrealized Gross Unrealized(In thousands) Amortized Cost Gains Losses Fair Value

Available-for-sale and tradingsecurities, December 31, 2011:Debt securities . . . . . . . . . . . . . . . $ 95,135 $5,795 $ (68) $100,862Equity securities . . . . . . . . . . . . . . 40,558 2,953 (1,891) 41,620

Total securities . . . . . . . . . . . . . . . . . $135,693 $8,748 $(1,959) $142,482

103

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 35 of 53

SCampbell

Typewritten Text

FDD


Note 13. Cash and Marketable Securities (Continued)

Gross Unrealized Gross Unrealized(In thousands) Amortized Cost Gains Losses Fair Value

Available-for-sale and tradingsecurities, December 31, 2010:Debt securities . . . . . . . . . . . . . . . $ 96,594 $4,622 $ (283) $100,933Equity securities . . . . . . . . . . . . . . 36,363 4,999 (1,712) 39,650

Total securities . . . . . . . . . . . . . . . . . $132,957 $9,621 $(1,995) $140,583

The portion of unrealized losses which had been in a loss position for more than one year was$1.7 million and $0.1 million as of December 31, 2011 and 2010, respectively. The aggregate fairvalue of the investments with unrealized losses was $13.6 million and $18.5 million as ofDecember 31, 2011 and 2010, respectively.

As of December 31, 2011 and 2010, $226.2 million and $242.2 million, respectively, of the cashand short- and long-term marketable securities balance are associated with regulatory requirementsat American Home Shield and for other purposes. Such amounts are identified as being potentiallyunavailable to be paid to the Company by its subsidiaries. American Home Shield’s investmentportfolio has been invested in a combination of high quality, short duration fixed income securitiesand equities.

Gains and losses on sales of investments, as determined on a specific identification basis, areincluded in investment income in the period they are realized. The Company periodically reviews itsportfolio of investments to determine whether there has been an other than temporary decline in thevalue of the investments from factors such as deterioration in the financial condition of the issuer orthe market(s) in which the issuer competes.

The table below summarizes proceeds, gross realized gains and gross realized losses, eachresulting from sales of available-for-sale securities and impairment charges due to other thantemporary declines in the value of certain investments.


Proceeds from sales of securities . . . . . . . . . . . . . $45,065 $20,071 $35,141

Gross realized gains, pre-tax . . . . . . . . . . . . . . . . 6,065 2,326 3,882Gross realized gains, net of tax . . . . . . . . . . . . . . 3,714 1,418 2,385

Gross realized losses, pre-tax . . . . . . . . . . . . . . . . (249) (207) (1,492)Gross realized losses, net of tax . . . . . . . . . . . . . . (153) (126) (917)

Impairment charges, pre-tax . . . . . . . . . . . . . . . . . (195) (174) (5,854)Impairment charges, net of tax . . . . . . . . . . . . . . . (119) (106) (3,596)

Note 14. Receivable Sales

The Company has an accounts receivable securitization arrangement under which TruGreenand Terminix may sell certain eligible trade accounts receivable to Funding, the Company’s whollyowned, bankruptcy-remote subsidiary, which is consolidated for financial reporting purposes.Funding, in turn, may transfer, on a revolving basis, an undivided percentage ownership interest of

104

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 36 of 53

SCampbell

Typewritten Text

FDD


Note 14. Receivable Sales (Continued)

up to $50.0 million in the pool of accounts receivable to the Purchasers. The amount of the eligiblereceivables varies during the year based on seasonality of the businesses and could, at times, limitthe amount available to the Company from the sale of these interests. As of December 31, 2011,the amount of eligible receivables was approximately $31.1 million.

During the years ended December 31, 2011, 2010 and 2009, there were no transfers ofinterests in the pool of trade accounts receivables to Purchasers under this arrangement. As ofDecember 31, 2011, 2010 and 2009, the Company had $10.0 million outstanding under thearrangement and, as of December 31, 2011, had $21.1 million of remaining capacity availableunder the accounts receivable securitization arrangement.

The accounts receivable securitization arrangement is a 364-day facility that is renewableannually at the option of Funding, with a final termination date of July 17, 2012. Only one of thePurchasers is required to purchase interests under the arrangement. As part of the annual renewalof the facility, which occurred on July 26, 2011, this Purchaser agreed to continue its participation inthe arrangement through July 17, 2012.

The Company has recorded its obligation to repay the Purchasers for its interest in the pool ofreceivables within current portion of long-term debt on the Consolidated Statements of FinancialPosition. The interest rates applicable to the Company’s obligation are based on a fluctuating rateof interest measured based on the Purchaser’s pooled commercial paper rate (0.26 percent atDecember 31, 2011). In addition, the Company pays usage fees on its obligations and commitmentfees on undrawn amounts committed by the Purchasers. Unless the arrangement is renegotiated orextended prior to its expiration, all obligations under the accounts receivable securitizationarrangement must be repaid by July 17, 2012.

Note 15. Comprehensive Income

Comprehensive income (loss), which primarily includes net income (loss), unrealized gain(loss) on marketable securities, unrealized gain (loss) on derivative instruments and the effect offoreign currency translation is disclosed in the Consolidated Statements of Shareholder’s Equity.

105

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 37 of 53

SCampbell

Typewritten Text

FDD


Note 15. Comprehensive Income (Continued)

The following table summarizes the activity in other comprehensive income (loss) and the relatedtax effects.


Net unrealized gains (losses) on securities:Unrealized gains(1) . . . . . . . . . . . . . . . . . . . . $ 3,092 $ 2,808 $ 2,416Reclassification adjustment for net (gains)

losses realized(2) . . . . . . . . . . . . . . . . . . . . (3,787) (1,225) 2,182

Net unrealized (losses) gains on securities . . (695) 1,583 4,598

Net unrealized gains (losses) on derivativeinstruments:Unrealized losses(3) . . . . . . . . . . . . . . . . . . . . (3,419) (24,901) (24,636)Reclassification adjustment for net losses

realized(4) . . . . . . . . . . . . . . . . . . . . . . . . . 16,733 27,535 47,380

Net unrealized gains on derivativeinstruments . . . . . . . . . . . . . . . . . . . . . . . 13,314 2,634 22,744

Foreign currency translation . . . . . . . . . . . . . . . . (1,460) 2,186 5,038

Other comprehensive income . . . . . . . . . . . . . . . $11,159 $ 6,403 $ 32,380

(1) Net of tax effect of $(2.1) million in 2011, $(1.3) million in 2010 and $(1.4) million in2009.

(2) Net of tax effect of $2.2 million in 2011, $0.7 million in 2010 and $(1.3) million in 2009.

(3) Net of tax effect of $1.4 million in 2011, $14.4 million in 2010 and $13.8 million in2009.

(4) Net of tax effect of $(9.1) million in 2011, $(15.5) million in 2010 and ($28.6) million in2009.

Accumulated other comprehensive loss included the following components as of December 31:


Net unrealized gains on securities, net of tax . . . . . . . . . . . $ 4,330 $ 5,026Net unrealized losses on derivative instruments, net of tax . . (14,268) (27,582)Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . 3,726 5,185

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6,212) $(17,371)

Note 16. Supplemental Cash Flow Information

In the Consolidated Statements of Cash Flows, the caption ‘‘Cash and cash equivalents’’includes investments in short-term, highly-liquid securities having a maturity of three months or less

106

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 38 of 53

SCampbell

Typewritten Text

FDD


Note 16. Supplemental Cash Flow Information (Continued)

when purchased. Supplemental information relating to the Consolidated Statements of Cash Flowsfor the years ended December 31, 2011, 2010 and 2009 is presented in the following table:


Cash paid for or (received from):Interest expense . . . . . . . . . . . . . . . . . . . . . . . $252,284 $268,693 $301,527Interest and dividend income . . . . . . . . . . . . . (4,888) (5,331) (6,621)Income taxes, net of refunds . . . . . . . . . . . . . . 11,677 13,353 824

The Company acquired $10.1 million of property and equipment by entering into capital leasesin 2011, which has been excluded from the Consolidated Statements of Cash Flows as a non-cashinvesting activity. There were no similar transactions in 2009 or 2010.

Note 17. Capital Stock

Effective July 24, 2007 upon completion of the Merger, the Certificate of Incorporation of theCompany was amended to provide for the authorization of 1,000 shares of common stock toreplace the previously authorized, issued and outstanding common stock. As a result of the Merger,CDRSVM Holding, Inc. holds 1,000 shares of the Company’s common stock, which represents all ofthe authorized and issued common stock. The Company has no other classes of capital stock,authorized or issued.

Note 18. Stock-Based Compensation

The board of directors and stockholders of Holdings have adopted the Amended and RestatedServiceMaster Global Holdings, Inc. Stock Incentive Plan (the ‘‘MSIP’’). The MSIP provides for thesale of shares and deferred share units (‘‘DSUs’’) of Holdings stock to ServiceMaster’s executives,officers and other employees and to Holdings’ directors as well as the grant of both restricted stockunits (‘‘RSUs’’) and options to purchase shares of Holdings to those individuals. DSUs represent aright to receive a share of common stock in the future. The board of directors of Holdings, or acommittee designated by it, selects the ServiceMaster executives, officers and employees and theHoldings’ directors eligible to participate in the MSIP and determines the specific number of sharesto be offered or options to be granted to an individual. A maximum of 14,595,000 shares ofHoldings stock is authorized for issuance under the MSIP. Holdings currently intends to satisfy anyneed for shares of common stock of Holdings associated with the settlement of DSUs, vesting ofRSUs or exercise of options issued under the MSIP through those new shares available forissuance 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-shareexercise price no less than the fair market value of one share of Holdings stock on the grant date.Any stock options granted will generally have a term of ten years and vesting will be subject to anemployee’s continued employment. The board of directors of Holdings, or a committee designatedby it, may accelerate the vesting of an option at any time. In addition, vesting of options will beaccelerated if Holdings experiences a change in control (as defined in the MSIP) unless optionswith substantially equivalent terms and economic value are substituted for existing options in placeof accelerated vesting. Vesting of options will also be accelerated in the event of an employee’sdeath or disability (as defined in the MSIP). Upon a termination for cause (as defined in the MSIP),

107

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 39 of 53

SCampbell

Typewritten Text

FDD


Note 18. Stock-Based Compensation (Continued)

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 orthree months following termination of employment (one year in the case of death, disability orretirement at normal retirement age). Unless sooner terminated by the board of directors ofHoldings, the MSIP will remain in effect until November 20, 2017.

In 2011, 2010 and 2009, Holdings completed various equity offerings to certain executives,officers and employees of ServiceMaster pursuant to the MSIP. The shares sold and options grantedin connection with these equity offerings are subject to and governed by the terms of the MSIP. Inconnection with these offerings, Holdings sold a total of 495,538, 97,200 and 234,500 shares ofcommon stock in 2011, 2010 and 2009, respectively, at a purchase price of $11.00 per share in2011 and $10.00 per share in 2010 and 2009, respectively. In addition, Holdings grantedServiceMaster’s executives, officers and employees options to purchase 2,280,391, 284,400 and906,000 shares of Holdings common stock in 2011, 2010 and 2009, respectively, at an exerciseprice of $11.00 per share for options issued in 2011 and $10.00 per share for options issued in2010 and 2009, respectively. 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 thecompensation committee of Holdings of the fair market value of the common stock of Holdings asof the purchase/grant dates.

All options, except for 86,364 options granted to our CEO in 2011 (‘‘SuperperformanceOptions’’), granted to date will vest in four equal annual installments, subject to an employee’scontinued employment. The four-year vesting period is the requisite service period over whichcompensation cost will be recognized on a straight-line basis for all grants. The SuperperformanceOptions granted in 2011 will vest immediately in the event that the stock price of Holdings reachesa targeted level. All options issued are accounted for as equity-classified awards. The non-cashstock-based compensation expense associated with the MSIP is pushed down from Holdings andrecorded in the financial statements of ServiceMaster.

The value of each option award was estimated on the grant date using the Black-Scholesoption valuation model that incorporates the assumptions noted in the following table. For optionsgranted in 2011, 2010 and 2009, the expected volatilities were based on the historical and impliedvolatilities of the publicly traded stock of a group of companies comparable to ServiceMaster. Theexpected life represents the period of time that options granted are expected to be outstanding andwas calculated using the simplified method as outlined by the SEC in Staff Accounting BulletinsNo. 107 and 110. The risk-free interest rates were based on the U.S. Treasury securities with termssimilar to the expected lives of the options as of the grant dates.

Year Ended Dec. 31,Assumption 2011 2010 2009

Expected volatility . . . . . . . . . . . . . 31.0% - 50.3% 31.7% - 34.3% 38.5% - 46.9%Expected dividend yield . . . . . . . . . 0.0% 0.0% 0.0%Expected life (in years) . . . . . . . . . 6.3 6.3 6.3Risk-free interest rate . . . . . . . . . . . 1.07% - 2.65% 1.77% - 2.63% 2.56% - 2.92%

The weighted-average grant-date fair value of the options granted during 2011, 2010 and 2009was $4.31, $3.65 and $4.36 per option, respectively. The Company has applied a forfeitureassumption of 8.50 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 applieda forfeiture rate of zero.

108

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 40 of 53

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD



A summary of option activity under the MSIP as of December 31, 2011, and changes duringthe year then ended is presented below:

WeightedWeighted Avg.

Avg. RemainingStock Exercise Contractual

Options Price Term (in years)

Total outstanding, December 31, 2010 . . . . . 9,601,683 $10.00Granted to employees . . . . . . . . . . . . . . . 2,280,391 $11.00Exercised . . . . . . . . . . . . . . . . . . . . . . . . (500,000) $10.00Forfeited . . . . . . . . . . . . . . . . . . . . . . . . (976,225) $10.00Expired . . . . . . . . . . . . . . . . . . . . . . . . . (782,175) $10.00

Total outstanding, December 31, 2011 . . . . . 9,623,674 $10.24 6.6

Total exercisable, December 31, 2011 . . . . . 6,783,358 $10.00 5.6

Holdings granted ServiceMaster’s executives, officers and employees 350,454 and 735,000RSUs in 2011 and 2010, respectively, with grant date fair values of $11.00 and $10.00 per unit,respectively, which was equivalent to the then current fair value of Holdings’ common stock.Holdings’ Compensation Committee determined the fair market value of Holdings common stock asof December 31, 2011 was $14 per share. No RSUs were granted in 2009. All RSUs, with theexception of the performance-based RSUs discussed below, will vest in three equal annualinstallments, subject to an employee’s continued employment. During 2011, the Company issued20,000 RSUs with vesting subject to certain performance conditions to the president of TruGreen.These performance-based RSUs will vest as follows: (i) up to 10,000 units will vest onDecember 31, 2012, and (ii) up to 10,000 units will vest on December 31, 2013 based on theHoldings’ Compensation Committee’s evaluation of the achievement of certain qualitativeperformance conditions, in its sole discretion, by the TruGreen president. The performance-basedRSUs do not meet the criteria required under ASC 718 for the establishment of a grant date. As aresult, the performance-based RSUs are not included in the total outstanding RSUs as ofDecember 31, 2011. Upon vesting, each RSU will be converted into one share of Holdings’common stock.

A summary of RSU activity under the MSIP as of December 31, 2011, and changes during theyear then ended is presented below:

Weighted Avg.Grant Date

RSUs Fair Value

Total outstanding, December 31, 2010 . . . . . . . . . . . . . 735,000 $10.00Granted to employees . . . . . . . . . . . . . . . . . . . . . . . 350,454 $11.00Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (176,669) $10.00Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (225,000) $10.00

Total outstanding, December 31, 2011 . . . . . . . . . . . . . 683,785 $10.51

During the years ended December 31, 2011, 2010 and 2009, the Company recognized stock-based compensation expense of $8.4 million ($5.2 million, net of tax), $9.4 million ($5.7 million, netof tax) and $8.1 million ($5.0 million, net of tax), respectively. As of December 31, 2011, there was

109

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 41 of 53

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD



$15.8 million of total unrecognized compensation cost related to non-vested stock options andRSUs granted by Holdings under the MSIP. These remaining costs are expected to be recognizedover a weighted-average period of 2.9 years.

In September 2010, ServiceMaster announced the retirement of its former CEO with aretirement date of March 31, 2011. On September 8, 2010, in connection with the CEO’s retirementannouncement, Holdings extended the option period on the former CEO’s vested standaloneoptions to three years following his departure date. This extension of the option period isconsidered a stock option modification resulting in additional stock compensation expense of$0.5 million, which was recorded in the year ended December 31, 2010.

Note 19. Fair Value of Financial Instruments

The period end carrying amounts of receivables, accounts payable and accrued liabilitiesapproximate fair value because of the short maturity of these instruments. The period end carryingamounts of long-term notes receivable approximate fair value as the effective interest rates for theseinstruments are comparable to market rates at period end. The period end carrying amounts ofcurrent and long-term marketable securities also approximate fair value, with unrealized gains andlosses reported net-of-tax as a component of accumulated other comprehensive loss on theConsolidated Statements of Financial Position, or, for certain unrealized losses, reported in interestand net investment income in the Consolidated Statements of Operations if the decline in value isother than temporary. The carrying amount of total debt was $3.876 billion and $3.949 billion andthe estimated fair value was $3.788 billion and $3.958 billion as of December 31, 2011 and 2010,respectively. The fair values of the Company’s financial instruments reflect the amounts that wouldbe received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date (exit price). The fair value estimates presented in this reportare based on information available to the Company as of December 31, 2011 and 2010.

The Company has estimated the fair value of its financial instruments measured at fair value ona recurring basis using the market and income approaches. For investments in marketablesecurities, deferred compensation trust assets and derivative contracts, which are carried at theirfair values, the Company’s fair value estimates incorporate quoted market prices, other observableinputs (for example, forward interest rates) and unobservable inputs (for example, forwardcommodity prices) at the balance sheet date.

Interest rate swap contracts are valued using forward interest rate curves obtained from thirdparty market data providers. The fair value of each contract is the sum of the expected futuresettlements between the contract counterparties, discounted to present value. The expected futuresettlements are determined by comparing the contract interest rate to the expected forward interestrate as of each settlement date and applying the difference between the two rates to the notionalamount of debt in the interest rate swap contracts. See Note 12 for a summary of the Company’sinterest rate swap contracts.

Fuel swap contracts are valued using forward fuel price curves obtained from third party marketdata providers. The fair value of each contract is the sum of expected future settlements betweencontract counterparties, discounted to present value. The expected future settlements aredetermined by comparing the contract fuel price to the expected forward fuel price as of eachsettlement date and applying the difference between the contract and expected prices to thenotional gallons in the fuel swap contracts.

110

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 41 of 53

SCampbell

Typewritten Text

FDD


Note 19. Fair Value of Financial Instruments (Continued)

The carrying amount and estimated fair value of the Company’s financial instruments that arerecorded at fair value for the periods presented are as follows:

As of December 31, 2011Estimated Fair Value MeasurementsQuoted Significant As ofPrices In Other Significant December 31, 2010Active Observable Unobservable

Balance Sheet Carrying Markets Inputs Inputs Carrying Estimated(In thousands) Locations Value (Level 1) (Level 2) (Level 3) Value Fair Value

Financial Assets:Deferred compensation

trust assets . . . . . . . Long-term marketablesecurities $ 10,834 $10,834 $ — $ — $ 10,859 $ 10,859

Investments inmarketable securities . Marketable securities

and long-termmarketable securities 131,648 52,358 79,290 — 129,724 129,724

Fuel swap contracts:Current . . . . . . . . . . Prepaid expenses and

other assets 548 — — 548 5,813 5,813Noncurrent . . . . . . . Other assets — — — — 836 836

Total financial assets . . . $143,030 $63,192 $79,290 $ 548 $147,232 $147,232

Financial Liabilities:Fuel swap contracts:

Current . . . . . . . . . . Other accrued liabilities $ 1,281 $ — $ — $1,281 $ — $ —Interest rate swap

contracts . . . . . . . . Other long-termliabilities 23,467 — 23,467 — 50,085 50,085

Total financial liabilities . $ 24,748 $ — $23,467 $1,281 $ 50,085 $ 50,085

A reconciliation of the beginning and ending fair values of financial instruments valued usingsignificant unobservable inputs (Level 3) is presented as follows:

Fuel SwapContract

(In thousands) Assets (Liabilities)

Balance as of December 31, 2009 . . . . . . . . . . . . . . . . . . . . . . $ 6,916Total gains (losses) (realized and unrealized):

Included in earnings(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,015Included in other comprehensive income . . . . . . . . . . . . . . (267)

Settlements, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,015)

Balance as of December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . $ 6,649Total gains (losses) (realized and unrealized):

Included in earnings(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,010Included in other comprehensive income . . . . . . . . . . . . . . (7,382)

Settlements, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,010)

Balance as of December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . $ (733)

(1) Gains (losses) included in earnings are reported in cost of services rendered andproducts sold.

111

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 42 of 53

SCampbell

Typewritten Text

FDD



The Company uses derivative financial instruments to manage risks associated with changes infuel prices and interest rates. The Company does not hold or issue derivative financial instrumentsfor trading or speculative purposes. In designating its derivative financial instruments as hedginginstruments under accounting standards for derivative instruments, the Company formallydocuments the relationship between the hedging instrument and the hedged item, as well as therisk management objective and strategy for the use of the hedging instrument. This documentationincludes linking the derivatives to forecasted transactions. The Company assesses at the time aderivative contract is entered into, and at least quarterly thereafter, whether the derivative item iseffective 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 ofapproximately 21 million gallons. The Company has also hedged the interest payments on a portionof its variable rate debt through the use of interest rate swap agreements. All of the Company’s fuelswap 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 aseither an asset or liability at fair value, with the effective portion of changes in the fair valueattributable to the hedged risks recorded in accumulated other comprehensive loss. Any change inthe fair value of the hedging instrument resulting from ineffectiveness, as defined by accountingstandards, is recognized in current period earnings. Cash flows related to fuel and interest ratederivatives are classified as operating activities in the Consolidated Statements of Cash Flows.

The effect of derivative instruments on the Consolidated Statements of Operations andaccumulated other comprehensive loss on the Consolidated Statements of Financial Position for theyears ended December 31, 2011 and 2010, respectively, is presented as follows:

Effective Portion ofEffective Portion of Gain (Loss) Reclassified from

(In thousands) (Loss) Gain Recognized in Accumulated OtherAccumulated Other Comprehensive LossDerivatives designated as Comprehensive Loss into IncomeCash Flow Hedge Location of Gain (Loss)

Relationships Year ended December 31, 2011 included in Income

Fuel swap contracts . . . . . $ (7,382) $ 9,739 Cost of services renderedand products sold

$ 271 Loss (income) fromdiscontinued operations, netof income tax

Interest rate swap contracts $28,340 $(37,613) Interest expense

Effective Portion ofEffective Portion of Gain (Loss) Reclassified from

(Loss) Gain Recognized in Accumulated OtherAccumulated Other Comprehensive LossDerivatives designated as Comprehensive Loss into IncomeCash Flow Hedge Location of Gain (Loss)

Relationships Year ended December 31, 2010 included in Income

Fuel swap contracts . . . . . $ (267) $ 5,316 Cost of services renderedand products sold

$ 699 Loss (income) fromdiscontinued operations,net of income tax

Interest rate swap contracts $4,035 $(48,970) Interest expense

112

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 44 of 53



Ineffective portions of derivative instruments designated in accordance with accountingstandards as cash flow hedge relationships were insignificant during the year ended December 31,2011. As of December 31, 2011, the Company had fuel swap contracts to pay fixed prices for fuelwith an aggregate notional amount of $45.5 million, maturing through 2012. Under the terms of itsfuel swap contracts, the Company is required to post collateral in the event that the fair value of thecontracts exceeds a certain agreed upon liability level and in other circumstances required by thecounterparty. As of December 31, 2011, the Company had posted $3.8 million in letters of credit ascollateral under its fuel hedging program, none of which were posted under the Company’sRevolving Credit Facility. As of December 31, 2011, the Company had interest rate swap contractsto pay fixed rates for interest on long-term debt with an aggregate notional amount of $1.430 billion,maturing through 2013.

The effective portion of the gain or loss on derivative instruments designated and qualifying ascash flow hedging instruments is recorded in other comprehensive loss. These amounts arereclassified into earnings in the same period or periods during which the hedged forecasted debtinterest settlement or the fuel settlement affects earnings. The amount expected to be reclassifiedinto earnings during the next 12 months includes unrealized gains and losses related to open fuelhedges and interest rate swaps. Specifically, as the underlying forecasted transactions occur duringthe next 12 months, the hedging gains and losses in accumulated other comprehensive lossexpected to be recognized in earnings is a loss of $14.1 million, net of tax, as of December 31,2011. The amounts that are ultimately reclassified into earnings will be based on actual interestrates and fuel prices at the time the positions are settled and may differ materially from the amountnoted above.

Note 20. Condensed Consolidating Financial Statements of The ServiceMaster Company andSubsidiaries

The following condensed consolidating financial statements of the Company and itssubsidiaries have been prepared pursuant to Rule 3-10 of Regulation S-X. These condensedconsolidating financial statements have been prepared from the Company’s financial information onthe same basis of accounting as the Consolidated Financial Statements. Goodwill and otherintangible assets have been allocated to all of the subsidiaries of the Company based onmanagement’s estimates.

The payment obligations of the Company under the 2015 Notes and the 2020 Notes are jointlyand severally guaranteed on a senior unsecured basis by the Guarantors. Each of the Guarantors iswholly owned, directly or indirectly, by the Company, and all guarantees are full and unconditional.All other subsidiaries of the Company, either directly or indirectly owned, do not guarantee the 2015Notes or the 2020 Notes (‘‘Non-Guarantors’’). A Guarantor will be released from its obligationsunder its guarantee under certain customary circumstances, including, (i) the sale or disposition ofthe Guarantor, (ii) the release of the Guarantor from all of its obligations under all guaranteesrelated to any indebtedness of the Company, (iii) the merger or consolidation of the Guarantor asspecified in the indenture governing the 2015 Notes or the 2020 Notes, as the case may be, (iv) theGuarantor becomes an unrestricted subsidiary under the indenture governing the 2015 Notes or the2020 Notes, as the case may be, (v) the defeasance of the Company’s obligations under theindenture governing the 2015 Notes or the 2020 Notes, as the case may be, or (vi) the payment infull of the principal amount of the 2015 Notes or the 2020 Notes, as the case may be.

113

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 45 of 53


Note 20. Condensed Consolidating Financial Statements of The ServiceMaster Company andSubsidiaries (Continued)

THE SERVICEMASTER COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations

For the Year Ended December 31, 2011

(In thousands)

TheServiceMaster Non-

Company Guarantors Guarantors Eliminations Consolidated

Operating Revenue . . . . . . . . . $ — $2,452,731 $ 811,446 $(58,305) $3,205,872Operating Costs and

Expenses:Cost of services rendered and

products sold . . . . . . . . . . . . — 1,483,220 388,201 (57,715) 1,813,706Selling and administrative

expenses . . . . . . . . . . . . . . . 9,186 499,101 372,630 (425) 880,492Amortization expense . . . . . . . . 222 67,443 23,687 — 91,352Trade name impairment . . . . . . . — 36,700 — — 36,700Restructuring charges . . . . . . . . 35 4,678 3,449 — 8,162

Total operating costs andexpenses . . . . . . . . . . . . . . . 9,443 2,091,142 787,967 (58,140) 2,830,412

Operating (Loss) Income . . . . . (9,443) 361,589 23,479 (165) 375,460Non-operating Expense

(Income):Interest expense (income) . . . . . 189,677 89,819 (6,373) — 273,123Interest and net investment loss

(income) . . . . . . . . . . . . . . . . 2,969 3,491 (17,346) — (10,886)Loss on extinguishment of debt . 774 — — — 774Other expense . . . . . . . . . . . . . — — 700 — 700

(Loss) Income from ContinuingOperations before IncomeTaxes . . . . . . . . . . . . . . . . . . (202,863) 268,279 46,498 (165) 111,749

(Benefit) provision for incometaxes . . . . . . . . . . . . . . . . . . . (76,622) 18,720 101,814 — 43,912

(Loss) Income from ContinuingOperations . . . . . . . . . . . . . . (126,241) 249,559 (55,316) (165) 67,837

Income (loss) from discontinuedoperations, net of incometaxes . . . . . . . . . . . . . . . . . . . — 19,497 (46,678) 165 (27,016)

Equity in earnings ofsubsidiaries (net of tax) . . . . . 167,062 (111,863) — (55,199) —

Net Income (Loss) . . . . . . . . . . $ 40,821 $ 157,193 $(101,994) $(55,199) $ 40,821

114

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 46 of 53






(In thousands)



Operating Revenue . . . . . . . . . $ — $2,405,822 $ 777,219 $(55,647) $3,127,394Operating Costs and


products sold . . . . . . . . . . . . — 1,461,057 371,293 (55,046) 1,777,304Selling and administrative

expenses . . . . . . . . . . . . . . . 9,577 516,349 370,208 (184) 895,950Amortization expense . . . . . . . . 222 99,918 35,860 — 136,000Restructuring charges (credits) . 1,208 10,484 (244) — 11,448

Total operating costs andexpenses . . . . . . . . . . . . . . . 11,007 2,087,808 777,117 (55,230) 2,820,702

Operating (Loss) Income . . . . . (11,007) 318,014 102 (417) 306,692Non-operating Expense

(Income):Interest expense . . . . . . . . . . . . 196,647 76,258 14,028 — 286,933Interest and net investment loss

(income) . . . . . . . . . . . . . . . . 1,628 3,596 (14,582) — (9,358)Other expense . . . . . . . . . . . . . — — 733 — 733

(Loss) Income from ContinuingOperations before IncomeTaxes . . . . . . . . . . . . . . . . . . (209,282) 238,160 (77) (417) 28,384

(Benefit) provision for incometaxes . . . . . . . . . . . . . . . . . . . (73,163) 25,134 58,974 — 10,945

(Loss) Income from ContinuingOperations . . . . . . . . . . . . . . (136,119) 213,026 (59,051) (417) 17,439

Income (loss) from discontinuedoperations, net of incometaxes . . . . . . . . . . . . . . . . . . . — 17,868 (50,283) 417 (31,998)

Equity in earnings ofsubsidiaries (net of tax) . . . . . 121,560 (117,729) — (3,831) —

Net (Loss) Income . . . . . . . . . . $ (14,559) $ 113,165 $(109,334) $ (3,831) $ (14,559)

115

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 47 of 53






(In thousands)



Operating Revenue . . . . . . . . . $ — $2,284,625 $765,609 $ (72,349) $2,977,885Operating Costs and


products sold . . . . . . . . . . . . . — 1,419,278 343,011 (71,038) 1,691,251Selling and administrative

expenses . . . . . . . . . . . . . . . . 9,582 505,945 315,220 — 830,747Amortization expense . . . . . . . . . 222 122,643 35,906 — 158,771Trade name impairment . . . . . . . — 21,400 5,200 — 26,600Restructuring charges . . . . . . . . 2,321 12,107 12,254 — 26,682

Total operating costs andexpenses . . . . . . . . . . . . . . . . 12,125 2,081,373 711,591 (71,038) 2,734,051

Operating (Loss) Income . . . . . (12,125) 203,252 54,018 (1,311) 243,834Non-operating Expense

(Income):Interest expense (income) . . . . . 288,514 (3,414) 14,233 — 299,333Interest and net investment loss

(income) . . . . . . . . . . . . . . . . 938 5,555 (13,572) — (7,079)Gain on extinguishment of debt . (46,106) — — — (46,106)Other expense . . . . . . . . . . . . . . — — 748 — 748

(Loss) Income from ContinuingOperations before IncomeTaxes . . . . . . . . . . . . . . . . . . (255,471) 201,111 52,609 (1,311) (3,062)

(Benefit) provision for incometaxes . . . . . . . . . . . . . . . . . . . (107,346) 32,445 65,697 — (9,204)

(Loss) Income from ContinuingOperations . . . . . . . . . . . . . . (148,125) 168,666 (13,088) (1,311) 6,142

(Loss) income from discontinuedoperations, net of incometaxes . . . . . . . . . . . . . . . . . . . — (4,186) 10,228 1,311 7,353

Equity in earnings of subsidiaries(net of tax) . . . . . . . . . . . . . . . 161,620 (12,716) — (148,904) —

Net Income . . . . . . . . . . . . . . . $ 13,495 $ 151,764 $ (2,860) $(148,904) $ 13,495

116

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 48 of 53



Condensed Consolidating Statement of Financial Position

As of December 31, 2011

(In thousands)



AssetsCurrent Assets:Cash and cash equivalents . . . . . . . . . . . . . . . $ 232,382 $ 13,751 $ 82,797 $ — $ 328,930Marketable securities . . . . . . . . . . . . . . . . . . — — 12,026 — 12,026Receivables . . . . . . . . . . . . . . . . . . . . . . . . 1,202 108,486 452,149 (187,637) 374,200Inventories . . . . . . . . . . . . . . . . . . . . . . . . . — 57,219 2,424 — 59,643Prepaid expenses and other assets . . . . . . . . . 5,629 12,742 20,218 (294) 38,295Deferred customer acquisition costs . . . . . . . . . — 13,838 16,565 — 30,403Deferred taxes . . . . . . . . . . . . . . . . . . . . . . 39,221 47,218 4,170 — 90,609Assets of discontinued operations . . . . . . . . . . — 7 10 — 17

Total Current Assets . . . . . . . . . . . . . . . . . . . 278,434 253,261 590,359 (187,931) 934,123

Property and Equipment:At cost . . . . . . . . . . . . . . . . . . . . . . . . . . . — 377,900 163,917 — 541,817Less: accumulated depreciation . . . . . . . . . . . . — (164,689) (70,369) — (235,058)

Net property and equipment . . . . . . . . . . . . — 213,211 93,548 — 306,759

Other Assets:Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,796,789 365,191 — 3,161,980Intangible assets, primarily trade names, service

marks and trademarks, net . . . . . . . . . . . . . — 1,804,619 738,920 — 2,543,539Notes receivable . . . . . . . . . . . . . . . . . . . . . 1,997,157 82 31,187 (2,005,104) 23,322Long-term marketable securities . . . . . . . . . . . 10,834 — 119,622 — 130,456Investments in and advances to subsidiaries . . . . 2,890,634 872,451 — (3,763,085) —Other assets . . . . . . . . . . . . . . . . . . . . . . . 51,871 3,838 3,926 (50,789) 8,846Debt issuance costs . . . . . . . . . . . . . . . . . . . 37,708 — 90 — 37,798

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . $5,266,638 $5,944,251 $1,942,843 $(6,006,909) $7,146,823

Liabilities and Shareholder’s EquityCurrent Liabilities:Accounts payable . . . . . . . . . . . . . . . . . . . . $ 192 $ 46,378 $ 35,071 $ — $ 81,641Accrued liabilities:

Payroll and related expenses . . . . . . . . . . . . 1,659 40,608 43,079 — 85,346Self-insured claims and related expenses . . . . . — 20,400 52,671 — 73,071Accrued interest payable . . . . . . . . . . . . . . . 67,000 260 45 (294) 67,011Other . . . . . . . . . . . . . . . . . . . . . . . . . . 2,919 31,760 35,424 — 70,103

