SERVICEMASTER GLOBAL HOLDINGS INC (Form: 10-Q, Received: 08/01/2017 17:33:26)

As of June 30,

Growth in Home Warranties

Customer Retention Rate

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________

FORM 10-Q

________________________________________________


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-36507

________________________________________________

ServiceMaster Global Holdings, Inc.

(Exact name of registrant as specified in its charter)


Delaware		20-8738320
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

860 Ridge Lake Boulevard, Memphis, Tennessee 38120

(Address of principal executive offices) (Zip Code)

901-597-1400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


	Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


	Yes ☒ No ☐

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



Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐
		(Do not check if a smaller reporting company)	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).


	Yes ☐ No ☒

The number of shares of the registrant’s common stock outstanding as of July 28, 2017 : 133,441,487 s hares of common stock, par value $0.01 per share

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TABLE OF CONTENTS


	Page No.
Part I. Financial Information

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations and Comprehensive Income	3

Condensed Consolidated Statements of Financial Position	4

Condensed Consolidated Statements of Cash Flows	5

Notes to Condensed Consolidated Financial Statements	6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3. Quantitative and Qualitative Disclosures About Market Risk	36

Item 4. Controls and Procedures	36

Part II. Other Information	36

Item 1. Legal Proceedings	36

Item 1A. Risk Factors	37

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	39

Item 6. Exhibits	40

Signature	41

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

( In millions, except per share data )



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Revenue	$	807	$	747	$	1,450	$	1,355
Cost of services rendered and products sold		415		379		761		704
Selling and administrative expenses		206		187		392		360
Amortization expense		7		8		14		16
401(k) Plan corrective contribution		—		1		—		1
Fumigation related matters (Note 3)		1		88		2		91
Insurance reserve adjustment		—		23		—		23
Impairment of software and other related costs		—		1		2		1
Restructuring charges		1		4		3		5
Gain on sale of Merry Maids branches		—		—		—		(2)
Interest expense		38		38		75		76
Interest and net investment income		(1)		(4)		(1)		(4)
Loss on extinguishment of debt		3		—		3		—
Income from Continuing Operations before Income Taxes		137		23		199		85
Provision for income taxes		52		7		76		30
Income from Continuing Operations		85		16		123		54
Income from discontinued operations, net of income taxes		—		—		1		—
Net Income	$	85	$	16	$	124	$	54
Total Comprehensive Income	$	84	$	15	$	124	$	55
Weighted-average common shares outstanding - Basic		133.7		135.5		134.1		135.6
Weighted-average common shares outstanding - Diluted		135.0		137.7		135.5		137.7
Basic Earnings Per Share:
Income from Continuing Operations	$	0.64	$	0.11	$	0.92	$	0.40
Income from discontinued operations, net of income taxes		—		—		—		—
Net Income		0.64		0.12		0.92		0.40
Diluted Earnings Per Share:
Income from Continuing Operations	$	0.63	$	0.11	$	0.91	$	0.40
Income from discontinued operations, net of income taxes		—		—		—		—
Net Income		0.63		0.11		0.91		0.39

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

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Condensed Consolidated Statements of Financial Position (Unaudited)

(In millions, except share data)



	As of		As of
	June 30,		December 31,
	2017		2016
Assets:
Current Assets:
Cash and cash equivalents	$	378	$	291
Marketable securities		25		25
Receivables, less allowances of $22 and $22, respectively		562		536
Inventories		45		43
Prepaid expenses and other assets		92		70
Deferred customer acquisition costs		37		34
Total Current Assets		1,140		998
Other Assets:
Property and equipment, net		224		210
Goodwill		2,254		2,247
Intangible assets, primarily trade names, service marks and trademarks, net		1,704		1,708
Restricted cash		89		95
Notes receivable		40		37
Long-term marketable securities		27		19
Other assets		63		71
Total Assets	$	5,541	$	5,386
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts payable	$	128	$	112
Accrued liabilities:
Payroll and related expenses		51		54
Self-insured claims and related expenses		128		111
Accrued interest payable		15		16
Other		97		60
Deferred revenue		658		629
Current portion of long-term debt		141		59
Total Current Liabilities		1,219		1,042
Long-Term Debt		2,678		2,772
Other Long-Term Liabilities:
Deferred taxes		714		719
Other long-term obligations, primarily self-insured claims		189		167
Total Other Long-Term Liabilities		903		886
Commitments and Contingencies (Note 3)
Shareholders' Equity:
Common stock $0.01 par value (authorized 2,000,000,000 shares with 144,950,350 shares issued and 133,431,298 outstanding at June 30, 2017 and 144,339,338 shares issued and 135,030,283 outstanding at December 31, 2016)		2		2
Additional paid-in capital		2,289		2,274
Accumulated deficit		(1,281)		(1,405)
Accumulated other comprehensive loss		(2)		(3)
Less common stock held in treasury, at cost ( 11,519,052 shares at June 30, 2017 and 9,309,055 shares at December 31, 2016)		(267)		(182)
Total Shareholders' Equity		741		686
Total Liabilities and Shareholders' Equity	$	5,541	$	5,386

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

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Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)



	Six Months Ended
	June 30,
	2017		2016
Cash and Cash Equivalents and Restricted Cash at Beginning of Period	$	386	$	296
Cash Flows from Operating Activities from Continuing Operations:
Net Income		124		54
Adjustments to reconcile net income to net cash provided from operating activities:
Income from discontinued operations, net of income taxes		(1)		—
Depreciation expense		37		27
Amortization expense		14		16
Amortization of debt issuance costs		3		2
401(k) Plan corrective contribution		—		1
Fumigation related matters		2		91
Payments on fumigation related matters		(1)		(2)
Insurance reserve adjustment		—		23
Impairment of software and other related costs		2		1
Gain on sale of Merry Maids branches		—		(2)
Loss on extinguishment of debt		3		—
Deferred income tax (benefit) provision		(2)		5
Stock-based compensation expense		9		7
Gain on sale of marketable securities		—		(3)
Other		7		3
Change in working capital, net of acquisitions:
Receivables		(24)		(18)
Inventories and other current assets		(13)		(20)
Accounts payable		18		34
Deferred revenue		28		24
Accrued liabilities		18		10
Accrued interest payable		(1)		—
Accrued restructuring charges		—		3
Current income taxes		37		(13)
Net Cash Provided from Operating Activities from Continuing Operations		260		244
Cash Flows from Investing Activities from Continuing Operations:
Property additions		(34)		(31)
Sale of equipment and other assets		1		7
Business acquisitions, net of cash acquired		(12)		(73)
Purchases of available-for-sale securities		(7)		(2)
Sales and maturities of available-for-sale securities		2		48
Origination of notes receivable		(54)		(53)
Collections on notes receivable		50		48
Other investments		(1)		(3)
Net Cash Used for Investing Activities from Continuing Operations		(56)		(58)
Cash Flows from Financing Activities from Continuing Operations:
Payments of debt		(46)		(33)
Repurchase of common stock		(85)		(17)
Issuance of common stock		7		5
Net Cash Used for Financing Activities from Continuing Operations		(124)		(45)
Cash Flows from Discontinued Operations:
Cash provided from operating activities		1		—
Net Cash Provided from Discontinued Operations		1		—
Effect of Exchange Rate Changes on Cash		—		1
Cash Increase During the Period		81		141
Cash and Cash Equivalents and Restricted Cash at End of Period	$	467	$	437

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

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SERVICEMASTER GLOBAL HOLDINGS , INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

ServiceMaster Global Holdings, Inc. and its majority-owned subsidiary partnerships, limited liability companies and corporations (collectively, “ServiceMaster,” the “ Company,” “we,” “us, and “our”) is a leading provider of essential residential and commercial services. The Company’s services include termite and pest control, home warranties, disaster restoration, janitorial, residential cleaning, cabinet and wood furniture repair and home inspection. The Company provides these services through an extensive service network of company-owned, franchised and licensed locations operating primarily under the following leading brands: Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. All consolidated Company subsidiaries are wholly-owned. Intercompany transactions and balances have been eliminated.

The unaudited 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 U.S. Securities and Exchange Commission (“SEC”). The Company recommends that the quarterly unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 201 6 , as filed with the SEC (the “201 6 Form 10-K”). The unaudited condensed consolidated financial statements reflect all normal and recurring 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 not indicative of the results that might be achieved for a full year.

Note 2. Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the Company’s 2016 Form 10-K. There have been no material changes to the significant accounting policies for the three and six months ended June 30, 2017.

Ne wly Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” to provide a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This model supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or modified approach to adopt the guidance. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. To date, the Company has performed the following: A transition team has been established to implement the required changes; an initial assessment of the Company’s revenue streams has been initiated; the Company has substantially completed its inventory of all outstanding contracts; and the Company has begun the process of applying the five-step model to those contracts and revenue streams to evaluate the quantitative and qualitative impacts the new standard will have on its business and reported revenues. The Company plans to adopt the new revenue standard in the first quarter of 2018 utilizing the full retrospective transition method . The Company does not expect adoption of the new revenue standard to have a material impact on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” to change how entities measure certain equity investments, to require the disclosure of changes in the fair value of financial liabilities measured under the fair value option that are attributable to a company’s own credit, and to change certain other disclosure requirements. The changes in ASU 2016-01 specifically require that the changes in fair value of all investments in equity securities be recognized in net income. The amendments in ASU 2016-01 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and will be adopted prospectively. Upon adoption, changes in fair value of the Company’s available-for-sale securities, which are currently recognized in other comprehensive income, will be recognized in net income.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which is the final standard on accounting for leases. While both lessees and lessors are affected by the new guidance, the effects on lessees are much more significant. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. Entities are required to use a modified retrospective approach to adopt the guidance. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on the Company’s consolidated financial statements and currently expects that most of the operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption of ASU 2016-02, which will increase the amount of total assets and total liabilities that is reported relative to such amounts prior to adoption.

[

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Note 3. Commitments and Contingencies

The Company carries insurance policies on insurable risks at levels that it believes to be appropriate, including workers’ compensation, automobile and general liability risks. The Company purchases insurance policies from third-party insurance carriers, which typically incorporate significant deductibles or self-insured retentions. The Company is responsible for all claims that fall below the retention limits, exceed our coverage limits or are otherwise not covered by our insurance policies. In determining the Company’s accrual for self-insured claims, the Company uses historical claims experience to establish both the current year accrual and the underlying provision for future losses. This actuarially determined provision and related accrual include known claims, as well as incurred but not reported claims. The Company adjusts its estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.

A reconciliation of 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 consolidated statements of financial position, net of insurance recoverables, which are included in Prepaid expenses and other assets and Other assets on the condensed consolidated statements of financial position, is presented as follows:



	Accrued
	Self-insured
(In millions)	Claims, Net
Balance as of December 31, 2016	$	120
Provision for self-insured claims		18
Cash payments		(17)
Balance as of June 30, 2017	$	122

Balance as of December 31, 2015	$	114
Provision for self-insured claims (1)		44
Cash payments		(24)
Balance as of June 30, 2016	$	133

___________________________________

(1)

Includes a charge of $23 million recorded in the three and six months ended June 30, 2016 for an adjustment to the Company’s accrued self-insured claims related to automobile, general liability and workers’ compensation risks. The adjustment was based on the Company’s detailed annual assessment of this actuarially determined accrual, which the Company completes in the second quarter of each year. This adjustment related to coverage periods of 2015 and prior.

Accruals for home warranty claims in the American Home Shield business are made based on the Company’s claims experience and actuarial projections. Termite damage claim accruals in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per claim. Current activity could differ causing a change in estimates. The Company has certain liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified.

In 2008, the Company amended its Profit Sharing and Retirement Plan, a tax qualified 401(k) defined contribution plan available to substantially all of its employees (the “401(k) Plan”), to implement a qualified automatic contribution arrangement (“QACA”) under the safe harbor provisions of the Internal Revenue Code of 1986, as amended (the “Code”). QACA plans, in general, require automatic enrollment of employees into the retirement plan absent an affirmative election that such employees do not wish to participate. Although the Company implemented processes to auto-enroll new hires after adopting the QACA plan in 2008, it discovered that it did not auto-enroll then existing employees who were not participating in the 401(k) Plan. In response, the Company implemented an auto-enrollment process for affected active employees and submitted to the Internal Revenue Service (the “IRS”) a voluntary correction proposal to remedy the issue for prior years. The Company’s current estimate of the cost of the correction ranges from $2 5 million to approximately $93 million. The Company has recorded in the condensed consolidated statement of operations and comprehensive income charges of $25 million, of which $1 million was recorded in the three and six months ended June 30, 2016. Charges for 401(k) Plan corrective contributions recorded in the three and six months ended June 30, 2017 were less than $1 million. However, there can be no assurances as to the ultimate cost of the correction.

In addition to the matter discussed above and the fumigation related matters discussed below, in the ordinary course of conducting business activities, the Company and its subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedings involving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and other matters. The Company has entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court or other approvals. If one or more of the Company’s settlements are not finally approved, the Company could have additional or different exposure, which could be material. Subject to the paragraphs below, the Company does not expect any of these proceedings to have a material effect on its reputation, business, financial position, results of operations or cash flows; however, the Company can give no

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assurance that the results of any such proceedings will not materially affect its reputation, business, financial position, results of operations and cash flows .

F umigation Related Matters

On July 21, 2016, Terminix International USVI, LLC (“TMX USVI”) and The Terminix International Company Limited Partnership (“TMX LP”), each an indirect, wholly-owned subsidiary of the Company, entered into a superseding Plea Agreement (the “Superseding Plea Agreement”) in connection with the investigation initiated by the United States Department of Justice Environmental Crimes Section (the “DOJ”) into allegations that a local Terminix branch used methyl bromide as a fumigant at a resort in St. John, U.S. Virgin Islands. The Superseding Plea Agreement was intended to resolve four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide. Those charges were set forth in an Information, dated March 29, 2016, in the matter styled United States of America v. The Terminix International Company Limited Partnership and Terminix International USVI, LLC. At a hearing held on August 25, 2016, the United States District Court of the U.S. Virgin Islands (the “District Court”) rejected the Superseding Plea Agreement. On August 31, 2016, the DOJ requested that the charges be dismissed, reserving its right to re-file the charges, in light of ongoing discussions to resolve the matter. The District Court granted that request, and the March 29, 2016 Information was dismissed.