Deferred revenue . . . . . . . . . . . . . . . . . . . . . — 142,918 330,324 — 473,242Liabilities of discontinued operations . . . . . . . . . — 279 526 — 805Current portion of long-term debt . . . . . . . . . . . 108,428 14,258 116,789 (187,637) 51,838

Total Current Liabilities . . . . . . . . . . . . . . . . . 180,198 296,861 613,929 (187,931) 903,057

Long-Term Debt . . . . . . . . . . . . . . . . . . . . . 3,782,391 2,015,961 30,784 (2,005,104) 3,824,032Other Long-Term Liabilities:

Deferred taxes . . . . . . . . . . . . . . . . . . . . . — 808,830 278,652 (50,789) 1,036,693Intercompany payable . . . . . . . . . . . . . . . . 12,309 — 310,011 (322,320) —Liabilities of discontinued operations . . . . . . . — — 2,070 — 2,070Other long-term obligations, primarily

self-insured claims . . . . . . . . . . . . . . . . . 43,821 220 89,011 — 133,052

Total Other Long-Term Liabilities . . . . . . . . . . 56,130 809,050 679,744 (373,109) 1,171,815

Shareholder’s Equity . . . . . . . . . . . . . . . . . . 1,247,919 2,822,379 618,386 (3,440,765) 1,247,919

Total Liabilities and Shareholder’s Equity . . . . . $5,266,638 $5,944,251 $1,942,843 $(6,006,909) $7,146,823

117

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 49 of 53



Condensed Consolidating Statement of Financial Position

As of December 31, 2010

(In thousands)



AssetsCurrent Assets:Cash and cash equivalents . . . . . . . . . . . . . . . $ 132,168 $ 16,900 $ 103,630 $ — $ 252,698Marketable securities . . . . . . . . . . . . . . . . . . — — 30,406 — 30,406Receivables . . . . . . . . . . . . . . . . . . . . . . . . 1,229 109,680 414,370 (173,185) 352,094Inventories . . . . . . . . . . . . . . . . . . . . . . . . . — 52,139 2,593 — 54,732Prepaid expenses and other assets . . . . . . . . . 10,129 12,583 18,152 — 40,864Deferred customer acquisition costs . . . . . . . . . — 15,163 19,214 — 34,377Deferred taxes . . . . . . . . . . . . . . . . . . . . . . — 12,808 391 (1,641) 11,558Assets of discontinued operations . . . . . . . . . . — — 51,004 — 51,004

Total Current Assets . . . . . . . . . . . . . . . . . . . 143,526 219,273 639,760 (174,826) 827,733

Property and Equipment:At cost . . . . . . . . . . . . . . . . . . . . . . . . . — 307,468 132,581 — 440,049Less: accumulated depreciation . . . . . . . . . . — (118,614) (54,537) — (173,151)

Net property and equipment . . . . . . . . . . . — 188,854 78,044 — 266,898

Other Assets:Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . — 2,760,512 364,781 — 3,125,293Intangible assets, primarily trade names, service

marks and trademarks, net . . . . . . . . . . . . . — 1,895,059 758,452 — 2,653,511Notes receivable . . . . . . . . . . . . . . . . . . . . . 1,990,383 231 30,269 (1,998,333) 22,550Long-term marketable securities . . . . . . . . . . . 10,859 — 99,318 — 110,177Investments in and advances to subsidiaries . . . . 3,299,019 913,502 — (4,212,521) —Other assets . . . . . . . . . . . . . . . . . . . . . . . 98,425 4,164 882 (96,307) 7,164Debt issuance costs . . . . . . . . . . . . . . . . . . . 52,366 — — — 52,366Assets of discontinued operations . . . . . . . . . . — — 32,398 — 32,398

Total Assets . . . . . . . . . . . . . . . . . . . . . . . . $5,594,578 $5,981,595 $2,003,904 $(6,481,987) $7,098,090

Liabilities and Shareholder’s EquityCurrent Liabilities:Accounts payable . . . . . . . . . . . . . . . . . . . . $ 272 $ 46,187 $ 26,186 $ — $ 72,645Accrued liabilities:

Payroll and related expenses . . . . . . . . . . . . 1,608 45,031 39,008 — 85,647Self-insured claims and related expenses . . . . . — 20,430 60,848 — 81,278Accrued interest payable . . . . . . . . . . . . . . . 69,613 259 (227) — 69,645Other . . . . . . . . . . . . . . . . . . . . . . . . . . 7,427 37,273 40,055 (1,641) 83,114

Deferred revenue . . . . . . . . . . . . . . . . . . . . . — 134,817 314,830 — 449,647Liabilities of discontinued operations . . . . . . . . . — 150 16,150 — 16,300Current portion of long-term debt . . . . . . . . . . . 103,654 13,093 105,850 (173,185) 49,412

Total Current Liabilities . . . . . . . . . . . . . . . . . 182,574 297,240 602,700 (174,826) 907,688

Long-Term Debt . . . . . . . . . . . . . . . . . . . . . 3,868,474 1,699,589 329,345 (1,998,333) 3,899,075

Other Long-Term Liabilities:Deferred taxes . . . . . . . . . . . . . . . . . . . . . . — 753,945 277,333 (96,307) 934,971Intercompany payable . . . . . . . . . . . . . . . . . 287,220 — 183,617 (470,837) —Liabilities of discontinued operations . . . . . . . . . — — 4,848 — 4,848Other long-term obligations . . . . . . . . . . . . . . 68,783 535 94,663 — 163,981

Total Other Long-Term Liabilities . . . . . . . . . . . . 356,003 754,480 560,461 (567,144) 1,103,800

Shareholder’s Equity . . . . . . . . . . . . . . . . . . 1,187,527 3,230,286 511,398 (3,741,684) 1,187,527

Total Liabilities and Shareholder’s Equity . . . . . . $5,594,578 $5,981,595 $2,003,904 $(6,481,987) $7,098,090

118

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 50 of 53




Condensed Consolidating Statement of Cash Flows


(In thousands)



Cash and Cash Equivalents atBeginning of Period . . . . . . . . . . . . $ 132,168 $ 16,900 $ 103,630 $ — $ 252,698

Net Cash Provided from (Used for)Operating Activities from ContinuingOperations . . . . . . . . . . . . . . . . . . . 476,575 565,023 (29,251) (717,346) 295,001

Cash Flows from Investing Activitiesfrom Continuing Operations:

Property additions . . . . . . . . . . . . . . . . — (68,189) (28,351) — (96,540)Sale of equipment and other assets . . . . — 4,433 172 — 4,605Acquisition of The ServiceMaster

Company . . . . . . . . . . . . . . . . . . . . (35) — — — (35)Other business acquisitions, net of cash

acquired . . . . . . . . . . . . . . . . . . . . — (43,316) (1,049) — (44,365)Purchase of other intangibles . . . . . . . . — (1,900) — — (1,900)Notes receivable, financial investments

and securities, net . . . . . . . . . . . . . . — 633 2,376 — 3,009

Net Cash Used for Investing Activitiesfrom Continuing Operations . . . . . . . (35) (108,339) (26,852) — (135,226)

Cash Flows from Financing Activitiesfrom Continuing Operations:

Borrowings of debt . . . . . . . . . . . . . . . — — 4,000 — 4,000Payments of debt . . . . . . . . . . . . . . . . (91,500) (13,119) (1,286) — (105,905)Shareholders’ dividends . . . . . . . . . . . . — (573,412) (143,934) 717,346 —Debt issuance costs paid . . . . . . . . . . . (267) — — — (267)Net intercompany advances . . . . . . . . . (284,559) 100,224 184,335 — —

Net Cash (Used for) Provided fromFinancing Activities from ContinuingOperations . . . . . . . . . . . . . . . . . . . (376,326) (486,307) 43,115 717,346 (102,172)

Cash Flows from DiscontinuedOperations:

Cash provided from (used for) operatingactivities . . . . . . . . . . . . . . . . . . . . . — 340 (6,228) — (5,888)

Cash provided from (used for) investinginvesting activities:Proceeds from sale of business . . . . . . — 26,134 — — 26,134Other investing activities . . . . . . . . . . — — (1,617) — (1,617)

Net Cash Provided from (Used for)Discontinued Operations . . . . . . . . . — 26,474 (7,845) — 18,629

Cash Increase (Decrease) During thePeriod . . . . . . . . . . . . . . . . . . . . . . 100,214 (3,149) (20,833) — 76,232

Cash and Cash Equivalents at End ofPeriod . . . . . . . . . . . . . . . . . . . . . . $ 232,382 $ 13,751 $ 82,797 $ — $ 328,930

119

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 51 of 53






(In thousands)



Cash and Cash Equivalents atBeginning of Period . . . . . . . . . . . . $ 124,674 $ 17,689 $112,993 $ — $ 255,356

Net Cash Provided from (Used for)Operating Activities from ContinuingOperations . . . . . . . . . . . . . . . . . . . 296,963 460,679 (62,561) (472,537) 222,544



Company . . . . . . . . . . . . . . . . . . . . (2,245) — — — (2,245)Other business acquisitions, net of cash

acquired . . . . . . . . . . . . . . . . . . . . — (57,724) (217) — (57,941)Purchase of other intangibles . . . . . . . . — (2,500) — — (2,500)Notes receivable, financial investments

and securities, net . . . . . . . . . . . . . . 22,012 — (1,585) — 20,427

Net Cash Provided from (Used for)Investing Activities from ContinuingOperations . . . . . . . . . . . . . . . . . . . 19,767 (141,815) (53,090) — (175,138)


Borrowings of debt . . . . . . . . . . . . . . . 5,000 — 10,000 — 15,000Payments of debt . . . . . . . . . . . . . . . . (32,250) (15,325) (13,758) — (61,333)Shareholders’ dividends . . . . . . . . . . . . — (413,197) (59,340) 472,537 —Debt issuance costs paid . . . . . . . . . . . — — (30) — (30)Net intercompany advances . . . . . . . . . (281,986) 108,869 173,117 — —

Net Cash (Used for) Provided fromFinancing Activities from ContinuingOperations . . . . . . . . . . . . . . . . . . . (309,236) (319,653) 109,989 472,537 (46,363)


Cash provided from operating activities . . — — 6,776 — 6,776Cash used for investing investing activities — — (10,477) — (10,477)

Net Cash Used for DiscontinuedOperations . . . . . . . . . . . . . . . . . . . — — (3,701) — (3,701)

Cash Increase (Decrease) During thePeriod . . . . . . . . . . . . . . . . . . . . . . 7,494 (789) (9,363) — (2,658)

Cash and Cash Equivalents at End ofPeriod . . . . . . . . . . . . . . . . . . . . . . $ 132,168 $ 16,900 $103,630 $ — $ 252,698

120

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

Page 52 of 53






(In thousands)



Cash and Cash Equivalents atBeginning of Period . . . . . . . . . . . . $ 300,362 $ 13,865 $ 93,120 $ — $ 407,347

Net Cash Provided from OperatingActivities from Continuing Operations 252,927 424,092 16,772 (525,459) 168,332



Company . . . . . . . . . . . . . . . . . . . . (1,695) — — — (1,695)Other business acquisitions, net of cash

acquired . . . . . . . . . . . . . . . . . . . . — (32,647) — — (32,647)Notes receivable, financial investments

and securities, net . . . . . . . . . . . . . . — — 6,151 — 6,151

Net Cash Used for Investing Activitiesfrom Continuing Operations . . . . . . . (1,695) (78,819) (2,027) — (82,541)


Borrowings of debt . . . . . . . . . . . . . . . — — — — —Payments of debt . . . . . . . . . . . . . . . . (233,260) (17,127) (2,498) (252,885)Shareholders’ dividends . . . . . . . . . . . . — (426,359) (99,100) 525,459 —Debt issuance costs paid . . . . . . . . . . . (426) — — — (426)Net intercompany advances . . . . . . . . . (193,234) 102,037 91,197 — —

Net Cash Used for Financing Activitiesfrom Continuing Operations . . . . . . . (426,920) (341,449) (10,401) 525,459 (253,311)


Cash provided from operating activities . . — — 21,426 — 21,426Cash used for investing activities . . . . . . — — (5,897) — (5,897)

Net Cash Provided from DiscontinuedOperations . . . . . . . . . . . . . . . . . . . — — 15,529 — 15,529

Cash (Decrease) Increase During thePeriod . . . . . . . . . . . . . . . . . . . . . . (175,688) 3,824 19,873 — (151,991)

Cash and Cash Equivalents at End ofPeriod . . . . . . . . . . . . . . . . . . . . . . $ 124,674 $ 17,689 $112,993 $ — $ 255,356

121

SCampbell

Typewritten Text

FDD

SCampbell

Typewritten Text

Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 53 of 53

Table of Contents

PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSTHE SERVICEMASTER COMPANY

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)(In thousands)

Three months endedJune 30,

2012 2011

Operating Revenue $ 962,165 $ 967,440

Operating Costs and Expenses:

Cost of services rendered and products sold 532,954 520,634

Selling and administrative expenses 241,929 259,148

Amortization expense 17,802 26,387

Trade name impairment 67,700 —

Restructuring charges 5,026

94

Total operating costs and expenses 865,411

806,263

Operating Income 96,754 161,177

Non-operating Expense (Income):

Interest expense 59,700 68,378

Interest and net investment income (1,396) (1,398)Other expense

177

173

Income from Continuing Operations before Income Taxes 38,273 94,024

Provision for income taxes 16,028 33,462

Equity in losses of joint venture (111) —

Income from Continuing Operations 22,134 60,562

Income (loss) from discontinued operations, net of income taxes

838

(3,842)Net Income

$ 22,972

$ 56,720

Total Comprehensive Income

$ 22,414

$ 55,510

See accompanying Notes to the Condensed Consolidated Financial Statements

3

SCampbell

Typewritten Text

Page 1 of 28

SCampbell

Typewritten Text

FDD EXHIBIT B - FINANCIAL STATEMENTS*

SCampbell

Typewritten Text

*Source: The ServiceMaster Company 10-Q dated August 7, 2012

SCampbell

Typewritten Text

Table of Contents

THE SERVICEMASTER COMPANYCondensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In thousands)

Six months endedJune 30,

2012 2011

Operating Revenue $ 1,616,854 $ 1,582,111


Cost of services rendered and products sold 919,542 891,203

Selling and administrative expenses 433,299 450,453



Restructuring charges 9,016

2,683

Total operating costs and expenses 1,465,348

1,397,089

Operating Income 151,506 185,022


Interest expense 124,514 136,893

Interest and net investment income (4,038) (3,591)Loss on extinguishment of debt 39,193 —

Other expense 351

348

(Loss) Income from Continuing Operations before Income Taxes (8,514) 51,372

(Benefit) Provision for income taxes (1,653) 16,105

Equity in losses of joint venture (111) —

(Loss) Income from Continuing Operations (6,972) 35,267

Loss from discontinued operations, net of income taxes

(86) (24,943)Net (Loss) Income

$ (7,058) $ 10,324

Total Comprehensive (Loss) Income

$ (364) $ 20,312


4

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 2 of 28

Table of Contents

THE SERVICEMASTER COMPANYCondensed Consolidated Statements of Financial Position (Unaudited)

(In thousands, except share data)

As ofJune 30, 2012

As ofDecember 31, 2011

Assets

Current Assets:

Cash and cash equivalents $ 299,954 $ 328,930

Marketable securities 35,161 12,026

Receivables, less allowance of $18,844 and $20,362, respectively 461,955 374,200

Inventories 58,888 59,643

Prepaid expenses and other assets 87,086 38,295

Deferred customer acquisition costs 51,065 30,403

Deferred taxes 91,237 90,609

Assets of discontinued operations —

17

Total Current Assets 1,085,346

934,123

Property and Equipment:

At cost 596,624 541,817

Less: accumulated depreciation (261,449) (235,058)

Net property and equipment 335,175

306,759

Other Assets:

Goodwill 3,172,313 3,161,980

Intangible assets, primarily trade names, service marks and trademarks, net 2,443,002 2,543,539

Notes receivable 22,109 23,322

Long-term marketable securities 117,606 130,456

Other assets 6,255 8,846

Debt issuance costs 37,058

37,798

Total Assets $ 7,218,864

$ 7,146,823

Liabilities and Shareholder's Equity

Current Liabilities:

Accounts payable $ 114,496 $ 81,641

Accrued liabilities:

Payroll and related expenses 73,861 85,346

Self-insured claims and related expenses 82,453 73,071

Accrued interest payable 54,823 67,011

Other 72,404 70,103

Deferred revenue 526,499 473,242

Liabilities of discontinued operations 939 805

Current portion of long-term debt 55,640

51,838

Total Current Liabilities 981,115

903,057

Long-Term Debt 3,825,951 3,824,032

Other Long-Term Liabilities:

Deferred taxes 1,035,887 1,036,693

Liabilities of discontinued operations — 2,070

Other long-term obligations, primarily self-insured claims 124,898

133,052

Total Other Long-Term Liabilities 1,160,785

1,171,815

Commitments and Contingencies (See Note 4)

Shareholder's Equity:

Common stock $0.01 par value, authorized 1,000 shares; issued 1,000 shares — —

Additional paid-in capital 1,467,751 1,464,293

Retained deficit (217,220) (210,162)Accumulated other comprehensive income (loss)

482

(6,212)Total Shareholder's Equity

1,251,013

1,247,919

Total Liabilities and Shareholder's Equity $ 7,218,864

$ 7,146,823


5

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 3 of 28

Table of Contents

THE SERVICEMASTER COMPANYCondensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)


2012 2011

Cash and Cash Equivalents at Beginning of Period $ 328,930 $ 252,698

Cash Flows from Operating Activities from Continuing Operations:

Net (Loss) Income (7,058) 10,324

Adjustments to reconcile net (loss) income to net cash provided from operating activities:

Loss from discontinued operations 86 24,943

Equity in losses of joint venture 111 —

Depreciation expense 37,756 35,574


Amortization of debt issuance costs 6,528 7,080

Loss on extinguishment of debt 39,193 —

Call premium paid on retirement of debt (32,250) —

Premium received on issuance of debt 3,000 —

Deferred income tax (benefit) provision (3,787) 391

Stock-based compensation expense 3,458 4,171


Restructuring charges 9,016 2,683

Cash payments related to restructuring charges (7,326) (3,145)Change in working capital, net of acquisitions:

Current income taxes (4,612) 11,592

Receivables (79,724) (76,105)Inventories and other current assets (61,944) (65,376)Accounts payable 38,204 40,146

Deferred revenue 52,344 86,230

Accrued liabilities (18,470) 9,390

Other, net 16,576

2,462

Net Cash Provided from Operating Activities from Continuing Operations 94,592

143,110

Cash Flows from Investing Activities from Continuing Operations:

Property additions (48,362) (57,834)Sale of equipment and other assets 434 951

Acquisition of The ServiceMaster Company — (35)Other business acquisitions, net of cash acquired (11,495) (11,886)Purchase of other intangibles — (1,900)Notes receivable, financial investments and securities, net

(14,613) (4,341)Net Cash Used for Investing Activities from Continuing Operations

(74,036) (75,045) Cash Flows from Financing Activities from Continuing Operations:

Borrowings of debt 600,000 —

Payments of debt (633,045) (20,437)Debt issuance costs paid

(12,700) (280)Net Cash Used for Financing Activities from Continuing Operations

(45,745) (20,717) Cash Flows from Discontinued Operations:

Cash used for operating activities (238) (1,818)Cash (used for) provided from investing activities:

Proceeds from sale of businesses (3,549) 27,523

Other investing activities —

(1,617)

Net Cash (Used for) Provided from Discontinued Operations (3,787) 24,088

Cash (Decrease) Increase During the Period

(28,976) 71,436

Cash and Cash Equivalents at End of Period

$ 299,954

$ 324,134


6

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 4 of 28

Table of Contents

THE SERVICEMASTER COMPANYNOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

The ServiceMaster Company ("ServiceMaster," the "Company," "we," "us" or "our") is a global company serving bothresidential and commercial customers. ServiceMaster's services include termite and pest control, lawn care, home warranties andpreventative maintenance contracts, cleaning and disaster restoration, house cleaning, furniture repair and home inspection.ServiceMaster provides these services through a network of company-owned, franchised and licensed locations operating primarilyunder the following leading brands: Terminix, TruGreen, American Home Shield, ServiceMaster Clean, Merry Maids, FurnitureMedic and AmeriSpec.

The condensed consolidated financial statements include the accounts of ServiceMaster and its majority-owned subsidiary

partnerships, limited liability companies and corporations. All consolidated ServiceMaster subsidiaries are wholly owned.ServiceMaster is organized into five principal reportable segments: Terminix, TruGreen, American Home Shield, ServiceMasterClean and Other Operations and Headquarters. Intercompany transactions and balances have been eliminated.

The condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted

accounting principles in the United States ("GAAP") and pursuant to the rules and regulations of the Securities and ExchangeCommission ("SEC"). The Company recommends that the quarterly condensed consolidated financial statements be read inconjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-Kfor the year ended December 31, 2011, as filed with the SEC (the "2011 Form 10-K"). The condensed consolidated financialstatements reflect all adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position,results of operations and cash flows for the interim periods presented. The results of operations for any interim period are notindicative of the results that might be achieved for a full year.

On July 24, 2007 (the "Closing Date"), ServiceMaster was acquired pursuant to a merger transaction (the "Merger"), and,

immediately following the completion of the Merger, all of the outstanding common stock of ServiceMaster Global Holdings, Inc.("Holdings"), the ultimate parent company of ServiceMaster, was owned by investment funds sponsored by, or affiliated with,Clayton, Dubilier & Rice, LLC ("CD&R"), Citigroup Private Equity LP ("Citigroup"), BAS Capital Funding Corporation ("BAS")and JPMorgan Chase Funding Inc. ("JPMorgan"). On September 30, 2010, Citigroup transferred the management responsibility forcertain investment funds that own shares of common stock of Holdings to StepStone Group LLC ("StepStone") and its proprietaryinterests in such investment funds to Lexington Partners Advisors LP. CD&R, StepStone, as an assignee from Citigroup, JPMorganand BAS are referred to as the "Equity Sponsors" herein.

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 senior secured term loan facilityand (iii) cash on hand at ServiceMaster, were used, among other things, to finance the aggregate Merger consideration, to makepayments in satisfaction of other equity-based interests in ServiceMaster under the Merger agreement, to settle existing interest rateswaps, to redeem or provide for the repayment of certain of the Company's existing indebtedness and to pay related transaction feesand expenses. In addition, letters of credit issued under a then new $150.0 million pre-funded letter of credit facility (together with thesenior secured term loan facility, the "Term Facilities") were used to replace and/or secure letters of credit previously issued under aServiceMaster credit facility that was terminated as of the Closing Date. On the Closing Date, the Company also entered into, but didnot then draw under, a senior secured revolving credit facility (the "Revolving Credit Facility"). The Interim Loan Facility matured onJuly 24, 2008. On the maturity date, outstanding amounts under the Interim Loan Facility were converted on a one-to-one basis into10.75% senior notes maturing in 2015 (the "2015 Notes").

Note 2. Significant Accounting Policies

The Company's significant accounting policies are included in the 2011 Form 10-K. The following selected accountingpolicies should be read in conjunction with the 2011 Form 10-K.

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 liquidtreatments) and baiting systems. Termite services using baiting systems, termite inspection and protection contracts, as well as homewarranties, are frequently sold through annual contracts for a one-time, upfront payment. Direct costs of these contracts (service costsfor termite contracts and claim costs for home warranties) are expensed as incurred. The Company recognizes revenue over the life ofthese contracts in proportion to the expected direct costs. Those costs bear a direct relationship to the fulfillment of the Company's

7

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 5 of 28

Table of Contents

obligations under the contracts and are representative of the relative value provided to the customer (proportional performancemethod). The Company regularly reviews its estimates of direct costs for its termite bait and home warranties and adjusts the estimateswhen appropriate.

The Company has franchise agreements in its Terminix, TruGreen, ServiceMaster Clean, AmeriSpec, Furniture Medic and

Merry Maids businesses. Franchise revenue (which in the aggregate represents approximately four percent of consolidated revenuefrom 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 is reported by the franchisee and collectability isreasonably assured. Franchise revenue also includes initial fees resulting from the sale of a franchise. These initial franchise fees arepre-established, fixed amounts and are recognized as revenue when collectability is reasonably assured and all material services orconditions relating to the sale have been substantially performed. Total profits from the franchised operations were $16.8 million and$33.6 million for the three and six months ended June 30, 2012, respectively, and $17.7 million and $34.1 million for the three and sixmonths ended June 30, 2011, respectively. Consolidated operating income from continuing operations was $96.8 million and $151.5million for the three and six months ended June 30, 2012, respectively, and $161.2 million and $185.0 million for the three and sixmonths ended June 30, 2011, respectively. The Company evaluates the performance of its franchise businesses based primarily onoperating profit before corporate general and administrative expenses, interest expense and amortization of intangible assets. Theportion of total franchise fee income related to initial fees received from the sale of franchises was immaterial to the Company'scondensed consolidated financial statements for all periods.

The Company had $526.5 million and $473.2 million of deferred revenue as of June 30, 2012 and December 31, 2011,

respectively. Deferred revenue consists primarily of payments received for annual contracts relating to home warranties, termitebaiting, termite inspection, pest control and lawn care services.

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 costswhich can be shown to have resulted in a successful sale. Deferred customer acquisition costs amounted to $51.1 million and $30.4million as of June 30, 2012 and December 31, 2011, respectively.

TruGreen has significant seasonality in its business. In the winter and spring, this business sells a series of lawn applications

to customers which are rendered primarily in March through October (the production season). This business incurs incremental sellingexpenses at the beginning of the year that directly relate to successful sales for which the revenues are recognized in later quarters. Onan interim basis, TruGreen defers these incremental selling expenses, pre-season advertising costs and annual repairs and maintenanceprocedures that are performed primarily in the first quarter. These costs are deferred and recognized in proportion to the revenuegenerated over the production season and are not deferred beyond the calendar year-end. Other business segments of the Companyalso defer, on an interim basis, advertising costs incurred early in the year. These pre-season costs are deferred and recognizedapproximately in proportion to revenue over the balance of the year and are not deferred beyond the calendar year-end.

The cost of direct-response advertising at Terminix and TruGreen, consisting primarily of direct-mail promotions, is

capitalized and amortized over its expected period of future benefits. The Company's total comprehensive income (loss) consists primarily of net income (loss), unrealized gain (loss) on

marketable securities, unrealized gain (loss) on derivative instruments and the effect of foreign currency translations. The preparation of the condensed consolidated financial statements requires management to make certain estimates and

assumptions required under GAAP which may differ from actual results. Disclosures in the 2011 Form 10-K presented the significantareas requiring the use of management estimates and discussed how management formed its judgments. The areas discussed includedrevenue 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 possibleoutcome of outstanding litigation; accruals for income tax liabilities as well as deferred tax accounts; the deferral and amortization ofcustomer acquisition costs; useful lives for depreciation and amortization expense; the valuation of marketable securities; and thevaluation of tangible and intangible assets.

8

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 6 of 28

Table of Contents

Note 3. Restructuring Charges

The Company incurred restructuring charges of $5.0 million ($3.1 million, net of tax) and $0.1 million ($0.1 million, net oftax) for the three months ended June 30, 2012 and 2011, respectively and $9.0 million ($5.5 million, net of tax) and $2.7 million ($1.6million, net of tax) for the six months ended June 30, 2012 and 2011, respectively. Restructuring charges (credits) were comprised ofthe following:



(In thousands) 2012 2011 2012 2011

Terminix branch optimization (1) $ 697 $ (73) $ 2,817 $ 2,467

TruGreen reorganization and restructuring (2) 149 — 820 —

ServiceMaster Clean reorganization (3) 467 — 467 —

Centers of excellence initiative(4) 3,713 — 4,912 —

Other(5) —

167

—

216

Total restructuring charges $ 5,026

$ 94

$ 9,016

$ 2,683

(1) Represents restructuring charges (credits) related to a branch optimization project. For the three and six months ended June30, 2012, these charges included lease termination costs. For the three months ended June 30, 2011, these credits includedadjustments to lease termination reserves. For the six months ended June 30, 2011, these charges included lease terminationcosts of $2.4 million and severance costs of $0.1 million.

(2) Represents restructuring charges related to a reorganization of field leadership and a restructuring of branch operations. For

the three months ended June 30, 2012, these charges included severance costs. For the six months ended June 30, 2012, thesecharges included severance and lease termination costs of $0.3 million and $0.5 million, respectively.

(3) Represents restructuring charges related to a reorganization of leadership. For the three and six months ended June 30, 2012,

these charges included severance costs. (4) 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 ofexcellence." For the three months ended June 30, 2012, these charges included professional fees of $0.7 million andseverance and other costs of $3.0 million. For the six months ended June 30, 2012, these charges included professional feesof $1.4 million and severance and other costs of $3.5 million.

(5) For the three and six months ended June 30, 2011, these charges included reserve adjustments associated with previous

restructuring initiatives.

The pretax charges discussed above are reported in Restructuring charges in the condensed consolidated statements ofoperations.

A reconciliation of the beginning and ending balances of accrued restructuring charges, which are included in Accrued

liabilities — Other on the condensed consolidated statements of financial position, is presented as follows:

(In thousands)

AccruedRestructuring

Charges

Balance as of December 31, 2011 $ 3,890

Costs incurred 9,016

Costs paid or otherwise settled

(7,500)Balance as of June 30, 2012

$ 5,406

Note 4. Commitments and Contingencies

A portion of the Company's vehicle fleet and some equipment are leased through month-to-month operating leases,cancelable at the Company's option. There are residual value guarantees by the Company (ranging from 70 percent to 84 percent ofthe estimated terminal value at the inception of the lease depending on the agreement) relative to these vehicles and equipment, whichhistorically have not resulted in significant net payments to the lessors. The fair value of the assets under all of the fleet and equipmentleases is expected to substantially mitigate the Company's guarantee obligations under the agreements. As of June 30, 2012, the

9

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 7 of 28

Table of Contents

Company's residual value guarantees related to the leased assets totaled $25.9 million for which the Company has recorded a liabilityfor the estimated fair value of these guarantees of $0.5 million in the condensed consolidated statements of financial position.

The Company carries insurance policies on insurable risks at levels that it believes to be appropriate, including workers'

compensation, auto and general liability risks. The Company purchases insurance policies from third party insurance carriers, whichtypically incorporate significant deductibles or self-insured retentions. The Company is responsible for all claims that fall below theretention limits. In determining the Company's accrual for self-insured claims, the Company uses historical claims experience toestablish both the current year accrual and the underlying provision for future losses. This actuarially determined provision and relatedaccrual includes known claims, as well as incurred but not reported claims. The Company adjusts its estimate of accrued self-insuredclaims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.

A reconciliation of 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 condensed consolidatedstatements of financial position, is presented as follows:

(In thousands)

AccruedSelf-insured

Claims


Provision for self-insured claims 19,515

Cash payments (18,921)

Balance as of June 30, 2012 $ 108,676

(In thousands)

AccruedSelf-insured

Claims


Provision for self-insured claims(1) 15,229

Cash payments (16,509)


(1) For the six months ending June 30, 2011, provisions for uninsured claims of $2.0 million were included in loss fromdiscontinued operations, net of income taxes, in the condensed consolidated statements of operations and comprehensiveincome.

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 are recorded based on both the historical rates of claims incurredwithin a contract year and the cost per claim. Current activity could differ causing a change in estimates. The Company has certainliabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues for these liabilities whenit is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could bematerial, are recorded in the period the adjustments are identified.

The Company has guarantees on certain bonds issued on behalf of divested companies associated with TruGreen LandCare,

primarily performance type bonds. The maximum payments the Company could be required to make if the buyer of the divestedcompanies is unable to fulfill their obligations was approximately $1.5 million as of June 30, 2012. The TruGreen LandCare purchaseagreement requires that the buyer replace the bonds at the bonds' expiration date. Substantially all of the bonds are scheduled to expireprior to 2015, but may be extended depending on the completion of the related projects. The fair value of the Company's obligationsrelated to these guarantees is not significant and no liability has been recorded.

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 includeinsured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedingsinvolving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and othermatters. The Company has entered into settlement agreements in certain cases, including with respect to putative collective and classactions, which are subject to court or other approvals. If one or more of the Company's settlements are not finally approved, theCompany could have additional or different exposure, which could be material. At this time, the Company does not expect any ofthese proceedings to have a material effect on its reputation, business, financial position, results of operations or cash flows; however,the Company can

10

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 8 of 28

Table of Contents

give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial position, resultsof operations and cash flows.

Note 5. Goodwill and Intangible Assets

In accordance with applicable accounting standards, goodwill and intangible assets that are not amortized are subject toassessment for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate apotential impairment. The Company's annual assessment date is October 1. The results for the three and six months ended June 30,2012 include a non-cash impairment charge of $67.7 million to reduce the carrying value of the TruGreen trade name as a result of theCompany's interim impairment testing of indefinite-lived intangible assets. There were no similar trade name impairment chargesincluded in continuing operations for the three and six months ended June 30, 2011.

Based on the revenue results at TruGreen in the first six months of 2012 and a 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 interimindefinite-lived intangible asset impairment test for the TruGreen trade name as of June 30, 2012.

The impairment test for 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 isrecognized in an amount equal to that excess. The estimates of fair value of intangible assets not subject to amortization aredetermined using a discounted cash flow ("DCF") valuation analysis. The DCF methodology used to value trade names is known asthe relief from royalty method and entails identifying the hypothetical cash flows generated by an assumed royalty rate that a thirdparty would pay to license the trade names and discounting them back to the valuation date. Significant judgments inherent in thisanalysis include the selection of appropriate discount rates and hypothetical royalty rates, estimating the amount and timing of futurerevenue attributable to the trade names over a defined projection period and identification of appropriate long-term revenue growthrate assumptions after the defined projection period. The discount rates used in the DCF analyses are intended to reflect the riskinherent in the projected future cash flows generated by the respective intangible assets.

As a result of the aforementioned impairment indicators and in accordance with applicable accounting standards, the

Company performed an impairment analysis on its indefinite-lived intangible asset related to TruGreen's trade name to determine thefair value as of June 30, 2012. Based on the lower projected revenue for TruGreen as discussed above, the Company determined thefair value attributable to the TruGreen trade name was less than its carrying value by $67.7 million, which was recorded as a tradename impairment in the second quarter of 2012.

The impairment charge 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 last annualimpairment assessment performed on October 1, 2011. Although the Company projected future growth in revenue at TruGreen as partof its June 30, 2012 impairment analysis, such growth was lower than the revenue growth projected at the time the trade name wastested for impairment in 2011. The long-term revenue growth rates used in the impairment tests at June 30, 2012 and October 1, 2011were the same and in line with historical U.S. gross domestic product growth rates. The discount rate used in the June 30, 2012impairment test was 50 basis points ("bps") lower than the discount rate used in the October 1, 2011 impairment test for the TruGreentrade name. The decrease in the discount rate is primarily attributable to changes in market conditions which indicated an improvedoutlook for the U.S. financial markets since the last analysis. Had the Company used a discount rate in assessing the impairment of itsTruGreen trade name that was 100 bps higher (holding all other assumptions unchanged), the Company would have recorded anadditional impairment charge of approximately $93.7 million in the second quarter of 2012.

As a result of the trade name impairment recorded in the second quarter of 2012, the carrying value of the TruGreen trade

name was adjusted to its estimated fair value as of June 30, 2012. Any further decline in the estimated fair value of this trade namewill result in additional trade name impairment. It is possible that such impairment, if required, could be material and may need to berecorded prior to the fourth quarter of 2012 (i.e., during the third quarter) if the Company's results of operations or other factorsrequire such assets to be tested for impairment at an interim date.

Although the TruGreen reporting unit has lowered its projected revenue as compared with previous forecasts, the Company

does not believe such changes would more likely than not reduce the fair value of the TruGreen reporting unit below its carryingamount. As such, the Company did not perform an interim goodwill impairment test for the TruGreen reporting unit.

The Company determined that there were no impairment indicators for the goodwill or other indefinite-lived intangible assets

of any reporting units other than TruGreen as of June 30, 2012. During the six months ended June 30, 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.

11

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 9 of 28

Table of Contents

The table below summarizes the goodwill balances by segment for continuing operations:

(In thousands) Terminix TruGreen

AmericanHomeShield

ServiceMasterClean

OtherOperations &Headquarters Total

Balance as of December 31, 2011 $ 1,424,518 $ 1,201,922 $ 347,573 $ 135,677 $ 52,290 $ 3,161,980

Acquisitions 8,728 2,674 — — 130 11,532

Other(1)

(883) (202) (47) (60) (7) (1,199)Balance as of June 30, 2012

$ 1,432,363

$ 1,204,394

$ 347,526

$ 135,617

$ 52,413

$ 3,172,313

(1) Reflects the impact of the amortization of tax deductible goodwill and foreign exchange rate changes.

There were no accumulated impairment losses as of June 30, 2012. The table below summarizes the other intangible asset balances for continuing operations:

As ofJune 30, 2012 As ofDecember 31, 2011

(In thousands) Gross

AccumulatedAmortization Net Gross

AccumulatedAmortization Net

Trade names(1) $ 2,265,800 $ — $ 2,265,800 $ 2,333,500 $ — $ 2,333,500

Customer relationships 688,781 (568,056) 120,725 683,324 (539,638) 143,686

Franchise agreements 88,000 (45,528) 42,472 88,000 (42,406) 45,594

Other 55,962

(41,957) 14,005

58,471

(37,712) 20,759

Total $ 3,098,543

$ (655,541) $ 2,443,002

$ 3,163,295

$ (619,756) $ 2,543,539

(1) Not subject to amortization. Includes a non-cash impairment charge of $67.7 million recorded in the six months ended June30, 2012 to reduce the carrying value of the TruGreen trade name as a result of the Company's interim impairment testing ofindefinite-lived intangible assets.

Note 6. Stock-Based Compensation

For the three months ended June 30, 2012 and 2011, the Company recognized stock-based compensation expense of $1.8million ($1.1 million, net of tax) and $1.8 million ($1.1 million, net of tax), respectively. For the six months ended June 30, 2012 and2011, the Company recognized stock-based compensation expense of $3.5 million ($2.1 million, net of tax) and $4.2 million ($2.6million, net of tax), respectively. As of June 30, 2012, there was $14.1 million of total unrecognized compensation cost related to non-vested stock options and restricted share units granted by Holdings under the Amended and Restated ServiceMaster Global Holdings,Inc. Stock Incentive Plan (the "MSIP"). These remaining costs are expected to be recognized over a weighted-average period of 2.6years.

Note 7. Supplemental Cash Flow Information

Supplemental information relating to the condensed consolidated statements of cash flows for the six months ended June 30,2012 and 2011 is presented in the following table:



Cash paid for or (received from):

Interest expense $ 125,607 $ 126,620

Interest and dividend income (2,575) (2,462)Income taxes, net of refunds 6,766 8,366

The Company acquired $27.7 million and $5.3 million of property and equipment through capital leases and other non-cash

financing transactions in the six months ended June 30, 2012 and 2011, respectively, which has been excluded from the condensedconsolidated statements of cash flows as non-cash investing and financing activities.

12

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 10 of 28

Table of Contents

Note 8. Receivable Sales

The Company has an accounts receivable securitization arrangement under which Terminix and TruGreen may sell certaineligible trade accounts receivable to ServiceMaster Funding Company LLC ("Funding"), the Company's wholly owned, bankruptcy-remote subsidiary, which is consolidated for financial reporting purposes. Funding, in turn, may transfer, on a revolving basis, anundivided percentage ownership interest of up to $50.0 million in the pool of accounts receivable to one or both of the purchasers whoare parties to the accounts receivable securitization arrangement ("Purchasers"). The amount of the eligible receivables varies duringthe year based on seasonality of the businesses and could, at times, limit the amount available to the Company from the sale of theseinterests. As of June 30, 2012, the amount of eligible receivables was $50.0 million.

During the six months ended June 30, 2012, there were no transfers of interests in the pool of trade accounts receivables to

Purchasers under this arrangement. As of June 30, 2012 and December 31, 2011, the Company had $10.0 million outstanding underthe arrangement and, as of June 30, 2012, had $40.0 million of remaining capacity available under the accounts receivablesecuritization arrangement.

The accounts receivable securitization arrangement is a 364-day facility that was scheduled to mature on July 17, 2012. In

July 2012, the maturity date of the accounts receivable securitization arrangement was extended to September 17, 2012. The Companyis currently in negotiations with the Purchasers to extend the arrangement until September 2013. The Company has recorded itsobligation to repay the Purchasers for their interest in the pool of receivables within the current portion of long-term debt on thecondensed consolidated statements of financial position. The interest rates applicable to the Company's obligation are based on afluctuating rate of interest based on the Purchasers' pooled commercial paper rate (0.24 percent as of June 30, 2012). In addition, theCompany pays usage fees on its obligations and commitment fees on undrawn amounts committed by the Purchasers. Unless thearrangement is renegotiated or extended prior to its expiration, all obligations under the accounts receivable securitization arrangementmust be repaid by September 17, 2012.

Note 9. Cash and Marketable Securities

Cash, money market funds and certificates of deposits, with maturities of three months or less when purchased, are includedin Cash and cash equivalents on the condensed consolidated statements of financial position. As of June 30, 2012 and December 31,2011, the Company's investments consisted 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 theCompany's short- and long-term investments in Debt and Equity securities as of June 30, 2012 and December 31, 2011 were asfollows:

(In thousands) Amortized Cost

Gross UnrealizedGains

Gross UnrealizedLosses Fair Value

Available-for-sale and trading securities, June 30, 2012:

Debt securities $ 104,790 $ 6,187 $ (62)$ 110,915

Equity securities

39,571

4,061

(1,780) 41,852

Total securities $ 144,361

$ 10,248

$ (1,842)$ 152,767

(In thousands) Amortized Cost

Gross UnrealizedGains

Gross UnrealizedLosses Fair Value

Available-for-sale and trading securities, December, 31, 2011:

Debt securities $ 95,135 $ 5,795 $ (68)$ 100,862

Equity securities

40,558

2,953

(1,891) 41,620

Total securities $ 135,693

$ 8,748

$ (1,959)$ 142,482

The portion of unrealized losses which had been in a loss position for more than one year was $1.7 million as of June 30,

2012 and December 31, 2011. The aggregate fair value of the investments with unrealized losses was $17.2 million and $13.6 millionas of June 30, 2012 and December 31, 2011, respectively.

As of June 30, 2012 and December 31, 2011, $258.4 million and $226.2 million, respectively, of the cash and short- and

long-term marketable securities balance were associated with regulatory requirements at American Home Shield and for otherpurposes. Such amounts are identified as being potentially unavailable to be paid to the Company by its subsidiaries. American HomeShield's investment portfolio has been invested in a combination of high quality, short duration fixed income securities and equities.

13

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 11 of 28

Table of Contents

Gains and losses on sales of investments, as determined on a specific identification basis, are included in investment incomein the period they are realized. The Company periodically reviews its portfolio of investments to determine whether there has been another than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issueror the market(s) in which the issuer competes. The table below summarizes proceeds, gross realized gains and gross realized losses,each resulting from sales of available-for-sale securities. There were no impairment charges due to other than temporary declines inthe value of certain investments for the three and six months ended June 30, 2012 and 2011.



(In thousands) 2012 2011 2012 2011

Proceeds from sale of securities $ 5,251 $ 1,580 $ 7,730 $ 5,373

Gross realized gains, pre-tax 493 104 879 611

Gross realized gains, net of tax 304 64 542 374

Gross realized losses, pre-tax (20) (21) (20) (36)Gross realized losses, net of tax (12) (13) (12) (22) Note 10. Long-Term Debt

Long-term debt as of June 30, 2012 and December 31, 2011 is summarized in the following table:

(In thousands)

As ofJune 30, 2012


Senior secured term loan facility maturing in 2014 $ 2,508,292 $ 2,530,750

8.00% senior notes maturing in 2020(1) 602,895 —

10.75% senior notes maturing in 2015 396,000 996,000

Revolving credit facility maturing in 2017 — —

7.10% notes maturing in 2018(2) 68,438 67,474



Other 89,561 66,980

Less current portion (55,640) (51,838)

Total long-term debt $ 3,825,951

$ 3,824,032

(1) Includes unamortized portion of $3.0 million premium received on the sale of $100.0 million aggregate principal amount ofsuch notes.

(2) The increase in the balance from December 31, 2011 to June 30, 2012 reflects the amortization of fair value adjustments

related to purchase accounting, which increases the effective interest rate from the coupon rates shown above.

Interest rate swap agreements in effect as of June 30, 2012 are as follows:

Trade Date

EffectiveDate

ExpirationDate

NotionalAmount

FixedRate(1)

FloatingRate

September 15, 2008 October 1, 2008 October 1, 2012 200,000 3.53% One month LIBORJune 10, 2010 March, 3, 2011 March 1 ,2013 100,000 1.77% One month LIBORJune 10, 2010 September 1, 2011 September 1, 2013 50,000 2.25% One month LIBORJune 15, 2010 March 3, 2011 March 1, 2013 150,000 1.66% One month LIBORJune 15, 2010 September 1, 2011 September 1, 2013 150,000 2.21% One month LIBOR

August 18, 2011 September 1, 2011 August 1, 2013 530,000 1.51% One month LIBOR

(1) Before the application of the incremental borrowing margin (2.50 percent as of June 30, 2012). On January 30, 2012, ServiceMaster entered into the Extension Amendment and the Increase Supplement to its Revolving

Credit Facility, which provides for senior secured revolving loans and stand-by and other letters of credit. After effectiveness onFebruary 13, 2012 of the Extension Amendment and the Increase Supplement, we have available borrowing capacity under theRevolving 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. The Company will continue to have access to letters of credit up to $75.0million through January 31, 2017.

14

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 12 of 28

Table of Contents

In February 2012, the Company sold in transactions exempt from registration under the Securities Act of 1933, as amended,$600 million aggregate principal amount of 8 percent senior notes due 2020 (the "2020 Notes"). The 2020 Notes will mature onFebruary 15, 2020 and bear interest at a rate of 8 percent per annum. The 2020 Notes are guaranteed on a senior unsecured basis bycertain of the Company's domestic subsidiaries excluding certain subsidiaries subject to regulatory requirements in various states (the"Guarantors"). The Company used the proceeds from the sale of the 2020 Notes, together with available cash, to redeem $600 millionaggregate principal amount of its outstanding 2015 Notes during the first quarter of 2012.

The 2015 Notes and 2020 Notes are senior unsecured obligations of ours and rank equally in right of payment with all of our

other existing and future senior unsecured indebtedness. The 2015 Notes and 2020 Notes are jointly and severally guaranteed on asenior unsecured basis by the Guarantors. The subsidiary guarantees are general unsecured senior obligations of the Guarantors andrank equally in right of payment with all of the existing and future senior unsecured indebtedness of all other subsidiaries of theCompany, either directly or indirectly owned (the "Non-Guarantors"). The 2015 Notes and 2020 Notes are effectively junior to all ofour existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness.

Note 11. Discontinued Operations

Loss from discontinued operations, net of income taxes, for all periods presented includes the operating results of TruGreenLandCare and the other previously sold businesses noted in the 2011 Form 10-K.

The operating results of discontinued operations were as follows:



(In thousands) 2012 2011 2012 2011

Operating Results:

Operating revenue $ — $ 19,464 $ — $ 75,765

Operating loss(1) (277) (5,115) (608) (39,375)Benefit for income taxes(1)

(106) (1,986) (235) (15,145)Operating loss, net of income taxes(1) (171) (3,129) (373) (24,230)Gain (loss) on sale, net of income taxes

1,009

(713) 287

(713)Income (loss) from discontinued operations, net of income taxes(1)

$ 838

$ (3,842)$ (86) $ (24,943)

(1) During the first quarter of 2011, a pre-tax non-cash impairment charge of $34.2 million ($21.0 million, net of tax) wasrecorded to reduce the carrying value of TruGreen LandCare's assets to their estimated fair value less cost to sell inaccordance with applicable accounting standards.

The table below summarizes the activity for the six months ended June 30, 2012 for the remaining liabilities from operations

that were discontinued in years prior to 2012. 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)


Cash Paymentsor Other

(Income)Expense

As ofJune 30, 2012

Remaining liabilities of discontinued operations:

ARS/AMS $ 228 $ (91)$ (37)$ 100

Certified Systems, Inc. and other 2,100 (2,041) — 59

InStar 279 32 58 369

TruGreen LandCare

268

(209) 352

411

Total liabilities of discontinued operations $ 2,875

$ (2,309)$ 373

$ 939

Note 12. Income Taxes

As of June 30, 2012 and December 31, 2011, the Company had $9.4 million and $9.0 million, respectively, of tax benefitsprimarily reflected in state tax returns that have not been recognized for financial reporting purposes ("unrecognized tax benefits").The Company currently estimates that, as a result of pending tax settlements and expiration of statutes of limitations, the amount ofunrecognized tax benefits could be reduced by approximately $1.7 million during the next 12 months.

15

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 13 of 28

Table of Contents

As required by Accounting Standard Codification ("ASC") 740 "Income Taxes," the Company computes interim periodincome taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss from continuing operations beforeincome taxes, except for significant unusual or infrequently occurring items. The Company's estimated tax rate is adjusted eachquarter in accordance with ASC 740.

The effective tax rate on income from continuing operations was 41.9 percent for the three months ended June 30, 2012

compared to 35.6 percent for the three months ended June 30, 2011. The effective tax rate for the three months ended June 30, 2011was favorably impacted by the recognition of previously unrecognized tax benefits.

The effective tax rate on income from continuing operations was 19.4 percent for the six months ended June 30, 2012

compared to 31.3 percent for the six months ended June 30, 2011. The effective tax rate for the six months ended June 30, 2012 wasaffected by the impairment of the TruGreen trade name and the resulting impact on the allocation of the full year effective tax rate onincome from continuing operations to interim periods.

Note 13. Business Segment Reporting

The business of the Company is 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 anddistributes pest control products. The TruGreen segment provides residential and commercial lawn, tree and shrub care services. TheAmerican Home Shield segment provides home warranties and preventative maintenance contracts for household systems andappliances. The ServiceMaster Clean segment provides residential and commercial disaster restoration, janitorial and cleaning servicesthrough franchises primarily under the ServiceMaster and ServiceMaster Clean brand names, on-site furniture repair and restorationservices 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, whichprovide home cleaning services. The Other Operations and Headquarters segment also includes The ServiceMaster AcceptanceCompany Limited Partnership ("SMAC"), our financing subsidiary exclusively dedicated to providing financing to our franchiseesand 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.

Segment information for continuing operations is presented below:

Three months ended Six months ended

June 30, June 30,

(In thousands) 2012 2011 2012 2011

Operating Revenue:

Terminix $ 347,245 $ 334,258 $ 658,664 $ 618,414

TruGreen 351,372 383,022 482,483 519,283

American Home Shield 208,394 195,326 367,439 336,258

ServiceMaster Clean 32,409 32,870 64,354 65,702

Other Operations and Headquarters 22,745

21,964

43,914

42,454

Total Operating Revenue $ 962,165

$ 967,440

$ 1,616,854

$ 1,582,111

Operating Income (Loss):(1),(2)

Terminix $ 68,438 $ 72,108 $ 137,508 $ 123,489

TruGreen 8,791 68,588 (5,531) 48,828

American Home Shield 40,556 31,356 68,384 44,513

ServiceMaster Clean 10,537 12,529 22,813 25,262

Other Operations and Headquarters (31,568) (23,404) (71,668) (57,070)

Total Operating Income $ 96,754

$ 161,177

$ 151,506

$ 185,022

16

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 14 of 28

Table of Contents

(1) Presented below is a reconciliation of operating income to income (loss) from continuing operations before income taxes: Three months ended Six months ended

June 30, June 30,

(In thousands) 2012 2011 2012 2011

Total Operating Income $ 96,754 $ 161,177 $ 151,506 $ 185,022


Interest expense 59,700 68,378 124,514 136,893

Interest and net investment income (1,396) (1,398) (4,038) (3,591)Loss on extinguishment of debt — — 39,193 —

Other expense 177

173

351

348

Income (Loss) from Continuing Operations before Income Taxes $ 38,273

$ 94,024

$ (8,514)$ 51,372

(2) Includes 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 field leadership at ServiceMaster Clean,an initiative to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters andother restructuring costs. Presented below is a summary of restructuring charges (credits) by segment:

Three months ended Six months ended

June 30, June 30,

(In thousands) 2012 2011 2012 2011

Restructuring charges:

Terminix $ 697 $ (73) $ 2,817 $ 2,467

TruGreen 149 8 820 5

American Home Shield — — — —

ServiceMaster Clean 467 — 467 20

Other Operations and Headquarters 3,713

159

4,912

191

Total restructuring charges $ 5,026

$ 94

$ 9,016

$ 2,683

Note 14. Related Party Transactions

In connection with the Merger and the related transactions, the Company entered into a consulting agreement with CD&Runder which CD&R provides the Company with on-going consulting and management advisory services. The annual management feepayable under the consulting agreement with CD&R is $6.25 million. Under this agreement, the Company recorded management feesof $1.6 million and $3.1 million in the three and six months ended June 30, 2012 and 2011, respectively, which is included in Sellingand administrative expenses in the condensed consolidated statements of operations and comprehensive income. The consultingagreement also provides that CD&R may receive additional fees in connection with certain subsequent financing and acquisition ordisposition transactions. 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, each of

which is or was an Equity Sponsor or an affiliate of an Equity Sponsor. Under the consulting agreements, Citigroup, BAS andJPMorgan each provide the Company with on-going consulting and management advisory services through June 30, 2016 or theearlier termination of the existing consulting agreement between the Company and CD&R. On September 30, 2010, Citigrouptransferred the management responsibility for certain investment funds that own shares of common stock of Holdings to StepStoneand Lexington Partners Advisors LP. 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 ofDecember 22, 2011, Holdings purchased from BAS 7.5 million shares of capital stock of Holdings, and, effective January 1, 2012, theannual management fee payable to BAS was reduced to $0.25 million. The Company pays annual management fees of $0.5 million,$0.25 million and $0.25 million to StepStone, BAS and JPMorgan, respectively. The Company recorded aggregate consulting feesrelated to these agreements of $0.25 million and $0.3 million in the three months ended June 30, 2012 and 2011, respectively, and$0.5 million and $0.6 million in the six months ended June 30, 2012 and 2011, respectively, which is included in Selling andadministrative expenses in the condensed consolidated statements of operations and comprehensive income.

In 2008 and 2009, Holdings completed open market purchases totaling $65.0 million in face value of the 2015 Notes for a

cost of $21.4 million. On December 21, 2011, the Company purchased from Holdings and retired $65.0 million in face value of the2015 Notes for an aggregate purchase price of $68.0 million, which included payment of accrued interest of $3.0 million. TheCompany recorded interest expense of $3.5 million for the six months ended June 30, 2011 related to the 2015 Notes held byHoldings. The Company paid interest to Holdings of $3.5 million for the six months ended June 30, 2011. As a result of the purchaseof the 2015 Notes from Holdings, the Company did not have interest payable to Holdings as of June 30, 2012 and December 31, 2011.

17

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 15 of 28

Table of Contents

Note 15. Newly Issued Accounting Statements and Positions

In May 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-04,"Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and International FinancialReporting Standards ("IFRS")." This ASU is the result of joint efforts by the FASB and the International Accounting Standards Boardto develop converged guidance on how to measure fair value and what disclosures to provide about fair value measurements. TheASU is largely consistent with existing fair value measurement principles in U.S. GAAP; however, it expands existing disclosurerequirements for fair value measurements and makes other amendments, many of which eliminate unnecessary wording differencesbetween U.S. GAAP and IFRS. This ASU is effective for interim and annual periods beginning after December 15, 2011 (calendaryear 2012). The Company adopted the required provisions of this standard during the first quarter of 2012. The adoption of thisstandard did not have a material impact on the Company's condensed consolidated financial statements.

In June 2011, the FASB issued ASU 2011-05, "Presentation of Comprehensive Income," to eliminate the option to present

components of other comprehensive income as part of the statement of changes in stockholders' equity and require that all non-ownerchanges in stockholders' equity be presented either in a single continuous statement of comprehensive income or in two separate butconsecutive statements. In both options, an entity is required to present each component of net income along with total net income,each component of other comprehensive income along with a total for other comprehensive income, and a total amount forcomprehensive income. In December 2011, the FASB issued ASU 2011-12, "Comprehensive Income," to effectively defer thechanges from ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensiveincome. The amendments will be temporary to allow the Board time to redeliberate the presentation requirements for reclassificationsout of accumulated other comprehensive income for annual and interim financial statements. This standard is effective for fiscal years,and interim periods within those years, beginning after December 15, 2011 (calendar year 2012) and must be applied retrospectivelyto all periods upon adoption. The Company adopted the required provisions of this standard during the first quarter of 2012. Theadoption of this standard changed the presentation of the Company's condensed consolidated financial statements.

Note 16. Fair Value of Financial Instruments

The period end carrying amounts of receivables, accounts payable and accrued liabilities approximate fair value because ofthe short maturity of these instruments. The period end carrying amounts of long-term notes receivables approximate fair value as theeffective interest rates for these instruments are comparable to market rates at period end. The period end carrying amounts of currentand long-term marketable securities also approximate fair value, with unrealized gains and losses reported net-of-tax as a componentof accumulated other comprehensive loss on the condensed consolidated statements of financial position, or, for certain unrealizedlosses, reported in interest and net investment income in the condensed consolidated statements of operations and comprehensiveincome if the decline in value is other than temporary. The carrying amount of total debt was $3.882 billion and $3.876 billion and theestimated fair value was $3.917 billion and $3.788 billion as of June 30, 2012 and December 31, 2011, respectively. The fair value ofthe Company's debt is estimated based on available market prices for the same or similar instruments which are considered significantother observable inputs (Level 2) within the fair value hierarchy. The fair values of the Company's financial instruments reflect theamounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants atthe measurement date (exit price). The fair value estimates presented in this report are based on information available to the Companyas of June 30, 2012 and December 31, 2011.

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 (forexample, 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 presentvalue. The expected future settlements are determined by comparing the contract interest rate to the expected forward interest rate asof each settlement date and applying the difference between the two rates to the notional amount of debt in the interest rate swapcontracts.

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 the expected future settlements between the 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 eachsettlement 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 fairvalue for reasonableness utilizing information available to the Company from other published sources.

18

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 16 of 28

Table of Contents

The Company has not changed its valuation techniques for measuring the fair value of any financial assets and liabilitiesduring the year. Transfers between levels, if any, are recognized at the end of the reporting period. There were no significant transfersbetween levels during the six months ended June 30, 2012 or 2011.

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 ofJune 30, 2012


Estimated Fair Value Measurements

(In thousands) Balance Sheet Locations

CarryingValue

QuotedPrices In

ActiveMarkets(Level 1)

SignificantOther

ObservableInputs

(Level 2)

SignificantUnobservable

Inputs(Level 3)

CarryingValue

EstimatedFair Value

Financial Assets:

Deferred compensation trustassets

Long-term marketable securities $ 11,114 $ 11,114 $ — $ — $ 10,834 $ 10,834

Investments in marketablesecurities

Marketable securities and Long-term marketable securities 141,653 51,575 90,078 — 131,648 131,648

Fuel swap contracts:

Current Prepaid expenses and other assets 213 — — 213 548 548

Noncurrent Other assets

35

—

—

35

—

—

Total financial assets

$153,015 $ 62,689

$ 90,078

$ 248

$143,030

$143,030

Financial Liabilities:

Fuel swap contracts:

Current Other accrued liabilities 2,225 — — 2,225 1,281 1,281

Interest rate swap contracts Other long-term obligations

15,326

—

15,326

—

23,467

23,467

Total financial liabilities

$ 17,551 $ —

$ 15,326

$ 2,225

$ 24,748

$ 24,748

The carrying amount and estimated fair value of the Company's assets that were recorded at fair value on a nonrecurring basis

as of June 30, 2012 are as follows:

As of

June 30, 2012

Estimated Fair Value Measurements

Quoted Significant

Prices In Other Significant

Active Observable Unobservable

Carrying Markets Inputs Inputs

(In thousands) Balance Sheet Location Value (Level 1) (Level 2) (Level 3)

TruGreen Trade Name (1)

Intangible assets, primarily trade names, service marks andtrademarks, net $657,800 $ — $ — $ 657,800

(1) In the second quarter of 2012, we recognized a non-cash impairment charge of $67.7 million to reduce the carrying value ofthe TruGreen trade name to its fair value as a result of our interim impairment testing of indefinite-lived intangible assets. SeeNote 5 for further information regarding the factors that led to the completion of the interim impairment analysis along with adescription of the methodology, assumptions, and significant unobservable inputs used to estimate the fair value of theTruGreen trade name. 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 SwapContract

Assets (Liabilities)

Balance as of December 31, 2011 $ (733)Total gains (realized and unrealized)

Included in earnings(1) 1,134

Included in accumulated other comprehensive loss (1,244)Settlements, net

(1,134)Balance as of June 30, 2012

$ (1,977)

(In thousands)

Fuel SwapContract

Assets (Liabilities)


Total gains (realized and unrealized)

Included in earnings(1) 5,493

Included in accumulated other comprehensive loss 1,016

Settlements, net (5,493)


SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 17 of 28

(1) Gains included in earnings are reported in Cost of services rendered and products sold, with the exception of $0.3 million ofgains in the six months ended June 30, 2011, which are reported in loss from discontinued operations, net of income taxes.

19

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 18 of 28

Table of Contents

The following table presents information relating to the significant unobservable inputs of our Level 3 financial instrumentsas of June 30, 2012:

Item

Fair Value as ofJune 30, 2012(in thousands)

ValuationTechnique

UnobservableInput Range

WeightedAverage

Fuel swap contracts $ (1,977) Discounted Cash Flows Forward Unleaded Price per Gallon(1) $3.05-$3.33 $ 3.16

Forward Diesel Price per Gallon(1) $3.60-$3.68 $ 3.62

(1) Forward price per gallon for unleaded and diesel were derived from third-party market data providers. A decrease in theforward 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 interest rates.

The Company does not hold or issue derivative financial instruments for trading or speculative purposes. In designating its derivativefinancial instruments as hedging instruments under accounting standards for derivative instruments, the Company formally documentsthe relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for theuse of the hedging instrument. This documentation includes linking the derivatives to forecasted transactions. The Company assessesat the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsettingthe projected changes in cash flows of the associated forecasted transactions. All of the Company's designated hedging instruments areclassified as cash flow hedges.

The Company has historically hedged a significant portion of its annual fuel consumption of approximately 21 million

gallons. The Company has also hedged the interest payments on a portion of its variable rate debt through the use of interest rate swapagreements. 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 condensed consolidated statements of financial position as either an asset or liability atfair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in accumulated othercomprehensive income (loss). Any change in the fair value of the hedging instrument resulting from ineffectiveness, as defined byaccounting standards, is recognized in current period earnings. Cash flows related to fuel and interest rate derivatives are classified asoperating activities in the condensed consolidated statements of cash flows.

The effect of derivative instruments on the condensed consolidated statements of operations and comprehensive income and

accumulated other comprehensive income (loss) on the condensed consolidated statements of financial position for the six monthsended June 30, 2012 and 2011, respectively, is presented as follows:

(In thousands)

Derivatives designated asCash Flow Hedge

Effective Portion ofGain (Loss) Recognized in

Accumulated OtherComprehensive Income (Loss)

Effective Portion of Gain (Loss)Reclassified from

Accumulated OtherComprehensive Income

(Loss) into Income Location of Gain (Loss)

Relationships Six months ended June 30, 2012 included in Income

Fuel swap contracts $ (1,244)$ 1,134 Cost of services rendered and products sold

Interest rate swap contracts $ 11,011 $ (14,665)Interest expense

Derivatives designated asCash Flow Hedge

Effective Portion ofGain Recognized inAccumulated Other

Comprehensive Income (Loss)

Effective Portion of Gain (Loss)Reclassified from

Accumulated OtherComprehensive Income

(Loss) into Income Location of Gain (Loss)

Relationships Six months ended June 30, 2011 included in Income

Fuel swap contracts $ 1,016 $ 5,493 Cost of services rendered and products sold

$ — $ 271

Loss from discontinued operations, net of incometaxes

Interest rate swap contracts $ 11,554 $ (19,483)Interest expense

20

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 19 of 28

Table of Contents

Ineffective portions of derivative instruments designated in accordance with accounting standards as cash flow hedgerelationships were insignificant during the six months ended June 30, 2012. As of June 30, 2012, the Company had fuel swapcontracts to pay fixed prices for fuel with an aggregate notional amount of $23.4 million, maturing through 2013. Under the terms ofits fuel swap contracts, the Company is required to post collateral in the event that the fair value of the contracts exceeds a certainagreed upon liability level and in other circumstances required by the counterparty. As of June 30, 2012, the Company had posted $4.0million in letters of credit as collateral under its fuel hedging program, none of which were posted under the Company's RevolvingCredit Facility. As of June 30, 2012, the Company had interest rate swap contracts to pay fixed rates for interest on long-term debtwith an aggregate notional amount of $1.180 billion, maturing through 2013.

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 sameperiod or periods during which the hedged forecasted debt interest settlement or the fuel settlement affects earnings. The amountexpected to be reclassified into earnings during the next 12 months includes unrealized gains and losses related to open fuel hedgesand interest rate swaps. Specifically, as the underlying forecasted transactions occur during the next 12 months, the hedging gains andlosses in accumulated other comprehensive income (loss) expected to be recognized in earnings is a loss of $11.2 million, net of tax,as of June 30, 2012. The amounts that are ultimately reclassified into earnings will be based on actual interest rates and fuel prices atthe time the positions are settled and may differ materially from the amount noted above.

Note 17. Condensed Consolidating Financial Statements of The ServiceMaster Company and Subsidiaries

The following condensed consolidating financial statements of the Company and its subsidiaries have been prepared pursuantto Rule 3-10 of Regulation S-X. These condensed consolidating financial statements have been prepared from the Company's financialinformation on the same basis of accounting as the condensed consolidated financial statements. Goodwill and other intangible assetshave been allocated to all of the subsidiaries of the Company based on management's estimates.

The payment obligations of the Company under the 2015 Notes and the 2020 Notes are jointly and severally guaranteed on a

senior unsecured basis by the Guarantors. Each of the Guarantors is wholly owned, directly or indirectly, by the Company, and allguarantees are full and unconditional. The Non-Guarantors do not guarantee the 2015 Notes or the 2020 Notes. A Guarantor will bereleased from its obligations under its guarantee under certain customary circumstances, including (i) the sale or disposition of theGuarantor, (ii) the release of the Guarantor from all of its obligations under all guarantees related to any indebtedness of the Company,(iii) the merger or consolidation of the Guarantor as specified in the indenture governing the 2015 Notes or the 2020 Notes, as the casemay be, (iv) the Guarantor becomes an unrestricted subsidiary under the indenture governing the 2015 Notes or the 2020 Notes, as thecase may be, (v) the defeasance of the Company's obligations under the indenture governing the 2015 Notes or the 2020 Notes, as thecase may be, or (vi) the payment in full of the principal amount of the 2015 Notes or the 2020 Notes, as the case may be.