On January 20, 2017, TMX USVI and TMX LP entered into a new Plea Agreement (the “New Plea Agreement”) with the DOJ, which has been filed with the District Court, and replaces the Superseding Plea Agreement. At a hearing on March 23, 2017, TMX USVI and TMX LP pled guilty to four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide, as set forth in a new Information filed on January 20, 2017 with the District Court that is substantially similar to the March 29, 2016 Information. Under the terms of the New Plea Agreement, the parties agreed and jointly recommended to the District Court that (i) TMX USVI and TMX LP each pay a fine of $4 million (total of $8 million); (ii) TMX USVI pay $1 million to the EPA for costs incurred by the EPA for the response and clean-up of the affected units at the resort in St. John; (iii) TMX USVI make a community service payment of $1 million to the National Fish and Wildlife Foundation for the purpose of engaging a third party to provide training to pesticide applicators in the U.S. Virgin Islands; and (iv) both TMX USVI and TMX LP serve a three-year probation period, subject to the special conditions of probation under the New Plea Agreement. The total financial terms of the recommended sentence under the New Plea Agreement are equivalent in total amount to the financial terms under the Superseding Plea Agreement. Unlike the Superseding Plea Agreement, however, the New Plea Agreement is non-binding on the District Court. The sentencing hearing before the District Court previously scheduled for July 27, 2017 , has been rescheduled for September 21, 2017 . It is possible that at that hearing the District Court could use its discretion to impose fines or other terms different than those in the New Plea Agreement. If approved by the District Court, and upon compliance with the terms and conditions of the New Plea Agreement, the New Plea Agreement will resolve the federal criminal consequences associated with the DOJ investigation. The New Plea Agreement does not bind any other federal, state or local authority; however, the EPA has indicated that it does not intend to initiate any administrative enforcement action or refer the matter to the DOJ for any civil enforcement action if the New Plea Agreement is approved by the District Court.

The Company has previously recorded within Fumigation related matters in the condensed consolidated statement of operations and comprehensive income total charges of $10 million in connection with the aforementioned criminal matter. On December 16, 2016, the U.S. Virgin Islands Department of Justice filed a civil complaint in the Superior Court of the Virgin Islands related to the aforementioned fumigation incident in a matter styled Government of the United States Virgin Islands v. The ServiceMaster Company, LLC, The Terminix International Company Limited Partnership, and Terminix International USVI, LLC. The amount and extent of any further potential penalties, fines, sanctions, costs and damages that the federal or other governmental authorities may yet impose, investigation or other costs and reputational harm, as well as the impact of any additional civil, criminal or other claims or judicial, administrative or regulatory proceedings resulting from or related to the U.S. Virgin Islands matter, which could be material, is not currently known, and any such further penalties, fines, sanctions, costs or damages would not be covered under the Company’s general liability insurance policies.

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Note 4 . Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. The Company’s annual assessment date is October 1. There were no goodwill or trade name impairment charges recorded in the thre e and six months ended June 30, 2017 and 2016 . There were no accumulated impairment losses recorded as of June 30, 2017 . The table below summarizes the goodwill balances for continuing operations by reportable segment:



			American		Franchise
(In millions)	Terminix		Home Shield		Services Group		Total
Balance as of December 31, 2016	$	1,601	$	471	$	175	$	2,247
Acquisitions		1		4		—		5
Impact of foreign exchange rates		1		—		—		1
Balance as of June 30, 2017	$	1,603	$	476	$	175	$	2,254

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




	As of June 30, 2017						As of December 31, 2016
			Accumulated						Accumulated
(In millions)	Gross		Amortization		Net		Gross		Amortization		Net
Trade names (1)	$	1,608	$	—	$	1,608	$	1,608	$	—	$	1,608
Customer relationships		588		(547)		42		594		(538)		56
Franchise agreements		88		(68)		20		88		(67)		21
Other		81		(46)		35		65		(42)		23
Total	$	2,365	$	(661)	$	1,704	$	2,356	$	(647)	$	1,708

___________________________________

(1)

Not subject to amortization.

For the existing intangible assets, the Company anticipates amortization expense for the remainder of 2017 and each of the next five years of $ 13 m illion, $ 21 million, $ 16 million, $12 million, $9 million and $ 6 million, respectively .

Note 5 . Stock-Based Compensation

For the three months ended June 30, 2017 and 2016 , the Company recognized stock-based compensation expense o f $4 million ( $2 million, net of tax) and $ 4 million ( $2 million, net of tax), respectively. For the six months ended June 30, 2017 and 2016 , the Company recognized stock-based compensation expense o f $9 million ( $ 5 million, net of tax) and $7 million ( $4 million, net of tax), respectively. These charges are recorded within Selling and administrative expenses in the condensed consolidated statements of operations and comprehensive income.

As of June 30 , 2017 there was $ 33 million of total unrecognized co mpensation costs related to non- vested stock options , restricted stock units (“RSUs”) and performance shares granted under the Amended and Restated ServiceMaster Global Holdings , Inc. Stock Incentive Plan (“MSIP”) and the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) and discounts associated with the ServiceMaster Global Holdings, Inc. Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). These remaining costs are expected to be recognized over a weighted-average period o f 2. 41 years.

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N ote 6. Comprehensive Income

Comprehensive income , which primarily includes net income (loss), unrealized gain (loss) on marketable securities, unrealized gain (loss) on derivative instruments and the effect of foreign currency translation gain (loss), is disclosed in the condensed consolidated statements of operations and comprehensive income.

The following tables summarize the activity in accumulated other comprehensive income (loss), net of the related tax effects.



			Unrealized
			Gains
	Unrealized		on Available		Foreign
	Gains (Losses)		-for-Sale		Currency
(In millions)	on Derivatives		Securities		Translation		Total
Balance as of December 31, 2016	$	12	$	1	$	(15)	$	(3)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(9)		2		2		(5)
Tax benefit		(3)		—		—		(3)
After-tax amount		(6)		2		2		(2)
Amounts reclassified from accumulated other comprehensive income (loss) (1)		3		—		—		3
Net current period other comprehensive income		(3)		2		2		1
Balance as of June 30, 2017	$	9	$	2	$	(13)	$	(2)

Balance as of December 31, 2015	$	(7)	$	2	$	(15)	$	(21)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(4)		(1)		3		(2)
Tax benefit		(1)		—		—		(1)
After-tax amount		(3)		(1)		3		(1)
Amounts reclassified from accumulated other comprehensive income (loss) (1)		3		(2)		—		2
Net current period other comprehensive (loss) income		1		(3)		3		1
Balance as of June 30, 2016	$	(7)	$	(1)	$	(12)	$	(20)

___________________________________

(1)

Amounts are net of tax. See reclassifications out of accumulated other comprehensive income (loss) below for further details.

Reclassifications out of accumulated other comprehensive income (loss) included the following components for the periods indicated.


	Amounts Reclassified from Accumulated
	Other Comprehensive Income (Loss)
	Three Months Ended				Six Months Ended				Condensed Consolidated Statements of
	June 30,				June 30,				Operations and Comprehensive Income
(In millions)	2017		2016		2017		2016		Location
Losses on derivatives:
Fuel swap contracts	$	—	$	(1)	$	1	$	(2)	Cost of services rendered and products sold
Interest rate swap contracts		(4)		(2)		(5)		(3)	Interest expense
Net losses on derivatives		(3)		(2)		(4)		(5)
Impact of income taxes		1		1		1		2	Provision for income taxes
Total reclassifications related to derivatives	$	(2)	$	(1)	$	(3)	$	(3)
Gains on available-for-sale securities	$	—	$	3	$	—	$	3	Interest and net investment income
Impact of income taxes		—		(1)		—		(1)	Provision for income taxes
Total reclassifications related to securities	$	—	$	2	$	—	$	2
Total reclassifications for the period	$	(2)	$	—	$	(3)	$	(2)

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Note 7 . Supplemental Cash Flow Information

Supplemental information relating to the condensed consolidated statements of cash flows is presented in the following table:



	Six Months Ended
	June 30,
(In millions)	2017		2016
Cash paid for or (received from):
Interest expense	$	67	$	70
Interest and dividend income		—		(1)
Income taxes, net of refunds		41		37

As of June 30, 2017, December 31, 2016 and June 30, 2016, Cash and cash equivalents of $378 million, $291 million, and $342 million , respectively, and Restricted cash of $89 million, $95 million, and $95 million, respectively, as presented on the condensed consolidated statements of financial position represent the amounts comprising Cash and cash equivalents and restricted cash of $467 million, $386 million, and $437 million, respectively, on the condensed consolidated statement of cash flows. There was no restricted cash balance as of December 31, 2015.

The Company acquired $23 million and $ 29 million of property and equipment through capital leases and other non-cash financing transactions in the six months ended June 30, 2017 and 2016 , respectively, which have been excluded from the condensed consolidated statements of cash flows as non-cash investing and financing activities.

In the six months ended June 30, 2016 , the Company converted certain company-owned Merry Maids branches to franchises for a total purchase price of $8 million. In the six months ended June 30, 2016 , the Company received cash of $6 million and provided financing of $2 million. These financed amounts have been excluded from the condensed consolidated statements of cash flows as non-cash investing activities.

Note 8 . Cash and Marketable Securities

Cash, money market funds and certificates of deposits with maturities of three months or less when purchased are included in Cash and cash equivalents on the condensed consolidated statements of financial position. As of June 30, 2017 and December 31, 2016 , the Company’s investments consisted primarily of treasury bills (“ Debt securities”) and common equity securities (“Equity securities”). The amortized cost, fair value and gross unrealized gains and losses of the Company’s short- and long-term investments in Debt and Equity securities are as follows:



			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In millions)	Cost		Gains		Losses		Value
Available-for-sale securities, June 30, 2017:
Debt securities	$	29	$	—	$	—	$	29
Equity securities		21		3		—		24
Total securities	$	50	$	3	$	—	$	53
Available-for-sale securities, December 31, 2016:
Debt securities	$	27	$	—	$	—	$	27
Equity securities		15		1		—		17
Total securities	$	43	$	1	$	—	$	44

There were no unrealized losses which had been in a loss position for more than one year as of June 30, 2017 and December 31, 2016.

Gains and losses on sales of investments, as determined on a specific identification basis, are included in investment income in the period they are realized. The Company periodically reviews its portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which the issuer competes . The table below summarizes proceeds, gross realized gains and gross realized losses resulting from sales of available-for-sale securities. There were no impairment charges due to other than temporary declines in the value of certain investments for the three and six months ended June 30, 2017 and 2016.



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2017		2016		2017		2016
Proceeds from sale of securities	$	—	$	42	$	—	$	42
Gross realized gains, pre-tax		—		4		—		4
Gross realized gains, net of tax		—		2		—		2
Gross realized (losses), pre-tax		—		—		—		—
Gross realized (losses), net of tax		—		—		—		—

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Note 9 . Long-Term Debt

Long-term debt is summarized in the following table:



	As of		As of
	June 30,		December 31,
(In millions)	2017		2016
Senior secured term loan facility maturing in 2023 (1)	$	1,621	$	1,628
Revolving credit facility maturing in 2021		—		—
5.125% notes maturing in 2024 (2)		738		737
7.10% notes maturing in 2018 (3)		78		77
7.45% notes maturing in 2027 (3)		168		167
7.25% notes maturing in 2038 (3)		52		65
Vehicle capital leases (4)		94		87
Other		67		71
Less current portion		(141)		(59)
Total long-term debt	$	2,678	$	2,772

___________________________________

(1)

As of June 30, 2017 and December 31, 2016, presented net of $17 million and $ 18 million, respectively, in unamortized debt issuance costs and $4 million and $ 4 million, respectively, in unamortized original issue discount paid.

(2)

As of June 30, 2017 and December 31, 2016, presented net of $12 and $ 13 million, respectively, in unamortized debt issuance costs.

(3)

As of June 30, 2017 and December 31, 2016, collectively presented net of $42 million and $ 48 million, respectively, of unamortized fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates shown above.

(4)

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

Repurchase of Notes

On May 11, 2017, the Company purchased $17 million in aggregate principal amount of its 7.25% notes maturing in 2038 at a price of 97% of the principal amount using available cash. The repurchased notes were delivered to the trustee for cancellation. In connection with this partial repurchase, the Company recorded a loss on extinguishment of debt of $3 million in the three and six months ended June 30, 2017.

Interest Rate Swaps

Interest rate swap agreements in effect as of June 30, 2017 are as follows:


Trade Date	Effective Date	Expiration Date	Notional Amount	Fixed Rate (1)		Floating Rate
November 7, 2016	November 8, 2016	November 30, 2023	$650,000	1.493	%	One month LIBOR

___________________________________

(1) Before the application of the applicable borrowing margin.

Note 10 . Acquisitions

Acquisitions have been accounted for using the acquisition method and, accordingly, the results of operations of the acquired businesses have been included in the condensed consolidated financial statements since their dates of acquisition. The assets and liabilities of these businesses were recorded in the financial statements at their estimated fair values as of the acquisition dates.

During the six months ended June 30, 2017, the Company completed two pest control acquisitions and purchased a ServiceMaster Clean master distributor within the Franchise Services Group. The total purchase price for these acquisitions was $14 million. The Company recorded goodwill of $1 million and other intangibles, primarily reacquired rights, of $13 million related to these acquisitions.

On November 30, 2016, the Company acquired Landmark Home Warranty, LLC (“Landmark”) for a total purchase price of $39 million. The Company recorded goodwill of $37 million and other intangibles, primarily customer relationships, of $13 million related to this acquisition. During the six months ended June 30, 2017, the Company finalized its assessment of the fair value of the

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assets acquired and liabilities assumed. The Company updated its preliminary allocation and reclassified $4 million from other intangibles, primarily customer relationships, to goodwill.

During the six months ended June 30, 2016, the Company completed several pest control and termite acquisitions. The total purchase price for these acquisitions was $23 million. The Company recorded goodwill of $17 million and other intangibles of $3 million related to these acquisitions. On June 27, 2016, the Company acquired OneGuard Home Warranties (“OneGuard”) for a total purchase price of $65 million. The C ompany recorded goodwill of $57 million and other intangibles of $15 million related to the OneGuard acquisition.