21

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 20 of 28

Table of Contents

THE SERVICEMASTER COMPANY AND SUBSIDIARIESCondensed Consolidating Statement of Operations and Comprehensive Income

For the Three Months Ended June 30, 2012 (Unaudited)(In thousands)

The

ServiceMaster Non-


Operating Revenue $ — $ 731,404 $ 245,522 $ (14,761)$ 962,165


Cost of services rendered and products sold — 434,105 113,503 (14,654) 532,954

Selling and administrative expenses 2,031 137,013 102,992 (107) 241,929

Amortization expense 56 16,563 1,183 — 17,802

Trade name impairment — 67,700 — — 67,700

Restructuring charges —

1,310

3,716

—

5,026


656,691

221,394

(14,761) 865,411

Operating (Loss) Income (2,087) 74,713 24,128 — 96,754


Interest expense (income) 42,514 21,589 (4,403) — 59,700

Interest and net investment loss (income) 654 4,729 (6,779) — (1,396)Other expense

—

—

177

—

177

(Loss) Income from Continuing Operations before Income Taxes (45,255) 48,395 35,133 — 38,273

(Benefit) provision for income taxes (14,574) 6,964 23,638 — 16,028

Equity in losses of joint venture —

—

(111) —

(111)

(Loss) Income from Continuing Operations (30,681) 41,431 11,384 — 22,134

Income from discontinued operations, net of income taxes — 798 40 — 838

Equity in earnings of subsidiaries (net of tax) 53,653

9,799

—

(63,452) —

Net Income $ 22,972

$ 52,028

$ 11,424

$ (63,452)$ 22,972


$ 22,414 $ 52,387

$ 10,393

$ (62,780)$ 22,414

22

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 21 of 28

Table of Contents


For the Three Months Ended June 30, 2011 (Unaudited)(In thousands)

The

ServiceMaster Non-


Operating Revenue $ — $ 750,739 $ 231,405 $ (14,704)$ 967,440





Restructuring charges (credits) 3

(65) 156

—

94


611,104

207,287

(14,636) 806,263

Operating (Loss) Income (2,508) 139,635 24,118 (68) 161,177




—

—

173

—

173

(Loss) Income from Continuing Operations before Income Taxes (49,667) 113,326 30,433 (68) 94,024

(Benefit) provision for income taxes (19,464) 31,279

21,647

—

33,462

(Loss) Income from Continuing Operations (30,203) 82,047 8,786 (68) 60,562

Income (loss) from discontinued operations, net of income taxes — 2,602 (6,512) 68 (3,842)Equity in earnings of subsidiaries (net of tax)

86,923

104

—

(87,027) —

Net Income $ 56,720

$ 84,753

$ 2,274

$ (87,027)$ 56,720


$ 55,510 $ 84,460

$ 3,367

$ (87,827)$ 55,510

23

SCampbell

Typewritten Text

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 22 of 28

Table of Contents


For the Six Months Ended June 30, 2012 (Unaudited)(In thousands)

The

ServiceMaster Non-


Operating Revenue $ — $ 1,217,276 $ 428,585 $ (29,007)$ 1,616,854





Trade name impairment — 67,700 — — 67,700

Restructuring charges —

3,589

5,427

—

9,016


1,087,552

402,579

(29,007) 1,465,348

Operating (Loss) Income (4,224) 129,724 26,006 — 151,506



Interest and net investment loss (income) 464 6,350 (10,852) — (4,038)Loss on extinguishment of debt 39,193 — — — 39,193

Other expense —

—

351

—

351

(Loss) Income from Continuing Operations before Income Taxes (133,236) 79,590 45,132 — (8,514)(Benefit) provision for income taxes (47,404) 4,679 41,072 — (1,653)Equity in losses of joint venture

—

—

(111) —

(111) (Loss) Income from Continuing Operations (85,832) 74,911 3,949 — (6,972) (Loss) income from discontinued operations, net of income taxes — (123) 37 — (86)Equity in earnings of subsidiaries (net of tax)

78,774

3,025

—

(81,799) —

Net (Loss) Income $ (7,058)$ 77,813

$ 3,986

$ (81,799)$ (7,058)

Total Comprehensive (Loss) Income

$ (364)$ 78,761 $ 4,586

$ (83,347)$ (364)

24

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 23 of 28

Table of Contents


For the Six Months Ended June 30, 2011 (Unaudited)(In thousands)

The

ServiceMaster Non-


Operating Revenue $ — $ 1,215,057 $ 395,297 $ (28,243)$ 1,582,111





Restructuring charges 35

2,492

156

—

2,683


1,040,326

380,013

(28,078) 1,397,089

Operating (Loss) Income (4,828) 174,731 15,284 (165) 185,022


Interest expense 92,598 42,118 2,177 — 136,893


—

—

348

—

348

(Loss) Income from Continuing Operations before Income Taxes (98,295) 128,155 21,677 (165) 51,372

(Benefit) provision for income taxes (40,197) 23,341

32,961

—

16,105

(Loss) Income from Continuing Operations (58,098) 104,814 (11,284) (165) 35,267

Income (loss) from discontinued operations, net of income taxes — 15,761 (40,869) 165 (24,943)Equity in earnings (losses) of subsidiaries (net of tax)

68,422

(53,891) —

(14,531) —

Net Income (Loss) $ 10,324

$ 66,684

$ (52,153)$ (14,531)$ 10,324

Total Comprehensive Income (Loss)

$ 20,312 $ 66,697

$ (49,374)$ (17,323)$ 20,312

25

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 24 of 28

Table of Contents

THE SERVICEMASTER COMPANY AND SUBSIDIARIESCondensed Consolidating Statement of Financial Position (Unaudited)

As of June 30, 2012(In thousands)

The

ServiceMaster Non-


Assets

Current Assets:

Cash and cash equivalents $ 182,764 $ 17,674 $ 99,516 $ — $ 299,954

Marketable securities — — 35,161 — 35,161

Receivables 1,127 168,656 510,985 (218,813) 461,955

Inventories — 56,272 2,616 — 58,888

Prepaid expenses and other assets 10,804 54,221 22,326 (265) 87,086

Deferred customer acquisition costs — 36,112 14,953 — 51,065

Deferred taxes 39,745

47,205

4,287

—

91,237

Total Current Assets 234,440

380,140

689,844

(219,078) 1,085,346


At cost — 416,864 179,760 — 596,624

Less: accumulated depreciation —

(184,778) (76,671) —

(261,449)

Net property and equipment —

232,086

103,089

—

335,175

Other Assets:

Goodwill — 2,805,585 366,728 — 3,172,313

Intangible assets, primarily trade names, service marks and trademarks,net — 1,705,234 737,768 — 2,443,002

Notes receivable 2,019,913 55 30,001 (2,027,860) 22,109

Long-term marketable securities 11,114 — 106,492 — 117,606

Investments in and advances to subsidiaries 2,943,261 960,396 — (3,903,657) —

Other assets 48,499 3,905 1,414 (47,563) 6,255

Debt issuance costs 37,047

—

11

—

37,058


$6,087,401

$2,035,347

$(6,198,158)$7,218,864



Accounts payable $ 238 $ 70,757 $ 43,501 $ — $ 114,496


Payroll and related expenses 1,684 36,250 35,927 — 73,861

Self-insured claims and related expenses — 19,246 63,207 — 82,453

Accrued interest payable 54,691 353 44 (265) 54,823

Other 4,454 29,368 38,582 — 72,404

Deferred revenue — 193,318 333,181 — 526,499

Liabilities of discontinued operations — 776 163 — 939

Current portion of long-term debt 110,601

19,301

144,551

(218,813) 55,640

Total Current Liabilities 171,668

369,369

659,156

(219,078) 981,115

Long-Term Debt 3,765,531 2,033,577 54,703 (2,027,860) 3,825,951


Deferred taxes — 805,918 277,532 (47,563) 1,035,887

Intercompany payable 70,016 — 348,927 (418,943) —

Other long-term obligations, primarily self insured claims 36,046

1,328

87,524

—

124,898

Total Other Long-Term Liabilities 106,062

807,246

713,983

(466,506) 1,160,785

Shareholder's Equity

1,251,013

2,877,209

607,505

(3,484,714) 1,251,013


$6,087,401

$2,035,347

$(6,198,158)$7,218,864

26

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 25 of 28

SCampbell

Typewritten Text

Table of Contents

THE SERVICEMASTER COMPANY AND SUBSIDIARIESCondensed Consolidating Statement of Financial Position

As of December 31, 2011(In thousands)

TheServiceMaster

Company Guarantors

Non-Guarantors Eliminations Consolidated

Assets

Current Assets:

Cash and cash equivalents $ 232,382 $ 13,751 $ 82,797 $ — $ 328,930

Marketable securities — — 12,026 — 12,026

Receivables 1,202 108,486 452,149 (187,637) 374,200

Inventories — 57,219 2,424 — 59,643

Prepaid expenses and other assets 5,629 12,742 20,218 (294) 38,295

Deferred customer acquisition costs — 13,838 16,565 — 30,403

Deferred taxes 39,221 47,218 4,170 — 90,609

Assets of discontinued operations

—

7

10

—

17

Total Current Assets

278,434

253,261

590,359

(187,931) 934,123


At cost — 377,900 163,917 — 541,817

Less: accumulated depreciation

—

(164,689) (70,369) —

(235,058)Net property and equipment

—

213,211

93,548

—

306,759

Other Assets:

Goodwill — 2,796,789 365,191 — 3,161,980

Intangible assets, primarily trade names, service marks and trademarks,net — 1,804,619 738,920 — 2,543,539

Notes receivable 1,997,157 82 31,187 (2,005,104) 23,322

Long-term marketable securities 10,834 — 119,622 — 130,456

Investments in and advances to subsidiaries 2,890,634 872,451 — (3,763,085) —

Other assets 51,871 3,838 3,926 (50,789) 8,846

Debt issuance costs

37,708

—

90

—

37,798


$5,944,251

$1,942,843

$(6,006,909)$7,146,823



Accounts payable $ 192 $ 46,378 $ 35,071 $ — $ 81,641


Payroll and related expenses 1,659 40,608 43,079 — 85,346

Self-insured claims and related expenses — 20,400 52,671 — 73,071

Accrued interest payable 67,000 260 45 (294) 67,011

Other 2,919 31,760 35,424 — 70,103

Deferred revenue — 142,918 330,324 — 473,242

Liabilities of discontinued operations — 279 526 — 805

Current portion of long-term debt

108,428

14,258

116,789

(187,637) 51,838

Total Current Liabilities

180,198

296,861

613,929

(187,931) 903,057

Long-Term Debt 3,782,391 2,015,961 30,784 (2,005,104) 3,824,032


Deferred taxes — 808,830 278,652 (50,789) 1,036,693

Intercompany payable 12,309 — 310,011 (322,320) —

Liabilities of discontinued operations — — 2,070 — 2,070

Other long-term obligations, primarily self-insured claims

43,821

220

89,011

—

133,052

Total Other Long-Term Liabilities

56,130

809,050

679,744

(373,109) 1,171,815

Shareholder's Equity

1,247,919

2,822,379

618,386

(3,440,765) 1,247,919


$5,944,251

$1,942,843

$(6,006,909)$7,146,823

27

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 26 of 28

Table of Contents

THE SERVICEMASTER COMPANY AND SUBSIDIARIESCondensed Consolidating Statement of Cash Flows (Unaudited)

For the Six Months Ended June 30, 2012(In thousands)

The

ServiceMaster Non-


Cash and Cash Equivalents at Beginning of Period $ 232,382

$ 13,751

$ 82,797

$ —

$ 328,930

Net Cash (Used for) Provided from Operating Activities from Continuing

Operations (47,305) 180,656

8,455

(47,214) 94,592


Property additions — (28,823) (19,539) — (48,362)Sale of equipment and other assets — 431 3 — 434

Other business acquisitions, net of cash acquired — (9,504) (1,991) — (11,495)Notes receivable, financial investments and securities, net

—

—

(14,613) —

(14,613)Net Cash Used for Investing Activities from Continuing Operations

—

(37,896) (36,140) —

(74,036) Cash Flows from Financing Activities from Continuing Operations:

Borrowings of debt 600,000 — — — 600,000

Payments of debt (625,831) (5,755) (1,459) — (633,045)Debt issuance costs paid (12,700) — — — (12,700)Shareholders' dividends — (23,607) (23,607) 47,214 —

Net intercompany advances 36,218

(105,746) 69,528

—

—

Net Cash (Used for) Provided from Financing Activities from ContinuingOperations

(2,313) (135,108) 44,462

47,214

(45,745) Cash Flows from Discontinued Operations:

Cash used for operating activities — (180) (58) — (238)Cash used for investing activities:

Proceeds from sale of business —

(3,549) —

—

(3,549)

Net Cash Used for Discontinued Operations —

(3,729) (58) —

(3,787)

Cash (Decrease) Increase During the Period

(49,618) 3,923

16,719

—

(28,976) Cash and Cash Equivalents at End of Period

$ 182,764 $ 17,674

$ 99,516

$ —

$ 299,954

28

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

Page 27 of 28

Table of Contents

THE SERVICEMASTER COMPANY AND SUBSIDIARIESCondensed Consolidating Statement of Cash Flows (Unaudited)

For the Six Months Ended June 30, 2011(In thousands)

The

ServiceMaster Non-


Cash and Cash Equivalents at Beginning of Period $ 132,168

$ 16,900

$ 103,630

$ —

$ 252,698

Net Cash (Used for) Provided from Operating Activities from Continuing

Operations (32,996) 172,817

43,419

(40,130) 143,110


Property additions — (41,423) (16,411) — (57,834)Sale of equipment and other assets — 861 90 — 951

Acquisition of The ServiceMaster Company (35) — — — (35)Other business acquisitions, net of cash acquired — (11,886) — — (11,886)Purchase of other intangibles — (1,900) — (1,900)Notes receivable, financial investments and securities, net

—

—

(4,341) —

(4,341)Net Cash Used for Investing Activities from Continuing Operations

(35) (54,348) (20,662) —

(75,045) Cash Flows from Financing Activities from Continuing Operations:

Borrowings of debt — — — — —

Payments of debt (13,250) (6,520) (667) — (20,437)Debt issuance costs paid (280) — — — (280)Shareholders' dividends — (20,065) (20,065) 40,130 —

Net intercompany advances 98,907

(105,399) 6,492

—

—

Net Cash Provided from (Used for) Financing Activities from ContinuingOperations

85,377

(131,984) (14,240) 40,130

(20,717) Cash Flows from Discontinued Operations:

Cash used for operating activities — (20) (1,798) — (1,818)Cash provided from (used for) investing activities:

Proceeds from sale of business — 27,523 — — 27,523

Other investing activities —

—

(1,617) —

(1,617)

Net Cash Provided from (Used for) Discontinued Operations —

27,503

(3,415) —

24,088

Cash Increase During the Period

52,346

13,988

5,102

—

71,436

Cash and Cash Equivalents at End of Period

$ 184,514 $ 30,888

$ 108,732

$ —

$ 324,134

29

SCampbell

Typewritten Text

FDD Exhibit B

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 28 of 28

EXHIBIT C

MM FDD 4-1-2012 Page 1 of 4 As Amended 9-10-2012 Exhibit C

STATE FRANCHISE AGENCIES

CALIFORNIA California Commissioner of Corporations Department of Corporations 320 West 4th Street, Suite 750 Los Angeles, California 90013-2344 HAWAII Commissioner of Securities Hawaii Dept. of Commerce & Consumer Affairs Business Registration Division Securities Compliance Branch 335 Merchant Street, Rm 203 Honolulu, Hawaii 96813 ILLINOIS Attorney General State of Illinois 500 South Second Street Springfield, Illinois 62706 INDIANA Securities Commissioner Indiana Securities Division 302 W. Washington, Room E-111 Indianapolis, Indiana 46204 MARYLAND Office of the Attorney General Division of Securities 200 St. Paul Place Baltimore, Maryland 21202-2020 MICHIGAN Consumer Protection Division Antitrust and Franchising Unit Michigan Department of the Attorney General 670 G. Mennen Williams Building 525 West Ottawa Lansing, Michigan 48913 MINNESOTA Commissioner of Commerce Minnesota Department of Commerce 85 7th Place East, Suite 500 St. Paul, Minnesota 55101-2198 NEW YORK New York State Department of Law Bureau of Investor Protection and Securities

120 Broadway, 23rd Floor New York, New York 10271 NORTH DAKOTA Office of the Securities Commissioner State of North Dakota 5th Floor, State Capitol 600 East Boulevard Ave. Bismarck, North Dakota 58505 RHODE ISLAND Administrator – Securities Division Rhode Island Dept. of Business Regulation John O. Pastore Complex, Building 69-1 1511 Pontiac Avenue Cranston, Rhode Island 02920 SOUTH DAKOTA Division of Securities State of South Dakota 445 East Capitol Pierre, South Dakota 57501-3185 VIRGINIA State Corporations Commission Division of Securities and Retail Department 1300 East Main Street, 9th Floor Richmond, Virginia 23219 WASHINGTON Director, Washington State Department of Financial Institutions P. O. Box 9033 Olympia, Washington 98507 Or 150 Israel Road SW Tumwater, WA 98501 WISCONSIN Commissioner of Securities Department of Financial Institutions Bureau of Registration & Enforcement P. O. Box 1768 Madison, Wisconsin 53701 Or 345 West Washington Ave., 4th Floor Madison, WI 53703

EXHIBIT C


AGENTS FOR SERVICES OF PROCESS ALABAMA CT Corporation System 2 North Jackson Street, Suite 605 Montgomery, AL 36104 ALASKA CT Corporation System 9360 Glacier Hwy., Suite 202 Juneau, AK 99801 ARIZONA CT Corporation System 2394 E. Camelback Rd. Phoenix, AZ 85016 ARKANSAS The Corporation Company 124 W. Capitol Ave., Suite 1900 Little Rock, AR 72201 CALIFORNIA C T Corporation System 818 West Seventh St. Los Angeles, CA 90017 COLORADO The Corporation Company 1675 Broadway Denver, CO 80202 CONNECTICUT C T Corporation System One Corporate Center, 11th Floor Hartford, CT 06103 DELAWARE The Corporation Trust Company 1209 Orange Street Wilmington, DE 19801 DISTRICT OF COLUMBIA C T Corporation System 1015 15th Street, N.W., Suite 1000 Washington, D.C. 20005 FLORIDA C T Corporation System 1200 South Pine Island Road Plantation, FL 33324

GEORGIA CT Corporation System 1201 Peachtree St. NE Atlanta, GA 30361 HAWAII Commission of Securities Hawaii Dept. of Commerce & Consumer Affairs Business Registration Division Securities Compliance Branch 335 Merchant Street, Rm 203 Honolulu, HI 96813 IDAHO C T Corporation System 1111 West Jefferson, Suite 530 Boise, ID 83702 ILLINOIS Illinois Attorney General 500 South Second Street Springfield, IL 62706 INDIANA C T Corporation System 251 E. Ohio Street, Suite 1100 Indianapolis, IN 46204 IOWA C T Corporation System 500 East Court Avenue, Suite 500 Des Moines, IA 50309 KANSAS The Corporation Company, Inc. 112 SW 7th Street, Suite 3C Topeka, KS 66603 KENTUCKY C T Corporation System 4169 Westport Road Louisville, KY 40207 LOUISIANA C T Corporation System 5615 Corporate Blvd., Suite 400B Baton Rouge, LA 70808 MAINE C T Corporation System One Portland Square Portland, ME 04101

EXHIBIT C


MARYLAND Maryland Securities Commissioner 200 Saint Paul Place Baltimore, MD 21202-2020 MASSACHUSETTS C T Corporation System 155 Federal St., Suite 700 Boston, MA 02110 MICHIGAN The Corporation Company 30600 Telegraph Road, Suite 2345 Bingham Farms, MI 48025 MINNESOTA Minnesota Commissioner of Commerce Minnesota Department of Commerce 85 7th Place, East, Suite 500 St. Paul, MN 55101-2198 MISSISSIPPI C T Corporation System 645 Lakeland East Dr., Suite 101 Flowood, MS 39232 MISSOURI C T Corporation System 120 South Central Ave., Suite 400 Clayton, MO 63105 MONTANA C T Corporation System 208 N. Broadway, Suite 313 Billings, MT 59101 NEBRASKA C T Corporation System 1024 K Street Lincoln, NE 68508 NEVADA The Corporation Trust Company of Nevada 311 S. Division Street Carson City, NV 89703 NEW HAMPSHIRE C T Corporation System 9 Capitol St. Concord, NH 03301 NEW JERSEY The Corporation Trust Company Mountain View Office Park 820 Bear Tavern Road, 3rd Floor West Trenton, NJ 08628

NEW MEXICO C T Corporation System 123 East Marcy Santa Fe, NM 87501 NEW YORK C T Corporation System 111 Eighth Avenue New York, NY 10011 NORTH CAROLINA C T Corporation System 150 Fayetteville St., Box 1011. Raleigh, NC 27601 NORTH DAKOTA Commissioner of Securities North Dakota Securities Department 600 East Boulevard, 5th Floor Bismarck, ND 58505-0510 OHIO C T Corporation System 1300 East 9th Street, Suite 1010 Cleveland, OH 44114 OKLAHOMA The Corporation Company 1833 South Morgan Road Oklahoma City, OK 73128 OREGON C T Corporation System 388 State Street, Suite 420 Salem, OR 97301 PENNSYLVANIA C T Corporation System 116 Pine St., Suite 320 Harrisburg, PA 17101 RHODE ISLAND Director of Business Regulation Rhode Island Dept. of Business Regulation John O. Pastore Complex, Bldg. 69-1 1511 Pontiac Avenue Cranston, RI 02920 SOUTH CAROLINA C T Corporation System 2 Office Park Court, Suite 103 Columbia, SC 29223

EXHIBIT C


SOUTH DAKOTA Director, Division of Securities S. D. Dept. of Revenue & Regulation 445 East Capitol Avenue Pierre, SD 57501-3185 TENNESSEE C T Corporation System 800 S. Gay St., Suite 2021 Knoxville, TN 37929 TEXAS C T Corporation System 350 N. St. Paul Street, Suite 2900 Dallas, TX 75201 UTAH C T Corporation System 1108 E. South Union Avenue Midvale, UT 84047 VERMONT C T Corporation System 400 Cornerstone Drive, Suite 240 Williston, VT 05495 VIRGINIA Clerk of the State Corporation Commission 1300 East Main Street, 1st Floor Richmond, VA 23219 WASHINGTON Director, Washington State Department of Financial Institutions 150 Israel Road SW Tumwater, WA 98501 Or P. O. Box 9033 Olympia, WA 98507 WEST VIRGINIA C T Corporation System 5400 D Big Tyler Road Charleston, WV 25313 WISCONSIN Commissioner of Securities Wisconsin Dept. of Financial Institutions Bureau of Registration & Enforcement 345 West Washington Ave., 4th Floor Madison, WI 53703 Or P. O. Box 1768 Madison, WI 53701

WYOMING C T Corporation System 1720 Carey Avenue, Suite 200 Cheyenne, WY 82001

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 1 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Page 2 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 3 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 4 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 5 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 6 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 7 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 8 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 9 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 10 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 11 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 12 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 13 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 14 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 15 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 16 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 17 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 18 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 19 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 20 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 21 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 22 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 23 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 24 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 25 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 26 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 27 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 28 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 29 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 30 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 31 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 32 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 33 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 34 of 37

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 35 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 36 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT D

SCampbell

Typewritten Text

MM FDD 4-1-2012

SCampbell

Typewritten Text

Page 37 of 37

SCampbell

Typewritten Text

SCampbell

Typewritten Text

Exhibit D

SCampbell

Typewritten Text

EXHIBIT E

* NAME ADDRESS CITY STATE ZIP PHONE

2 Brian Jackson 595 Millich Drive suite 100 Campbell CA 95008 (408) 488-6826

2 Bill & CJ Eastman 117 State Road 436 Fern Park FL 32730 (407) 331‐5266

Donna Parton & Dwayne

Keller 200 Malaga Dr. Suite 6 St. Augustine FL 32084 (904) 827‐9699

2 Paul Piccione 1025 N Florida Mango Rd #4 West Palm Beach FL 33409 (561) 640-9112

Kelly Walters & Laura Martin 1139 Summit Hills Dr. Bettendorf IA 52722 (563) 340‐3800Jennifer Ward & Timonthy Livesay 307 W McMackin St Salem IL 62881 (618) 548-8290

2 Jeff & Diana Strassel 1115 Briarpatch Broussard LA 70518 (337) 319-9722Bethany & Todd Hoppe 3160 Christy Way #2 Saginaw MI 48603 (800) 637-7962

Paul Robert & Kent

Christianson 4553 McComber Rd. Duluth MN 55803 (218) 393‐5160

Terri Koepke 3302 W. Central Ave. Missoula MT 59804 (406) 542‐4768

Danny Barnett 405 E. Amador Suite A Las Cruces NM 88011 (575) 527‐8199

2 Danny Barnett 7 South Howard Suite 424 Spokane WA 99201 (509) 891‐1030

* This column indicates if an owner on this list has more than one outlet terminated, transferred, cancelled or non-renewed.

The following is a compilation of the name, and last known address and telephone number of every franchisee who has had an outlet terminated, transferred, cancelled, not renewed or otherwise voluntarily ceased to do business under the Merry Maids Franchise Agreement or who has not communicated with us within ten weeks of this disclosure date.

Former Franchise Listing

MM FDD 4‐1‐2012Page 1 of 2

Exhibit E

scampbell

Cross-Out

EXHIBIT F

MM FDD 4-1-2012 Page 1 of 15 As amended 9-10-2012 Exhibit F

ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT FOR THE STATE OF ILLINOIS

The following information applies to franchises and Franchisees subject to the Illinois Disclosure

Act of 1987. Item numbers correspond to those in the main body:

1. Cover Page

Risk Factors: 1. PURSUANT TO ILLINOIS COMPILED STATUTES 2002, CHAPTER 815, SECTION 705/4

ILLINOIS COURTS HAVE JURISDICTION AND VENUE IN MATTERS REGARDING ILLINOIS FRANCHISEES. THE FRANCHISE AGREEMENT STATES THAT THE LAW OF TENNESSEE GOVERNS THE AGREEMENT AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. PURSUANT TO ILLINOIS COMPILED STATUTES 2002, CHAP. 815, SECTIONS 701/1 THROUGH 705/44, THIS STATEMENT SHALL NOT IN ANY WAY ABROGATE OR REDUCE ANY RIGHTS OF THE FRANCHISEE AS PROVIDED FOR IN THE ILLINOIS FRANCHISE DISCLOSURE ACT.

2. THIS FRANCHISE AGREEMENT STATES THE CONTINUATION OF THE FRANCHISEE’S TERRITORIAL EXCLUSIVITY DEPENDS ON YOUR MAINTAINING THE MINIMUM WEEKLY GROSS SALES LEVELS. MERRY MAIDS MAY REDUCE THE SIZE OF YOUR MARKET OR TERMINATE YOUR FRANCHISE AGREEMENT IF YOU FAIL TO MAINTAIN THESE SALES LEVELS.

3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE. 2. Item 5 A. The second sentence of the second paragraph in Item 5, under the heading “Initial

Franchise Fee,” is amended as follows: “Before you sign the Franchise Agreement but at least fourteen days after you receive this DISCLOSURE DOCUMENT and five business days after receipt of the completed franchise agreements, Merry Maids will allow you to make a partial payment of $4,500 for the Small-Sized Market, $5,400 for the Mid-Sized Market, and $6,600 for the Full-Sized Market, to reserve the availability of the Market in question.”

B. The fourth sentence of the second paragraph in Item 5, under the heading “Initial Franchise Fee,” is amended as follows: “This partial payment is a payment made directly to us and is in addition to any “down payment” amounts required by our financing affiliate, SMAC, as disclosed in Footnote 1 of Item 7 and in Item 10.”

2. Item 17 A. Item 17v and 17w, under the heading "Renewal, Termination, Transfer and Dispute

Resolution", is amended by the addition of the following language to the original language that appears therein:

“Illinois law applies.”

EXHIBIT F


ADDENDUM TO THE FRANCHISE AGREEMENT FOR THE STATE OF ILLINOIS

This Addendum relates to franchises sold in the state of Illinois and is intended to comply with Illinois statutes and regulations. In consideration of the execution of the Franchise Agreement (the “Agreement”), Merry Maids Limited Partnership (“Merry Maids”) and Franchisee agree to amend the Agreement as follows:

1. The conditions under which the Franchise Agreement can be terminated and the rights upon nonrenewal may be affected by Illinois Law, 815 ILCS 705/19 and 705/20. 2. Section 21 of the Agreement, under the heading “Entire Agreement” shall not be construed to mean that Franchisee may not rely on representations in the FRANCHISE DISCLOSURE DOCUMENT that Franchisor provided to Franchisee in connection with the offer and purchase of the franchise granted under the Franchise Agreement. 3. Section 24 of the Agreement, under the heading “Applicable Law”, is amended by the addition of the following language to the original language that appears therein: “Illinois law applies.” 4. Section 26.1 of the Agreement, under the heading, “Representations by Franchisee”, is hereby deleted in its entirety, pursuant to Section 41 of the Illinois Franchise Disclosure Act. IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and delivered this Amendment to the Franchise Agreement on the same day and year that the Franchise Agreement has been executed.

Attest: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., Its General Partner

By: __________________________________________

__________________________ Title:________________________________________ “FRANCHISEE” Attest: By: _________________________________________ ___________________________ Title: _______________________________________

EXHIBIT F


ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT FOR THE STATE OF MARYLAND

The following information applies to franchises and Franchisees subject to Maryland statutes and

regulations. Item numbers correspond to those in the main body:

1. Item 17 A. Items 17v and w, under the heading "Renewal, Termination, Transfer and Dispute

Resolution", are amended by the addition of the following language to the original language that appears therein:

"The Maryland Franchise Registration and Disclosure Law allows a franchisee to bring a lawsuit in Maryland for claims arising under this law".

B. Item 17c, under the heading "Renewal, Termination, Transfer and Dispute Resolution", is

amended by the addition of the following language to the original language that appears therein:

"The general release required as a condition of renewal and/or assignment/transfer shall not apply to any liability under the Maryland Franchise Registration and Disclosure Law."

C. Item 17f, under the heading "Renewal, Termination, Transfer and Dispute Resolution", is

amended by the addition of the following language to the original language that appears therein:

"The provision in the franchise agreement which provides for termination upon bankruptcy of the franchise may not be enforceable under federal bankruptcy law (11 U.S.C. Section 101 et seq.).

EXHIBIT F


ADDENDUM TO THE FRANCHISE AGREEMENT

FOR THE STATE OF MARYLAND This Addendum relates to franchises sold in the state of Maryland and is intended to comply with Maryland statutes and regulations. In consideration of the execution of the Franchise Agreement (the “Agreement”), Merry Maids Limited Partnership (“Merry Maids”) and Franchisee agree to amend the Agreement as follows:

1. Section 24 of the Agreement, under the heading "Applicable State Law", is amended by the addition of the following language to the original language that appears therein:

"The Maryland Franchise Registration and Disclosure Law allows a franchisee to bring a lawsuit in Maryland for claims arising under this Law".

2. Section 14 (I) of the Agreement, under the heading "Termination and Non-Renewal of the Franchise; Assignment; Modification" is amended by the addition of the following language to the original language that appears therein:

"The general release required as a condition of assignment or transfer shall not apply to any liability under the Maryland Franchise Registration and Disclosure Law".

IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and delivered this Amendment to the Franchise Agreement on the same day and year that the Franchise Agreement has been executed. Attest: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., Its General Partner _______________________ By: _________________________________________ Title: _______________________________________ Attest: FRANCHISEE: _______________________________ _______________________ By: _________________________________________ Title: _______________________________________

EXHIBIT F


ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT FOR THE STATE OF MINNESOTA

The following information applies to franchises and Franchisees subject to the Minnesota

Franchise Act. Item numbers correspond to those in the main body:

Cover Page

Risk Factors: THE MINNESOTA FRANCHISE ACT MAKES IT UNLAWFUL TO OFFER OR

SELL ANY FRANCHISE IN THIS STATE WHICH IS SUBJECT TO REGISTRATION WITHOUT FIRST PROVIDING TO THE FRANCHISEE, AT LEAST 7 DAYS PRIOR TO THE EXECUTION BY THE PROSPECTIVE FRANCHISEE OR ANY BINDING FRANCHISE OR OTHER AGREEMENT, OR AT LEAST 7 DAYS PRIOR TO THE PAYMENT OF ANY CONSIDERATION, BY THE FRANCHISEE, WHICHEVER OCCURS FIRST, A COPY OF THIS PUBLIC DISCLOSURE DOCUMENT STATEMENT, TOGETHER WITH A COPY OF ALL PROPOSED AGREEMENT RELATING TO THE SALE OF THE FRANCHISE. THIS PUBLIC OFFERING STATEMENT CONTAINS A SUMMARY ONLY OF CERTAIN MATERIAL PROVISIONS OF THE FRANCHISE AGREEMENT. THE CONTRACT OF AGREEMENT SHOULD BE REFERRED TO FOR UNDERTANDING OF ALL RIGHTS AND OBLIGATIONS OF THE FRANCHISOR AND FRANCHISEE.

Item 13 A. Item 13, under the heading, “Trademarks,” is amended by the addition of the following language to the original language that appears therein: “The franchisor will protect the franchisee’s rights to use the trademarks, service marks, trade names, logotypes or other commercial symbols or indemnify the franchisee from any loss, costs or expenses arising out of any claim, suit or demand regarding the use of the name.”

Item 17 A. Item 17e and f, under the heading “Renewal, Termination, Transfer and Dispute Resolution”, is amended by the addition of the following language to the original language that appears therein:

“With respect to franchises governed by Minnesota law, we will comply with Minnesota Stat. Sec. 80C.14, Subds. 3, 4 and 5 which require, except in certain specified cases, (1) that you will be given 90 days notice of termination (with 60 days to cure) and 180 days notice for non-renewal of the franchise agreement, and (2) that consent to the transfer of the franchise will not be unreasonably withheld .”

B. Item 17v and w, under the heading “Renewal, Termination, Transfer and Dispute Resolution”, is amended by the addition of the following language to the original language that appears therein:

“Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J, prohibit franchisor from requiring litigation, to be conducted outside Minnesota. In addition, nothing in the Franchise Disclosure Document or agreement(s) can abrogate or reduce: (1) any of the franchisee’s rights as provided for in Minnesota Statutes, Chapter 80C, or (2) franchisee’s rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction.”

EXHIBIT F


“Minn. Rule 2860.4400D prohibits a franchisor from requiring a franchisee to assent to a general release.” “Minn. Rule 2860.4400J permits a franchisor to seek injunctive relief; however, a franchisee cannot consent to the franchisor obtaining injunctive relief. A Court will determine if a bond is required.” “Limitations of Claims section must comply with Minnesota Statutes, Section 80C.17, Subd.5.”

EXHIBIT F


ADDENDUM TO THE FRANCHISE AGREEMENT FOR THE STATE OF MINNESOTA

This Addendum relates to franchises sold in the state of Minnesota and is intended to comply with Minnesota statutes and regulations. In consideration of the execution of the Franchise Agreement (the “Agreement”), Merry Maids Limited Partnership (“Franchisor”) and Franchisee agree to amend the Agreement as follows: 1. Sections 3 and 14 of the Agreement, under the headings, “Term and Renewal,” “Termination and Non-Renewal of the Franchise,” and “Assignment” are amended by the addition of the following language to the original language that appears therein:

“With respect to franchises governed by Minnesota law, the franchisor will comply with Minn. Stat. Sec. 80C.14, Subds. 3, 4 and 5 which require, except in certain specified cases, (a) that a franchisee be given 90 days notice of termination (with 60 days to cure) and 180 days notice for non-renewal of the franchise agreement, and (2) that consent to the transfer of the franchise will not be unreasonably withheld.”

“Minnesota Rule 2860.4400(d) prohibits a Franchisor from requiring a franchisee to assent to a

general release.” 2. Section 4 of the Agreement, under the heading, “Proprietary Marks,” is amended by the addition of the following language to the original language that appears therein: “The Franchisor will protect the franchisee’s rights to use the trademarks, service marks, trade names, logotypes or other commercial symbols or indemnify the franchisee from any loss, costs or expenses arising out of any claim, suit or demand regarding the use of the name.” 3. Sections 24 and 25, under the headings, “Applicable State Law” and “Forum Selection Clause” are amended by the addition of the following language to the original language that appears therein:

“Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J, prohibit Franchisor from requiring litigation to be conducted outside Minnesota. In addition, nothing in the Franchise Disclosure Document or agreement(s) can abrogate or reduce: (1) any of the franchisee’s rights as provided for in Minnesota Statutes, Chapter 80C, or (2) franchisee’s rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction.” “The Franchisor may seek injunctive relief; however, franchisee cannot consent to the franchisor obtaining injunctive relief. A Court will determine if a bond is required.” “Limitations of Claims section must comply with Minnesota Statutes, Section 80C.17, Subd. 5.”

EXHIBIT F


ADDENDUM TO FRANCHISE AGREEMENT STATE OF MINNESOTA Page 2 Attest: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., Its General Partner _______________________ By: _________________________________________ Title: _______________________________________ Attest: FRANCHISEE: _____________________________________ ________________________ By: _________________________________________ Title: _______________________________________

EXHIBIT F


ADDENDUM TO THE FRANCHISE AGREEMENT

FOR THE STATE OF NORTH DAKOTA This Addendum relates to franchises sold in the state of North Dakota and is intended to comply with North Dakota statutes and regulations. In consideration of the execution of the Franchise Agreement (the “Agreement”), Merry Maids Limited Partnership (“Merry Maids”) and Franchisee agree to amend the Agreement as follows:

1. Notwithstanding anything to the contrary contained in the foregoing Franchise Agreement and FRANCHISE DISCLOSURE DOCUMENT, the laws of the State of North Dakota shall govern the Franchise Agreement. 2. North Dakota Century Code Section 9-08-06 states, “Every contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is to that extent void, except: 1) One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business within a specified county, city, or a part of either, so long as the buyer or any person deriving title to the goodwill from him carries on a like business therein and 2) Partners, upon or in anticipation of a dissolution of the partnership business has been transacted, or within a specified part thereof.” IN WITNESS WHEREOF, the parties hereto have duly executed, sealed and delivered this Amendment to the Franchise Agreement on the same day and year that the Franchise Agreement has been executed. ATTEST: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., its General Partner _______________________ By: __________________________ Title: _________________________ ATTEST: FRANCHISEE: _________________________ ________________________ By: _________________________

Title: __________________________

EXHIBIT F


ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT FOR THE STATE OF RHODE ISLAND

The following information applies to franchises and Franchisees subject to the Rhode Island

Franchise Act. Item numbers correspond to those in the main body:

Item 17

Item 17v and w, under the heading, "Renewal, Termination, Transfer and Dispute Resolution", is amended by the addition of the following language to the original language that appears therein:

Section 19-28.1-14 of the Rhode Island Franchise Investment Act provides that "A provision in a franchise agreement restricting jurisdiction or venue to a forum outside this state or requiring the application of the laws of another state is void with respect to a claim otherwise enforceable under the Act."

EXHIBIT F


ADDENDUM TO THE FRANCHISE AGREEMENT FOR THE STATE OF RHODE ISLAND

This Addendum relates to franchises sold in the state of Rhode Island and is intended to comply with Rhode Island statutes and regulations. In consideration of the execution of the Franchise Agreement (the “Agreement”), Merry Maids Limited Partnership (“Merry Maids”) and Franchisee agree to amend the Agreement as follows:

Section 24 of the Agreement, under the heading "Applicable Law," is amended by the addition of the following language to the original language that appears therein:

Section 19-28.1-14 of the Rhode Island Franchise Investment Act provides that "A provision in a franchise agreement restricting jurisdiction or venue to a forum outside this state or requiring the application of the laws of another state is void with respect to a claim otherwise enforceable under the Act.

IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and delivered this Amendment to the Franchise Agreement on the same day and year that the Franchise Agreement has been executed. Attest: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., Its General Partner ______________________ By: ______________________________ Title: __________________________ Attest: FRANCHISEE: _____________________ _______________________ By: ______________________________ Title: __________________________

EXHIBIT F


ADDENDUM TO DISCLOSURE DOCUMENT FOR THE STATE OF VIRGINIA

The following information applies to franchises and Franchisees subject to Virginia statues and regulations.

Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for a franchisor to cancel a franchise without reasonable cause. If any grounds for default or termination stated in the Franchise Agreement does not constitute “reasonable cause,” as that term may be defined in the Virginia Retail Franchising Act or the laws of Virginia, that provision may not be enforceable.

EXHIBIT F


ADDENDUM TO THE FRANCHISE AGREEMENT FOR THE STATE OF WASHINGTON

This Addendum relates to franchises sold in the state of Washington and is intended to comply with Washington statutes and regulations. In consideration of the execution of the Franchise Agreement (the “Agreement”), Merry Maids Limited Partnership (“Merry Maids”) and Franchisee agree to amend the Agreement as follows: 1. The state of Washington has a statute, RCW 19.100.180 which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions, which may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. 2. In any arbitration involving a franchise purchased in Washington, the arbitration site shall be either in the State of Washington, or in a place mutually agreed upon at the time of the arbitration, or as deemed by the arbitrator. 3. In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW shall prevail. 4. A release or waiver of rights executed by a franchisee shall not include rights under the Washington Franchise Protection Act except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, rights or remedies under the Act such as a right to a jury trial may not be enforceable. 5. Transfer fees are collectable to the extent that they reflect the franchisor's reasonable estimated or actual costs in effecting a transfer. The undersigned does hereby acknowledge receipt of this addendum. Dated this _______ day of ____________________, 20_____. IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and delivered this Amendment to the Franchise Agreement on the same day and year that the Franchise Agreement has been executed. Attest: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., Its General Partner ______________________ By: ______________________________ Title: __________________________ Attest: FRANCHISEE: _____________________ _______________________ By: ______________________________ Title: ____________________________

EXHIBIT F


ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT FOR THE STATE OF WISCONSIN

The following information applies to franchises and Franchisees subject to the Wisconsin

Administrative Code. Item numbers correspond to those in the main body:

Item 17

“The Wisconsin Fair Dealership Law supersedes any provision of the applicant’s franchise contract or agreement inconsistent with that law.”

EXHIBIT F


ADDENDUM TO THE FRANCHISE AGREEMENT FOR THE STATE OF WISCONSIN

This Addendum relates to franchises sold in the state of Wisconsin and is intended to comply with Wisconsin statutes and regulations. In consideration of the execution of the Franchise Agreement (the “Agreement”), Merry Maids Limited Partnership (“Merry Maids”) and Franchisee agree to amend the Agreement as follows:

“The Wisconsin Fair Dealership Law supersedes any provisions of the applicant’s franchise contract or agreement inconsistent with that law.” IN WITNESS WHEREOF, the parties hereto have duly executed, sealed, and delivered this Amendment to the Franchise Agreement on the same day and year that the Franchise Agreement has been executed. Attest: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., Its General Partner _______________________ By: _________________________________________ Title: _______________________________________ Attest: FRANCHISEE: _____________________________________ ________________________ By: _________________________________________ Title: ____________________________________

EXHIBIT G

NEW EMPLOYEE BROCHURE PACK 1

CUSTOMER COMMENT CARD PACK 1

MAID NOTE CARD - WITH MESSAGE PACK 1

DVD PROFESSIONAL HOUSE CLEANING 101 EACH 1

CLEANING 101 RING CARDS EACH 2

SAFETY TOOL KIT DVD EACH 1

SAFETY TOOL KIT NOTEBOOK EACH 1

SAFETY WORK GLOVES PACK 1

DISPOSABLE LATEX GLOVES BOX 1

SAFETY WORK APRON EACH 1

ALAIR SAFETY GLASSES EACH 4

FIRST AID KIT - NEW EACH 2

LOGO STICKERS GOLD-MERRY MAIDS ROLL 1

WELCOME TO MM FOLDERS PACK 1

CLEANING 101 CERTIFICATE EACH 4

CERTIFICATE FRAME EACH 4

OVEN CLEANER CASE 1

SCRUB & SHINE CASE 1

MERRY MAIDS STAINLESS STEEL CLEANER CASE 1

SHINEFFECTIVE DEGREASER CASE 1

SHINEFFECTIVE ALL PURPOSE CLEANER CASE 1

SHINEFFECTIVE BATHROOM CASE 1

SHINEFFECTIVE FLOOR AND STONE CASE 1

FOAMY MAC GREEN SOLUTION BOX 1

FRESH WAVE 2- 64 OZ LIQUID CONCENTRATE BOTTLES CASE 1

NEW FOAMING HEAD SPRAYER EACH 2

TRIGGER SPRAYER RED - 9" EACH 4

TRIGGER SPRAYER BLUE - 7" EACH 9

TURRET TOP FOR 16 OZ BOTTLE EACH 4

FLIP TOP FOR SCRUB & SHINE EACH 2

TOILET BRUSH EACH 2

SCRUB BRUSH WITH HANDLE EACH 2

GROUT BRUSH EACH 2

SPONGE - YELLOW 10 PACK PACK 1

SPONGE-PINK 10 PACK PACK 1

WOOL DUSTER EACH 2

SH-MOP (BASE ONLY) EACH 2

SH-MOP HANDLE EACH 2

SH-MOP MICRO FIBER COVER EACH 2

MICROFIBER CLOTH, BLUE, GLASS DOZEN 2

MICROFIBER CLOTH, GREEN, DUSTING DOZEN 2

MICROFIBER CLOTH, YELLOW, GEN PURPOSE DOZEN 5

Merry Maids Opening Inventory Package

MM FDD 4‐1‐20121 of 3

Exhibit G

EXHIBIT G


MICROFIBER CLOTH, PINK, BATHROOMS DOZEN 4

MICROFIBER DUSTER COVER EACH 2

SCRUBBER CLOTH - YELLOW DOZEN 1

SCRUBBER CLOTH - PINK DOZEN 1

PUMP DISPENSER - 1 GAL EACH 1

TOTE BAG-GREEN, HEAVY DUTY EACH 2

MESH LAUNDRY BAG EACH 2

LITTLE CHIZLER EACH 2

BUCKET - PLASTIC EACH 2

TOTE TRAY EACH 2

PUTTY KNIFE EACH 2

TEAM (MAID) GREEN BOOK EACH 2

CASH & KEY POUCH EACH 2

KEY TAGS WITH RACK EACH 1

STEP STOOL EACH 2

CUP WITH HANDLE EACH 2

TRASH BAGS BOX 1

SCREWDRIVER SET- PHILLIPS & FLAT SET 2

BOWL BRUSH HOLDER WITH LID EACH 2

BOTTLE - BLANK, GRADUATED 16 OZ EACH 4

BOTTLE - BLANK, 8 OZ EACH 4



RTU/PRO LABEL SE ALL PURPOSE EACH 4

RTU/PRO LABEL SE BATHROOM EACH 2

RTU/PRO LABEL SE FLOOR & STONE EACH 2

RTU/PRO LABEL SE DEGREASER EACH 2

RTU/PRO LABEL SE FLOOR & STONE CONTR EACH 2

RTU/PRO LABEL FOAMY MAC GREEN EACH 2

RTU LABEL-SCRUB & SHINE EACH 2

RTU/PRO LABEL FRESH WAVE EACH 2

HOOVER PORTAPOWER VACUUM EACH 2

HOOVER EXTENTION WAND - PLASTIC EACH 4

CLEANMAX ZOOM 400 VACUUM EACH 2

CLEANMAX ZOOM 400 VACUUM BELTS EACH 2

CLEANMAX ZOOM STANDARD BAGS PACK 4

ORECK STEAM-IT EACH 1

ORECK STEAM-IT PORCUPINE BONNETS EACH 4

ACCUDOSE 3 BUTTON PROPORTIONER EACH 2

PORTION AID - 3 OUNCE EACH 4

ONE GALLON DISPENSER EACH 1

UNIFORM SHIRT, M, GREEN EACH 1

MM FDD 4‐1‐20122 of 3

Exhibit G

EXHIBIT G


UNIFORM SHIRT, L, GREEN EACH 2

UNIFORM SHIRT, XL, GREEN EACH 1

WOMENS PLAIN FRONT PANT PAIR 4

TWILL APRON EACH 4

KNEE PADS - SUPER SOFT GEL FILLED PAIR 4

NAME TAG \ PROFESSIONAL EACH 6

SERVICE SCORECARD EACH 1

Total Opening Inventory Package Included in Franchise Fee

MM FDD 4‐1‐20123 of 3

Exhibit G

EXHIBIT H

MM FDD 4-1-2012 Page 1 of 1 Exhibit H

MM FDD – 4-1-2012 Page 1 of 1 Exhibit I

EXHIBIT I

Merry Maids Operations Manual

Table of Contents No. of Pages

Chapter One History, People and Objectives 8 Chapter Two Getting Started, Office Setup and Layout 10 Chapter Three Merry Maids Signature Cleaning System 5 Chapter Four OSHA and Proper Safety Procedures 13 Chapter Five Employees: Recruitment, Hiring and Retention 23 Chapter Six Customers: Acquisition, Sales and Service 11 Chapter Seven Financial Reporting and Accounting 14 Index 2 Total 86

EXHIBIT J MM FDD 4-1-2012

«Lgl_Name» - Business Note Page 1 of 6 __________ Initials

(INITIAL OFFER FIXED INTEREST ONLY 6 OR 12 MONTHS)

BUSINESS NOTE

«Lgl_Name» «Date» Principal Amount: up to $«Amt» 1.0 PROMISE TO PAY. FOR VALUE RECEIVED, the Undersigned (“Borrower”), jointly and severally, with all

other co-Borrowers, guarantors or obligors, promises to pay to the order of The ServiceMaster Acceptance Company Limited Partnership, a Delaware limited partnership, or its successors or assigns (“Company”), the total credit limit of up to «Sum» and «Cents»/100 DOLLARS ($«Amt») or so much thereof as may be advanced in connection with Borrower’s «PurchaseOf».

2.0 MATURITY DATE. This Business Note (“Note”) shall be paid in full on or before the «Mat_Day» («Mat_Day_1»)

anniversary of the date of funding, which date should be «Maturity_Date» (“Maturity Date”). 3.0 INTEREST. Simple interest will accrue on the unpaid principal balance at the rate of «Per» percent («Per_1»%) per

annum. Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 365 days or 366 days, whichever is applicable. Upon maturity of this Business Note and Security Agreement (“Note”), whether by acceleration or otherwise, interest shall accrue on the principal balance at the rate of eighteen percent (18%) per annum. If Borrower defaults under this Note, then interest will accrue at the fixed rate of eighteen percent (18%) per annum (“Default Rate”) so long as such default shall continue, compounded on each date for the payment of interest hereunder, before and after any demand or judgment.

4.0 PAYMENTS.

4.01 Payments will be payable in «Pmt» («Pmt_1») consecutive monthly installments, beginning «First_payment_date_» and due on the «Day» day of each month thereafter until all obligations under this Note have been paid in full. With the first 6 or 12 payments of this Note, Borrower shall make at least the referenced minimum “Required Payment”. The “Required Payment” shall equal the greater of ONE HUNDRED AND 00/100 DOLLARS ($100.00) or the accrued interest also to include a small portion of principal to ensure a consistent monthly payment amount. Interest will begin to accrue on date of funding. The remaining 72 or 78 payments on the loan will be principal and interest payments. An amortization schedule will be provided prior to the first monthly installment. All payments will be applied first to costs, attorneys fees, if any, as hereinafter provided, then to NSF fees and Late Charges; then to unpaid, accrued interest; and then to the principal balance. The monthly installment payment schedule shall be supplied to Borrower once the sum certain is determined. TIME IS OF THE ESSENCE AS TO EACH TERM, CONDITION AND REQUIREMENT OF THIS NOTE.

4.02 All payments shall be made in lawful money of the United States and in immediately available funds to

Company at 860 Ridge Lake Blvd., Memphis, TN 38120, or at such other place as Company or the holder of this Note designates. Payments are considered received only when deposited in Company’s bank and are subject to being confirmed as collected and good funds.

4.03 Borrower shall make payments of all amounts due under this Note by automatic transfer from Borrower’s

bank account and shall give Company authorization for such automatic transfer. Should Company agree to accept payments in a form other than by automatic transfer, a fee may be charged to the Borrower.

4.04 This Note may be prepaid in whole or in part, without penalty. Such prepayments shall also include any late

charges and fees, and all accrued interest thereon through the date of prepayment. No prepayment of this Note shall affect Borrower’s obligation to make monthly installment payments required by the terms of this Note.



5.0 ADDITIONAL CHARGES. Borrower agrees to pay a late charge on each installment not received within 10 days of its due date in an amount not exceeding the greater of five percent (5%) of the installment or TWENTY-FIVE and 00/100 DOLLARS ($25.00) (“Late Charge”). A charge of TWENTY-FIVE and 00/100 DOLLARS ($25.00) will be assessed for each check returned unpaid for any reason (“NSF Fees”).

6.0 SECURITY AGREEMENT. To secure the payment and performance of the indebtedness and obligations contained

herein, Borrower has contemporaneously herewith executed a Security Agreement. This Note, the Security Agreement, and any promissory note or other instrument at any time evidencing Indebtedness to Company or under any other security agreement, loan agreement, mortgage, assignment, guaranty, or other agreement that now or hereafter secures or relates to any indebtedness or obligation now or hereafter owing by Borrower to Company or that secures or relates to any guaranty of any such indebtedness or obligation shall be collectively referred to as “Loan Documents.” IF VEHICLES ARE OR WILL BE PURCHASED WITH PROCEEDS OF THE LOAN, ORIGINAL VEHICLE TITLES MUST BE COMPLETED REFLECTING COMPANY AS THE LIEN HOLDER AND SUBMITTED TO COMPANY IMMEDIATELY UPON RECEIPT IF THEY ARE NOT SENT DIRECTLY TO COMPANY. FAILURE TO RECORD COMPANY’S LIEN AND TO SUBMIT THE ORIGINAL TITLES TO COMPANY WITHIN 60 DAYS OF PURCHASE WILL BE AN EVENT OF DEFAULT.

7.00 INDEBTEDNESS. For purposes of this Note, “Indebtedness” means all monies owed under this Note, including

costs, attorney's fees, late charges, accrued interest, and principal; and all other obligations or indebtedness now or hereafter owed Company executed by Borrower, including but not limited to all renewals, extensions and modifications of such obligations or indebtedness, regardless of whether such Indebtedness is (a) not presently in existence, (b) not presently intended or contemplated by Borrower or Company, (c) indirect, secondary or contingent, (d) unrelated to the collateral or any collateral financing by the Company, (e) of a kind or class that is different from the Indebtedness or obligation now owing by Borrower to Company or (f) evidenced by a note or other document that does not refer to the security interest or this Note. If Borrower is more than one person, the Indebtedness includes all indebtedness and obligations now owing the Company by any one or more such persons, regardless of whether the remaining person or persons are liable for such indebtedness or whether one or more such persons who are not parties to this Note are also liable for such Indebtedness.

8.0 BORROWER’S COVENANTS, WARRANTIES, AND REPRESENTATIONS. Borrower hereby represents and

warrants to, and covenants Collateral (as that term is defined in the Security Agreement with, Company that:

8.01 Borrower will do or cause to be done all things necessary to preserve, renew and keep in full force and effect its corporate existence, material rights, licenses, permits and franchises required to conduct its business. Borrower shall further comply with all laws, ordinances, rules and regulations relating to, and shall promptly pay when due all license fees, franchise fees, registration fees, taxes, assessments and other charges which may be levied upon or assessed against, the ownership, operation, possession, maintenance, use or method of use of the Collateral (as that term is defined in the Security Agreement);

8.02 Upon request, Borrower shall promptly submit to Company, until the Indebtedness be paid in full, annual (or

monthly) Balance Sheet(s) and Profit & Loss Statement(s). Borrower shall not prepare any financial statements which account for, nor will Borrower in any other respect account for, the transactions contemplated hereby in a manner which is inconsistent with Company’s interest in the Collateral and/or related property which are the subject of the Security Agreement, and any publicly available financial statements prepared by Borrower shall indicate the security interest of Company in the Collateral. Upon request, Company shall also receive, prior to their filing, copies of any and all income tax returns or similar returns. All financial statements are to be prepared in accordance with generally accepted accounting principles;

8.03 Borrower does not use any other corporate name or fictitious name other than the name shown on this Note

and the original Articles of Incorporation or other organization charter or instrument of record; 8.04 Borrower possesses adequate assets, licenses, patents, patent applications, copyrights, service marks, trade

marks, and trade names to continue its business as heretofore conducted by it;



8.05 Borrower shall not further recapitalize, nor consolidate with, merge with, or otherwise acquire all or substantially all of the assets or properties of any other person or entity without consent of Company;

8.06 All accounts reflected on the books of Borrower, now and in the future, shall be genuine and are actually and

absolutely owing Borrower and are in no way contingent, and adequate provisions have been made in the financial records of Borrower to account for uncollectible and deemed worthless accounts;

8.07 The proceeds of the loans made by the Company to Borrower shall be used exclusively for commercial or business

purposes. 8.08 Loss, theft, damage to, destruction or seizure of the Collateral shall not relieve Borrower from the payment and

performance of any obligation or Indebtedness under this Note. 9.0 EVENTS OF DEFAULT. The occurrence of any one or more of the following is an event of default hereunder:

9.01 Failure of Borrower to pay any installment of principal or interest when due on the Indebtedness; 9.02 The filing of any petition by or against Borrower under the Federal Bankruptcy Act now or hereafter in force; 9.03 The execution and delivery by Borrower of a general assignment for the benefit of creditors; 9.04 The appointment of a Receiver for Borrower by a court of competent jurisdiction, which appointment shall not have been

vacated within a period of thirty (30) days after the date of the appointment of such Receiver; 9.05 Failure of Borrower to notify Company of any event identified in subparagraphs 9.02, 9.03, or 9.04 in writing within five

(5) days of such event; 9.06 Insolvency of Borrower. Insolvency shall be defined as, when the current liabilities, less payables due

Company, exceed the current assets of Borrower, as determined by generally accepted accounting principles; 9.07 Failure of Borrower to maintain on a current basis any account with any ServiceMaster Affiliated Company.

“ServiceMaster Affiliated Company” means any company which is owned in whole or in part by The ServiceMaster Company;

9.08 Failure to cure, within applicable grace periods, any breach of License Agreement(s) with any ServiceMaster

Affiliated Company; or termination or expiration (which is not subsequently renewed) of License Agreement(s) with any ServiceMaster Affiliated Company;

9.09 Borrower’s assignment, sale, transfer, or the like of all or substantially all of the assets of Borrower’s

franchised business or change in the majority ownership interest of Borrower without prior approval by Company;

9.10 Failure of Borrower to notify Company, in advance, of any voluntary change in business structure, including,

but not limited to, the creation or dissolution of a corporation, partnership, limited liability company or limited liability partnership; or failure of Borrower to maintain its corporation, limited liability company or limited liability partnership in good standing under the applicable law where the entity is incorporated and operating;

9.11 Failure of Borrower to notify Company of any change in business name or address, within fifteen (15) days

of such event; 9.12 The death or judicially declared or adjudicated incompetency of any guarantor or other obligor of the Note; 9.13 Failure to comply with any other provision in this Note or failure to comply with the provisions of the

Security Agreement or any other Loan Document;



9.14 Failure of the Borrower or any Guarantor or Co Borrower to comply with any provisions in this Note or any Loan Documents;

9.15 Any representation or warranty made by Borrower in the Note or Loan Documents is breached or violated,

or proves to be false, misleading or inaccurate, in any material respect; 9.16 The occurrence of an Event of Default as it relates to any guarantor of the Note; 9.17 Any material adverse change in the financial condition of Borrower as determined by Company, or 9.18 The substantial cessation of business operations of Borrower for more than thirty (30) days; 9.19 Failure of Borrower to provide Company with original vehicle titles in accordance with Paragraph 6.0.

10.0 REMEDIES AND RECOURSES. Upon the occurrence or existence of any of the Events of Default, or if this Note

at any time or for any reason ceases to be in full force and effect (other than pursuant to normal termination as hereinafter provided) or the validity or enforceability of this Note shall be contested by Borrower (unless such contest is based on the full and final payment of Indebtedness) then at the option of Company and without demand or notice to Borrower (demand and notice as to such event being hereby expressly waived by Borrower), Company shall, to the fullest extent permitted by law, be entitled to:

10.01 Exercise all the rights, powers and privileges reserved or granted to Borrower in the Security Agreement;

and/or 10.02 Accelerate the Note(s) and declare all sums due and owing immediately, and accelerate all Indebtedness

declaring it due and owing immediately. In addition, Company may exercise any or other powers, rights, remedies or recourses afforded to Company under the Note(s) or other documents relating to the Indebtedness or otherwise available under applicable law.

11.0 PERFORMANCE OF BORROWER OBLIGATIONS. If Borrower shall fail to do any action or thing which

Borrower has agreed to do under this Note, or in any Loan Document, Company may, but shall not be obligated to do the same or cause it to be done, or remedy such breach or violation, and if in connection therewith, Company shall make any advances or expenditures or money for the account of Borrower, then there shall be added to the obligations and liabilities of Borrower hereunder, the costs or expenses so paid or incurred by Company and any and all amounts paid or incurred by Company in taking any such action shall be repaid to Company upon demand being made to Borrower therefore and shall bear interest from the date advanced or expended, to and including the date of repayment at the Default Rate as defined in the Note.

12.0 POWER OF ATTORNEY. Borrower hereby appoints Company, with full power of substitution, as Borrower’s

attorney-in-fact for the purpose of carrying out the provisions of this Note and taking any action and executing any document or instrument which Company may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest, all in accordance with the provisions of this Note. Borrower shall indemnify, save, defend and hold harmless Company from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind and nature, and to reimburse Company for all costs and expenses, including court costs and reasonable attorneys’ fees and expenses, growing out of or resulting from the enforcement of this Note or any document related to the Indebtedness, or the exercise by Company of any rights, powers, privileges, interests or remedies granted to Company hereunder, except such as result from Company’s own gross negligence or misconduct. In no event shall Company be liable for any matter or thing by virtue of, arising from or in connection with this Note or any Loan Document, other than to account for monies which may be actually received by Company in accordance with the terms hereof.

13.0 NOTICE. All notices, demands or other communications required or desired to be given hereunder shall be in writing,

signed by Borrower or its authorized agents or attorneys, or Company, its authorized agents or attorneys, as the case may be, and shall be deemed to have been properly given if served in person, or if mailed, by regular mail and sent by facsimile transmission to the following address and facsimile number:

If to Borrower: «Lgl_Name»



«Address» «City_State_Zip» Business Facsimile: «Bus_Fax» If to Company: The ServiceMaster Acceptance Company Limited Partnership 860 Ridge Lake Boulevard Memphis, Tennessee 38120 Attn: Dana McWherter Business Facsimile: (901) 597-9784

or to such other address as may from time to time be designated by the party to be addressed, by notice to the other in the manner hereinabove provided. Any such notices, demands or other communications mailed as provided herein shall be deemed to have been given and received on the business day faxed.

14.0 GENERAL

14.01 Borrower authorizes and directs Company, if deemed appropriate by Company, to disburse the proceeds of this Note to creditors of Borrower.

14.02 No waiver of any provision herein or action by Company contrary to the terms of this Note shall constitute a

waiver of any subsequent default of the same or different terms, covenants or conditions herein. 14.03 Wherever “Company” is referred to herein, it shall be deemed to refer to Company or any other assignee or

subsequent holder of this Note.

14.04 Borrower agrees to correct, execute, or initial all typographical or clerical errors discovered in this Note to Company’s satisfaction and to execute any and all documents necessary to grant Company a security interest in the Collateral and to effectuate the provisions of this Note.

14.05 This Note may only be amended by a written agreement signed by all parties to this Note, provided, however,

that the requirement of a written amendment may not be amended in any circumstance. 14.06 As an express condition precedent and inducement to Company to accept this Note, Borrower hereby

affirmatively waives: (I) presentment of this Note, (ii) claims of setoff against Company. 14.07 BORROWER KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO TRIAL BY JURY

AND FULLY UNDERSTANDS THAT BY SIGNING THIS NOTE IT HAS GIVEN UP ITS RIGHT TO TRIAL BY JURY.

Initials: _____________ 14.08 If a court determines any provision of this Note to be invalid or unenforceable, all other provisions of the Note

shall survive and be enforced according to their terms. 15.0 COMMERCIAL PURPOSE. This Note evidences and pertains to a business loan and financing solely for commercial

purposes. 16.0 APPLICABLE LAW, JURISDICTION AND VENUE. The laws of the State of Tennessee shall govern this

Note. In all legal proceedings or actions brought under this Note, the Borrower submits to the exclusive personal jurisdiction and venue of the Circuit Court of the State of Tennessee for Shelby County or the Federal District Court of Western District of Tennessee, whichever Company may elect in its sole discretion, and waives all defenses to lack of personal jurisdiction, forum non conviens, or other inconvenient forum defense.

17.0 FACSIMILE SIGNATURE. For the sake of expediency in providing financing and funding to the Borrower under

the Note, the Borrower (as well as any other guarantor or obligor hereof) agree, as an express inducement to Company to provide such financing, that: (a) the Company may elect to rely upon any fax or electronically transmitted signature to this Note (as well as any Agreement, guaranty, security instruments or other documents



pertaining hereto) as if the same were an original signature hereto or thereto; and (b) upon any such fax or electronic transmission of a signature hereto or to any such other instrument, the Borrower (and/or guarantor or other respective signatory[ies]) covenants, represents and warrants to Company that the original of such executed Agreement, Note, guaranty, security instrument or other such documents exist and have been validly executed and are the property of the Company and that such original(s) instrument(s) are possessed and held “in trust” by such Borrower or signatory for the express benefit of Company and will promptly be delivered to the Company as the Company.

18.0 BORROWER UNDERSTANDING. Borrower understands and acknowledges that neither Merry Maids Limited

Partnership nor any employee, salesperson or agent of Merry Maids Limited Partnership has any express or implied authority to act as an agent of The ServiceMaster Acceptance Company Limited Partnership. No representations, oral or written, have been made to induce Borrower to execute this Note. Borrower has read and fully understands the terms and conditions of this Note and has freely consented to the terms herein.

19.0 AUTHORITY TO ACT. To the extent the Borrower is an entity other than an individual, the undersigned warrants

that he/she has full authority to act on behalf of the Borrower and to execute this Note on Borrower’s behalf. 20.0 NO MODIFICATION. The rates and terms offered in this Note are authorized solely by The ServiceMaster

Acceptance Company Limited Partnership. It cannot be modified or amended, nor can any of the Collateral be released except with an express writing signed by The ServiceMaster Acceptance Company Limited Partnership.

BORROWER: «Lgl_Name» «Address» «City_State_Zip» Business Phone: «Phone»

By: By: «Contact», «Title» «Contact_1», «Title_1»



(INITIAL OFFER FIXED STRAIGHT PRINCIPAL & INTEREST)

BUSINESS NOTE («Lgl_Name»)

«Date» Principal Amount: up to $«Amt» 1.0 PROMISE TO PAY. FOR VALUE RECEIVED, the Undersigned (“Borrower”), jointly and severally, with all

other co-Borrowers, guarantors or obligors, promises to pay to the order of The ServiceMaster Acceptance Company Limited Partnership, a Delaware limited partnership, or its successors or assigns (“Company”), the total credit limit of up to «Sum» and «Cents» 00/100 DOLLARS ($«Amt») or so much thereof as may be advanced in connection with Borrower’s purchase of a «PurchaseOf».

2.0 MATURITY DATE. This Business Note (“Note”) shall be paid in full on or about the «Mat_Day» («Mat_Day_1»)


annum. Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 365 days or 366 days, whichever is applicable. Upon maturity of this Business Note and Security Agreement (“Note”), whether by acceleration or otherwise, interest shall accrue on the principal balance at the rate of eighteen percent (18%) per annum. If Borrower defaults under this Note, then interest will accrue at the fixed rate of eighteen percent (18%) per annum “Default Rate”) so long as such default shall continue, compounded on each date for the payment of interest hereunder, before and after any demand or judgment..

4.0 PAYMENTS.

4.01 Principal and interest are payable in «Pmt» («Pmt_1») consecutive monthly installments on the «Day» day of each month, beginning «First_payment_date_», thereafter until all obligations under this Note have been paid in full. The Borrower shall make at least the referenced minimum “Required Payment”. The “Required Payment” shall equal the greater of ONE HUNDRED AND 00/100 DOLLARS ($100.00) or the principal and interest. Interest will begin to accrue on date of funding. An amortization schedule will be provided prior to the first monthly installment. All payments will be applied first to costs, attorneys fees, if any, as hereinafter provided, then to NSF fees and Late Charges; then to unpaid, accrued interest; and then to the principal balance. The monthly installment payment schedule shall be supplied to Borrower once the sum certain is determined. TIME IS OF THE ESSENCE AS TO EACH TERM, CONDITION AND REQUIREMENT OF THIS NOTE.







5.0 ADDITIONAL CHARGES. Borrower agrees to pay a late charge on each installment not received within 10 days of

its due date in an amount not exceeding the greater of five percent (5%) of the installment or TWENTY-FIVE and 00/100 DOLLARS ($25.00) (“Late Charge”). A charge of TWENTY-FIVE and 00/100 DOLLARS ($25.00) will be assessed for each check returned unpaid for any reason (“NSF Fees”).



6.0 SECURITY AGREEMENT. To secure the payment and performance of the indebtedness and obligations contained herein, Borrower has contemporaneously herewith executed a Security Agreement. This Note, the Security Agreement, and any promissory note or other instrument at any time evidencing Indebtedness to Company or under any other security agreement, loan agreement, mortgage, assignment, guaranty, or other agreement that now or hereafter secures or relates to any indebtedness or obligation now or hereafter owing by Borrower to Company or that secures or relates to any guaranty of any such indebtedness or obligation shall be collectively referred to as “Loan Documents.” IF VEHICLES ARE OR WILL BE PURCHASED WITH PROCEEDS OF THE LOAN, ORIGINAL VEHICLE TITLES MUST BE COMPLETED REFLECTING COMPANY AS THE LIEN HOLDER AND SUBMITTED TO COMPANY IMMEDIATELY UPON RECEIPT IF THEY ARE NOT SENT DIRECTLY TO COMPANY. FAILURE TO RECORD COMPANY’S LIEN AND TO SUBMIT THE ORIGINAL TITLES TO COMPANY WITHIN 60 DAYS OF PURCHASE WILL BE AN EVENT OF DEFAULT.




warrants to, and covenants Collateral (as that term is defined in the Security Agreement) with, Company that:






marks, and trade names to continue its business as heretofore conducted by it; 8.05 Borrower shall not further recapitalize, nor consolidate with, merge with, or otherwise acquire all or

substantially all of the assets or properties of any other person or entity without consent of Company; 8.06 All accounts reflected on the books of Borrower, now and in the future, shall be genuine and are actually and




















Security Agreement or any other Loan Document; 9.14 Failure of the Borrower or any Guarantor or Co Borrower to comply with any provisions in this Note or any

Loan Documents; 9.15 Any representation or warranty made by Borrower in the Note or Loan Documents is breached or violated,

or proves to be false, misleading or inaccurate, in any material respect; 9.16 The occurrence of an Event of Default as it relates to any guarantor of the Note;



9.17 Any material adverse change in the financial condition of Borrower as determined by Company, or 9.18 The substantial cessation of business operations of Borrower for more than thirty (30) days; 9.19 Failure of Borrower to provide Company with original vehicle titles in accordance with Paragraph 6.0.












If to Borrower: «Lgl_Name» «Address» «City_State_Zip» Business Facsimile: «Bus_Fax» If to Company: The ServiceMaster Acceptance Company Limited Partnership 860 Ridge Lake Boulevard Memphis, Tennessee 38120



Attn: Dana McWherter Business Facsimile: (901) 597-9784


14.0 GENERAL















the Note, the Borrower (as well as any other guarantor or obligor hereof) agree, as an express inducement to Company to provide such financing, that: (a) the Company may elect to rely upon any fax or electronically transmitted signature to this Note (as well as any Agreement, guaranty, security instruments or other documents pertaining hereto) as if the same were an original signature hereto or thereto; and (b) upon any such fax or electronic transmission of a signature hereto or to any such other instrument, the Borrower (and/or guarantor or other respective signatory[ies]) covenants, represents and warrants to Company that the original of such executed Agreement, Note, guaranty, security instrument or other such documents exist and have been validly executed and are the property of the Company and that such original(s) instrument(s) are possessed and held “in trust” by such Borrower or signatory for the express benefit of Company and will promptly be delivered to the Company as the Company.