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



	Six Months Ended
	June 30,
(In millions)	2017		2016
Assets acquired	$	15	$	88
Liabilities assumed		(1)		—
Net assets acquired	$	14	$	88

Net cash paid	$	12	$	73
Seller financed debt		3		15
Purchase price	$	14	$	88

N ote 11 . Income Taxes

As of June 30, 2017 and December 31, 2016, the Company had $ 13 million of tax benefits primarily reflected in state tax returns that have not been recognized for financial reporting purposes (“unrecognized tax benefits”). Based on information currently available, it is reasonably possible that over the next 12 month period unrecognized tax benefits may decrease by $2 million as the result of settlements of ongoing audits, statute of limitation expirations or final settlements of uncertain tax positions in multiple jurisdictions.

As required by Accounting Standard Codification (“ASC”) 740, “Income Taxes,” the Company computes interim period income taxes by applying an anticipated annual effective tax rate to the Company’s year-to-date income or loss from continuing operations before income taxes, except for significant unusual or infrequently occurring items. The Company’s estimated tax rate is adjusted each quarter in accordance with ASC 740.

T he effective tax rate on income from continuing operations was 3 8.0 percent and 31. 0 percent for the three months ended June 30, 2017 and 2016, respectively. The effective tax rate on income from continuing operations for the three months ended June 30, 2016 was primarily affected by excess tax benefits for share-based awards and the release of a valuation allowance recorded discretely during the quarter.

T he effective tax rate on income from continuing operations was 38 .0 percent and 35. 4 percent for the six months ended June 30, 2017 and 2016, respectively. The effective tax rate on income from continuing operations for the six months ended June 30, 2016 was primarily affected by excess tax benefits for share-based awards and the release of a valuation allowance recorded discretely during the second quarter.

Note 12 . Business Segment Reporting

The business of the Company is conducted through three reportable segments: Terminix, American Home Shield and Franchise Services Group.

In accordance with accounting standards for segments, the Company’s reportable segments are strategic business units that offer different services. The Terminix segment provides termite and pest control services to residential and commercial customers and distributes pest control products. The American Home Shield segment provides home warranties for household systems and appliances. The Franchise Services Group segment provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster, ServiceMaster Restore and ServiceMaster Clean brand names, home cleaning services through franchises primarily under the Merry Maids brand name, cabinet and wood furniture repair primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name. Corporate includes SMAC , the Company’s financing subsidiary exclusively dedicated to providing financing to its franchisees and retail customers of its operating units, and the Company’s headquarters operations (substantially all of which costs are allocated to the Company’s reportable segments), wh ich provide various technology, marketing , finance, legal and other support services to the reportabl e segments. The composition of the Company’s reportable segments is consistent with that used by the Company’s chief operating decision maker (the “CODM”) to evaluate performance and allocate resources.

Information regarding the accounting policies used by the Company is described in the Company’s 2016 Form 10-K . The Company derives substantially all of its revenue from customers and franchisees in the United States with approximately two percent

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generated in foreign markets. Operating expenses of the business units consist primarily of direct costs and indirect costs allocated from Co rporate .

The Company uses Reportable Segment Adjusted EBITDA as its measure of segment profitability. Accordingly, the CODM evaluates performance and allocates resources based primarily on Reportable Segment Adjusted EBITDA. Reportable Segment Adjusted EBITDA is defined as net income before: unalloca ted corporate expenses; income from discontinued operations, net of income taxes; provision for income taxes; interest expense; depreciation and amortization expense; 401(k) Plan corrective contribution; fumigation related matters; insurance reserve adjustment; non-cash stock-based compensation expense; restructuring charges; gain on sale of Merry Maids branches; non-cash impairment of software and other related costs; and loss on extinguishment of debt . The Company’s definition of Reportable Segment Adjusted EBITDA may not be calculated or comparable to similarly titled measures of other companies. The Company believe s Reportable Segment Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restruct uring initiatives and equity-based, long-term incentive plans.

Information for continuing operations for each reportable segment and Corporate is presented below:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2017		2016		2017		2016
Revenue:
Terminix	$	428	$	414	$	794	$	778
American Home Shield		326		282		553		477
Franchise Services Group		52		50		102		99
Reportable Segment Revenue	$	806	$	747	$	1,449	$	1,354
Corporate		1		1		1		1
Total Revenue	$	807	$	747	$	1,450	$	1,355
Reportable Segment Adjusted EBITDA: (1)
Terminix	$	105	$	112	$	186	$	207
American Home Shield		82		72		113		90
Franchise Services Group		22		19		43		37
Reportable Segment Adjusted EBITDA	$	209	$	203	$	343	$	334

___________________________________

(1)

Presented below is a reconciliation of Net Income to Reportable Segment Adjusted EBITDA:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2017		2016		2017		2016
Net Income	$	85	$	16	$	124	$	54
Unallocated corporate expenses		—		—		(1)		3
Depreciation and amortization expense		25		22		51		43
401(k) Plan corrective contribution		—		1		—		1
Fumigation related matters		1		88		2		91
Insurance reserve adjustment		—		23		—		23
Non-cash stock-based compensation expense		4		4		9		7
Restructuring charges		1		4		3		5
Gain on sale of Merry Maids branches		—		—		—		(2)
Non-cash impairment of software and other related costs		—		1		2		1
Income from discontinued operations, net of income taxes		—		—		(1)		—
Provision for income taxes		52		7		76		30
Loss on extinguishment of debt		3		—		3		—
Interest expense		38		38		75		76
Reportable Segment Adjusted EBITDA	$	209	$	203	$	343	$	334

Note 13 . Related Party Transactions

TruGreen Spin-off

In connection with the TruGreen spin-off on January 14, 2014, the Company entered into a transition services agreement with Tru Green Holding Corporation (“ TruGreen”) pursuant to which the Company provide s TruGreen with specified communications,

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public relations, finance and accounting, tax, treasury, internal audit, human resources operations and benefits, risk management and insurance, supply management, real estate management, marketing, facilities, information technology and other support services. The charges for the transition services are designed to allow the Company to fully recover the direct costs of providing the services, plus specified margins and any out-of-pocket costs and expenses. The services provided under the transition services agreement terminated at various specified times on or prior to December 31, 2016, except certain information technology services, which the Company has entered into an amendment to the transition services agreement with TruGreen to extend through June 30, 2018. TruGreen may terminate the extended transition services agreement for convenience upon 90 days written notice .

Under this transition services agreement, the Company recorded $1 million in the three and six months ended June 30, 2017 and $ 2 million and $4 million in the three and six months ended June 30, 2016, respectively, of fees from TruGreen, which is included as a reduction in Selling and administrative expenses in the condensed consolidated statement of operations and comprehensive income. As of June 30, 2017, all amounts owed by TruGreen under this agreement have been paid.

Note 14. Fair Value Measurements

The period-end carrying amounts of cash and cash equivalents, receivables, restricted cash, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The period-end carrying amounts of long-term notes receivable approximate fair value as the effective interest rates for these instruments are comparable to period-end market rates. The period-end carrying amounts of short- and long-term marketable securities also approximate fair value, with unrealized gains and losses reported net of tax as a component of accumulated other comprehensive income (loss) on the condensed consolidated statements of financial position, or, for certain unrealized losses, reported in interest and net investment income in the condensed consolidated statements of operations and comprehensive income if the decline in value is other than temporary. The carrying amount of total debt was $2,819 million and $ 2,831 million and the estimated fair value was $2,9 38 million and $2, 930 million as of June 30, 2017 and December 31, 2016 , respectively. The fair value of the Company’s debt is estimated based on available market prices for the same or similar instruments which are considered significant other observable inputs (Level 2) within the fair value hierarchy. The fair values presented reflect the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value estimates presented in this report are based on information available to the Company as of June 30, 2017 and December 31, 2016 .

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

Interest rate swap contracts are valued using forward interest rate curves obtained from third-party market data providers. The fair value of each contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. The expected future settlements are determined by comparing the contract interest rate to the expected forward interest rate as of each settlement date and applying the difference between the two rates to the notional amount of debt in the interest rate swap contracts.

Fuel swap contracts are valued using forward fuel price curves obtained from third-party market data providers. The fair value of each contract is the sum of 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 each settlement date and applying the difference between the contract and expected prices to the notional gallons in the fuel swap contracts. The Company regularly reviews the forward price curves obtained from third-party market data providers and related changes in fair value for reasonableness utilizing information available to the Company from other published sources.

The Company has not changed its valuation techniques for measuring the fair value of any financial assets and liabilities during the year. Transfers between levels, if any, are recognized at the end of the reporting period. There were no significant transfers betwee n levels during each of the six month periods ended June 30, 2017 and 2016 .

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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:



				Estimated Fair Value Measurements
				Quoted		Significant
				Prices In		Other		Significant
				Active		Observable		Unobservable
	Statement of Financial	Carrying		Markets		Inputs		Inputs
(In millions)	Position Location	Value		(Level 1)		(Level 2)		(Level 3)
As of June 30, 2017:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	8	$	8	$	—	$	—
Investments in marketable securities	Marketable securities and Long-term marketable securities		45		40		5		—
Fuel swap contracts	Prepaid expenses and other assets		1		—		—		1
Interest rate swap contract	Other assets		21		—		21		—
Total financial assets		$	75	$	48	$	26	$	1
Financial Liabilities:
Fuel swap contracts	Other accrued liabilities	$	1	$	—	$	—	$	1
Interest rate swap contract	Other accrued liabilities		1		—		1		—
Total financial liabilities		$	2	$	—	$	1	$	1
As of December 31, 2016:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	8	$	8	$	—	$	—
Investments in marketable securities	Marketable securities and Long-term marketable securities		36		33		3		—
Fuel swap contracts	Prepaid expenses and other assets and Other assets		5		—		—		5
Interest rate swap contract	Other assets		27		—		27		—
Total financial assets		$	75	$	40	$	30	$	5
Financial Liabilities:
Interest rate swap contract	Other accrued liabilities and Other long-term obligations	$	4	$	—	$	4	$	—
Total financial liabilities		$	4	$	—	$	4	$	—

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:



	Fuel Swap
	Contract
	Assets
(In millions)	(Liabilities)		Location of Gain (Loss) included in Earnings
Balance as of December 31, 2016	$	5
Total (losses) gains (realized and unrealized)
Included in earnings		1	Cost of services rendered and products sold
Included in other comprehensive income		(5)
Settlements		(1)
Balance as of June 30, 2017	$	—

Balance as of December 31, 2015	$	(4)
Total (losses) gains (realized and unrealized)
Included in earnings		(2)	Cost of services rendered and products sold
Included in other comprehensive income		4
Settlements		2
Balance as of June 30, 2016	$	1

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The following tables present information relating to the significant unobservable inputs of the Company’s Level 3 financial instruments:

Fair Value

Valuation

Weighted

(in millions)

Technique

Unobservable Input

Range

Average

As of June 30, 2017:

Fuel swap contracts

—

Discounted Cash Flows

Forward Unleaded Price per Gallon (1)

$1.83 - $2.90

2.36

As of December 31, 2016:

Fuel swap contracts

Discounted Cash Flows

Forward Unleaded Price per Gallon (1)

$2.31 - $2.85

2.55

___________________________________

(1)

Forward prices per gallon were derived from third-party market data providers. A decrease in the forward price would result in a decrease in the fair value of the fuel swap contracts.

The Company uses derivative financial instruments to manage risks associated with changes in fuel prices and interest rates. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. In designating its derivative financial instruments as hedging instruments under accounting standards for derivative instruments, the Company formally documents the relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives to forecasted transactions. The Company assesses at the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsetting the projected changes in cash flows of the associated forecasted transactions. All of the Company’s designated hedging instruments are classified as cash flow hedges.

The Company has historically hedged a significant portion of its annual fuel consumption. The Company has also historically hedged the interest payments on a portion of its variable rate debt through the use of interest rate swap agreements. 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 at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in accumulated other comprehensive income (loss). Any change in the fair value of the hedging instrument resulting from ineffectiveness, as defined by accounting standards, is recognized in current period earnings. Cash flows related to fuel and interest rate derivatives are classified as operating activities in the condensed consolidated statements of cash flows.

Ineffective portions of derivative instruments designated in accordance with accounting standards as cash flow hedge relationships we re insignificant during the six months ended June 30, 2017 . As of June 30, 2017 , the Company had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $33 million, maturing through 2018. Under the terms of its fuel swap contracts, the Company is required to post collateral in the event that the fair value of the contracts exceeds a certain agreed upon liability level and in other circumstances required by the counterparty. As of June 30, 2017 , the Company had posted $ 2 million in letters of credit as collateral under its fuel hedging program, which were issued under the Revolving Credit Facility.

The effective portion of the gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments is recorded in accumulated other comprehensive income (loss). These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement or the fuel settlement affects earnings. See Note 6 to the condensed consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in accumulated other comprehensive income (loss) and for the amounts reclassified out of accumulated other comprehensive income (loss) and into earnings. The amount expected to be reclassified into earnings during the next 12 months includes unrealized gains and losses related to open fuel hedges and interest rate swaps. Specifically, as the underlying forecasted transactions occur during the next 12 months, the hedging gains and losses in accumulated other comprehensive income (loss) expected to be recognized in earnings is a loss of $4 million , net of tax, as of June 30, 2017 . The amounts that are ultimately reclassified into earnings will be based on actual fuel prices and interest rates at the time the positions are settled and may differ materially from the amount noted above.

Note 15 . Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The d ilutive effect of stock options, RSUs and performance shares are reflected in diluted net income per share by applying the treasury stock method.

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A reconciliation of the amounts included in the computation of basic earnings per share from continuing operations and diluted earnings per share from continuing operations is as follows:



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions, except per share data)	2017		2016		2017		2016
Income from continuing operations	$	85	$	16	$	123	$	54
Weighted-average common shares outstanding		133.7		135.5		134.1		135.6
Effect of dilutive securities:
RSUs		0.1		0.2		0.1		0.2
Stock options (1)		1.3		1.9		1.3		2.0
Weighted-average common shares outstanding—assuming dilution		135.0		137.7		135.5		137.7
Basic earnings per share from continuing operations	$	0.64	$	0.11	$	0.92	$	0.40
Diluted earnings per share from continuing operations	$	0.63	$	0.11	$	0.91	$	0.40

___________________________________

(1)

Options to purchase 1.3 million and 0.9 million shares for the three months ended June 30, 2017 and 2016, respectively, and 1.3 million and 0.9 million shares for the six months ended June 30, 2017 and 2016, respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

Note 16. Subsequent Events

On July 26, 2017, the Company issued a press release announcing that the Company intends to separate its American Home Shield business from the Company’s Terminix and Franchise Services Group businesses by means of a s pinoff of the American Home Shield business to Company shareholders, resulting in two public ly traded companies. The spin-off would create two independent companies each with an enhanced strategic focus, simplified operating structure, distinct investment identity and strong financial profile. The transaction is expected to be completed in the third quarter of 2018, subject to satisfaction of customary conditions, including the effectiveness of a Registration Statement on Form 10 to be filed with the SEC , receipt of a favorable ruling from the IRS concerning certain tax matters and final approval by the Company’s board of directors, and it is intended to qualify as a tax-free distribution to the Company’s shareholders for U.S. federal income tax purposes.

The Company also announced the appointment of Nikhil M. Varty as Chief Executive Officer of the Company and as a member of the board of directors of the Company, in each case effective as of July 26, 2017, and that Robert J. Gillette ceased to hold the position of Chief Executive Officer of the Company as of July 25, 2017, and resigned as a member of the board of directors as of July 30, 2017. Mr. Gillette w ill receive the severance payments and benefits to which he is entitled under his existing employment agreement .

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q . The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this report, particularly in “—Information Regarding Forward-Lookin g Statements.”

Overview

Our core services include termite and pest control, home warranties, disaster restoration, janitorial, residential cleaning, cabinet and wood furniture repair and home inspection under the following leading brands: Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. Our operations for the periods presented in this report are organized into three reportable segments: Terminix, American Home Shield and Franchise Services Group.

Recent Events

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Key Business Metrics

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

revenue,

operating expenses,

net income,

earnings per share,

Adjusted EBITDA,

organic revenue growth,

customer retention rates, and

customer counts growth.

To the extent applicable, these measures are evaluated with and without impairment, restructuring and other charges that management believes are not indicative of the earnings capabilities of our businesses. We also focus on measures designed to monitor cash flow, including net cash provided from operating activities from continuing operations and free cash flow .

Revenue. Our revenue results are primarily a function of the volume and pricing of the services and products provided to our customers by our businesses as well as the mix of services and products provided across our businesses. The volume of our revenue in Terminix and American Home Shield is impacted by new unit sales, the retention of our existing customers and acquisitions. We expect to continue our tuck-in acquisition program at Terminix and to periodically evaluate other strategic acquisitions . Revenue results in the Franchise Services Group are driven principally by royalty fees earned from our franchisees. We serve both residential and commercial customers, principally in the United States. In 201 6 , approximately 98 percent of our revenue was generated by sales in the United States.

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

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

Adjusted EBITDA. We evaluate performance and allocate resources based primarily on Adjusted EBITDA. We define Adjus ted EBITDA as net income b efore: income from discontinued operations, net of income taxes; provision for income taxes; interest expense; depreciation and amortization expense; 401(k) Plan corrective contribution; fumigation related matters; insurance reserve adjustment; non-cash stock-based compensation expense; restructuring charges; gain on sale of Merry Maids branches ; and non-cash impairment of software and other related costs. We believe Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipm ent, restructuring initiatives and equity-ba sed, long-term incentive plans.

Organic Revenue Growth. We evaluate organic revenue growth to track performance of the business, including the impacts of sales, pricing, new service offerings and other growth initiatives. Organic revenue growth excludes revenue from acquired customers for 12 months following the acquisition date.

Customer Retention Rates and Customer Counts Growth. Where applicable, w e report our customer retention rates and growth in customer counts in order to track the performance of the business. Customer counts represent our recurring customer base, which includes customers with active contracts for recurring services. Retention rates are calculated as the ratio of ending customer

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counts to the sum of beginning customer counts, new sales and acquired accounts for the applicable period. These measures are presented on a rolling, 12-month basis in order to avoid seasonal anomalies. See “—Segment Review.”

Seasonality

We have seasonality in our business, which drives fluctuations in revenue and Adjusted EBITDA for interim periods. In 201 6, approximately 22 percent, 27 percent, 28 percent and 23 percent of our revenue and approximately 19 percent, 30 percent, 29 percent and 22 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.

Effect of Weather Conditions

The demand for our services and our results of operations are also affected by weather conditions, including the seasonal nature of our termite and pest control services, home inspection services and disaster restoration services. Weather conditions which have a potentially unfavorable impact to our business include cooler temperatures or droughts which can impede the development of termite swarms and lead to lower demand for our termite control services; and extreme temperatures which can lead to an increase in service requests related to household systems . For example, in the third quarter of 2016, we experienced an increase in contract claims cost at American Home Shield driven by a higher number of HVAC work orders driven by high temperatures. Weather conditions which have a potentially favorable impact to our business include mild winters which can lead to higher demand for termite and pest control services; mild winters or summers which can lead to lower household systems claim frequency; and severe storms which can lead to an increase in demand for disaster restoration services.

Franchises

Franchises are important to the Terminix, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec businesses. Total profits from our franchised operations were $22 million and $21 million for the three months ended June 30, 2017 and 2016, respectively, and $44 million and $39 million for the six months ended June 30, 2017 and 2016, respectively. Nearly all of the franchise fees received by our Franchise Services Group segment are derived from the ServiceMaster Restore, ServiceMaster Clean and Merry Maids businesses. Franchise fees from our Terminix franchisees represented less than one percent of Terminix revenue for the three and six months ended June 30, 2017. We evaluate the performance of our franchise businesses based primarily on operating profit before corporate general and administrative expenses, interest expense and amortization of intangible assets. Franchise agreements entered into in the course of these businesses are generally for a term of five years. The majority of these franchise agreements are renewed prior to expiration. Internationally, we have license agreements, whereby licensees provide services under our brand names that would ordinarily be provided by franchisees in the United States. The majority of international licenses are for 10 ‑year terms.

Results of Operations



	Three Months Ended				Increase
	June 30,				(Decrease)		% of Revenue
(In millions)	2017		2016		2017 vs. 2016		2017		2016
Revenue	$	807	$	747	8	%	100	%	100	%
Cost of services rendered and products sold		415		379	9		51		51
Selling and administrative expenses		206		187	10		26		25
Amortization expense		7		8	(12)		1		1
401(k) Plan corrective contribution		—		1	*		—		—
Fumigation related matters		1		88	*		—		12
Insurance reserve adjustment		—		23	*		—		3
Impairment of software and other related costs		—		1	*		—		—
Restructuring charges		1		4	(77)		—		1
Interest expense		38		38	—		5		5
Interest and net investment income		(1)		(4)	(74)		—		(1)
Loss on extinguishment of debt		3		—	*		—		—
Income from Continuing Operations before Income Taxes		137		23	505		17		3
Provision for income taxes		52		7	643		6		1
Income from Continuing Operations		85		16	446		11		2
Income from discontinued operations, net of income taxes		—		—	*		—		—
Net Income	$	85	$	16	442	%	11	%	2	%

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	Six Months Ended				Increase
	June 30,				(Decrease)		% of Revenue

(In millions)	2017		2016		2017 vs. 2016		2017		2016
Revenue	$	1,450	$	1,355	7	%	100	%	100	%
Cost of services rendered and products sold		761		704	8		52		52
Selling and administrative expenses		392		360	9		27		27
Amortization expense		14		16	(14)		1		1
401(k) Plan corrective contribution		—		1	*		—		—
Fumigation related matters		2		91	(98)		—		7
Insurance reserve adjustment		—		23	*		—		2
Impairment of software and other related costs		2		1	147		—		—
Restructuring charges		3		5	(35)		—		—
Gain on sale of Merry Maids branches		—		(2)	*		—		—
Interest expense		75		76	(2)		5		6
Interest and net investment income		(1)		(4)	(67)		—		—
Loss on extinguishment of debt		3		—	*		—		—
Income from Continuing Operations before Income Taxes		199		85	135		14		6
Provision for income taxes		76		30	153		5		2
Income from Continuing Operations		123		54	126		8		4
Income from discontinued operations, net of income taxes		1		—	*		—		—
Net Income	$	124	$	54	128	%	9	%	4	%

_________________________________

* not meaningful

Revenue

We reported revenue of $ 807 million and $ 747 million for the three months ended June 30, 2017 and 2016, respectively, and revenue of $1,450 million and $1,355 million for the six months ended June 30, 2017 and 2016, respectively. A summary of changes in revenue for each of our reportable segments and Cor porate is included in the table below. See “—Segment Review” for a discussion of the drivers of the year-over-year changes.



			American		Franchise
			Home		Services
(In millions)	Terminix		Shield		Group		Corporate		Total
Three Months Ended June 30, 2016	$	414	$	282	$	50	$	1	$	747
Pest Control (1)		3		—		—		—		3
Termite and Other Services (2)		9		—		—		—		9
Home Warranties (3)		—		43		—		—		43
Franchise-Related Revenue		—		—		4		—		4
Sale of Merry Maids branches (4)		—		—		(2)		—		(2)
Other		3		—		—		—		3
Three Months Ended June 30, 2017	$	428	$	326	$	52	$	1	$	807

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			American		Franchise
			Home		Services
(In millions)	Terminix		Shield		Group		Corporate		Total
Six Months Ended June 30, 2016	$	778	$	477	$	99	$	1	$	1,355
Pest Control (1)		(2)		—		—		—		(2)
Termite and Other Services (2)		15		—		—		—		15
Home Warranties (3)		—		76		—		—		76
Franchise-Related Revenue		—		—		8		—		8
Sale of Merry Maids branches (4)		—		—		(6)		—		(6)
Other		2		—		—		—		2
Six Months Ended June 30, 2017	$	794	$	553	$	102	$	1	$	1,450

________________________________

(1)

Includes growth from acquisitions of approximately $2 million and $6 million for the three and six months ended June 30, 2017, respectively.

(2)

Includes wildlife exclusion, crawl space encapsulation and attic insulation products which are managed as a component of our termite line of business. Includes growth from acquisitions of approximately $1 million and $2 million for the three and six months ended June 30, 2017, respectively.

(3)

Includes growth from acquisitions of approximately $21 million and $38 million for the three and six months ended June 30, 2017, respectively, as a result of the acquisitions of OneGuard and Landmark.

(4)

Represents a reduction in revenue from company-owned branches as a result of the conversion of certain company-owned Merry Maids branches to franchises (the “branch conversions”), which were completed in 2016.

Cost of Services Rendered and Products Sold

We reported cost of services rendered and products sold of $ 415 million and $ 379 million for the three months ended June 30, 2017 and 2016 , respectively , and $761 million and $704 million for the six months ended June 30, 2017 and 2016, respectively. The following table provide s a summary of changes in cost of services rendered and products sold for each of our rep ortable segments and Corporate:



			American		Franchise
			Home		Services
(In millions)	Terminix		Shield		Group		Corporate		Total
Three Months Ended June 30, 2016	$	217	$	142	$	21	$	—	$	379
Impact of change in revenue (1)		6		19		2		—		26
Production labor		3		—		—		—		3
Damage claims		2		—		—		—		2
Insurance program		1		—		—		—		1
Technology costs		1		—		—		—		1
Fuel prices		(1)		—		—		—		(1)
Contract claims		—		2		—		—		2
Sale of Merry Maids branches		—		—		(2)		—		(2)
Other		3		—		(1)		—		2
Three Months Ended June 30, 2017	$	232	$	163	$	20	$	—	$	415

__ _______________________________

(1)

For American Home Shield, includes growth from acquisitions of approximately $10 million as a result of the acquisitions of OneGuard and Landmark.

At Terminix, the increase in production labor was driven by investments in field operations focused on improving safety, customer service and retention. The increase in damage claims was driven by increased termite warranty claims. The increase in our insurance programs was principally driven by an increase in the number of company-owned sales vehicles. Additionally, the increase in technology costs was driven by investments to improve our customers’ experiences through technology.

The increase in contract claims costs at American Home Shield is primarily due to normal inflationary pressure on the underlying costs of repairs.

We realized a reduction in cost of sales of $2 million in the Franchise Services Group as a result of the branch conversions completed in 2016.

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			American		Franchise
			Home		Services
(In millions)	Terminix		Shield		Group		Corporate		Total
Six Months Ended June 30, 2016	$	411		247		41		4	$	704
Impact of change in revenue (1)		6		33		3		—		43
Production labor		9		—		—		—		9
Damage claims		6		—		—		—		6
Insurance program		3		—		—		(4)		(1)
Technology costs		2		—		—		—		2
Fuel prices		(2)		—		—		—		(2)
Contract claims		—		4		—		—		4
Sale of Merry Maids branches		—		—		(5)		—		(5)
Depreciation		1		—		—		—		1
Other		1		1		(1)		—		1
Six Months Ended June 30, 2017	$	438	$	285	$	38	$	—	$	761

__ _______________________________

(1)

For American Home Shield, includes growth from acquisitions of approximately $17 million as a result of the acquisitions of OneGuard and Landmark.

The increase in contract claims costs at American Home Shield is primarily due to normal inflationary pressure on the underlying costs of repairs.

We realized a reduction in cost of sales of $5 million in the Franchise Services Group as a result of the branch conversions completed in 2016.

Selling and Administrative Expenses

We reported selling and administrative expenses of $206 million and $187 million for the three months ended June 30, 2017 and 2016, respectively, and $392 million and $360 million for the six months ended June 30, 2017 and 2016, respectively. For the three months ended June 30, 2017 and 2016, selling and administrative expenses comprised general and administrative expenses of $74 million and $69 million, respectively, and selling and marketing expenses of $132 million and $118 million, respectively. For the six months ended June 30, 2017 and 2016, selling and administrative expenses comprised general and administrative expenses of $151 million and $144 million, respectively, and selling and marketing expenses of $241 million and $216 million, respectively. The following table provides a summary of changes in selling and administrative expenses for each of our reportable segments and Corporate:



			American		Franchise
			Home		Services
(In millions)	Terminix		Shield		Group		Corporate		Total
Three Months Ended June 30, 2016	$	94	$	74	$	11	$	8	$	187
Sales and marketing costs		4		(2)		—		—		3
OneGuard and Landmark selling and administrative expenses		—		7		—		—		7
Customer service costs		—		4		—		—		4
Depreciation		2		—		—		1		3
Other		2		(1)		1		1		2
Three Months Ended June 30, 2017	$	102	$	82	$	11	$	10	$	206

The increase in sales and marketing costs at Terminix was driven by investments to grow and train our sales force, higher commissions attributable to the growth in core termite, wildlife exclusion and attic insulation sales and incremental marketing investments.