By: By:___________________________ «Contact», «Title» «Contact_1», «Title_1»


«Lgl_Name» - Business Note Page 1 of 6 ________ Initials

(ADJUSTABLE STRAIGHT PRINCIPAL & INTEREST)


«NoteSADate» Principal Amount: up to $«Amt» 1.0 PROMISE TO PAY. FOR VALUE RECEIVED, the Undersigned (“Borrower”), jointly and severally, with all other

co-Borrowers, guarantors or obligors, promises to pay to the order of The ServiceMaster Acceptance Company Limited Partnership, a Delaware limited partnership, or its successors or assigns (“Company”), the total credit limit of up to «Sum» and «Cents»/100 DOLLARS ($«Amt») or so much thereof as may be advanced in connection with Borrower’s purchase of a «PurchaseOf».


anniversary of the date of funding, which date should be «Maturity_Date» (“Maturity Date”). 3.0 INTEREST. Interest will accrue on a daily basis on the principal balance at the rate per annum equal to «Per» percent

(«Per_1»%) in excess of the Prime Rate. “Prime Rate” means the reference rate in effect for commercial loans as published by The Wall Street Journal (“WSJ”). If such WSJ ceases to publish such Prime Rate, Company is authorized to select and utilize a reasonably comparable index, selected in Company’s discretion to such WSJ Prime Rate. The rate of interest hereunder is a floating adjustable rate that shall adjust monthly on the first (1st) day of each calendar month, provided that no adjustment will cause the rate to exceed eighteen percent (18%) per annum or fall below a “floor” of «Floor» percent («Floor_1»%) per annum during the term of this Note. Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 365 days or 366 days, whichever is applicable. The Rate shall adjust and be fixed for each calendar month based upon the Prime Rate as in effect on the last day of the preceding calendar month. The monthly payment will be adjusted so as to fully amortize the loan over the remaining scheduled payments. After the maturity of this Note (whether by acceleration or otherwise), interest shall accrue on the principal balance at the rate of eighteen percent (18%) per annum. If Borrower defaults under this Note, then interest will accrue at the fixed rate of eighteen percent (18%) per annum (“Default Rate”) so long as such default shall continue, compounded on each date for the payment of interest hereunder, before and after any demand or judgment.

4.0 PAYMENTS.

4.01 Principal and interest are payable in «Pmt» («Pmt_1») consecutive monthly installments on the «Day» day of each month, beginning one month after date of funding and thereafter until all obligations under this Note have paid in full. The Borrower shall make at least the referenced minimum “Required Payment”. The “Required Payment” shall equal the greater of ONE HUNDRED AND 00/100 DOLLARS ($100.00) or the principal and interest. Interest will begin to accrue on date of funding. All payments will be applied first to costs, attorneys fees, if any, as hereinafter provided, then to NSF fees and Late Charges; then to unpaid, accrued interest; and then to the principal balance. The monthly installment payment schedule shall be supplied to Borrower once the sum certain is determined. TIME IS OF THE ESSENCE AS TO EACH TERM, CONDITION AND REQUIREMENT OF THIS NOTE.


Company at 860 Ridge Lake Blvd., Memphis, Tennessee, 38120, or at such other place as Company or the holder of this Note designates. Payments are considered received only when deposited in Company’s bank and are subject to being confirmed as collected and good funds.

4.03 Borrower shall make payments of all amounts due under this Note by automatic transfer from Borrower’s bank

account and shall give Company authorization for such automatic transfer. Should Company agree to accept payments in a form other than by automatic transfer, a fee may be charged to the Borrower.





5.0 ADDITIONAL CHARGES. Borrower agrees to pay a late charge on each installment not received within 10 days of its due date in an amount not exceeding the greater of five percent (5%) of the installment or TWENTY-FIVE and 00/100 DOLLARS ($25.00) (“Late Charge”). A charge of TWENTY-FIVE and 00/100 DOLLARS ($25.00) will be assessed for each check returned unpaid for any reason (“NSF Fees”).



7.00 INDEBTEDNESS. For purposes of this Note, “Indebtedness” means all monies owed under this Note, including costs,

attorney's fees, late charges, accrued interest, and principal; and all other obligations or indebtedness now or hereafter owed Company executed by Borrower, including but not limited to all renewals, extensions and modifications of such obligations or indebtedness, regardless of whether such Indebtedness is (a) not presently in existence, (b) not presently intended or contemplated by Borrower or Company, (c) indirect, secondary or contingent, (d) unrelated to the collateral or any collateral financing by the Company, (e) of a kind or class that is different from the Indebtedness or obligation now owing by Borrower to Company or (f) evidenced by a note or other document that does not refer to the security interest or this Note. If Borrower is more than one person, the Indebtedness includes all indebtedness and obligations now owing the Company by any one or more such persons, regardless of whether the remaining person or persons are liable for such indebtedness or whether one or more such persons who are not parties to this Note are also liable for such Indebtedness.






8.03 Borrower does not use any other corporate name or fictitious name other than the name shown on this Note and

the original Articles of Incorporation or other organization charter or instrument of record; 8.04 Borrower possesses adequate assets, licenses, patents, patent applications, copyrights, service marks, trade


substantially all of the assets or properties of any other person or entity without consent of Company;



8.06 All accounts reflected on the books of Borrower, now and in the future, shall be genuine and are actually and absolutely owing Borrower and are in no way contingent, and adequate provisions have been made in the financial records of Borrower to account for uncollectible and deemed worthless accounts;

8.07 The proceeds of the loans made by the Company to Borrower shall be used exclusively for commercial or business purposes. 8.08 Loss, theft, damage to, destruction or seizure of the Collateral shall not relieve Borrower from the payment and performance of

any obligation or Indebtedness under this Note. 9.0 EVENTS OF DEFAULT. The occurrence of any one or more of the following is an event of default hereunder:


vacated within a period of thirty (30) days after the date of the appointment of such Receiver; 9.05 Failure of Borrower to notify Company of any event identified in subparagraphs 9.02, 9.03, or 9.04 in writing within five (5)

days of such event; 9.06 Insolvency of Borrower. Insolvency shall be defined as, when the current liabilities, less payables due





9.09 Borrower’s assignment, sale, transfer, or the like of all or substantially all of the assets of Borrower’s franchised

business or change in the majority ownership interest of Borrower without prior approval by Company; 9.10 Failure of Borrower to notify Company, in advance, of any voluntary change in business structure, including,


9.11 Failure of Borrower to notify Company of any change in business name or address, within fifteen (15) days of

such event; 9.12 The death or judicially declared or adjudicated incompetency of any guarantor or other obligor of the Note; 9.13 Failure to comply with any other provision in this Note or failure to comply with the provisions of the Security

Agreement or any other Loan Document; 9.14 Failure of the Borrower or any Guarantor or Co Borrower to comply with any provisions in this Note or any Loan

Documents; 9.15 Any representation or warranty made by Borrower in the Note or Loan Documents is breached or violated, or

proves to be false, misleading or inaccurate, in any material respect; 9.16 The occurrence of an Event of Default as it relates to any guarantor of the Note;




10.0 REMEDIES AND RECOURSES. Upon the occurrence or existence of any of the Events of Default, or if this Note at

any time or for any reason ceases to be in full force and effect (other than pursuant to normal termination as hereinafter provided) or the validity or enforceability of this Note shall be contested by Borrower (unless such contest is based on the full and final payment of Indebtedness) then at the option of Company and without demand or notice to Borrower (demand and notice as to such event being hereby expressly waived by Borrower), Company shall, to the fullest extent permitted by law, be entitled to:

10.01 Exercise all the rights, powers and privileges reserved or granted to Borrower in the Security Agreement; and/or 10.02 Accelerate the Note(s) and declare all sums due and owing immediately, and accelerate all Indebtedness




12.0 POWER OF ATTORNEY. Borrower hereby appoints Company, with full power of substitution, as Borrower’s attorney-

in-fact for the purpose of carrying out the provisions of this Note and taking any action and executing any document or instrument which Company may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest, all in accordance with the provisions of this Note. Borrower shall indemnify, save, defend and hold harmless Company from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind and nature, and to reimburse Company for all costs and expenses, including court costs and reasonable attorneys’ fees and expenses, growing out of or resulting from the enforcement of this Note or any document related to the Indebtedness, or the exercise by Company of any rights, powers, privileges, interests or remedies granted to Company hereunder, except such as result from Company’s own gross negligence or misconduct. In no event shall Company be liable for any matter or thing by virtue of, arising from or in connection with this Note or any Loan Document, other than to account for monies which may be actually received by Company in accordance with the terms hereof.



If to Borrower: «Lgl_Name» «Address»

«City_State_Zip» Business Facsimile: «Bus_Fax» If to Company: The ServiceMaster Acceptance Company Limited Partnership 860 Ridge Lake Boulevard Memphis, Tennessee 38120 Attn: Dana McWherter



Business Facsimile: (901) 597-9784


14.0 GENERAL


14.02 No waiver of any provision herein or action by Company contrary to the terms of this Note shall constitute a waiver

of any subsequent default of the same or different terms, covenants or conditions herein. 14.03 Wherever “Company” is referred to herein, it shall be deemed to refer to Company or any other assignee or



14.05 This Note may only be amended by a written agreement signed by all parties to this Note, provided, however, that

the requirement of a written amendment may not be amended in any circumstance. 14.06 As an express condition precedent and inducement to Company to accept this Note, Borrower hereby affirmatively

waives: (I) presentment of this Note, (ii) claims of setoff against Company. 14.07 BORROWER KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO TRIAL BY JURY AND

FULLY UNDERSTANDS THAT BY SIGNING THIS NOTE IT HAS GIVEN UP ITS RIGHT TO TRIAL BY JURY.



purposes. 16.0 APPLICABLE LAW, JURISDICTION AND VENUE. The laws of the State of Tennessee shall govern this Note.

In all legal proceedings or actions brought under this Note, the Borrower submits to the exclusive personal jurisdiction and venue of the Circuit Court of the State of Tennessee for Shelby County or the Federal District Court of Western District of Tennessee, whichever Company may elect in its sole discretion, and waives all defenses to lack of personal jurisdiction, forum non conviens, or other inconvenient forum defense.

17.0 FACSIMILE SIGNATURE. For the sake of expediency in providing financing and funding to the Borrower under the

Note, the Borrower (as well as any other guarantor or obligor hereof) agree, as an express inducement to Company to provide such financing, that: (a) the Company may elect to rely upon any fax or electronically transmitted signature to this Note (as well as any Agreement, guaranty, security instruments or other documents pertaining hereto) as if the same were an original signature hereto or thereto; and (b) upon any such fax or electronic transmission of a signature hereto or to any such other instrument, the Borrower (and/or guarantor or other respective signatory[ies]) covenants, represents and warrants to Company that the original of such executed Agreement, Note, guaranty, security instrument or other such documents exist and have been validly executed and are the property of the Company and that such original(s) instrument(s) are possessed and held “in trust” by such Borrower or signatory for the express benefit of Company and will promptly be delivered to the Company as the Company.


«Lgl_Name» - Business Note Page 6 of 6

18.0 BORROWER UNDERSTANDING. Borrower understands and acknowledges that neither Merry Maids Limited Partnership nor any employee, salesperson or agent of Merry Maids Limited Partnership has any express or implied authority to act as an agent of The ServiceMaster Acceptance Company Limited Partnership. No representations, oral or written, have been made to induce Borrower to execute this Note. Borrower has read and fully understands the terms and conditions of this Note and has freely consented to the terms herein.

19.0 AUTHORITY TO ACT. To the extent the Borrower is an entity other than an individual, the undersigned warrants that

he/she has full authority to act on behalf of the Borrower and to execute this Note on Borrower’s behalf. 20.0 NO MODIFICATION. The rates and terms offered in this Note are authorized solely by The ServiceMaster



By: «Contact», «Title» By: «Contact_1», «Title_1»



(ADJUSTABLE INTEREST ONLY 6 OR 12 MONTHS)


«Date» Principal Amount: up to $«Amt» 1.0 PROMISE TO PAY. FOR VALUE RECEIVED, the Undersigned (“Borrower”), jointly and severally, with all other

co-Borrowers, guarantors or obligors, promises to pay to the order of The ServiceMaster Acceptance Company Limited Partnership, a Delaware limited partnership, or its successors or assigns (“Company”), the total credit limit of up to «Sum» and «Cents»/100 DOLLARS ($«Amt») or so much thereof as may be advanced in connection with Borrower’s «PurchaseOf».


anniversary of the date of funding, which date should be «Maturity_Date» (“Maturity Date”). 3.0 INTEREST. Interest will accrue on a daily basis on the principal balance at the rate per annum equal to «Per» percent

(«Per_1»%) in excess of the Prime Rate. “Prime Rate” means the reference rate in effect for commercial loans as published by The Wall Street Journal (“WSJ”). If such WSJ ceases to publish such Prime Rate, Company is authorized to select and utilize a reasonably comparable index, selected in Company’s discretion to such WSJ Prime Rate. The rate of interest hereunder is a floating adjustable rate that shall adjust monthly on the first (1st) day of each calendar month, provided that no adjustment will cause the rate to exceed eighteen percent (18%) per annum or fall below a “floor” of «Floor» percent («Floor_1»%) per annum during the term of this Note. Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 365 days or 366 days, whichever is applicable. The Rate shall adjust and be fixed for each calendar month based upon the Prime Rate as in effect on the last day of the preceding calendar month. The monthly payment will be adjusted so as to fully amortize the loan over the remaining scheduled payments. After the maturity of this Note (whether by acceleration or otherwise), interest shall accrue on the principal balance at the rate of eighteen percent (18%) per annum. If Borrower defaults under this Note, then interest will accrue at the fixed rate of eighteen percent (18%) per annum (“Default Rate”) so long as such default shall continue, compounded on each date for the payment of interest hereunder, before and after any demand or judgment.

4.0 PAYMENTS.

4.01 Payments will be payable in «Pmt» («Pmt_1») consecutive monthly installments, being due on the «Day» day of each month, , beginning one month after date of funding and thereafter until all obligations under this Note have paid in full. With the first 6 or 12 payments of this Note, Borrower shall make at least the referenced minimum “Required Payment”. The “Required Payment” shall equal the greater of ONE HUNDRED AND 00/100 DOLLARS ($100.00) or the accrued interest also to include a small portion of principal to ensure a consistent monthly payment amount. Interest will begin to accrue on date of funding. The remaining 72 or 78 payments on the loan will be principal and interest payments. An amortization schedule will be provided prior to the first monthly installment. All payments will be applied first to costs, attorneys fees, if any, as hereinafter provided, then to NSF fees and Late Charges; then to unpaid, accrued interest; and then to the principal balance. The monthly installment payment schedule shall be supplied to Borrower once the sum certain is determined. TIME IS OF THE ESSENCE AS TO EACH TERM, CONDITION AND REQUIREMENT OF THIS NOTE.


Company at 860 Ridge Lake Blvd., Memphis, TN, or at such other place as Company or the holder of this Note designates. Payments are considered received only when deposited in Company’s bank and are subject to being confirmed as collected and good funds.

4.03 Borrower shall make payments of all amounts due under this Note by automatic transfer from Borrower’s bank

account and shall give Company authorization for such automatic transfer. Should Company agree to accept payments in a form other than by automatic transfer, a fee may be charged to the Borrower.



4.04 This Note may be prepaid in whole or in part, without penalty. Such prepayments shall also include any late charges and fees, and all accrued interest thereon through the date of prepayment. No prepayment of this Note shall affect Borrower’s obligation to make monthly installment payments required by the terms of this Note.

5.0 ADDITIONAL CHARGES. Borrower agrees to pay a late charge on each installment not received within 10 days of its

due date in an amount not exceeding the greater of five percent (5%) of the installment or TWENTY-FIVE and 00/100 DOLLARS ($25.00) (“Late Charge”). A charge of TWENTY-FIVE and 00/100 DOLLARS ($25.00) will be assessed for each check returned unpaid for any reason (“NSF Fees”).



7.00 INDEBTEDNESS. For purposes of this Note, “Indebtedness” means all monies owed under this Note, including costs,

attorney's fees, late charges, accrued interest, and principal; and all other obligations or indebtedness now or hereafter owed Company executed by Borrower, including but not limited to all renewals, extensions and modifications of such obligations or indebtedness, regardless of whether such Indebtedness is (a) not presently in existence, (b) not presently intended or contemplated by Borrower or Company, (c) indirect, secondary or contingent, (d) unrelated to the collateral or any collateral financing by the Company, (e) of a kind or class that is different from the Indebtedness or obligation now owing by Borrower to Company or (f) evidenced by a note or other document that does not refer to the security interest or this Note. If Borrower is more than one person, the Indebtedness includes all indebtedness and obligations now owing the Company by any one or more such persons, regardless of whether the remaining person or persons are liable for such indebtedness or whether one or more such persons who are not parties to this Note are also liable for such Indebtedness.






8.03 Borrower does not use any other corporate name or fictitious name other than the name shown on this Note and

the original Articles of Incorporation or other organization charter or instrument of record; 8.04 Borrower possesses adequate assets, licenses, patents, patent applications, copyrights, service marks, trade

marks, and trade names to continue its business as heretofore conducted by it;



8.05 Borrower shall not further recapitalize, nor consolidate with, merge with, or otherwise acquire all or



8.07 The proceeds of the loans made by the Company to Borrower shall be used exclusively for commercial or business purposes. 8.08 Loss, theft, damage to, destruction or seizure of the Collateral shall not relieve Borrower from the payment and performance of

any obligation or Indebtedness under this Note. 9.0 EVENTS OF DEFAULT. The occurrence of any one or more of the following is an event of default hereunder:


vacated within a period of thirty (30) days after the date of the appointment of such Receiver; 9.05 Failure of Borrower to notify Company of any event identified in subparagraphs 9.02, 9.03, or 9.04 in writing within five (5)

days of such event; 9.06 Insolvency of Borrower. Insolvency shall be defined as, when the current liabilities, less payables due





9.09 Borrower’s assignment, sale, transfer, or the like of all or substantially all of the assets of Borrower’s franchised

business or change in the majority ownership interest of Borrower without prior approval by Company; 9.10 Failure of Borrower to notify Company, in advance, of any voluntary change in business structure, including,


9.11 Failure of Borrower to notify Company of any change in business name or address, within fifteen (15) days of

such event; 9.12 The death or judicially declared or adjudicated incompetency of any guarantor or other obligor of the Note; 9.13 Failure to comply with any other provision in this Note or failure to comply with the provisions of the Security

Agreement or any other Loan Document; 9.14 Failure of the Borrower or any Guarantor or Co Borrower to comply with any provisions in this Note or any Loan

Documents;



9.15 Any representation or warranty made by Borrower in the Note or Loan Documents is breached or violated, or proves to be false, misleading or inaccurate, in any material respect;

9.16 The occurrence of an Event of Default as it relates to any guarantor of the Note; 9.17 Any material adverse change in the financial condition of Borrower as determined by Company, or 9.18 The substantial cessation of business operations of Borrower for more than thirty (30) days; 9.19 Failure of Borrower to provide Company with original vehicle titles in accordance with Paragraph 6.0.

10.0 REMEDIES AND RECOURSES. Upon the occurrence or existence of any of the Events of Default, or if this Note at

any time or for any reason ceases to be in full force and effect (other than pursuant to normal termination as hereinafter provided) or the validity or enforceability of this Note shall be contested by Borrower (unless such contest is based on the full and final payment of Indebtedness) then at the option of Company and without demand or notice to Borrower (demand and notice as to such event being hereby expressly waived by Borrower), Company shall, to the fullest extent permitted by law, be entitled to:

10.01 Exercise all the rights, powers and privileges reserved or granted to Borrower in the Security Agreement; and/or 10.02 Accelerate the Note(s) and declare all sums due and owing immediately, and accelerate all Indebtedness




12.0 POWER OF ATTORNEY. Borrower hereby appoints Company, with full power of substitution, as Borrower’s attorney-

in-fact for the purpose of carrying out the provisions of this Note and taking any action and executing any document or instrument which Company may deem necessary or advisable to accomplish the purposes hereof, which appointment is irrevocable and coupled with an interest, all in accordance with the provisions of this Note. Borrower shall indemnify, save, defend and hold harmless Company from and against any and all claims, demands, losses, judgments and liabilities (including liabilities for penalties) of whatsoever kind and nature, and to reimburse Company for all costs and expenses, including court costs and reasonable attorneys’ fees and expenses, growing out of or resulting from the enforcement of this Note or any document related to the Indebtedness, or the exercise by Company of any rights, powers, privileges, interests or remedies granted to Company hereunder, except such as result from Company’s own gross negligence or misconduct. In no event shall Company be liable for any matter or thing by virtue of, arising from or in connection with this Note or any Loan Document, other than to account for monies which may be actually received by Company in accordance with the terms hereof.



If to Borrower: «Lgl_Name» «Address» «City_State_Zip» Business Facsimile: «Bus_Fax»



If to Company: The ServiceMaster Acceptance Company Limited Partnership 860 Ridge Lake Boulevard Memphis, Tennessee 38120 Attn: Dana McWherter Business Facsimile: (901) 597-9784


14.0 GENERAL


14.02 No waiver of any provision herein or action by Company contrary to the terms of this Note shall constitute a waiver

of any subsequent default of the same or different terms, covenants or conditions herein. 14.03 Wherever “Company” is referred to herein, it shall be deemed to refer to Company or any other assignee or



14.05 This Note may only be amended by a written agreement signed by all parties to this Note, provided, however, that

the requirement of a written amendment may not be amended in any circumstance. 14.06 As an express condition precedent and inducement to Company to accept this Note, Borrower hereby affirmatively

waives: (I) presentment of this Note, (ii) claims of setoff against Company. 14.07 BORROWER KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO TRIAL BY JURY AND

FULLY UNDERSTANDS THAT BY SIGNING THIS NOTE IT HAS GIVEN UP ITS RIGHT TO TRIAL BY JURY.



purposes. 16.0 APPLICABLE LAW, JURISDICTION AND VENUE. The laws of the State of Tennessee shall govern this Note.

In all legal proceedings or actions brought under this Note, the Borrower submits to the exclusive personal jurisdiction and venue of the Circuit Court of the State of Tennessee for Shelby County or the Federal District Court of Western District of Tennessee, whichever Company may elect in its sole discretion, and waives all defenses to lack of personal jurisdiction, forum non conviens, or other inconvenient forum defense.

17.0 FACSIMILE SIGNATURE. For the sake of expediency in providing financing and funding to the Borrower under the

Note, the Borrower (as well as any other guarantor or obligor hereof) agree, as an express inducement to Company to provide such financing, that: (a) the Company may elect to rely upon any fax or electronically transmitted signature to this Note (as well as any Agreement, guaranty, security instruments or other documents pertaining hereto) as if the same were an original signature hereto or thereto; and (b) upon any such fax or electronic transmission of a signature hereto or to any such other instrument, the Borrower (and/or guarantor or other respective signatory[ies]) covenants, represents and warrants to Company that the original of such executed Agreement, Note, guaranty, security instrument or other such documents exist and have been validly executed and are the property of the Company and that such original(s)



instrument(s) are possessed and held “in trust” by such Borrower or signatory for the express benefit of Company and will promptly be delivered to the Company as the Company.



19.0 AUTHORITY TO ACT. To the extent the Borrower is an entity other than an individual, the undersigned warrants that

he/she has full authority to act on behalf of the Borrower and to execute this Note on Borrower’s behalf. 20.0 NO MODIFICATION. The rates and terms offered in this Note are authorized solely by The ServiceMaster



By: By: «Contact», «Title» «Contact_1», «Title_1»



(FIXED STRAIGHT PRINCIPAL & INTEREST)


«Date» Principal Amount: up to $«Amt» 1.0 PROMISE TO PAY. FOR VALUE RECEIVED, the Undersigned (“Borrower”), jointly and severally, with all

other co-Borrowers, guarantors or obligors, promises to pay to the order of The ServiceMaster Acceptance Company Limited Partnership, a Delaware limited partnership, or its successors or assigns (“Company”), the total credit limit of up to «Sum» and «Cents» 00/100 DOLLARS ($«Amt») or so much thereof as may be advanced in connection with Borrower’s purchase of a «PurchaseOf».

2.0 MATURITY DATE. This Business Note (“Note”) shall be paid in full on or about the «Mat_Day» («Mat_Day_1»)


annum. Interest shall be computed for the actual number of days elapsed on the basis of a year consisting of 365 days or 366 days, whichever is applicable. Upon maturity of this Business Note and Security Agreement (“Note”), whether by acceleration or otherwise, interest shall accrue on the principal balance at the rate of eighteen percent (18%) per annum. If Borrower defaults under this Note, then interest will accrue at the fixed rate of eighteen percent (18%) per annum “Default Rate”) so long as such default shall continue, compounded on each date for the payment of interest hereunder, before and after any demand or judgment..

4.0 PAYMENTS.

4.01 Principal and interest are payable in «Pmt» («Pmt_1») consecutive monthly installments on the «Day» day of each month, beginning one month after date of funding and thereafter until all obligations under this Note have paid in full. The Borrower shall make at least the referenced minimum “Required Payment”. The “Required Payment” shall equal the greater of ONE HUNDRED AND 00/100 DOLLARS ($100.00) or the principal and interest. Interest will begin to accrue on date of funding. All payments will be applied first to costs, attorneys fees, if any, as hereinafter provided, then to NSF fees and Late Charges; then to unpaid, accrued interest; and then to the principal balance. The monthly installment payment schedule shall be supplied to Borrower once the sum certain is determined. TIME IS OF THE ESSENCE AS TO EACH TERM, CONDITION AND REQUIREMENT OF THIS NOTE.







5.0 ADDITIONAL CHARGES. Borrower agrees to pay a late charge on each installment not received within 10 days of

its due date in an amount not exceeding the greater of five percent (5%) of the installment or TWENTY-FIVE and 00/100 DOLLARS ($25.00) (“Late Charge”). A charge of TWENTY-FIVE and 00/100 DOLLARS ($25.00) will be assessed for each check returned unpaid for any reason (“NSF Fees”).



6.0 SECURITY AGREEMENT. To secure the payment and performance of the indebtedness and obligations contained herein, Borrower has contemporaneously herewith executed a Security Agreement. This Note, the Security Agreement, and any promissory note or other instrument at any time evidencing Indebtedness to Company or under any other security agreement, loan agreement, mortgage, assignment, guaranty, or other agreement that now or hereafter secures or relates to any indebtedness or obligation now or hereafter owing by Borrower to Company or that secures or relates to any guaranty of any such indebtedness or obligation shall be collectively referred to as “Loan Documents.” IF VEHICLES ARE OR WILL BE PURCHASED WITH PROCEEDS OF THE LOAN, ORIGINAL VEHICLE TITLES MUST BE COMPLETED REFLECTING COMPANY AS THE LIEN HOLDER AND SUBMITTED TO COMPANY IMMEDIATELY UPON RECEIPT IF THEY ARE NOT SENT DIRECTLY TO COMPANY. FAILURE TO RECORD COMPANY’S LIEN AND TO SUBMIT THE ORIGINAL TITLES TO COMPANY WITHIN 60 DAYS OF PURCHASE WILL BE AN EVENT OF DEFAULT.




warrants to, and covenants Collateral (as that term is defined in the Security Agreement) with, Company that:



























Security Agreement or any other Loan Document; 9.14 Failure of the Borrower or any Guarantor or Co Borrower to comply with any provisions in this Note or any

Loan Documents; 9.15 Any representation or warranty made by Borrower in the Note or Loan Documents is breached or violated,

or proves to be false, misleading or inaccurate, in any material respect; 9.16 The occurrence of an Event of Default as it relates to any guarantor of the Note;















If to Borrower: «Lgl_Name» «Address» «City_State_Zip» Business Facsimile: «Bus_Fax» If to Company: The ServiceMaster Acceptance Company Limited Partnership 860 Ridge Lake Boulevard Memphis, Tennessee 38120



Attn: Dana McWherter Business Facsimile: (901) 597-9784


14.0 GENERAL















the Note, the Borrower (as well as any other guarantor or obligor hereof) agree, as an express inducement to Company to provide such financing, that: (a) the Company may elect to rely upon any fax or electronically transmitted signature to this Note (as well as any Agreement, guaranty, security instruments or other documents pertaining hereto) as if the same were an original signature hereto or thereto; and (b) upon any such fax or electronic transmission of a signature hereto or to any such other instrument, the Borrower (and/or guarantor or other respective signatory[ies]) covenants, represents and warrants to Company that the original of such executed Agreement, Note, guaranty, security instrument or other such documents exist and have been validly executed and are the property of the Company and that such original(s) instrument(s) are possessed and held “in trust” by such Borrower or signatory for the express benefit of Company and will promptly be delivered to the Company as the Company.









By: By:___________________________ «Contact», «Title» «Contact_1», «Title_1»


«Lgl_Name» - Security Agreement Page 1 of 6 _________ Initials

SECURITY AGREEMENT «Lgl_Name»

THE UNDERSIGNED (“Borrower”), for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, hereby assigns, transfers, sets over, pledges, hypothecates and delivers to ServiceMaster Acceptance Company, L.P. (“Company” or “SMAC”), as “Secured Party,” for collateral purposes, and grants to Company, pursuant to the Tennessee Uniform Commercial Code (“UCC”) and all other applicable law, a first lien and security interest in, all of the following: 1.0 COLLATERAL. All assets of the Borrower, including all property of any kind, including without limitation, inventory,

equipment, vehicles, fixtures, accounts, general intangibles, investment property, chattel paper, documents, instruments, monies, residues, deposit accounts, whether now existing or hereafter acquired, wherever located; all accessions, replacements or substitutions to any of the foregoing; all books and records related to any of the foregoing including, without limitation, any computer hardware, software, discs, tapes or print-outs; and all products and proceeds of any of the foregoing, including without limitation, proceeds of insurance policies insuring any of the foregoing (the same being hereinafter sometimes, collectively or severally, as the context requires, referred to as the “Collateral”).

1.1 INDEBTEDNESS SECURED. For purposes of this Security Agreement, “Indebtedness” means all monies owed

Company, including costs, attorney's fees, late charges, accrued interest, and principal; and all other obligations or indebtedness now or hereafter owed by Borrower to Company, including but not limited to all renewals, extensions and modifications of such obligations or indebtedness. This security agreement extends to and secures all of the Indebtedness regardless whether such Indebtedness is (a) not presently in existence, (b) not presently intended or contemplated by Borrower or Company, (c) indirect, secondary or contingent, (d) unrelated to the collateral or any collateral financing by the Company, (e) of a kind or class that is different from any Indebtedness or obligation now owing by Borrower to Company or (f) evidenced by a note or other document that does not refer to the security interest or this Agreement. If Borrower is more than one person, the indebtedness includes all indebtedness and obligations now owing the Company by any one or more such persons, regardless whether the remaining person or persons are liable for such indebtedness or whether one or more such persons who are not parties to this are Note are also liable for such indebtedness.