At American Home Shield, the decrease in sales and marketing costs is driven by the timing of a marketing campaign. We incurred incremental selling and administrative expenses as a result of the OneGuard and Landmark acquisitions. Additionally, the increase in customer service costs is due to higher labor costs resulting from an acceleration of pre-season hiring and training in preparation for the high-volume summer season and an overall increase in call center staffing levels to improve response times.

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			American		Franchise
			Home		Services
(In millions)	Terminix		Shield		Group		Corporate		Total
Six Months Ended June 30, 2016	$	176	$	147	$	22	$	15	$	360
Sales and marketing costs		9		(2)		—		—		7
OneGuard and Landmark selling and administrative expenses		—		13		—		—		13
Customer service costs		—		4		—		—		4
Depreciation		4		—		—		3		7
Other		1		(2)		—		2		1
Six Months Ended June 30, 2017	$	190	$	160	$	22	$	20	$	392

Amortization Expense

A mortization expense was $ 7 million and $ 8 million in the three months ended June 30, 2017 and 2016, respectively, and $14 million and $16 million in the six months ended June 30, 2017 and 2016 respectively.

401(k) Plan Corrective Contribution

We recorded a charge of $1 million in the three and six months ended June 30, 2016 related to the 401(k) Plan. See Note 3 to the condensed consolidated financial statements for more details. Charges for 401(k) Plan corrective contributions recorded in the three and six months ended June 30, 2017 were less than $1 million.

Fumigation Related Matters

We recorded charges of $1 million and $88 million in the three months ended June 30, 2017 and 2016, respectively, and $2 million and $91 million in the six months ended June 30, 2017 and 2016, respectively, for fumigation related matters. There were no charges for fumigation related matters recorded in the three months ended June 30, 2017. See Note 3 to the condensed consolidated financial statements for more details.

Insurance Reserve Adjustment

We recorded a charge of $23 million in the three and six months ended June 30, 2016 for an adjustment to the Company’s accrued self-insured claims related to automobile, general liability and workers’ compensation risks. The adjustment was based on the Company’s detailed annual assessment of this actuarially determined accrual, which the Company completes in the second quarter of each year. This adjustment related to coverage periods of 2015 and prior. There were no insurance reserve adjustment charges recorded in the three and six months ended June 30, 2017.

Impairment of Software and Other Related Costs

We recorded impairment charges of $1 million in the three months ended June 30, 2016 and $2 million and $1 million in the six months ended June 30, 2017 and 2016, respectively, relating to our decision to replace certain software. There were no charges for impairment of software and other related costs recorded in the three months ended June 30, 2017.

Restructuring Charges

We incurred restructuring charges of $1 million and $4 million in the three months ended June 30, 2017 and 2016, respectively, and $3 million and $5 million in the six months ended June 30, 2017 and 2016, respectively. For the three and six months ended June 30, 2017, these charges included $1 million of costs related to the relocation of our headquarters. For the six months ended June 30, 2017, these charges included $2 million of severance. For the three and six months ended June 30, 2016, these charges included $2 million of lease termination costs and $1 million of severance primarily related to the decision to consolidate the stand-alone operations of a previously acquired business with those of the Terminix branch organization.

Gain on Sale of Merry Maids Branches

We recorded a gain of $2 million in the six months ended June 30, 2016, associated with the branch conversions at Merry Maids . There was no gain recorded in the three and six months ended June 30, 2017 and three months ended June 30, 2016. As of October 10, 2016, the branch conversion process was complete.

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Interest Expense

Interest expense was $38 million in each of the three month periods ended June 30, 2017 and 2016 and $75 million and $76 million for the six months ended June 30, 2017 and 2016, respectively.

Interest and Net Investment Income

Interest and net investment income was $1 million and $4 million for the three months ended June 30, 2017 and 2016, respectively, and $1 million and $4 million for the six months ended June 30, 2017 and 2016, respectively, and comprised net investment gains and interest and dividend income realized on the American H ome Shield investment portfolio and interest income on other cash balances.

Income from Continuing Operations before Income Taxes

Income from continuing operations before income taxes was $137 million and $23 million for the three months ended June 30, 2017 and 2016, respectively, and $199 million and $85 million for six months ended June 30, 2017 and 2016, respectively. The change in income from continuing operations before income taxes primarily reflects the net effect of year-over-year changes in the following items:



	Three Months Ended			Six Months Ended
	June 30,		June 30,
(In millions)	2017 vs. 2016		2017 vs. 2016
Reportable segments and Corporate (1)	$	7	$	13
Depreciation expense (2)		(4)		(9)
Fumigation related matters (3)		86		89
Insurance reserve adjustment (4)		23		23
Other (5)		2		(1)
Increase (decrease) in income from continuing operations before income taxes	$	114	$	114

___________________________________

(1)

Represents the net change in Adjusted EBITDA as described in “—Segment Review.”

(2)

Represents the net change in depreciation expense, driven by investments in vehicles and technology.

(3)

Represents the $88 million and $91 million charge for fumigation related matters recorded in the three and six months ended June 30, 2016, respectively. See Note 3 to the condensed consolidated financial statements for more details.

(4)

Represents $23 million insurance reserve adjustment recorded in the three and six months ended June 30, 2016 as described in “—Insurance Reserve Adjustment.”

(5)

Primarily represents the net change in amortization expense, 401(k) Plan corrective contribution, impairment of software and other related costs, restructuring charges, gain on sale of Merry Maids branches, interest expense, loss on extinguishment of debt and stock-based compensation expense.

Provision for Income Taxes

The effective tax rate on income from continuing operations was 38.0 percent and 31.0 percent for the three months ended June 30, 2017 and 2016, respectively . The effective tax rate on income from continuing operations for the three months ended June 30, 2016 was primarily affected by excess tax benefits for share-based awards and the release of a valuation allowance recorded discretely during the quarter.

The effective tax rate on income from continuing operations was 38.0 percent and 35.4 percent for the six months ended June 30, 2017 and 2016, respectively . The effective tax rate on income from continuing operations for the six months ended June 30, 2016 was primarily affected by excess tax benefits for share-based awards and the release of a valuation allowance recorded discretely during the second quarter.

Net Income

Net income was $85 million and $16 million for the three months ended June 30, 2017 and 2016, respectively, and was driven by a $114 million increase in income from continuing operations before income taxes, offset, in part, by a $45 million increase in the provision for income taxes. Net income was $124 million and $54 million for the six months ended June 30, 2017 and 2016, respectively, and was primarily driven by a $114 million increase in income from continuing operations before income taxes, offset, in part, by a $46 million increase in the provision for income taxes.

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Segment Review

The following business segment reviews should be read in conjunction with the required footnote disclosures presente d in the notes to the condensed consolidated financial statements included in this report.

Revenue and Adjusted EBITDA by reportable segment and for Corporate are as follows:



	Three Months Ended						Six Months Ended
	June 30,				Increase		June 30,				Increase
(In millions)	2017		2016		(Decrease)		2017		2016		(Decrease)
Revenue:
Terminix	$	428	$	414	3	%	$	794	$	778	2	%
American Home Shield		326		282	15			553		477	16
Franchise Services Group		52		50	5			102		99	3
Corporate		1		1	*			1		1	*
Total Revenue:	$	807	$	747	8	%	$	1,450	$	1,355	7	%
Adjusted EBITDA: (1)
Terminix	$	105	$	112	(7)	%	$	186	$	207	(10)	%
American Home Shield		82		72	15			113		90	25
Franchise Services Group		22		19	15			43		37	17
Reportable Segment Adjusted EBITDA		209		203	3			343		334	3
Corporate (2)		—		—	*			1		(3)	*
Total Adjusted EBITDA	$	210	$	203	3	%	$	343	$	330	4	%

___________________________________

* not meaningful

(1)

See Note 12 for our definition of Adjusted EBITDA and a reconciliation of Net Income to Reportable Segment Adjusted EBITDA.

(2)

Represents unallocated corporate expenses.

Terminix Segment

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

The Terminix segment, which provides termite and pest control services to residential and commercial customers and distributes pest control products, reported a three percent increase in revenue and a seven percent decrease in Adjusted EBITDA for the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

Revenue

Revenue by service line is as follows:



	Three Months Ended
	June 30,

(In millions)	2017		2016		Growth				Acquired				Organic
Pest Control	$	229	$	226	$	3	1	%	$	2	1	%	$	—	—	%
Termite and Other Services		177		168		9	5	%		1	—	%		8	5	%
Other		23		20		3	14	%		—	—	%		3	14	%
Total revenue	$	428	$	414	$	14	3	%	$	3	1	%	$	11	3	%

Pest control revenue increased one percent. Pest control revenue was comparable to the prior year period and was significantly impacted by a $5 million organic revenue decline associated with Alterra Pest Control (“Alterra”). Excluding Alterra, organic pest control revenue growth was $5 million, or 2 percent .

Termite revenue, including the wildlife exclusion, crawl space encapsulation and attic insulation products, which are managed as a component of our termite line of business, increased five percent. In the three months ended June 30, 2017, termite renewal revenue comprised 47 percent of total termite revenue, while the remainder consisted of termite new unit revenue. Organic termite revenue increased five percent, reflecting an increase in core termite, wildlife exclusion and attic insulation sales, improved price realization and a favorable change in the timing of termite renewal services. Termite activity is unpredictable in its nature. Factors that can impact termite activity include conducive weather conditions and consumer awareness of termite swarms.

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Adjusted EBITDA

The following table provides a summary of changes in the segment’s Adjusted EBITDA:



(In millions)
Three Months Ended June 30, 2016	$	112
Impact of change in revenue		8
Production labor		(3)
Damage claims		(2)
Insurance program		(1)
Technology costs		(1)
Fuel prices		1
Sales and marketing		(4)
Other		(4)
Three Months Ended June 30, 2017	$	105

The increase in production labor was driven by investments in field operations focused on improving safety, customer service and retention. The increase in damage claims was driven by increased termite warranty claims. The increase in our insurance programs was principally driven by an increase in the number of company-owned sales vehicles. The increase in technology costs was driven by investments to improve our customers’ experiences through technology. The increase in sales and marketing costs was driven by investments to grow and train our sales force, higher commissions attributable to the growth in core termite, wildlife exclusion and attic insulation sales and incremental marketing investments.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

The Terminix segment reported a two percent increase in revenue and a 10 percent decrease in Adjusted EBITDA for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

Revenue

Revenue by service line is as follows:



	Six Months Ended
	June 30,

(In millions)	2017		2016		Growth				Acquired				Organic
Pest Control	$	430	$	432	$	(2)	—	%	$	6	1	%	$	(8)	(2)	%
Termite and Other Services		326		311		15	5	%		2	1	%		13	4	%
Other		37		35		2	7	%		—	—	%		2	7	%
Total revenue	$	794	$	778	$	16	2	%	$	8	1	%	$	8	1	%

Pest control revenue was comparable to the prior year period. Pest control revenue decreased two percent and was significantly impacted by an $ 11 million organic revenue decline associated wit h Alterra . Excluding Alterra, organic p est control revenue growth was $3 million, or 1 percent.

Termite revenue, including the wildlife exclusion, crawl space encapsulation and attic insulation products, which are managed as a component of our termite line of business increased five percent. In the six months ended June 30, 2017, termite renewal revenue comprised 50 percent of total termite revenue, while the remainder consisted of termite new unit revenue. Organic termite revenue increased four percent, reflecting an increase in core termite, wildlife exclusion and attic insulation sales and improved price realization.

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Adjusted EBITDA

The following table provides a summary of changes in the segment’s Adjusted EBITDA:



(In millions)
Six Months Ended June 30, 2016	$	207
Impact of change in revenue		9
Production labor		(9)
Damage claims		(6)
Insurance program		(3)
Technology costs		(2)
Fuel prices		2
Sales and marketing		(9)
Other		(2)
Six Months Ended June 30, 2017	$	186

American Home Shield Segment

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

The American Home Shield segment, which provides home warranties for household systems and appliances, reported a 15 percent increase in revenue and a 15 percent increase in Adjusted EBITDA for the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

The growth in renewable customer counts and customer retention are presented below.

(1)

As of June 30, 2017 and 2016, excluding the impact of acquisitions, the growth in home warranties was six percent and seven percent, respectively, and the customer retention rate for our American Home Shield segment was 75 percent and 75 percent, respectively.

Revenue

The revenue results reflect an increase in new unit sales, improved price realization and the impact of the OneGuard and Landmark acquisitions (an approximate $21 million increase).

Adjusted EBITDA

The following table provides a summary of changes in the segment’s Adjusted EBITDA:



(In millions)
Three Months Ended June 30, 2016	$	72
Impact of change in revenue		24
Contract claims		(2)
Sales and marketing costs		2
OneGuard and Landmark selling and administrative expenses		(7)
Customer service costs		(4)
Interest and net investment income		(3)
Other		1
Three Months Ended June 30, 2017	$	82

The increase in contract claims costs is primarily due to normal inflationary pressure on the underlying costs of repairs. The decrease in sales and marketing costs is driven by the timing of a marketing campaign. We incurred incremental selling and administrative expenses as a result of the OneGuard and Landmark acquisitions. Additionally, the increase in customer service costs is

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due to higher labor costs resulting from an acceleration of pre-season hiring and training in preparation for the high-volume summer season and an overall increase in call center staffing levels to improve response times.

In the three months ended June 30, 2016, the segment’s Adjusted EBITDA included interest and net investment income from the American Home Shield investment portfolio of $3 million. There were no such investment gains in the three months ended June 30, 2017.

Extreme temperatures in 2017 could lead to an increase in service requests related to household systems, resulting in higher claim frequency and costs.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

The American Home Shield segment reported a 16 percent increase in revenue and a 25 percent increase in Adjusted EBITDA for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

Revenue

The revenue results reflect an increase in new unit sales, improved price realization and the impact of the OneGuard and Landmark acquisitions (an approximate $38 million increase).

A djusted EBITDA

The following table provides a summary of changes in the segment’s Adjusted EBITDA:


(In millions)
Six Months Ended June 30, 2016	$	90
Impact of change in revenue		43
Contract claims		(4)
Sales and marketing costs		2
OneGuard selling and administrative expenses		(13)
Customer service costs		(4)
Interest and net investment income		(3)
Other		2
Six Months Ended June 30, 2017	$	113

The increase in contract claims costs is primarily due to normal inflationary pressure on the underlying costs of repairs, offset in part, by a lower number of work orders. The decrease in sales and marketing costs is driven by the timing of a marketing campaign. We incurred incremental selling and administrative expenses as a result of the OneGuard and Landmark acquisitions. Additionally, the increase in customer service costs is due to higher labor costs resulting from an acceleration of pre-season hiring and training in preparation for the high-volume summer season and an overall increase in call center staffing levels to improve response times.

In the six months ended June 30, 2017 and 2016, the segment’s Adjusted EBITDA included interest and net investment income from the American Home Shield investment portfolio of $1 million and $4 million, respectively.

Franchise Services Group Segment

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

The Franchise Services Group segment, which consists of the ServiceMaster Restore (disaster restoration), ServiceMaster Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (cabinet and wood furniture repair) and AmeriSpec (home inspection) businesses, reported a five percent increase in revenue and a 15 percent increase in Adjusted EBITDA for the three months ended June 30, 2017 compared to the three months ended June 30, 2016.

Revenue

Revenue by service line is as follows:



	Three Months Ended				% of
	June 30,				Revenue
(In millions)	2017		2016		2017
Royalty Fees	$	32	$	30	61	%
Company-Owned Merry Maids Branches		—		2	—
Janitorial National Accounts		12		11	23
Sales of Products		4		4	7
Other		5		3	9
Total revenue	$	52	$	50	100	%

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The increase in royalty fees was primarily driven by higher disaster restoration services. The $2 million decline in revenue from company-owned Merry Maids branches was attributable to the branch conversions, which were completed in 2016. The increase in revenue from janitorial national accounts was driven by increased sales activity.

Adjusted EBITDA

The following table provides a summary of changes in the segment’s Adjusted EBITDA:



(In millions)
Three Months Ended June 30, 2016	$	19
Impact of change in revenue		2
Other		1
Three Months Ended June 30, 2017	$	22

Excluding the impact of the branch conversions at Merry Maids, the increase in revenue resulted in a $2 million increase in Adjusted EBITDA. The reduction in revenue from company-owned Merry Maids branches had a negligible impact on Adjusted EBITDA.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

The Franchise Services Group segment reported a three percent increase in revenue and a 17 percent increase in Adjusted EBITDA for the six months ended June 30, 2017 compared to the six months ended June 30, 2016.

Revenue

Revenue by service line is as follows:



	Six Months Ended				% of
	June 30,				Revenue
(In millions)	2017		2016		2017
Royalty Fees	$	63	$	58	62	%
Company-Owned Merry Maids Branches		—		6	—
Janitorial National Accounts		23		21	23
Sales of Products		7		7	7
Other		9		7	9
Total revenue	$	102	$	99	100	%

The increase in royalty fees was primarily driven by higher disaster restoration services. The $6 million decline in revenue from company-owned Merry Maids branches was attributable to the branch conversions, which were completed in 2016. The increase in revenue from janitorial national accounts was driven by increased sales activity.

Adjusted EBITDA

The following table provides a summary of changes i n the segment’s Adjusted EBITDA:



(In millions)
Six Months Ended June 30, 2016	$	37
Impact of change in revenue		5
Other		1
Six Months Ended June 30, 2017	$	43

Excluding the impact of the branch conversions at Merry Maids, the increase in revenue resulted in a $5 million increase in Adjusted EBITDA. The reduction in revenue from company-owned Merry Maids branches had a negligible impact on Adjusted EBITDA.

Corporate

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

Adjusted EBITDA for Corporate for the three months ended June 30, 2017 was comparable to the three months ended June 30, 2016.

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Corporate reported a $4 million increase in Adjusted EBITDA for the six months ended June 30, 2017 compared to the six months ended June 30, 2016. The six month ended June 30, 2016 included increased reserves in our automobile, general liability and workers’ compensation insurance program of $4 million driven by unfavorable claims trends, which were impacted by a charge of $3 million in connection with civil claims related to an incident at a family’s residence in Palm Beach County, Florida (an amount equal

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to our insurance deductibles under our general liability insurance program). There were no increased reserves in our automobile, general liability and workers’ compensation insurance program for the six months ended June 30, 2017.

Liquidity and Capital Resources

Liquidity

We are highly leveraged, and a substantial portion of our liquidity needs are due to service requirements on our significant indebtedness. The agreements governing the $1,650 million term loan facility maturing November 8, 2023 and the $300 million revolving credit facility maturing November 8, 2021 (together, the “Credit Facilities”) contain covenants that limit or restrict our ability, including the ability of certain of our subsidiaries, to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates. As of June 30, 2017 , we were in compliance with the covenants under the agreements that were in effect on such date.

Our ongoing liquidity needs are expected to be funded by cash on hand, net cash provided by operating activities and, as required, borrowings under the Credit F acilities. We expect that cash provided from operations and available capacity under the Revolving Credit Facility will provide sufficient funds to operate our business, make expected capital expenditures and meet our liquidity requirements for the following 12 months, including payment of interest and principal on our debt. Cash and short- and long-term mar ketable securities totaled $431 million as of June 30, 2017, compared with $335 million as of December 31, 2016 . As of June 30, 2017, there were $33 million of let ters of credit outstanding and $267 million of available borrowing capacity under the Revolving Credit Facility. The letters of credit are posted to satisfy collateral requirements under our automobile, general liability and workers’ compensation insurance program and fuel swap contracts.

In 2016, our board of directors authorized a three -year share repurchase program, under which we may repurchase up to $300 million of outstanding shares of our common stock. As of June 30, 2017, we have repurchased $145 million of outstanding shares under this program, which is included in treasury stock on the condensed consolidated statements of financial position.

In 2016, we settled all civil claims of the affected families related to the U.S. Virgin Islands and Florida fumigation matters, and payments in connection with those claims totaled $90 million ($56 million, net of tax). We have also sought to resolve by plea agreement the federal criminal consequences related to the U.S. Virgin Islands matter pursuant to which we expect to pay approximately $10 million. See Note 3 to the condensed consolidated financial statements for more details.

We have submitted to the IRS a voluntary correction proposal to remedy an administrative error related to our Profit Sharing and Retirement Plan. Our current estimate of the cost of the correction ranges from $25 million to approximately $93 million. See Note 3 to the condensed consolidated financial statements for more details.

Cash and short- and long-term marketable securities include balances associated with regulatory requirements at American Home Shield. See “—Limitations on Distributions and Dividends by Subsidiaries.” American Home Shield’s investment portfolio has been invested in a combination of high-quality debt securities and equity securities. We closely monitor the performance of the investments. From time to time, we review the statutory reserve requirements to which our regulated entities are subject and any changes to such requirements. These reviews may result in identifying current reserve levels above or below minimum statutory reserve requirements, in which case we may adjust our reserves. The reviews may also identify opportunities to satisfy certain regulatory reserve requirements through alternate financial vehicles.

As of June 30, 2017, we had posted $31 million in letters of credit, which were issued under the Rev olving Credit Facility, and $89 million of cash, which is included in Restricted cash on the condensed consolidated statements of financial position, as collateral under our automobile, general liability and workers’ compensation insurance program. This amount is not related to the payments made in connection with the U.S. Virgin Islands matter. We may from time to time change the amount of cash or marketable securities used to satisfy collateral requirements under our automobile, general liability and workers’ compensation insurance program. The amount of cash or marketable securities utilized to satisfy these collateral requirements will depend on the relative cost of the issuance of letters of credit under the Revolving Credit Facility and our cash position. Any change in cash or marketable securities used as collateral would result is a corresponding change in our available borrowing capacity under the Revolving Credit Facility.

Additionally, under the terms of our fuel swap contracts, we are required to post collateral in the event the fair value of the contracts exceeds a certain agreed upon liability level and in other circumstances required by the agreement w ith the counterparty. As of June 30, 2017 , the estimated fair value of our fuel swap contracts was a net liability of less than $1 million, and we had posted $2 million in letters of credit as collateral under our fuel hedging program, which were also issued under the Revolving Credit Facility. The continued use of letters of credit for this purpose in the future could limit our ability to post letters of credit for other purposes and could limit our borrowing availability under the Revolving Credit Facility. However, we do not expect the fair value of the outstanding fuel swap contracts to materially impact our financial position or liquidity.

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We may from time to time repurchase or otherwise retire or extend our debt and/or take other steps to reduce our debt or otherwise improve our financial position, results of operations or cash flows. These actions may include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and/or opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired or refinanced, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations.

Fleet and Equipment Financing Arrangements

We have entered into the Fleet Agreement which, among other things, allows us to obtain fleet vehicles through a leasing program. We expect to fulfill substantially all of our vehicle fleet needs through the leasing program under the Fleet Agreement. For the six months ended June 30, 2017, we acquired $22 million of vehicles through the leasing program under the Fleet Agreement. All leases under the Fleet Agreement are capital leases for accounting purposes. The lease rental payments include an interest component calculated using a variable rate based on one-month LIBOR plus other contractual adjustments and a borrowing margin totaling 2.45 percent. We have no minimum commitment for the number of vehicles to be obtained under the Fleet Agreement.

Additionally, a portion of our property and equipment is leased through programs outside the scope of the Fleet Agreement. For the six months ended June 30, 2017, we acquired $1 million of property and equipment through these incremental leasing programs, which are treated as capital leases for accounting purposes. We anticipate new lease financings, including the Fleet Agreement and incremental leasing programs, for the full year 2017 will range from approximately $30 million to $40 million.

Limitations on Distributions and Dividends by Subsidiaries

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

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

Furthermore, there are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. These restrictions are related to regulatory requirements at American Home Shield and to a subsidiary borrowing arrangement at SMAC. The payments of ordinary and extraordinary dividends by our home warranty and similar subsidiaries (through which we conduct our American Home Shield business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsid iaries can pay to us. As of June 30, 2017 , the total net assets subject to these third-party restrictions was $ 194 million. We expect that such limitations will be in effect for the foreseeable future . None of our subsidiaries are obligated to make funds available to us through the payment of dividends.

We consider undistributed earnings of our foreign subsidiaries as of June 30, 2017 to be indefinitely reinvested and, accordingly, no U.S. income t axes have been provided thereon . The amount of cash associated with indefinitely reinvested foreign earnings was appro ximately $25 million and $23 million as of June 30, 2017 and December 31, 2016, respectively . We have not repatriated, nor do we anticipate the need to repatriate, funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements.

Cash Flows

Cash flows from operating, investing and financing activities, as reflected in the accompanying condensed consolidated statements of cash flows, are summarized in the following table.



	Six Months Ended
	June 30,
(In millions)	2017		2016
Net cash provided from (used for):
Operating activities	$	260	$	244
Investing activities		(56)		(58)
Financing activities		(124)		(45)
Discontinued operations		1		—
Effect of exchange rate changes on cash		—		1
Cash increase during the period	$	81	$	141

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Operating Activities

Net cash provided from operating activities from conti nuing operations in creased $16 million to $260 million for the six months ended June 30, 2017 compared to $ 244 million for the six months ended June 30, 2016 .

Net cash provided from operating activities for the six months ended June 30, 2017 comprised $198 million in earnings adjusted for non-cash charges and a $63 million decrease in cash requi red for working capital (a $28 million decrease excluding the working capital impact of accrued interest, restructuring and taxes), offset, in part, by $1 million in payments related to fumigation matters. For the six months ended June 30, 2017 , working capital requireme nts were favorably impacted by seasonal activity and the timing of income tax payments, offset, in part by incentive compensation payments related to 2016 performance.

Net cash provided from operating activities for the six months ended June 30, 2016 comprised $ 227 million in earnings adjusted for non-cash charges and a $ 19 million de crease in cash required for working capital (a $29 million decrease excluding the working capital impact of accrued interest, restructuring and taxes), offset, in part, by $2 million in payments related to fumigation matters . For the six months ended June 30, 2016 , working capital requirements were favorably impacted by seasonal activity, offset, in part by incentive compensation payments related to 2015 performance and timing of income tax payments.

Investing Activities

Net cash used for investing activities from continuing operations was $56 million for the six months ended June 30, 2017, compared to $ 58 million for the six months ended June 30, 2016 .

Capital expenditures increased to $34 million for the six months ended June 30, 2017 from $31 million in the six months ended June 30, 2016 and included recurring capital needs and information technology projects. We anticipate capital expenditures for the full year 2017 for recurring capital needs and the continuation of investments in information systems and productivity enhancing technology will range from approximately $50 million to $60 million. Additionally, we expect capital needs for the full year 2017 associated with the relocation of our headquarters to be approximately $35 million for which we expect to be reimbursed through a tenant improvement allowance and grants totaling approximately $25 million for a net cash outflow of approximately $10 million . We expect to fulfill our ongoing vehicle fleet needs through vehicle capital leases. We have no additional material capital commitments at this time.

Proceeds from the sale of equi pment and other assets was $ 7 million for the six months ended June 30, 2016 , primarily driven by the branch conversions at Merry Maids . In the six months ended June 30, 2016, t he branches were sold for a total purchase price of $ 8 million for which we received cash of $6 million and provided financi ng of $2 million. As of October 10, 2016, the branch conversion process was complete.

Cash payments for acquisitions for the six months e nded June 30, 2017 totaled $12 million, compared with $ 73 million for the six months ended June 30, 2016 . Consideration given for the purchase of a master distributor and for tuck-in acquisitions consisted of cash payments and debt payable to sellers. In 2016, we acquired OneGuard Home Warranties for $65 million consisting of cash consideration of $55 million and deferred payments of $10 million. We expect to continue our tuck-in acquisition program at Terminix and to periodically evaluate other strategic acquisitions.

Cash flows used for purchases, sales and maturities of securities, net, for the six months e nded June 30, 2017 totaled $6 million and were driven by the purchase and maturity of marketable securities at American Home Shield. Cash flows from purchases, sales and maturities of securities, net, for the six months ended June 30, 2016 totaled $47 million and were driven by the maturity and sale of marketable securities at American Home Shield.

Cash flows used for notes receivable, net, for the six months ended June 30, 2017 and 2016 totaled $4 million and $5 million, respectively, and were a result of a net increase in financing provided by SMAC to our franchisees and retail customers of our operating units.