2.0 BORROWER'S COVENANTS, WARRANTIES AND REPRESENTATIONS. Borrower hereby represents and

warrants to, and covenants with, Company that:

2.01 Borrower is the lawful owner of all Collateral and upon request, Borrower will provide a detailed list of all collateral consisting of equipment or other hard assets no less often than once a year, and more frequently upon (1) any change in collateral through acquisition, loss or disposition or (2) as requested of the Company; and such detailed list shall be in a form satisfactory to Company;

2.02 Unless Company has otherwise expressly, separately agreed in writing to accept a junior lien and security interest,

Borrower has full right and power, and lawful authority, to grant Company a first lien and security interest in, and to transfer and to assign unto Company, all of Borrower's rights, powers, privileges, title and interest in and under the Collateral;

2.03 Except for the rights, interests and powers hereby granted to the Company, the Collateral is free and clear of all

liens and encumbrances whatsoever; 2.04 Borrower shall make no further assignment, pledge, hypothecation or transfer of the Collateral, or any portion

thereof, and will forever warrant and defend Borrower's title to the Collateral against the claims and demands of all persons;

2.05 There are no financing statements covering the Collateral or any part thereof, which are on file in any public office,

and Borrower will not execute, and there will not be on file in any public office, any additional financing statements affecting the Collateral, or any part thereof, except for the financing statements filed or to be filed pursuant to the Note(s) or such further Indebtedness to the Company that is incurred, with the Company's consent;

2.06 Borrower will, at the request of Company, execute or join with Company in executing and, at Borrower's expense,

file and refile under the Uniform Commercial Code of the state in which Borrower's principal place of business is located, or any other state as requested by the Company, such financing statements, amendments thereto, continuation statements and other documents including, without limitation, notices to depository companies under



the Uniform Commercial Code, in such offices as Company may deem necessary or appropriate and wherever required or permitted by law, in order to perfect and preserve Company's security interest in the Collateral;

2.07 Borrower shall notify Company of the name, address, branch and telephone number of its depository Bank or Banks

(“Bank(s)”) and in such notice shall identify the account number or numbers on its accounts in such Bank(s); and shall notify Company in the event that Borrower directs its deposits to another depository Bank(s) of the name, address, branch and telephone number of such Bank(s) (hereafter referred to as a “Direction”), and in such notice shall identify the account number or numbers of its accounts in such Bank(s) which notice shall be given within two (2) days of such Direction, and shall execute any further documents to perfect Company's interest in accounts and shall join with Company in another notice to such Bank(s) under the Uniform Commercial Code within three (3) days of such Direction;

2.08 Borrower will do or cause to be done all things necessary to preserve, renew and keep in full force and effect its

corporate existence, material, rights, licenses, permits and franchises required to conduct its business. Borrower shall further comply with all laws, ordinances, rules and regulations relating to, and shall promptly pay when due all license fees, franchise fees, registration fees, taxes, assessments and other charges which may be levied upon or assessed against, the ownership, operation, possession, maintenance, use or method of use of the Collateral;

2.09 Borrower will provide the Company with sufficient information (in the Company's reasonable judgment)

concerning the Collateral and any changes or dispositions concerning the Collateral which would be material to Company;

2.010 Borrower will furnish Company with such information regarding the Collateral as Company shall from time to time

request (including, without limitation, the names and addresses of Borrower’s account borrowers and the amount owing by each) and will allow Company at any reasonable time to inspect the Collateral and Borrower’s records regarding the Collateral;

2.011 Borrower will execute, file, record, or procure from third persons, such financing statements, subordination

agreements and other documents, and take all such other action as Company may deem necessary to perfect, to continue perfection of, or to maintain first priority of, Company's security interest in the Collateral, and Borrower will place upon the Collateral and/or documents evidencing the Collateral such notice of Company's security interest as Company may from time to time require;

2.012 Company may from time to time contact Borrower’s account borrowers for the purpose of verifying the existence,

amount and collectibility of, and other information regarding, Borrower’s accounts, chattel paper, instruments or general intangibles;

2.013 Upon request, Borrower shall promptly submit to Company, until the Indebtedness be paid in full, a quarterly

Balance Sheet(s) and Profit & Loss Statement(s) prepared in accordance with generally accepted accounting principles. Borrower shall not prepare any financial statements which account for, nor will Borrower in any other respect account for, the transactions contemplated hereby in a manner which is inconsistent with Company's interest in the Collateral and/or related property which are the subject of this Agreement, and any publicly available financial statements prepared by Borrower shall indicate the security interest of Company in the Collateral and/or related property which are the subject of this Agreement. Company shall also receive, prior to their filing, copies of any and all income tax returns or similar returns. All financial statements are to be prepared in accordance with generally accepted accounting principles;

2.014 Borrower does not use any other corporate name or fictitious name other than the name shown on the original

Articles of Incorporation or other organization charter or instrument of record; 2.015 Borrower possesses adequate assets, licenses, patents, patent applications, copyrights, service marks, trade marks,

and trade names to continue its business as heretofore conducted by it; 2.016 Borrower shall not further recapitalize, nor consolidate with, merge with, or otherwise acquire all or substantially all

of the assets or properties of any other person or entity without consent of Company; 2.017 Borrower shall not sell or dispose of any of the assets granted as Collateral hereunder, except Borrower may sell



and dispose of said assets in the ordinary course of business and replace said assets with other assets of equal or greater value;

2.018 All accounts reflected on the books of Borrower, now and in the future, shall be genuine and are actually and


2.019 Borrower will advise Company promptly and in reasonable detail of (a) any lien asserted or claim made against any

of the Collateral, (b) the occurrence of any breach by Borrower of any of its representations, warranties and covenants contained herein, (c) the occurrence of any other event, which in the case of (a) or (b), would have a material adverse effect on the aggregate value of the accounts receivable and/or related property subject to this Agreement and (d) the occurrence of any event of default as defined in paragraph E herein below with respect to Borrower;

2.020 Borrower agrees to deliver to Company forthwith upon Company's demand therefor, such additional collateral as

Company may request from time to time should the value of the Collateral (in Company's sole and exclusive opinion) decline, deteriorate, depreciate or become impaired, or should Company deem itself insecure for any reason whatsoever, including without limitation a change in the financial condition of the Borrower, or any party liable with respect to Borrower's liabilities, and does hereby grant to Company a continuing security interest in such other collateral, which shall be deemed to be a part of Collateral. Borrower shall execute and deliver to Company, at any time upon Company's demand therefor, all agreements, instruments, documents and other written matter that Company may request, in form and substance acceptable to Company, to perfect and maintain perfected Company's security interest in the Collateral or any additional collateral;

2.021 For each deposit account that the Borrower at any time opens or maintains, the Borrower shall, at the Company's

request and option, pursuant to an agreement in form and substance satisfactory to the Company, either (a) cause the depositary Bank (“Bank”) to agree to comply at any time with instructions from Company to Bank directing the disposition of funds from time to time credited to such deposit account, without further consent of the Borrower, or (b) arrange for the Company to become the customer of the Bank with respect to the deposit account, with the Borrower being permitted, only with the consent of Company, to exercise rights to withdraw funds from such deposit account; and


purposes. 2.1 COLLATERAL IMPAIRMENT. Loss, theft, damage to, destruction or seizure of the Collateral shall not relieve Borrower

from the payment and performance of any obligation or Indebtedness secured hereby. 3.0 EVENTS OF DEFAULT. The occurrence of any one or more of the following is an event of default hereunder:

3.01 Failure of Borrower to pay any installment of principal or interest when due on the Indebtedness; 3.03 If default occurs in the performance of any obligation of Borrower to Company under this Agreement or under any

promissory note or other instrument at any time evidencing Indebtedness or under any other security agreement, loan agreement, mortgage, assignment, guaranty, or other agreement that now or hereafter secures or relates to any indebtedness or obligation now or hereafter owing by Borrower to Company or that secures or relates to any guaranty of any such indebtedness or obligation (“Loan Documents”);

3.04 The filing of any petition by or against Borrower under the Federal Bankruptcy Act now or hereafter in force; 3.05 The execution and delivery by Borrower of a general assignment for the benefit of creditors; 3.06 If any attachment, garnishment, levy, execution or other legal process shall at any time be issued against or placed

upon any Collateral, then the entire Indebtedness shall automatically become immediately due and payable, without notice or demand. All or part of the Indebtedness also may become, or may be declared to be, immediately due and payable under the terms of any note at any time evidencing any of the Indebtedness or any loan agreement, Security Document or other agreement heretofore or hereafter entered into between Borrower and Company;



3.07 The appointment of a Receiver for Borrower by a court of competent jurisdiction, which appointment shall not have

been vacated within a period of thirty (30) days after the date of the appointment of such Receiver; 3.08 Failure of Borrower to notify Company of any event identified in subparagraphs 3.04, 3.05, 3.06 or 3.07herein in

writing within five (5) days of such event; 3.09 Failure of Borrower to maintain on a current basis any account with any ServiceMaster Affiliated Company;




3.011 Borrower's assignment, sale, transfer, or the like of all or substantially all of the assets of Borrower's franchised

business or change in the majority ownership interest of Borrower without prior approval by Company; 3.012 Failure of Borrower to notify Company 15 days in advance of any voluntary change in business structure, including,

but not limited to, the creation or dissolution of a corporation, partnership, or limited liability company or limited liability partnership; or failure of Borrower to maintain its corporation, limited liability company or limited liability partnership in good standing under the applicable law where the entity is incorporated and operating;

3.013 Failure of Borrower to notify Company of any change in business name or address, fifteen (15) days in advance of

such event; 3.014 The death or judicially declared or adjudicated incompetency of any guarantor or other obligor of the Indebtedness; 3.015 Failure to comply with any other provision in this Security Agreement or failure to comply with the provisions of

any other Loan Document; 3.016 Failure of Borrower to (1) adequately protect and maintain the value and/or utility of any Collateral; (2) failure to

report the sale, disposition or loss of any Collateral, or (3) failure to provide Company with information about the collateral upon Company request;

3.017 Failure of Borrower to adequately insure or otherwise protect, secure and maintain any Collateral; 3.018 Failure of the Borrower or any Guarantor or Co-Borrower to comply with any provisions in the Note(s) or any other

document related to the Indebtedness; 3.019 The breach of any representation, covenant or warranty made by Borrower in any document, or if a representation,

covenant or warranty proves to be false, misleading or inaccurate, in any material respect; 3.020 The occurrence of an Event of Default as it relates to any guarantor of the Indebtedness; 3.021 Any material adverse change in the financial condition of Borrower as determined by Company, or 3.022 The substantial cessation of business operations of Borrower for more than thirty (30) days.

4.0 REMEDIES AND RECOURSES. Upon the occurrence or existence of any of the Events of Default, or if the Note(s) at

any time or for any reason ceases to be in full force and effect or the validity or enforceability of the Note(s) shall be contested by Borrower (unless such contest is based on the full and final payment of Indebtedness) then, at the option of Company, and without demand or notice to Borrower (demand and notice as to such event being hereby expressly waived by Borrower), Company shall, to the fullest extent permitted by law, be entitled to: 4.01 Exercise all the rights, powers and privileges reserved or granted to Borrower as an owner of the Collateral to take

possession, manage, control, direct and otherwise deal with the Collateral, including without limitation, the right to



collect and receive all funds, issues, proceeds, or any part thereof, and to apply the same to the payment of the Indebtedness (whether or not due and in any order of priority as may be selected by Company, in its sole discretion); and/or

4.02 With respect to the Collateral, exercise all the rights, powers and remedies available to Company upon default under

the Uniform Commercial Code, including without limitation the right to sell and dispose of any or all of the Collateral at public or private sale. Borrower hereby acknowledges and agrees that five (5) business days notice of any such sale is and shall be commercially reasonable notice; and/or

4.03 At any time or times, and without prior notice to Borrower, notify any or all parties owing funds to Borrower

pursuant to the Borrower's accounts, which notice shall state that the accounts have been assigned to Company and that Company has a security interest therein. Company may direct any and all parties owing funds to Borrower to make all payments directly to Company. Company shall furnish Borrower with a copy of such notice and an accounting for amounts received; and/or

4.04 Accelerate the Note(s) and declare all sums due and owing immediately, and accelerate all Indebtedness declaring it

due and owing immediately. In addition, Company may exercise any or other powers, rights, remedies or recourses afforded to Company under the Note(s) or other documents relating to the Indebtedness or otherwise available under applicable law.

4.1 CUMULATIVE REMEDIES. All rights and remedies of Company shall be cumulative and may be exercised at its sole

and exclusive discretion. If all or any part of the Indebtedness is not paid at maturity, Company may dispose of the Collateral in any commercially reasonable manner. Any notification required to be given by Company to Borrower regarding any sale or other disposition of Collateral shall be considered reasonable if mailed at least five days before the sale or other disposition.

4.2 APPLICATION OF PROCEEDS OF COLLATERAL. All proceeds of sale of any of the Collateral by Company as

herein provided shall be applied in the following order of priority: 1ST: To the payment of the expenses incurred or sustained by Company in connection with the sale, including but not

limited to, the expenses of taking, advertising, processing, and preparing the Collateral to be sold, all court costs and the reasonable fees and expenses of legal counsel to Company in connection therewith, and to the repayment of all advances made by Company hereunder for the account of the Borrower and/or other obligor and the payment of all costs and expenses paid or incurred by Company in connection with the exercise of any right, power, or remedy hereunder, to the extent that such advances, costs and expenses shall not theretofore have been reimbursed to Company by Borrower;

2ND: To the payment of any then secured outstanding indebtedness and obligations owed to any prior secured creditor; (in any order of priority as may be selected by Company, in its sole discretion); and Borrower to remain liable for any deficiency, and any surplus is to be paid to Borrower; and

3RD: To the payment of the Indebtedness (whether or not due and in such order of priority as may be selected by Company, in its sole discretion); and Borrower to remain liable for any deficiency, and any surplus to be paid to Borrower.

4.3 PERFORMANCE OF BORROWER OBLIGATIONS.

4.31 Until all Indebtedness is paid in full, Borrower shall procure and maintain insurance on the Collateral against the risks of

fire, theft, and all other risks as Company may require, and Borrower shall furnish Company with a Certificate of Insurance or other reasonable evidence of such insurance coverage, which insurance coverage shall include and identify Company as additional insured and secured lien holder-loss payee. If Borrower fails, for any reason, to insure the Collateral as provided herein, or if Borrower's insurance is cancelled, Company, at its option, may procure such insurance deemed necessary by Company, pay the premiums therefor and add the cost of such premiums to the balance of the Note(s). Alternatively, Company may, at its option, declare all obligations secured hereby to be immediately due and payable.

4.32 If Borrower shall fail to do any other action or thing which Borrower has agreed to do under the Note(s), or under any agreement, covenant, representation or warranty by Borrower in any Security Documents related to the Indebtedness, Company may, but shall not be obligated to do the same or cause it to be done, or remedy such breach or violation.



4.33 In connection with any action taken by Company under this paragraph, if Company shall make any advances or expenditures of money for the account of Borrower, then there shall be added to the obligations and liabilities of Borrower hereunder the costs or expenses so paid or incurred by Company and any and all amounts paid or incurred by Company in taking any such action shall be repaid to Company.

5.0 GENERAL PROVISIONS.

5.01 No Waiver. No waiver of any provision herein or action by Company contrary to the terms of this Security Agreement shall constitute a waiver of any subsequent default of the same or different terms, covenants or conditions herein.

5.02 “Company” Defined. Wherever “Company” is referred to herein, it shall be deemed to refer to Company or any

other assignee or subsequent holder of the Note(s). 5.03 Applicable Law, Jurisdiction and Venue. The laws of the State of Tennessee shall govern this Security Agreement.

In all legal proceedings or actions brought under this Security Agreement, the Borrower submits to the exclusive personal jurisdiction and venue of the Circuit Court of the State of Tennessee for Shelby County or the Federal District Court of Western District of Tennessee, whichever Company may elect in its sole discretion, and waives all defenses to lack of personal jurisdiction, forum non conviens, or other inconvenient forum defense.

5.04 Facsimile Signature. For the sake of expediency in providing financing and funding to the Borrower under the

Note, the Borrower (as well as any other guarantor or obligor hereof) agree, as an express inducement to Company to provide such financing, that: (a) the Company may elect to rely upon any fax or electronically transmitted signature to this Agreement (as well as any Note, guaranty, security instruments or other documents pertaining hereto) as if the same were an original signature hereto or thereto; and (b) upon any such fax or electronic transmission of a signature hereto or to any such other instrument, the Borrower (and/or guarantor or other respective signatory[ies]) covenants, represents and warrants to Company that the original of such executed Agreement, Note, guaranty, security instrument or other such documents exist and have been validly executed and are the property of the Company and that such original(s) instrument(s) are possessed and held “in trust” by such Borrower or signatory for the express benefit of Company and will promptly be delivered to the Company as the Company may further direct.

5.05 Attorney Fees and Costs. Borrower will be liable to Company for all losses, damages, liabilities and expenses

(including attorneys' fees and costs) incurred by Company by reason of any failure of Borrower to comply with any of Borrower's obligations under this Agreement or by reason of any warranty or representation made by Borrower to Company in this Agreement being false in any material respect.

5.06 Severability. If any provision of this Security Agreement is held to be illegal, invalid, or unenforceable under

present or future laws effective during the term hereof, such provision shall be fully severable, and this Security Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions of the Security Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Security Agreement.

THE UNDERSIGNED Borrower individually or through its principal(s) has read the foregoing Security Agreement, understands the terms contained therein, and agrees to be bound as of the 25th day of July, 2011. BORROWER: «Lgl_Name»

By: «Contact», «Title» By: _____________________________________

«Contact_1», «Title_1»


«Guarantor_1» - Corporate Guaranty Page 1 of 3 __________ Initials

CORPORATE GUARANTY («Guarantor_1»)

1. In consideration of the Business Note and Security Agreement each dated «Date» as credit facilities extended by The

ServiceMaster Acceptance Company Limited Partnership (“Company”) to «Lgl_Name» (“Borrower”), the undersigned (“Guarantor”) hereby absolutely, unconditionally and irrevocably guarantees prompt payment when due and at all times thereafter of all interest, principal, costs and fees owing from Borrower to Company on the above-referenced credit facility, including all renewals, extensions and modifications thereof, now or hereafter owing from Borrower to Company (the “Indebtedness”).

2. Notwithstanding the foregoing, the liability of Guarantor to Company under paragraph 1 shall not exceed an amount

equal to the sum of (a) $Unlimited (“Base Amount”) and (b) Guarantor's Pro Rata Share of unpaid interest accrued from time to time upon the Indebtedness. Guarantor’s Pro Rata Share as of any given date shall determined by applying to all unpaid accrued interest as of such date a percentage that shall be the lesser of (i) 100% or (ii) the percentage obtained by dividing the Base Amount by the aggregate unpaid principal balance of the Indebtedness outstanding immediately after the last principal advance made by Company to Borrower prior to such date. The granting of credit from time to time to Borrower by Company in excess of the Base Amount shall not affect or impair the liability of Guarantor hereunder. Any maximum amount of Guarantor’s liability provided for under this paragraph 2 shall not be reduced by any payments or collections upon the Indebtedness received by Company from Borrower or any Source other than Guarantor.

3. Guarantor shall reimburse Company for all costs, attorneys’ fees and other expenses at any time expended or

incurred by Company in the collection or attempted collection of the Indebtedness or in the enforcement of this Guaranty or the realization upon any security for this Guaranty.

4. The effectiveness of this Guaranty is not subject to the satisfaction of any conditions, including, without limitation,

execution of this or another Guaranty, or the granting of any other security, by any other person, firm or corporation. Company may grant or continue credit to Borrower from time to time without giving notice or obtaining consent from Guarantor. Company shall not be obligated at any time, whether in connection with the granting or credit to Borrower or otherwise, to make any factual disclosure to Guarantor, including without limitation, any disclosure concerning Borrower’s financial condition, assets, liabilities, activities or operations or the status of the Indebtedness or of any other security for the Indebtedness. The execution of this Guaranty by Guarantor does not create any obligation or duty of Company to grant or continue credit to Borrower.

5. Company in its sole discretion may, without affecting, impairing or reducing this Guaranty, apply payments or

collections received from any source to the payment of indebtedness other than the Indebtedness, even though Company could have applied those payments to the Indebtedness. Any payments or collection that Company applies to the liability of Guarantor under this Guaranty shall be applied to costs or expenses described in paragraph 3, to the interest on or principal of the Indebtedness or to other components of the Indebtedness all in such manner as Company in its sole discretion shall determine.

6. Guarantor will not exercise or enforce, and hereby waives, any right of contribution, reimbursement, recourse or

subrogation available to Guarantor against Borrower or any other person liable for payment of all or part of the Indebtedness, or as to any security therefor, unless and until all of the Indebtedness is paid in full and discharged.

7. Guarantor warrants and represents to Company that all financial statements and other information concerning

Guarantor furnished to Company are true and correct in all material respects; that execution, delivery and performance of this Guaranty by Guarantor will not violate any law, rule, judgment, order, agreement or instrument binding upon Guarantor, nor require the approval of any public authority or other third party; and that this Guaranty constitutes the valid and binding obligation of Guarantor, enforceable in accordance with its terms. If Guarantor is a corporation, partnership, association, trust or other entity, Guarantor further represents and warrants to Company that Guarantor is duly organized and validly existing in good standing under the laws of the state indicated next to its name below; that Guarantor has full power and authority to enter into and perform its obligations under this Guaranty; that the execution, delivery, and performance hereof by Guarantor have been duly authorized by all necessary action of Guarantor’s board of directors, partners, trustees or other governing body and will not violate Guarantor's articles or certificate of incorporation, bylaws. partnership agreement, articles of association, trust agreement or other governing instrument, nor require the approval of its shareholders or members or of any of its partners, other than those whose signatures appear below.



8. Guarantor waives (a) notice of the acceptance of this Guaranty and of the extension or continuation of all or any part of the Indebtedness, (b) presentment, protest, notice, demand or action with respect to any default in payment of all or any part of the Indebtedness and with respect to any default by Guarantor in Guarantor’s obligations under this Guaranty, and (c) any right to require Company to sue Borrower, any other guarantor or any other person obligated with respect to all or any part of the Indebtedness or to foreclose or realize upon any security for all or any part of the Indebtedness.

9. If this Guaranty is terminated or revoked, it shall continue in effect as to all Indebtedness incurred, arising or

committed for before the termination or revocation, including any extensions, renewals or modification of such Indebtedness made after the termination or revocation. A notice of revocation must be in writing and shall not be effective until it is received by Company. If more than one person have executed this Guaranty, a notice of revocation shall be effective only as to the person or entity giving the notice, and this Guaranty shall continue in effect to each person or entity not giving the notice.

10. The validity and enforceability of this Guaranty shall not be impaired or affected by any act or omission by

Company (whether occurring before or after receipt by Company of notice of termination of this Guaranty) with respect to all or part of the Indebtedness or any agreement relating thereto or with respect to any present or future guaranty or other security for all or part of the Indebtedness, including, but not limited to, (a) any extension, modification, renewal, indulgence, or substitution; (b) any failure or omission to enforce any right, power or remedy; (c) any waiver of any right, power or remedy or of any default; (d) any release. surrender, compromise, settlement, subordination or modification, with or without consideration; (e) the unenforceability or invalidity thereof; (f) any failure by Company to perfect or secure any priority of its rights with respect to any security; or (g) any consent by Company to any sale or transfer of any security, all whether or not the undersigned shall have had notice or knowledge of any act, omission or circumstance referred to in this paragraph.

11. The liability of Guarantor hereunder is joint and several and independent of any other guaranties or

obligations at any time in effect with respect to all or any part of the Indebtedness and may be enforced regardless of the existence, validity, enforcement or non-enforcement of any such other guaranties or other obligations. If more than one person or entity have executed this Guaranty, Company is authorized to release or modify the obligations of or surrender any security given by or waive any rights against any of those who have executed this Guaranty, without in any manner affecting or impairing the liability of the other persons or entities.

12. Guarantor waives any and all defenses, claims and discharges of Borrower or any other obligor with respect to the

Indebtedness, except the defense of discharge by payment. Without limiting the generality of the foregoing, Guarantor will not assert, plead or enforce against Company any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, ultra vires, lack of authorization, illegality or unenforceability that may be available to Borrower or any other person liable in respect of any Indebtedness or any setoff available against Company to Borrower or any such other person, whether or not on account of a related transaction. Guarantor shall be liable for any deficiency remaining after foreclosure of or realization upon any security for all or part of the Indebtedness, whether or not the liability of Borrower or any other obligor for the deficiency is discharged pursuant to statute or judicial decision.

13. If any payment applied by Company to the Indebtedness is set aside, recovered, rescinded or required to be returned for any

reason (including, without limitation, the bankruptcy, insolvency or reorganization of Borrower or any other obligor), the Indebtedness to which the payment was applied shall for the purposes of this Guaranty be deemed to have continued in existence, notwithstanding the application, and this Guaranty shall be enforceable as to such Indebtedness as fully as if Company had rot made the application.

14. The obligations of Guarantor under this Guaranty are secured by any and all security agreements, guaranties, mortgages,

pledge agreements, assignments and all other security documents and instruments heretofore or hereafter given by Guarantor or any third party to Company (“Security Documents”), including, but not limited to, Security Documents given in connection with or referred to in any prior guaranty or other document evidencing any liability of Guarantor to Company. Any requirement of reasonable notice with respect to any sale or other disposition of collateral shall be met if Company sends the notice at least five days before the sale or other disposition.

This Guaranty is secured by a security interest in certain collateral described in a security agreement or mortgage or other

document of security to be executed concurrently herewith by the undersigned. The specific security given by Guarantor to secure this Guaranty is as follows: All assets including all property of any kind, including without limitation, inventory, equipment, vehicles, fixtures, accounts, general intangibles, investment property, chattel paper, documents, instruments,



monies, residues, deposit accounts, whether now existing or hereafter acquired, wherever located; all accessions, replacements or substitutions to any of the foregoing; all books and records related to any of the foregoing including, without limitation, any computer hardware, software, discs, tapes or print-outs; and all products and proceeds of any of the foregoing, including without limitation, proceeds of insurance policies insuring any of the foregoing. Guarantor agrees promptly upon the execution of this Guaranty to execute and deliver such papers and forms as shall be deemed by the Company to be necessary or advisable to create a perfected security interest in such collateral. The collateral may include any property and/or securities delivered to the Company and by any substitutions therefor or additions thereto which may be hereafter made, and by any and all monies, securities or property of the Guarantor that may have been or may be hereafter pledged to or come into possession of the Company. Upon the non-payment of any debt, the repayment of which is hereby guaranteed, the Company is hereby irrevocably authorized to sell such collateral property and/or securities, or any part thereof, at public or private sale, without recourse to judicial proceedings, and in accordance with the Uniform Commercial Code of Tennessee, and Company is hereby irrevocably authorized to make any transfers or deliveries to the purchaser or purchasers at such sale of any such property and/or securities and to apply the proceeds thereof (1) to the payment of all costs and commissions for selling and (2) to the payment of any Indebtedness of Borrower, including attorney’s fees and costs, interest, and principal, fees, up to the amount guaranteed hereunder. Proceeds will be applied first to attorney’s fees and costs, then to interest and then to the principal indebtedness.

15. This Guaranty shall be governed by and interpreted in accordance with the laws of the state of Tennessee, without giving

effect to principles of conflict of laws. Guarantor irrevocably agrees and consents that any action against Guarantor for collection or enforcement of this Guaranty may be brought in any state or federal court that is located in, or whose district includes, Memphis, Shelby County, Tennessee and that any such court shall have personal jurisdiction over Guarantor for purposes of that action.

GUARANTOR KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO TRIAL BY JURY AND FULLY

UNDERSTANDS THAT BY SIGNING THIS GUARANTEE IT HAS GIVEN UP ITS RIGHT TO TRIAL BY JURY.

Initials: ____________ 16. This Guaranty embodies the entire agreement between Guarantor and Company with respect to the subject matter hereof.

There are no promises, terms, conditions, or obligations other than those contained herein. This Guaranty may not be modified except by writing signed by the party to be charged. In this Guaranty, “Guarantor” means each, all and any of those who have executed this Guaranty.

17. This Guaranty shall be binding upon and inure to the benefit of Company and Guarantor, and their respective heirs,

executors, administrators, legal representatives, successors and assigns. 18. For the sake of expediency in providing financing and funding to the Borrower, Guarantor agrees as an express inducement

to Company to provide such financing that: (a) Company may elect to rely upon any fax or electronically transmitted signature to this Guaranty as if the same were an original signature hereto; and (b) upon any such fax or electronic transmission of a signature hereto, Guarantor has covenanted, represented and warranted to Company that the original of such executed document exists and has been validly executed and is the property of Company, and that such original instrument(s) are possessed and held “in trust” by such Guarantor for the express benefit of Company and will promptly be delivered to the Company as the Company may further direct.

GUARANTOR ACKNOWLEDGES HAVING READ ALL OF THE PROVISIONS OF THIS GUARANTY, INCLUDING THOSE APPEARING ON THE OTHER PAGES.

DATED: «NoteSADate» CORPORATE GUARANTOR: «Guarantor_1» By: «Contact», «Title» By:

«Contact_1», «Title_1»


«Guarantor_1» - Secured Guaranty Page 1 of 3

SECURED GUARANTY «Guarantor_1»

1. In consideration of the Business Note and Security Agreement dated «NoteSADate» and any other credit or other

financial accommodation heretofore or hereafter extended by The ServiceMaster Acceptance Company Limited Partnership (“Company”) to «Lgl_Name» (“Borrower”), the undersigned (“Guarantor”) hereby absolutely, unconditionally and irrevocably guarantees prompt payment when due and at all times thereafter of any and all existing and future Indebtedness and liabilities of every nature and kind, including all renewals, extensions and modifications thereof, now or hereafter owing from Borrower to Company, however and whenever created, arising, evidenced or acquired, and all interest accrued thereon (collectively the “Indebtedness”). The Indebtedness includes any and all Indebtedness and obligations now or hereafter owing to company by Borrower, regardless of whether any such indebtedness or obligation is (a) not presently intended or contemplated by Borrower, Company or Guarantor, (b) indirect, contingent or secondary, or (c) unrelated to, or of a different kind of class from, any indebtedness of obligations of Borrower or Company that are now owing or are committed or contemplated.


equal to the sum of (a) $Unlimited (“Base Amount”) and (b) Guarantor's Pro Rata Share of unpaid interest accrued from time to time upon the Indebtedness. Guarantor’s Pro Rata Share as of any given date shall be determined by applying to all unpaid accrued interest as of such date a percentage that shall be the lesser of (i) 100% or (ii) the percentage obtained by dividing the Base Amount by the aggregate unpaid principal balance of the Indebtedness outstanding immediately after the last principal advance made by Company to Borrower prior to such date. The granting of credit from time to time to Borrower by Company in excess of the Base Amount shall not affect or impair the liability of Guarantor hereunder. Any maximum amount of Guarantor’s liability provided for under this paragraph 2 shall not be reduced by any payments or collections upon the Indebtedness received by Company from Borrower or any Source other than Guarantor.

3. Guarantor shall reimburse Company for all costs, attorneys' fees and other expenses at any time expended or


4. The effectiveness of this Guaranty is not subject to the satisfaction of any conditions, including, without

limitation, execution of this or another Guaranty, or the granting of any other security, by any other person, firm or corporation. Company may grant or continue credit to Borrower from time to time without giving notice or obtaining consent from Guarantor. Company shall not be obligated at any time, whether in connection with the granting or credit to Borrower or otherwise, to make any factual disclosure to Guarantor, including without limitation, any disclosure concerning Borrower’s financial condition, assets, liabilities, activities or operations or the status of the Indebtedness or of any other security for the Indebtedness. The execution of this Guaranty by Guarantor does not create any obligation or duty of Company to grant or continue credit to Borrower.




subrogation available to Guarantor against Borrower or any other person liable for payment of all or part of the Indebtedness, or as to any security therefore, unless and until all of the Indebtedness is paid in full and discharged.


Guarantor furnished to Company are true and correct in all material respects; that execution, delivery and performance of this Guaranty by Guarantor will not violate any law, rule, judgment, order, agreement or instrument binding upon Guarantor, nor require the approval of any public authority or other third party; and that this Guaranty constitutes the valid and binding obligation of Guarantor, enforceable in accordance with its terms. If Guarantor is a corporation, partnership, association, trust or other entity, Guarantor further represents and warrants to Company that Guarantor is duly organized and validly existing in good standing under the laws of the



state indicated next to its name below; that Guarantor has full power and authority to enter into and perform its obligations under this Guaranty; that the execution, delivery, and performance hereof by Guarantor have been duly authorized by all necessary action of Guarantor’s board of directors, partners, trustees or other governing body and will not violate Guarantor's articles or certificate of incorporation, bylaws, partnership agreement, articles of association, trust agreement or other governing instrument, nor require the approval of its shareholders or members or of any of its partners, other than those whose signatures appear below.

8. Guarantor waives (a) notice of the acceptance of this Guaranty and of the extension or continuation of all or any

part of the Indebtedness, (b) presentment, protest, notice, demand or action with respect to any default in payment of all or any part of the Indebtedness and with respect to any default by Guarantor in Guarantor’s obligations under this Guaranty, and (c) any right to require Company to sue Borrower, any other guarantor or any other person obligated with respect to all or any part of the Indebtedness or to foreclose or realize upon any security for all or any part of the Indebtedness.





11. The liability of Guarantor hereunder is joint and several and independent of any other guaranties or

obligations at any time in effect with respect to all or any part of the Indebtedness and may be enforced regardless of the existence, validity, enforcement or non-enforcement of any such other guaranties or other obligations. If more than one person or entity have executed this Guaranty, Company is authorized to release or modify the obligations of or surrender any security given by or waive any rights against any of those who have executed this Guaranty, without in any manner affecting or impairing the liability of the other persons or entities.

12. Guarantor waives any and all defenses, claims and discharges of Borrower or any other obligor with respect to

the Indebtedness, except the defense of discharge by payment. Without limiting the generality of the foregoing, Guarantor will not assert, plead or enforce against Company any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, ultra vires, lack of authorization, illegality or unenforceability that may be available to Borrower or any other person liable in respect of any Indebtedness or any setoff available against Company to Borrower or any such other person, whether or not on account of a related transaction. Guarantor shall be liable for any deficiency remaining after foreclosure of or realization upon any security for all or part of the Indebtedness, whether or not the liability of Borrower or any other obligor for the deficiency is discharged pursuant to statute or judicial decision.

13. If any payment applied by Company to the Indebtedness is set aside, recovered, rescinded or required to be returned for

any reason (including, without limitation, the bankruptcy, insolvency or reorganization of Borrower or any other obligor), the Indebtedness to which the payment was applied shall for the purposes of this Guaranty be deemed to have continued in existence, notwithstanding the application, and this Guaranty shall be enforceable as to such Indebtedness as fully as if Company had rot made the application.


pledge agreements, assignments and all other security documents and instruments heretofore or hereafter given by Guarantor or any third party to Company (“Security Documents”), including, but not limited to, Security Documents



given in connection with or referred to in any prior guaranty or other document evidencing any liability of Guarantor to Company. Any requirement of reasonable notice with respect to any sale or other disposition of collateral shall be met if Company sends the notice at least five days before the sale or other disposition. This Guaranty is secured by a security interest in certain collateral described in a security agreement or mortgage or other document of security to be executed concurrently herewith by the undersigned. The specific security given by Guarantor to secure this Guaranty is: Real Property located in the County of «PropCounty», «PropAddress». Guarantor agrees promptly upon the execution of this Guaranty to execute and deliver such papers and forms as shall be deemed by the Company to be necessary or advisable to create a perfected security interest in such collateral. The collateral may include any property and/or securities delivered to the Company and by any substitutions therefore or additions thereto which may be hereafter made, and by any and all monies, securities or property of the Guarantor that may have been or may be hereafter pledged to or come into possession of the Company. Upon the non-payment of any debt, the repayment of which is hereby guaranteed, the Company is hereby irrevocably authorized to sell such collateral property and/or securities, or any part thereof, at public or private sale, without recourse to judicial proceedings, and in accordance with the Uniform Commercial Code of Tennessee, and Company is hereby irrevocably authorized to make any transfers or deliveries to the purchaser or purchasers at such sale of any such property and/or securities and to apply the proceeds thereof (1) to the payment of all costs and commissions for selling and (2) to the payment of any Indebtedness of Borrower, including attorney’s fees and costs, interest, and principal, fees, up to the amount guaranteed hereunder. Proceeds will be applied first to attorney’s fees and costs, then to interest and then to the principal indebtedness.



GUARANTOR KNOWINGLY AND VOLUNTARILY WAIVES ITS RIGHT TO TRIAL BY JURY AND

FULLY UNDERSTANDS THAT BY SIGNING THIS GUARANTEE IT HAS GIVEN UP ITS RIGHT TO TRIAL BY JURY. Initials: ____________

16. This Guaranty embodies the entire agreement between Guarantor and Company with respect to the subject matter hereof.



executors, administrators, legal representatives, successors and assigns. 18. For the sake of expediency in providing financing and funding to the Borrower, Guarantor agrees as an express

inducement to Company to provide such financing that: (a) Company may elect to rely upon any fax or electronically transmitted signature to this Guaranty as if the same were an original signature hereto; and (b) upon any such fax or electronic transmission of a signature hereto, Guarantor has covenanted, represented and warranted to Company that the original of such executed document exists and has been validly executed and is the property of Company, and that such original instrument(s) are possessed and held “in trust” by such Guarantor for the express benefit of Company and will promptly be delivered to the Company as the Company may further direct.


DATED: «NoteSADate» INDIVIDUAL GUARANTOR:

«Guarantor_1»


«Guarantor_1» - Secured Guaranty Page 1 of 4 __________Initial

SECURED CORPORATE GUARANTY «Guarantor_1»

1. In consideration of the Business Note and Security Agreement dated «NoteSADate» and any other credit or other

financial accommodation heretofore or hereafter extended by The ServiceMaster Acceptance Company Limited Partnership (“Company”) to «Lgl_Name» (“Borrower”), the undersigned (“Guarantor”) hereby absolutely, unconditionally and irrevocably guarantees prompt payment when due and at all times thereafter of any and all existing and future Indebtedness and liabilities of every nature and kind, including all renewals, extensions and modifications thereof, now or hereafter owing from Borrower to Company, however and whenever created, arising, evidenced or acquired, and all interest accrued thereon (collectively the “Indebtedness”). The Indebtedness includes any and all Indebtedness and obligations now or hereafter owing to company by Borrower, regardless of whether any such indebtedness or obligation is (a) not presently intended or contemplated by Borrower, Company or Guarantor, (b) indirect, contingent or secondary, or (c) unrelated to, or of a different kind of class from, any indebtedness of obligations of Borrower or Company that are now owing or are committed or contemplated.


equal to the sum of (a) $Unlimited (“Base Amount”) and (b) Guarantor's Pro Rata Share of unpaid interest accrued from time to time upon the Indebtedness. Guarantor’s Pro Rata Share as of any given date shall be determined by applying to all unpaid accrued interest as of such date a percentage that shall be the lesser of (i) 100% or (ii) the percentage obtained by dividing the Base Amount by the aggregate unpaid principal balance of the Indebtedness outstanding immediately after the last principal advance made by Company to Borrower prior to such date. The granting of credit from time to time to Borrower by Company in excess of the Base Amount shall not affect or impair the liability of Guarantor hereunder. Any maximum amount of Guarantor’s liability provided for under this paragraph 2 shall not be reduced by any payments or collections upon the Indebtedness received by Company from Borrower or any Source other than Guarantor.