Financing Activities

Net cash used for financing activities from continuing operations was $124 million for the six months ended June 30, 2017 compared to $ 45 million for the six months ended June 30, 2016 .

During the six months ended June 30, 2017 , we made scheduled principal pay ments on long-term debt of $29 million , purchased $17 million in aggregate principal amount of our 7.25% notes maturing in 2038 at a price of 97% of the principal amount, repurchased $85 million of common stock and received $7 million from the issuance of common stock upon the exercise of stock options and shares issued under the Employee Stock Purchase Plan .

During the six months ended June 30, 2016 , we made scheduled principal payments on long-term debt of $ 33 million , repurchased $17 million of common stock and received $5 million from the issuance of common stock.

Contractual Obligations

Our 2016 Form 10-K includes disclosures of our contractual obligations and commitments as of December 31, 2016. We continue to make the contractually required payments, and, t herefore, the 2017 obligations and commitments as listed in our 2016 Form 10-K have been reduced by the required payments.

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Off-Balance Sheet Arrangements

As of June 30, 2017 , we did not have any significant off-balance sheet arrangements.

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

Regulatory Matters

On July 21, 2016, TMX USVI and TMX LP, each an indirect, wholly-owned subsidiary of the Company, entered into the Superseding Plea Agreement in connection with the investigation initiated by the DOJ into allegations that a local Terminix branch used methyl bromide as a fumigant at a resort in St. John, U.S. Virgin Islands. The Superseding Plea Agreement was intended to resolve four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide. Those charges were set forth in an Information, dated March 29, 2016, in the matter styled United States of America v. The Terminix International Company Limited Partnership and Terminix International USVI, LLC. At a hearing held on August 25, 2016, the District Court rejected the Superseding Plea Agreement. On August 31, 2016, the DOJ requested that the charges be dismissed, reserving its right to re-file the charges, in light of ongoing discussions to resolve the matter. The District Court granted that request, and the March 29, 2016 Information was dismissed.

On January 20, 2017, TMX USVI and TMX LP entered into the New Plea Agreement with the DOJ, which has been filed with the District Court, and replaces the Superseding Plea Agreement. At a hearing on March 23, 2017, TMX USVI and TMX LP pled guilty to four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide, as set forth in a new Information filed on January 20, 2017 with the District Court that is substantially similar to the March 29, 2016 Information. Under the terms of the New Plea Agreement, the parties agreed and jointly recommended to the District Court that (i) TMX USVI and TMX LP each pay a fine of $4 million (total of $8 million); (ii) TMX USVI pay $1 million to the EPA for costs incurred by the EPA for the response and clean-up of the affected units at the resort in St. John; (iii) TMX USVI make a community service payment of $1 million to the National Fish and Wildlife Foundation for the purpose of engaging a third party to provide training to pesticide applicators in the U.S. Virgin Islands; and (iv) both TMX USVI and TMX LP serve a three-year probation period, subject to the special conditions of probation under the New Plea Agreement. The total financial terms of the recommended sentence under the New Plea Agreement are equivalent in total amount to the financial terms under the Superseding Plea Agreement. Unlike the Superseding Plea Agreement, however, the New Plea Agreement is non-binding on the District Court. The sentencing hearing before the District Court previously scheduled for July 27, 2017 , has been rescheduled for September 21, 2017. It is possible that at that hearing the District Court could use its discretion to impose fines or other terms different than those in the New Plea Agreement. If approved by the District Court, and upon compliance with the terms and conditions of the New Plea Agreement, the New Plea Agreement will resolve the federal criminal consequences associated with the DOJ investigation. The New Plea Agreement does not bind any other federal, state or local authority; however, the EPA has indicated that it does not intend to initiate any administrative enforcement action or refer the matter to the DOJ for any civil enforcement action if the New Plea Agreement is approved by the District Court.

Information Regarding Forward-Looking Statements

This report contains forward-looking statements and cautionary statements, including statements with respect to the potential separation of American Home Shield from ServiceMaster and the distribution of American Home Shield shares to ServiceMaster shareholders, and approval of the U.S. Virgin Islands plea agreement. Forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. Forward-looking statements are subject to known and unknown risks and uncertainties including, but not limited to: uncertainties as to the timing of the spin-off or whether it will be completed at all, the results and impact of the announcement of the proposed spin-off, the failure to satisfy any conditions to complete the spin-off, the expected tax treatment of the spin-off, the impact of the spin-off on the businesses of ServiceMaster and American Home Shield , and the failure to achieve anticipated benefits of the spin-off. These forward-looking statements also include, but are not limited to statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position; results of operations; cash flows; prospects; growth strategies or expectations; customer retention; the continuation

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of acquisitions, including the integration of any acquired company and risks relating to any such acquired company; fuel prices; attraction and retention of key personnel; the impact of fuel swaps; the valuation of marketable securities; estimates of accruals for self-insured claims related to workers’ compensation, auto and general liability risks; estimates of accruals for home warranty claims; estimates of future payments under operating and capital leases; estimates on current and deferred tax provisions; the outcome (by judgment or settlement) and costs of legal or administrative proceedings, including, without limitation, collective, representative or class action litigation; and the impact of prevailing economic conditions.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and cash flows, and the development of the market segments in which we operate, are consistent with the forward-looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertaint ies discussed in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” above and in “Risk Factors” below, could cause actual results and outcomes to differ from those reflected in the forward-looking statements. Additional factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

our ability to successfully complete the spin-off of American Home Shield and the benefits therefrom;

resolution of fumigation related matters, including approval of the terms of the New Plea Agreement by the District Court related to the criminal aspects of the U.S. Virgin Islands fumigation incident;

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

the 401(k) Plan corrective contribution and other employee benefit plan compliance issues;

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

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

our ability to generate the significant amount of cash needed to fund our operations and service our debt obligations;

our ability to successfully implement our business strategies;

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

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

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

increase in prices for fuel and raw materials, and in minimum wage levels;

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

adverse weather conditions;

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

changes in our services or products;

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

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

laws and governmental regulations increasing our legal and regulatory expenses;

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

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

restrictions contained in our debt agreements;

the effects of our substantial indebtedness and the limitations contained in the agreements governing such indebtedness; and

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

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

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

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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

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

Interest Rate Risk

We are exposed to the impact of interest rate changes and manage this exposure through the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps. In our opinion, the market risk associated with debt obligations and other significant instruments as of June 30, 2017 has not materially changed from December 31, 2016 (see Item 7A of the 2016 Form 10-K).

Fuel Price Risk

We are exposed to market risk for changes in fuel prices through the consumption of fuel by our vehicle fleet in the delivery of services to our customers. We expect to use approximately 12 million gallons of fuel in 2017. As of June 30, 2017, a ten percent change in fuel prices would result in a change of approximately $3 million in our annual fuel cost before considering the impact of fuel swap contracts.

We use fuel swap contracts to mitigate the financial impact of fluctuations in fuel prices. As of June 30, 2017 , we had fuel swap contracts to pay fixed prices for fuel with an ag gregate notional amount of $33 million, maturing through 201 8 . The estimated fair value of these contracts as of June 30, 2017 was a net liability of less than $ 1 million. These fuel swap contracts provide a fixed price for approximately 97 percent and 68 percent of our estimated fuel usage for the remainder of 201 7 and 2018, respectively .

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our Chief Executive Officer , Nikhil M. Varty, and Senior Vice President and Chief Financial Officer, Anthony D. DiLucente , have evaluated our disclosure controls and procedures (as defined in Rule 13a- 15(e) and Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q as required by Rule 13a- 15(b) and Rule 15d- 15(b) under the Exchange Act. Messrs. Varty and DiLucente have concluded that both the design and operation of our disclosure controls and procedures were effective as of June 30, 2017 .

Changes in internal control over financial reporting

No changes in our internal control over financial reporting, as defined in Rule 13a- 15(f) or Rule 15d- 15(f) under the Exchange Act, occurred during the three months ended June 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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guilty to four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide, as set forth in a new Information filed on January 20, 2017 with the District Court that is substantially similar to the March 29, 2016 Information. Under the terms of the New Plea Agreement, the parties agreed and jointly recommended to the District Court that (i) TMX USVI and TMX LP each pay a fine of $4 million (total of $8 million); (ii) TMX USVI pay $1 million to the EPA for costs incurred by the EPA for the response and clean-up of the affected units at the resort in St. John; (iii) TMX USVI make a community service payment of $1 million to the National Fish and Wildlife Foundation for the purpose of engaging a third party to provide training to pesticide applicators in the U.S. Virgin Islands; and (iv) both TMX USVI and TMX LP serve a three-year probation period, subject to the special conditions of probation under the New Plea Agreement. The total financial terms of the recommended sentence under the New Plea Agreement are equivalent in total amount to the financial terms under the Superseding Plea Agreement. Unlike the Superseding Plea Agreement, however, the New Plea Agreement is non-binding on the District Court. The sentencing hearing before the District Court previously scheduled for July 27, 2017 , has been rescheduled for September 21, 2017. It is possible that at that hearing the District Court could use its discretion to impose fines or other terms different than those in the New Plea Agreement. If approved by the District Court, and upon compliance with the terms and conditions of the New Plea Agreement, the New Plea Agreement will resolve the federal criminal consequences associated with the DOJ investigation. The New Plea Agreement does not bind any other federal, state or local authority; however, the EPA has indicated that it does not intend to initiate any administrative enforcement action or refer the matter to the DOJ for any civil enforcement action if the New Plea Agreement is approved by the District Court.

In addition to the matter discussed above, in the ordinary course of conducting business activities, we and our subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedings involving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and other matters. We have entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court or other approvals. If one or more of our settlements are not finally approved, we could have additional or different exposure, which could be material. Subject to the paragraph s above, we do not expect any of these proceedings to have a material effect on our reputation, business, financial position, results of operations or cash flows; however, we can give no assurance that the results of any such proceedings will not materially affect our reputation, business, financial position, results of operations and cash flows. See Note 3 to the condensed consolidated financial statement for more details.

ITEM 1A. RISK FACTORS

We discuss in our 2016 Form 10-K and our other filings with the SEC various risks that may materially affect our business. In addition, you should carefully consider the factors described below and t he materialization of any risks and uncertainties identified in Forward-Looking Statements contained in this report, together with those previously disclosed in the 2016 Form 10-K, and our other filings with the SEC or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Information Regarding Forward-Looking Statements” above.

The proposed American Home Shield separation is subject to various risks and uncertainties, and may not be completed on the terms or timeline currently contemplated, if at all.

On July 26, 2017, we announced our plan to spin off our American Home Shield business. The separation, which is expected to be completed in the third quarter of 2018, is subject to customary conditions, including the effectiveness of a Registration Statement on Form 10 to be filed with the SEC , receipt of a favorable ruling from the IRS concerning certain tax matters and final approval by the Company’s board of directors . There can be no assurance that the separation of American Home Shield will be completed. Unanticipated developments in the proposed separation, including with respect to covenant waivers, regulatory approvals or clearances, receipt of a favorable ruling from the IRS, uncertainty of the financial markets and challenges in establishing infrastructure or processes, could delay or prevent the completion of the proposed separation or cause the proposed separation to occur on terms or conditions that are different from those currently expected.

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The proposed American Home Shield separation may be more expensive than anticipated and may not achieve some or all of the anticipated benefits.

Executing the proposed separation will require us to incur costs, and could distract the attention of our senior management and key employees, which could disrupt operations and result in the loss of business opportunities, which could adversely affect our business, financial condition, and results of operations. We may also experience increased difficulties in attracting, retaining and motivating key employees during the pendency of the separation and following its completion, which could harm our business, financial condition and results of operations.

Even if the proposed separation is completed, we may not realize some or all of the anticipated benefits from the separation and the separation may in fact adversely affect our business. Separating the businesses may result in dis-synergies that could negatively impact the balance sheet, income statement and cash flows of each business. Moreover, we may not realize some or all of the anticipated strategic, operational, marketing or other benefits from the separation.

If the proposed separation is completed, both companies will be smaller, less diversified companies with a narrower business focus and may be more vulnerable to changing market conditions and competitive pressures, which could materially and adversely affect their respective businesses, financial conditions and results of operations. There can be no assurance that the combined value of the common stock of the two publicly traded companies following the completion of the proposed separation will be equal to or greater than what the value of our common stock would have been had the proposed separation not occurred.

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ITEM 2. UNREGISTERED SALES OF REGISTERED SECURITIES AND USE OF PROCEEDS

Share Repurchase Program

In 2016, our board of directors authorized a three-year share repurchase program, under which we may repurchase up to $300 million of outstanding shares of our common stock. We expect to fund the share repurchases from net cash provided from operating activities. The share repurchase program is part of our capital allocation strategy that focuses on sustainable growth and maximizing shareholder value.

Issuer Purchases of Equity Securities



				Total number of	Maximum dollar value
				shares purchased as	of shares that may yet
				part of publicly	be purchased under
	Total number of	Average price		announced plans or	the plans or programs
Period	shares purchased (1)	paid per share		programs	(in millions)
April 1, 2017 through April 30, 2017	213,309	$	40.86	213,309	$	180
May 1, 2017 through May 31, 2017	658,262		37.96	658,262		155
June 1, 2017 through June 30, 2017	—		—	—		155
Total	871,571	$	38.67	871,571	$	155

___________________________________

(1) All shares were acquired as part of our share repurchase program.

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ITEM 6. EXHIBITS


Exhibit Number		Description
10.1#		Employment Agreement, dated as of July 26, 2017, by and between Nikhil M. Varty and ServiceMaster Global Holdings, Inc.

10.2#		Performance Restricted Stock Unit Agreement, dated as of July 26, 2017, by and between Nikhil M. Varty and ServiceMaster Global Holdings, Inc.

10.3#		Employee Restricted Stock Agreement, dated as of July 26, 2017, by and between Nikhil M. Varty and ServiceMaster Global Holdings, Inc.

10.4#		Employee Stock Option Agreement, dated as of July 26, 2017, by and between Nikhil M. Varty and ServiceMaster Global Holdings, Inc.

10.5#		Schedule of Signatories to a Director Indemnification Agreement.

10.6#		Form of Performance Restricted Stock Unit Agreement under the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (“Omnibus Plan”) for awards granted as of July 26, 2017, which awards will 100% vest on the spin-off of American Home Shield from ServiceMaster.