4. The effectiveness of this Guaranty is not subject to the satisfaction of any conditions, including, without

limitation, execution of this or another Guaranty, or the granting of any other security, by any other person, firm or corporation. Company may grant or continue credit to Borrower from time to time without giving notice or obtaining consent from Guarantor. Company shall not be obligated at any time, whether in connection with the granting or credit to Borrower or otherwise, to make any factual disclosure to Guarantor, including without limitation, any disclosure concerning Borrower’s financial condition, assets, liabilities, activities or operations or the status of the Indebtedness or of any other security for the Indebtedness. The execution of this Guaranty by Guarantor does not create any obligation or duty of Company to grant or continue credit to Borrower.






Guarantor furnished to Company are true and correct in all material respects; that execution, delivery and performance of this Guaranty by Guarantor will not violate any law, rule, judgment, order, agreement or instrument binding upon Guarantor, nor require the approval of any public authority or other third party; and that this Guaranty constitutes the valid and binding obligation of Guarantor, enforceable in accordance with its terms. If Guarantor is a corporation, partnership, association, trust or other entity, Guarantor further represents and warrants to Company that Guarantor is duly organized and validly existing in good standing under the laws of the



state indicated next to its name below; that Guarantor has full power and authority to enter into and perform its obligations under this Guaranty; that the execution, delivery, and performance hereof by Guarantor have been duly authorized by all necessary action of Guarantor’s board of directors, partners, trustees or other governing body and will not violate Guarantor's articles or certificate of incorporation, bylaws, partnership agreement, articles of association, trust agreement or other governing instrument, nor require the approval of its shareholders or members or of any of its partners, other than those whose signatures appear below.


part of the Indebtedness, (b) presentment, protest, notice, demand or action with respect to any default in payment of all or any part of the Indebtedness and with respect to any default by Guarantor in Guarantor’s obligations under this Guaranty, and (c) any right to require Company to sue Borrower, any other guarantor or any other person obligated with respect to all or any part of the Indebtedness or to foreclose or realize upon any security for all or any part of the Indebtedness.





11. The liability of Guarantor hereunder is joint and several and independent of any other guaranties or obligations at

any time in effect with respect to all or any part of the Indebtedness and may be enforced regardless of the existence, validity, enforcement or non-enforcement of any such other guaranties or other obligations. If more than one person or entity have executed this Guaranty, Company is authorized to release or modify the obligations of or surrender any security given by or waive any rights against any of those who have executed this Guaranty, without in any manner affecting or impairing the liability of the other persons or entities.

12. Guarantor waives any and all defenses, claims and discharges of Borrower or any other obligor with respect to

the Indebtedness, except the defense of discharge by payment. Without limiting the generality of the foregoing, Guarantor will not assert, plead or enforce against Company any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, ultra vires, lack of authorization, illegality or unenforceability that may be available to Borrower or any other person liable in respect of any Indebtedness or any setoff available against Company to Borrower or any such other person, whether or not on account of a related transaction. Guarantor shall be liable for any deficiency remaining after foreclosure of or realization upon any security for all or part of the Indebtedness, whether or not the liability of Borrower or any other obligor for the deficiency is discharged pursuant to statute or judicial decision.

13. If any payment applied by Company to the Indebtedness is set aside, recovered, rescinded or required to be returned for

any reason (including, without limitation, the bankruptcy, insolvency or reorganization of Borrower or any other obligor), the Indebtedness to which the payment was applied shall for the purposes of this Guaranty be deemed to have continued in existence, notwithstanding the application, and this Guaranty shall be enforceable as to such Indebtedness as fully as if Company had rot made the application.


pledge agreements, assignments and all other security documents and instruments heretofore or hereafter given by Guarantor or any third party to Company (“Security Documents”), including, but not limited to, Security Documents



given in connection with or referred to in any prior guaranty or other document evidencing any liability of Guarantor to Company. Any requirement of reasonable notice with respect to any sale or other disposition of collateral shall be met if Company sends the notice at least five days before the sale or other disposition. This Guaranty is secured by a security interest in certain collateral described in a security agreement or mortgage or other document of security to be executed concurrently herewith by the undersigned. The specific security given by Guarantor to secure this Guaranty is: Real Property located in the County of «PropCounty», «PropAddress». Guarantor agrees promptly upon the execution of this Guaranty to execute and deliver such papers and forms as shall be deemed by the Company to be necessary or advisable to create a perfected security interest in such collateral. The collateral may include any property and/or securities delivered to the Company and by any substitutions therefore or additions thereto which may be hereafter made, and by any and all monies, securities or property of the Guarantor that may have been or may be hereafter pledged to or come into possession of the Company. Upon the non-payment of any debt, the repayment of which is hereby guaranteed, the Company is hereby irrevocably authorized to sell such collateral property and/or securities, or any part thereof, at public or private sale, without recourse to judicial proceedings, and in accordance with the Uniform Commercial Code of Tennessee, and Company is hereby irrevocably authorized to make any transfers or deliveries to the purchaser or purchasers at such sale of any such property and/or securities and to apply the proceeds thereof (1) to the payment of all costs and commissions for selling and (2) to the payment of any Indebtedness of Borrower, including attorney’s fees and costs, interest, and principal, fees, up to the amount guaranteed hereunder. Proceeds will be applied first to attorney’s fees and costs, then to interest and then to the principal indebtedness.








executors, administrators, legal representatives, successors and assigns. 18. For the sake of expediency in providing financing and funding to the Borrower, Guarantor agrees as an express

inducement to Company to provide such financing that: (a) Company may elect to rely upon any fax or electronically transmitted signature to this Guaranty as if the same were an original signature hereto; and (b) upon any such fax or electronic transmission of a signature hereto, Guarantor has covenanted, represented and warranted to Company that the original of such executed document exists and has been validly executed and is the property of Company, and that such original instrument(s) are possessed and held “in trust” by such Guarantor for the express benefit of Company and will promptly be delivered to the Company as the Company may further direct.


DATED: «Date» «Guarantor_1» By: Title: By: _________________________________ Title:


«Guarantor_1» - Personal Guaranty Page 1 of 3 __________ Initials

PERSONAL GUARANTY «Guarantor_1»

1. In consideration of the Business Note and Security Agreement dated «NoteSADate» and any other credit or other financial accommodation heretofore or hereafter extended by The ServiceMaster Acceptance Company Limited Partnership (“Company”) to «Lgl_Name» (“Borrower”), the undersigned (“Guarantor”) hereby absolutely, unconditionally and irrevocably guarantees prompt payment when due and at all times thereafter of any and all existing and future Indebtedness and liabilities of every nature and kind, including all renewals, extensions and modifications thereof, now or hereafter owing from Borrower to Company, however and whenever created, arising, evidenced or acquired, and all interest accrued thereon (collectively the “Indebtedness”). The Indebtedness includes any and all Indebtedness and obligations now or hereafter owing to company by Borrower, regardless of whether any such indebtedness or obligation is (a) not presently intended or contemplated by Borrower, Company or Guarantor, (b) indirect, contingent or secondary, or (c) unrelated to, or of a different kind of class from, any indebtedness of obligations of Borrower or Company that are now owing or are committed or contemplated.


equal to the sum of (a) Unlimited (“Base Amount”) and (b) Guarantor's Pro Rata Share of unpaid interest accrued from time to time upon the Indebtedness. Guarantor’s Pro Rata Share as of any given date shall be determined by applying to all unpaid accrued interest as of such date a percentage that shall be the lesser of (i) 100% or (ii) the percentage obtained by dividing the Base Amount by the aggregate unpaid principal balance of the Indebtedness outstanding immediately after the last principal advance made by Company to Borrower prior to such date. The granting of credit from time to time to Borrower by Company in excess of the Base Amount shall not affect or impair the liability of Guarantor hereunder. Any maximum amount of Guarantor’s liability provided for under this paragraph 2 shall not be reduced by any payments or collections upon the Indebtedness received by Company from Borrower or any Source other than Guarantor.



4. The effectiveness of this Guaranty is not subject to the satisfaction of any conditions, including, without limitation,

execution of this or another Guaranty, or the granting of any other security, by any other person, firm or corporation. Company may grant or continue credit to Borrower from time to time without giving notice to obtaining consent from Guarantor. Company shall not be obligated at any time, whether in connection with the granting or credit to Borrower or otherwise, to make any factual disclosure to Guarantor, including without limitation, any disclosure concerning Borrower’s financial condition, assets, liabilities, activities or operations or the status of the Indebtedness or of any other security for the Indebtedness. The execution of this Guaranty by Guarantor does not create any obligation or duty of Company to grant or continue credit to Borrower.

5. Company in its sole discretion may, without affecting, impairing or reducing this Guaranty, (a) apply payments or

collections received from any source to the payment of indebtedness other than the Indebtedness, even though Company could have applied those payments to the Indebtedness and (b) apply payments or collections received from Guarantor or from any present or future security for this Guaranty to the liability of Guarantor under this Guaranty or to any liability of Guarantor for payment to Company of any other Indebtedness. Any payments or collection that Company applies to the liability of Guarantor under this Guaranty shall be applied to costs or expenses described in paragraph 3, to the interest on or principal of the Indebtedness or to other components of the Indebtedness all in such manner as Company in its sole discretion shall determine.




Guarantor furnished to Company are true and correct in all material respects; that execution, delivery and performance of this Guaranty by Guarantor will not violate any law, rule, judgment, order, agreement or instrument binding upon Guarantor, nor require the approval of any public authority or other third party; and that this Guaranty


«Guarantor_1» - Personal Guaranty Page 2 of 3 __________ Initials

constitutes the valid and binding obligation of Guarantor, enforceable in accordance with its terms. If Guarantor is a corporation, partnership, association, trust or other entity, Guarantor further represents and warrants to Company that Guarantor is duly organized and validly existing in good standing under the laws of the state indicated next to its name below; that Guarantor has full power and authority to enter into and perform its obligations under this Guaranty; that the execution, delivery, and performance hereof by Guarantor have been duly authorized by all necessary action of Guarantor’s board of directors, partners, trustees or other governing body and will not violate Guarantor's articles or certificate of incorporation, bylaws, partnership agreement, articles of association, trust agreement or other governing instrument, nor require the approval of its shareholders or members or of any of its partners, other than those whose signatures appear below.


part of the Indebtedness, (b) presentment, protest, notice, demand or action with respect to any default in payment of all or any part of the indebtedness and with respect to any default by Guarantor in Guarantor’s obligations under this Guaranty. and (c) any right to require Company to sue Borrower, any other guarantor or any other person obligated with respect to all or any part of the Indebtedness or to foreclose or realize upon any security for all or any part of the Indebtedness.


committed for before the termination or revocation, including any extensions, renewals or modification of such Indebtedness made after the termination or revocation. A notice of revocation must be in writing and shall not be effective until it is received by Company. If more than one person has executed this Guaranty, a notice of revocation shall be effective only as to the person or entity giving the notice, and this Guaranty shall continue in effect to each person or entity not giving the notice.


Company (whether occurring before or after receipt by Company of notice of termination of this Guaranty) with respect to all or part of the Indebtedness or any agreement relating thereto or with respect to any present or future guarantee or other security for all or part of the Indebtedness, including, but not limited to, (a) any extension, modification, renewal, indulgence, or substitution; (b) any failure or omission to enforce any right, power or remedy; (c) any waiver of any right, power or remedy or of any default; (d) any release, surrender, compromise, settlement, subordination or modification, with or without consideration; (e) the unenforceability or invalidity thereof; (f) any failure by Company to perfect or secure any priority of its rights with respect to any security; or (g) any consent by Company to any sale or transfer of any security, all whether or not the undersigned shall have had notice or knowledge of any act, omission or circumstance referred to in this paragraph.

11. The liability of Guarantor hereunder is joint and several and independent of any other guaranties or obligations at

any time in effect with respect to all or any part of the Indebtedness and may be enforced regardless of the existence, validity, enforcement or non-enforcement of any such other guaranties or other obligations. If more than one person or entity has executed this Guaranty, Company is authorized to release or modify the obligations of or surrender any security given by or waive any rights against any of those who have executed this Guaranty, without in any manner affecting or impairing the liability of the other persons or entities.

12. Guarantor waives any and all defenses, claims and discharges of Borrower or any other obligor with respect to the

Indebtedness, except the defense of discharge by payment. Without limiting the generality of the foregoing, Guarantor will not assert, plead or enforce against Company any defense of waiver, release, discharge in bankruptcy, statute of limitations, res judicata, statute of frauds, anti-deficiency statute, fraud, incapacity, minority, usury, ultra vires, lack of authorization, illegality or unenforceability that may be available to Borrower or any other person liable in respect of any Indebtedness or any setoff available against Company to Borrower or any such other person, whether or not on account of a related transaction. Guarantor shall be liable for any deficiency remaining after foreclosure of or realization upon any security for all or part of the Indebtedness, whether or not the liability of Borrower or any other obligor for the deficiency if discharged pursuant to statute or judicial decision.

13. If any payment applied by Company to the Indebtedness is set aside, recovered, rescinded or required to be returned for any

reason (including, without limitation, the bankruptcy, insolvency or reorganization of Borrower or any other obligor), the Indebtedness to which the payment was applied shall for the purposes of this Guaranty be deemed to have continued in existence, notwithstanding the application, and this Guaranty shall be enforceable as to such Indebtedness as fully as if Company had not made the application.


«Guarantor_1» - Personal Guaranty Page 3 of 3

14. The obligations of Guarantor under this Guaranty are secured by any and all security agreements, guaranties, mortgages, pledge agreements, assignments and all other security documents and instruments heretofore or hereafter given by Guarantor or any third party to Company (“Security Documents”), including, but not limited to, Security Documents given in connection with or referred to in any prior guaranty or other document evidencing any liability of Guarantor to Company. Any requirement of reasonable notice with respect to any sale or other disposition of collateral shall be met if Company sends the notice at least five days before the sale or other disposition.








executors, administrators, legal representatives, successors and assigns. 18. For the sake of expediency in providing financing and funding to the Borrower, Guarantor agrees as an express inducement

to Company to provide such financing that: (a) Company may elect to rely upon any fax or electronically transmitted signature to this Guaranty as if the same were an original signature hereto; and (b) upon any such fax or electronic transmission of a signature hereto, Guarantor has covenanted, represented and warranted to Company that the original of such executed document exists and has been validly executed and are the property of Company and that such original instrument(s) are possessed and held “in trust” by such Guarantor for the express benefit of Company and will promptly be delivered to the Company as the Company may further direct.


DATED: «NoteSADate» INDIVIDUAL GUARANTOR: «Guarantor_1»

BANK AUTHORIZATION

FOR AUTOMATIC FUNDS TRANSFER In accordance with the terms of this Note, Borrower shall make payments of all amounts due under this Note by automatic transfer from Borrower's bank account and shall give Company authorization for such automatic transfer. The automatic transfer will occur on the date payment is due as stated in the Payments section of the Note or as stated in the loan commitment letter. Account Owner’s Name:

Bank Account Name (as it appears on check)

Bank Name, City, State:

Bank’s Transit Routing Number:

Checking Account Number:

Bank Phone Number:

Account Owner’s Signature Date

CUSTOMER – PLEASE COMPLETE THIS SECTION BY CHECKING ALL THAT APPLY PLEASE NOTE: THIS ACCOUNT WILL BE USED FOR DEBITS & CREDITS ON ALL LOANS UNLESS

SPECIFIED BELOW USE THIS ACCOUNT FOR DEBITS ONLY USE THIS ACCOUNT FOR CREDITS ONLY THIS ACCOUNT IS TO BE USED SPECIFICALLY FOR LOAN OR LOANS #______________________ #__________________________ #______________________

.

By my signature above, I hereby authorize The ServiceMaster Acceptance Company L.P. to initiate debit and credit entries to the account indicated above at the depository institution named above. I authorize ServiceMaster to reverse any erroneous information in accordance with the rules of the National Automatic Clearing House Association, and provided the account holder has been notified of the reversal. I acknowledge that the origination of the ACH transactions to the account must comply with the provisions of U. S. law. I also authorize ServiceMaster to charge my bank account for the amount of my monthly payments in accordance with this Note. This authorization will remain in full force and effect until it is revoked by Borrower in writing.

A blank voided check must be attached hereto.

ATTACH VOIDED CHECK HERE

scampbell

Typewritten Text

scampbell

Typewritten Text

scampbell

Typewritten Text

scampbell

Typewritten Text

EXHIBIT J

scampbell

Typewritten Text

scampbell

Typewritten Text

MM FDD 4-1-2012

scampbell

Typewritten Text

EXHIBIT K

MM Amdmt to Franc Agmt (2012) Page 1 of 4 MM FDD 4-1-2012, amended 9-10-2012Exhibit K

ADMENDMENT TO FRANCHISE AGREEMENT By and Between

MERRY MAIDS LIMITED PARTNERSHIP And

________________________________________

This Amendment, dated this ____________ day of _________________________, 2012, is by and between Merry Maids Limited Partnership located at 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125, (“Franchisor”) and ________________________________________, a _________ corporation, limited liability company, partnership or sole proprietorship, d/b/a Merry Maids _________, located at ___________________________________________________________________, and individually, __________________________________ (“Franchisee”). WHEREAS, Franchisor and Franchisee wish to amend certain terms and conditions of said Franchise Agreement. WHEREAS, the parties have executed certain Franchise Agreement(s) (“Agreement(s)”) dated _____________________________, Number(s) __________________________, for the operation of a Merry Maids business (the “Merry Maids Business”) in the territories set forth in Exhibit A(‘s) thereto and; NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the parties agree as follows:

1. Within the Franchise Agreement(s) listed above, Section 6.E is amended to change the Ad Fund contribution rate, to remove the contribution scale based on Gross Sales, and to remove the cap. Franchisee shall contribute to the Ad Fund an amount equal to 1.3% of the weekly Gross Sales of the Franchised Business.

2. The Franchise Agreement is further amended by adding a new Section 6.F, Local Digital Marketing Program. This new section shall read:

“F. Local Digital Marketing Program. Franchisee agrees to spend at a minimum an

amount equal to 0.7% of the weekly Gross Sales of the Franchised Business on local digital marketing or, with approval from Franchisor, on other local marketing or advertising (“Local Digital Marketing Program”). Franchisee is required to use Franchisor-approved vendors of local digital marketing. The approved vendors, contained in the Operations Manual, meet all of Franchisor’s specifications and standards. If Franchisee’s annual Local Digital Marketing spend exceeds the minimum required amount, Franchisee may not apply the excess spend as an offset against required contributions to the Ad Fund or future required amounts of the Local Digital Marketing Program.

“Franchisor may request Franchisee to submit, in a specified format on a periodic basis,

an accurate accounting of amounts spent as part of the Local Digital Marketing Program. If Franchisee fails to provide an accurate accounting or fails to spend the minimum amount on its Local Marketing Program in any calendar year, in addition to any other remedies available to Franchisor, Franchisee will be required to pay Franchisor the difference between the minimum amount on its Local Marketing Program and what was actually spent by Franchisee for approved digital marketing plus late fees and interest due. The payment of this difference will be added to the Ad Fund; Franchisor may, but has no obligation to, assign these funds for digital marketing in

EXHIBIT K


Franchisee’s market. Failure by Franchisee to meet this local digital marketing requirement will be considered a material breach of this Agreement, and Agreement may be terminated in accordance with Paragraph 14.D of this Agreement.”

3. Section 6.B of the Agreement is revised to read: “B. Franchisee shall maintain a full-time telephone with a 24-hour answering service or voice mail message system or such other system as Franchisor may require and shall continually have a listing in the printed Yellow Pages directory of the main service provider or any other appropriate directory in Franchisee’s Market, as determined by Franchisor, using a listing approved in advance by Franchisor. If distribution of the Yellow Pages publication in which Franchisee lists covers more than one Merry Maids Market, Franchisee shall consolidate their listing or advertisement with the other Merry Maids businesses licensed to service those areas to create one Merry Maids listing or advertisement displaying the telephone numbers of all Merry Maids’ offices serving that area.”

4. Inasmuch as Franchisee signed this amendment to the Agreement(s) by December 31, 2012,

Franchisor agrees as follows:

a. Franchisor shall pay into the Ad Fund Program and to Franchisee’s Local Digital Marketing Program an amount (the “Contribution Amount”) equal to $0.20 per year for each incremental dollar Franchisee would have to pay if the New Ad Fund Program Rate were applied to the Franchisee’s 2012 Gross Sales Revenue, assuming there was no cap on annual Ad Fund Contributions in 2012, for the next three calendar years, 2013, 2014, and 2015. The Contribution Amountshall be calculated as follows: Franchised Business’s 2012 calendar year total Gross Sales multiplied by 1.3% minus the amount Franchisee’s 2012 Ad Fund Contribution would have been assuming there was no cap on annual Ad Fund Contributions in 2012. multiplied by $0.20 The Contribution Amount paid by Franchisor shall be divided equally between the Ad Fund Program and the Franchisee’s Local Digital Marketing Program. Franchisor will pay the portion of the Contribution Amount for Franchisee’s Local Digital Marketing Program directly to the Franchisor-approved vendor that Franchisee designates during the first quarter of each year, 2013, 2014, and 2015. The Franchisor will pay the Contribution Amount to the Ad Fund Program on a quarterly basis spread out during the calendar years, 2013, 2014, and 2015.

EXHIBIT K


The Contribution Amount that Franchisor contributes to the Ad Fund Program and to the Local Digital Marketing Program will not be applied towards Franchisee’s required annual Ad Fund Program contribution or Local Digital Marketing Program requirement.

b. If Franchisee’s total Gross Sales for the 2012 calendar year is $1,000,000 or greater, instead of the full amount required by section 6.E of the Agreement(s) as amended, Franchisee shall pay to the Ad Fund in calendar year 2013 a prorated amount on all 2013 incremental Ad Fund dollars contributed above $13,000. This prorated amount is calculated as shown below: Franchised Business 2012 calendar year Gross Sales multiplied by 1.3% minus the greater of $13,000 or the amount Franchisee’s 2012 Ad Fund Contribution would have been assuming there was no cap on annual Ad Fund Contributions in 2012. multiplied by the percentage that equals: (the total number of Franchise Owners and company-owned branches who contribute under this New Ad Fund Program*) divided by (the total number of Franchise Owners** and company-owned branches as of January 1, 2013). * The total number of Franchise owners and company-owned branches who contribute under the New Ad Fund Program includes the following: those Franchise Owners who signed this amendment by December 31, 2012; those Franchise Owners scheduled to renew in 2012; all company-owned branches; and those Franchise Owners who have signed a new franchise agreement for a new Market or transfer of a Market during September, October, November, and December 2012 less any duplications. ** “Total Number of Franchise Owners” is defined by the Merry Maids database.

5. This change will be effective on January 1, 2013.

6. The remainder of the Agreement(s) shall remain in full force and only the Paragraphs identified above shall be modified as herein defined. Any undefined terms shall have the meaning described in the Agreement(s).

FRANCHISOR: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., its General Partner By: _______________________________________ Its: ________________________________________

EXHIBIT K


FRANCHISEE: ___________________________________________ By: _______________________________________ Its: _______________________________________ By: ______________________________________ Its: ______________________________________ By: ______________________________________ Its: _______________________________________

EXHIBIT K

MM Admt to Franc Agmt (2013) Page 1 of 3 MM FDD 4/1/12 amended 9/10/2012 Exhibit K



________________________________________

This Amendment, dated this ____________ day of _________________________, 2013, is by and between Merry Maids Limited Partnership located at 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125, (“Franchisor”) and ________________________________________, a _________ corporation, limited liability company, partnership or sole proprietorship, d/b/a Merry Maids _________, located at ___________________________________________________________________, and individually, __________________________________ (“Franchise”). WHEREAS, Franchisor and Franchisee wish to amend certain terms and conditions of said Franchise Agreement. WHEREAS, the parties have executed certain Franchise Agreement(s) (“Agreement(s)”) dated _____________________________, Number(s) __________________________, for the operation of a Merry Maids business (the “Merry Maids Business”) in the territories set forth in Exhibit A(‘s) thereto and; NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the parties agree as follows:

1. Within the Franchise Agreement(s) listed above, Section 6.E is amended to change the Ad Fund contribution rate, to remove the contribution scale based on Gross Sales, and to remove the cap. Franchisee shall contribute to the Ad Fund Program an amount equal to 1.3% of the weekly Gross Sales of the Franchise Business.

2. The Franchise Agreement is further amended by adding a new Section 6.F, Local Digital Marketing Program. This new section shall read:

“F. Local Digital Marketing Program. Franchisee agrees to spend at a minimum an

amount equal to 0.7% of the weekly Gross Sales of the Franchised Business on local digital marketing or, with approval from Franchisor, on other local marketing or advertising (“Local Digital Marketing Program”). Franchisee is required to use Franchisor-approved vendors of local digital marketing. The approved vendors, contained in the Operations Manual, meet all of Franchisor’s specifications and standards. If Franchisee’s annual Local Digital Marketing spend exceeds the minimum required amount, Franchisee may not apply the excess spend as an offset against required contributions to the Ad Fund or future required amounts of the Local Digital Marketing Program.

“Franchisor may request Franchisee to submit, in a specified format on a periodic basis,

an accurate accounting of amounts spent as part of the Local Digital Marketing Program. If Franchisee fails to provide an accurate accounting or fails to spend the minimum amount on its Local Marketing Program in any calendar year, in addition to any other remedies available to Franchisor, Franchisee will be required to pay Franchisor the difference between the minimum amount on its Local Marketing Program and what was actually spent by Franchisee for approved digital marketing plus late fees and interest due. The payment of this difference will be added to

EXHIBIT K


the Ad Fund; Franchisor may, but has no obligation to, assign these funds for digital marketing in Franchisee’s market. Failure by Franchisee to meet this local digital marketing requirement will be considered a material breach of this Agreement, and Agreement may be terminated in accordance with Paragraph 14.D of this Agreement.”

3. Section 6.B of the Agreement is revised to read: “B. Franchisee shall maintain a full-time telephone with a 24-hour answering service or voice mail message system or such other system as Franchisor may require and shall continually have a listing in the printed Yellow Pages directory of the main service provider or any other appropriate directory in Franchisee’s Market, as determined by Franchisor, using a listing approved in advance by Franchisor. If distribution of the Yellow Pages publication in which Franchisee lists covers more than one Merry Maids Market, Franchisee shall consolidate their listing or advertisement with the other Merry Maids businesses licensed to service those areas to create one Merry Maids listing or advertisement displaying the telephone numbers of all Merry Maids’ offices serving that area.”

4. Inasmuch as Franchisee signed this amendment to the Agreement(s) between January 1, 2013,

and December 31, 2013, Franchisor agrees to the following:

a. Franchisor shall pay into the Ad Fund Program and to the Franchisee’s Local Digital Marketing Program an amount (the “Contribution Amount”) equal to $0.10 per year for each incremental dollar Franchisee would have to pay if the New Ad Fund Program rate were applied to the Franchisee’s 2012 Gross Sales Revenue, assuming there was no cap on annual Ad Fund Contributions in 2012, for the next two calendar years, 2014 and 2015. The Contribution Amount is calculated as shown below:

Franchised Business 2012 calendar year total Gross Sales multiplied by 1.3% minus the amount of Franchisee’s 2012 Ad Fund Contribution would have been assuming there was no cap on annual Ad Fund Contributions in 2012 multiplied by $0.10 The Contribution Amount paid by Franchisor shall be divided equally between the Ad Fund Program and to Franchisee’s Local Digital Marketing Program. Franchisor will pay the portion of the Contribution Amount for Franchisee’s Local Digital Marketing Program directly to the Franchisor-approved vendor that Franchisee designates during the first quarter of each year 2014 and 2015. The Franchisor will pay the Contribution Amount to the Ad Fund Program on a quarterly basis spread out during the calendar years 2014 and 2015.

EXHIBIT K


b. The Contribution Amount that Franchisor contributes to the Ad Fund Program and to the Local Digital Marketing Program will not be applied towards Franchise’s required annual Ad Fund Program contribution and Local Digital Marketing Program requirement.


6. The remainder of the Agreement(s) shall remain in full force and only the Paragraphs identified above shall be modified as herein defined.

FRANCHISOR: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., its General Partner By: _______________________________________ Its: ________________________________________ FRANCHISEE: ___________________________________________ By: _______________________________________ Its: _______________________________________ By: ______________________________________ Its: ______________________________________ By: ______________________________________ Its: _______________________________________

EXHIBIT K

MM Admt to Franc Agmt (2013 renewals) Page 1 of 2 MM FDD 4/1/12 amended 9/10/2012 Exhibit K



________________________________________

This Amendment, dated this ____________ day of _________________________, 2013, is by and between Merry Maids Limited Partnership located at 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125, (“Franchisor”) and ________________________________________, a _________ corporation, limited liability company, partnership or sole proprietorship, d/b/a Merry Maids _________, located at ___________________________________________________________________, and individually, __________________________________ (“Franchisee”). WHEREAS, Franchisor and Franchisee wish to amend certain terms and conditions of said Franchise Agreement. WHEREAS, the parties have executed certain Franchise Agreement(s) (“Agreement(s)”) dated _____________________________, Number(s) __________________________, for the operation of a Merry Maids business (the “Merry Maids Business”) in the territories set forth in Exhibit A(‘s) thereto and; NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged by the parties, the parties agree as follows:

1. Inasmuch as Franchisee signed this amendment to the Agreement(s) between January 1, 2013,

and December 31, 2013, Franchisor agrees to the following:

a. Franchisor shall pay into the Ad Fund Program and to the Franchisee’s Local Digital Marketing Program an amount (the “Contribution Amount”) equal to $0.10 per year for each incremental dollar Franchisee would have to pay if the New Ad Fund Program rate were applied to the Franchisee’s 2012 Gross Sales Revenue, assuming there was no cap on annual Ad Fund Contributions in 2012, for the next two calendar years, 2014 and 2015. The Contribution Amount shall be calculated as follows:

Franchised Business 2012 calendar year total Gross Sales multiplied by 1.3% minus the amount of Franchisee’s 2012 Ad Fund Contribution would have been assuming there was no cap on annual Ad Fund Contributions in 2012 multiplied by $0.10

EXHIBIT K

MM Admt to Franc Agmt (2013 renewals) Page 2 of 2 MM FDD 4/1/12 amended 9/10/2012 Exhibit K

The Contribution Amount paid by Franchisor shall be divided equally between the Ad Fund Program and to Franchisee’s Local Digital Marketing Program. Franchisor will pay the portion of the Contribution Amount for Franchisee’s Local Digital Marketing Program directly to the Franchisor-approved vendor that Franchisee designates during the first quarter of each year 2014 and 2015. The Franchisor will pay the Contribution Amount to the Ad Fund Program on a quarterly basis spread out during the calendar years 2014 and 2015.

b. The Contribution Amount that Franchisor contributes to the Ad Fund Program and to the

Local Digital Marketing Program will not be applied towards Franchise’s required annual Ad Fund Program contribution and Local Digital Marketing Program requirement.


3. The remainder of the Agreement(s) shall remain in full force and only the Paragraphs identified above shall be modified as herein defined.

FRANCHISOR: MERRY MAIDS LIMITED PARTNERSHIP By: MM Maids L.L.C., its General Partner By: _______________________________________ Its: ________________________________________ FRANCHISEE: ___________________________________________ By: _______________________________________ Its: _______________________________________ By: ______________________________________ Its: ______________________________________ By: ______________________________________ Its: _______________________________________

EXHIBIT L

MM FDD 4-1-2012 Page 1 of 4 As amended 9-10-2012 Exhibit L

RECEIPT This disclosure document summarizes certain provisions of the Franchise Agreement and other information in plain language. Read this disclosure document and all agreements carefully. If Merry Maids Limited Partnership offers you a franchise, it must provide this disclosure document to you 14 calendar-days before you sign a binding agreement with, or make a payment to franchisor or an affiliate in connection with the proposed franchise sale or sooner if required by applicable state law. New York and Rhode Island require that we give you this disclosure document at the earlier of the first personal meeting or 10 business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. Iowa, Michigan, Oklahoma, Washington and Wisconsin require that we give you this disclosure document at least 10 business days before the execution of any binding franchise or other agreement or the payment of any consideration, whichever occurs first. If Merry Maids Limited Partnership does not deliver this disclosure document on time or if it contains a false or misleading statement, or a material omission, a violation of federal and state law may have occurred and should be reported to the Federal Trade Commission, Washington, D.C. 20580, and the appropriate state agency list in Exhibit C. The franchise seller for this offering is _____________________, ______________________________, ______________________________________________________________________________________, Merry Maids Limited Partnership, 3839 Forest Hill-Irene Road, Memphis, Tennessee, 38125, 901-597-8100. See Exhibit C for Merry Maids' agent for service of process in your state. Issuance Date: April 1, 2012, as amended September 10, 2012 I have received a disclosure document dated April 1, 2012, as amended September 10, 2012, that included the following Exhibits: A. Franchise Agreement B. Financial Statements C. State Agencies and Agents for Service of

Process D. Franchise List E. List of Franchisees Who Left the System F. State Specific Addenda (where applicable)

G. Opening Inventory Package H. Principal Trademarks I. MM Manual Table of Contents J. SMAC Financing Documents K. Amendment to Franchise Agreement L. Receipts

_________________________________________________________________________________ Signature Print Name Date _________________________________________________________________________________ Signature Print Name Date

Please sign this receipt and return it to Merry Maids.

EXHIBIT L


BACK OF RECEIPT PAGE

Franchise Seller(s):

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________

EXHIBIT L


RECEIPT

This disclosure document summarizes certain provisions of the Franchise Agreement and other information in plain language. Read this disclosure document and all agreements carefully. If Merry Maids Limited Partnership offers you a franchise, it must provide this disclosure document to you 14 calendar-days before you sign a binding agreement with, or make a payment to franchisor or an affiliate in connection with the proposed franchise sale or sooner if required by applicable state law. New York and Rhode Island require that we give you this disclosure document at the earlier of the first personal meeting or 10 business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. Iowa, Michigan, Oklahoma, Washington and Wisconsin require that we give you this disclosure document at least 10 business days before the execution of any binding franchise or other agreement or the payment of any consideration, whichever occurs first. If Merry Maids Limited Partnership does not deliver this disclosure document on time or if it contains a false or misleading statement, or a material omission, a violation of federal and state law may have occurred and should be reported to the Federal Trade Commission, Washington, D.C. 20580, and the appropriate state agency list in Exhibit C. The franchise seller(s) for this offering is _____________________, ____________________________, ___________________________, _______________________, ______________________________, Merry Maids Limited Partnership, 3839 Forest Hill-Irene Road, Memphis, Tennessee 38125, 901-597-8100. See Exhibit C for Merry Maids' agent for service of process in your state. Issuance Date: April 1, 2012, as amended September 10, 2012 I have received a disclosure document dated April 1, 2012, as amended September 10, 2012, that included the following Exhibits: A. Franchise Agreement B. Financial Statements C. State Agencies and Agents for Service of

Process D. Franchise List E. List of Franchisees Who Left the System F. State Specific Addenda (where applicable)

G. Opening Inventory Package H. Principal Trademarks I. MM Manual Table of Contents J. SMAC Financing Documents K. Amendment to Franchise Agreement L. Receipts

___________________________________________________________________________________ Signature Print Name Date ___________________________________________________________________________________ Signature Print Name Date

EXHIBIT L


BACK OF RECEIPT PAGE

Franchise Seller(s):

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________

Name: ______________________________ Phone: _____________________

Address: _____________________________

_______________________________