10.7#		Form of Performance Restricted Stock Unit Agreement under the Omnibus Plan for awards granted as of July 26, 2017, which will 50% vest on the spin-off of American Home Shield, and the other 50% vest on the first anniversary of the spin-off from ServiceMaster.

10.8#		Separation and Consulting Agreement, dated July 30, 2017, by and between Robert J. Gillette and ServiceMaster Global Holdings, Inc.

31.1#		Certification of Chief Executive Officer pursuant to Rule 13a — 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2#		Certification of Chief Financial Officer pursuant to Rule 13a — 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1#		Certification of Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2#		Certification of Chief Financial Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS#		XBRL Instance Document

101.SCH#		XBRL Taxonomy Extension Schema

101.CAL#		XBRL Taxonomy Extension Calculation Linkbase

101.DEF#		XBRL Taxonomy Extension Definition Linkbase

101.LAB#		XBRL Taxonomy Extension Label Linkbase

101.PRE#		XBRL Extension Presentation Linkbase

___________________________________

# Filed herewith.

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SIGNATURE

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

Date: August 1, 2017


	SERVICEMASTER GLOBAL HOLDINGS, INC.
	(Registrant)

	By:	/s/ Anthony D. DiLucente
		Anthony D. DiLucente
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Exhibit 10.1

EXECUTION COPY

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (th is “ Agreement ” ) is made as of July 26, 2017 , by and between Nikhil M. Varty ( “ Executive ” ) and ServiceMaster Global Holdings, Inc., a Delaware corporation ( “ ServiceMaster ” or the “ Company ” ).

WHEREAS, ServiceMaster desires to employ Executive as the Chief Executive Officer ( “ CEO ” ) of ServiceMaster and as a member of the Company’s Board of Directors (the “ Board ” ), and Executive desires to be retained by ServiceMaster in such capacities , in each case pursuant to the terms and conditions of this Agreement.

WHEREAS, ServiceMaster and Executive intend hereby to set forth the terms and conditions upon which Executive shall be employed in such capacities.

NOW, THEREFORE, in consideration of the mutual covenants and obligations contained herein, and intending to be legally bound, the parties, subject to the terms and conditions set forth herein, agree as follows:

1. Defined Terms . A ny capitalized terms which are not defined within this Agreement are defined in Exhibit A hereto attached.

2. Term . S erviceMaster shall employ Executive, and Executive agrees to be employed by ServiceMaster, in each case, subject to the terms and conditions of this Agreement, fo r the period commencing on July 26, 2017 (the “ Effective Date ” ) and continuing through and including the earliest of (a) the effective date of Executive ’ s termination of employment ( the “ Date of Termination ” ), (b) the date of Executive ’ s death, and (c) the third anniversary of the Effective Date ( such period, the “ Term ” ); provided that the Term shall automatically be extended by one year effective upon the third anniversary of the Effective Date and each anniversary thereafter , until such date as either the Company or Executive shall have terminated such automatic extension provision by giving written notice to the other at least ninety (9 0) days prior to the end of the initial Term or any extended Term .

3. Duties; Location of Performance .

(a) C ommencing on the Effective Date, continuing during the Term, and subject to the powers, authorities and responsibilities vested in the Board and committees of the Board, Executive shall : ( i ) have the authorities and responsibilities consistent with his position as the CEO of ServiceMaster and , at a level commensurate with such position, as an officer or director of such other of the Company ’ s subsidiaries as may be requested by the Board from time to time ; ( ii ) report directly to the Board; and ( iii ) so long as Executive serves as CEO of the Company, serve as a member of the Board without additional compensation . Commencing on the Effective Date, Executive shall be appointed as a member of the Board, and at all times as applicable during the Term, the Company shall nominate Executive for election to the Board; provided that upon any termination of Executive’s employment under this Agreement , Executive shall, effective as of the Date of Termination (or Executive’s death), immediately cease to serve on the

Board and any committees thereof. During the Term, a ll employees of ServiceMaster and its subsidiaries shall report to Executive or his designee .

(b) S ubject to any required business travel on behalf of the Company and the provisions of Section 4(d) below , Executive ’ s principal place of business will be at Service Master ’ s corporate offices in the greater Memphis, Tennessee metropolitan area ( the “ Corporate Headquarters ”) .

4. Obligations of ServiceMaster During the Term . S erviceMaster shall provide the following to Executive during the Term:

(a) Salary . S erviceMaster shall pay Executive a base salary ( as increased, “ Base Salary ” ) at an annual rate of at least $1, 0 00,000, payable in accordance with the payroll practices of the Company . Executive’s rate of Base Salary shall be subject to annual review by the Board or the Compensation Committee (defined below) and any possible increase (but not decrease) shall be at the discretion of the Board or the Compensation Committee. Executive ’ s Base Salary may not be decreased without t he written consent of Executive .

(b) Annual Bonus .

(1) Generally . E xecutive shall be eligible to participate in the Company ’ s Annual Bonus Plan (or any successor plan) (the “ Bonus Plan ”) in respect of each fiscal year of the Company on at least the same terms and conditions as other exec utive officers of ServiceMaster ; provided that Executive ’ s annual bonus opportunity payable at achievement of “ target ” levels shall not be less than 100 percent of Base Salary (the “ Target Bonus ”) , it being understood that the actual amount payable and the performance metrics, weighting, and thresholds applicable to Executive shall be determined in accordance with the Bonus Plan as adopted and administered by the Compensation Committee of the Board (the “ Compensation Committee ” ) . A ny amount payable pursuant to this Section 4( b )(1) , and Section 4(b)(2) below , shall be paid when paid to other exec utive officers of ServiceMaster under the Bonus Plan , but in no event later than March 15 of the year following the year in respect of which it was earned.

(2) 201 7 Performance Year . N otwithstanding Section 4(b )(1), in no event shall Executive ’ s annual bonus for the 2017 performance year be less t han an amount equal to (x) $1,0 00,000 , multiplied by (y) a fraction, the numerator of which is the number of days from the Effective Date through December 31, 201 7 and the denominator of which is 365.

(c) Benefits . E xecutive shall be entitled to those employee benefits and perquisites which the Company from time to time generally makes available to its executive officers ( “ Benefits ” ) subject to the terms and conditions of such benefit plans or programs . T he Benefits shall include, without limitation, medical insurance, dental insurance, life insurance, vision insurance, flexible spending or similar account, four weeks of paid annual vacation, and such other benefits, as the Board or Compensation Committee may determine from time to time. In addition, to the extent that, on and after the Effective Date, the Company provides its other named executive officers an

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automobile allowance or C ompany car, then the Company shall also provide the same level of automobile allowance or C ompany car to Executive.

(d) Reimbursement of Other Expenses; Relocation . E xecutive shall be reimbursed for all proper and reasonable expenses incurred by Executive in the performance of his duties hereunder in accordance wit h the policies of ServiceMaster . E xecutive shall , on a fully tax grossed-up basis, (i) also qualify for the Company’s relocation program and shall be provided with reimbursement of his relocation expenses in accordance with the terms and conditions of that program and (ii) through the first anniversary of the Effective Date, be provided with corporate housing in the Corporate Headquarters area and with reimbursement for reasonable weekly commuting expenses between Detroit, MI and Memphis, TN , consistent with the business travel reimbursement policies applicable to the Company’s executive officers .

5. Equity-Based Compensation .

(a) Performance R estricted Stock Units .

(1) PRSU Grant . E ffective as of the Effective Date , the Company shall grant Executive performance restricted stock units under the Stock Incentive Plan covering a number of shares of the common stock of the Company (“ Common Stock ”) having a grant date value equal to $1,500,000 (the “ PR SUs ” ) . T he P RSUs shall vest, subject to Executive ’ s continued employment w ith the Company, upon the earliest to occur of certain events prior to March 31, 2019 , and as otherwise provided in the P RSU Agreement (as defined below).

(2) Terms and Conditions . T he terms and conditions of the P RSUs (including, but not limited to, the vesting conditions) shall be set forth in a separate Employee Performance Restricted Stock Unit Agreement , substantially in the form attached hereto as Exhibit B , to be entered into between the Company and Executive (the “ PR SU Agreement ” ) and will be subject to the terms and provisi ons of the Stock Incentive Plan .

(b) Restricted Stock .

(1) RS Grant . Effective as of the Effective Date , the Company shall grant Executive a number of shares of restricted Common Stock under the Stock Incentive Plan having a grant date value equal to $500,000 (the “ Restricted Stock ” ) . The Restricted Stock shall vest, subject to Executive ’ s continued employment w ith the Company, upon the first anniversary of the Effective Date, and as otherwise provided in the RS Agreement (as defined below).

(2) Terms and Conditions . The terms and conditions of the Restricted Stock (including, but not limited to, the vesting conditions) shall be set forth in a separate Employee Restricted Stock Agreement , substantially in the form attached hereto as Exhibit C , to be entered into between the Company and Executive (the “ RS Agreement ” ) and will be subject to the terms and provisi ons of the Stock Incentive Plan .

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(1) Option Grant . Effective as of the Effective Date , the Company shall grant Executive non-qualified stock options to purchase shares of Common Stock under the Stock Incentive Plan having a Black-Scholes value equal to $1,250,000 (the “ Options ” and, collectively with the PRSUs and the Restricted Stock, the “ Equity Awards ” ) . T he Options will vest, subject to Executive ’ s continued employment with the Company, in four annual installments at a rate of one-fourth per year on each of the first four anniversaries of the Effective Date and as otherwise provided in the Employee Stock Option Agreement (as defined below) . T he exercise price per share of Common Stock covered by the Options shall be equal to the Fair Market Value (as defined in the Stock Incentive Plan) on the Effective Date, as required under the Stock Incentive Plan .

(2) Terms and Conditions . The terms and conditions of the Options (including, but not limited to, the vesting conditions) shall be set forth in a separate Employee Stock Option Agreement , substantially in the form attached hereto as Exhibit D , to be entered into between the Company and Executive (the “ Employee Stock Option Agreement ” and collectively with the PRSU Agreement and the RS Agreement, the “ Equity Award Agreements ” ) and will be subject to the terms and provisi ons of the Stock Incentive Plan .

(3) Annual Equity Grants . Beginning in calendar year 2018 and each subsequent calendar year occurring during the Term, Executive shall be eligible to be considered for annual long-term equity incentive grants, at levels commensurate with his position, at the same time as all other executive officers of the Company, with the form and terms of such annual equity grants to be determined by the Compensation Committee; provided, however , that for each of calendar years 2018 and 2019, Executive’s annual long-term equity incentive grants will be a total grant date value equal to 350% of Executive’s then Base Salary.

6. Severance Benefits .

(a) In the event that Executive ’ s employment hereunder is terminated during the period beginning on and including the Effective Date and ending on or prior to the expiration of the Term by ServiceMaster without Cause or by Executive for Good Reason, then ServiceMaster, subject to Section 6( g ), shall pay to Executive, as compensation for services rendered to ServiceMaster and its affiliated companies:

(1) Executive ’ s Base Salary earned through the Date of Termination, to the extent not previously paid (but after giving effect to any amounts that would be deferred pursuant to the ServiceMaster deferred compensation plan); plus

(2) ( i ) Executive ’ s annual bonus earned with respect to the fiscal year immediately prior to the fiscal year in which the Date of Termination occurs, to the extent not previously paid (but after giving effect to any amounts that would be deferred pursuant to the ServiceMaster deferred compensation plan), plus ( ii ) the bonus that Executive would have been paid in respect of the fiscal year in which the Date of Termination occurs had his employment not terminated, prorated for the portion of the

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fiscal year during which Executive was employed elapsed through the Date of Termination (the “ Pro Rata Bonus ” ); plus

(3) continued payment of his monthly Base Salary, at the rate in effect immediately prior to the Date of Termination, for 24 months following the Date of Termination (the “Severance Period”) ; plus

(4) reimbursement of Executive ’ s expenses pursuant to Section 4(d ) and any accrued but unused vacation ; plus

(5) if such a termi nation occurs prior to March 31, 2019 , to the extent not already vested by their terms on or prior to such Date of Termination, the Restricted Stock and the first installment of the Options ( each of which otherwise would have vested on the first anniversary of the Effective Date ) , and the PRSU , shall become immediately vested on such Date of Termination; plus

(6) if such a termination occurs between the date a definitive agreement is signed by the Company contemplating transactions which, if consummated, would result in a Change in Control and the date that is 24 months following the occurrence of the Change in Control as contemplated under such agreement, all then outstanding unvested Equity Awards (and any other then outstanding unvested awards granted to Executive under the Stock Incentive Plan) shall become immediately vested ; plus

(7) if applicable , outstanding and unvested equity awards not otherwise covered by Section 6(a)( 5 ) or Section 6(a)(6 ), as applicable, shall vest in accordance with their applicable terms .

(b) In the event that Executive ’ s employment hereunder is terminated during the period beginning on and including the Effective Date and ending on or prior to the expiration of the Term by ServiceMaster for Cause or by Executive for any reason other than Good Reason, including by reason of retirement, death or D isability, then ServiceMaster shall pay to Executive (or Executive ’ s executors, legal representatives or administrators in the event of Executive ’ s death), as compensation for services rendered to ServiceMaster and its affiliated companies:

(1) Executive ’ s Base Salary earned through the Date of Termination or date of death, to the extent not previously paid (but after giving effect to any amounts that would be deferred pursuant to the ServiceMaster deferred compensation plan); plus

(2) in the event Executive ’ s employment is terminated by reason of death, D isability or retirement, ( i ) Executive ’ s annual bonus earned with respect to the fiscal year immediately prior to the fiscal year in which the Date of Termination occurs, to the extent not previously paid (but after giving effect to any amounts that would be deferred pursuant to the ServiceMaster deferred compensation plan), plus ( ii ) a Pro Rata Bonus; plus

(3) reimbursement of Executive ’ s expenses pursuant to Section 4(d ) and any unused but accrued vacation ; plus

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(4) if applicable, outstanding and unvested e quit y awards shall vest in accordance with their applicable terms .

(c) Payment . S ubject to Section 14, ( i ) any amount payable pursuant to Section 6(a)(1) or 6(b)(1) above shall be paid in accordance with the payroll practices of the Company ; ( ii ) any amount payable pursuant to Section 6(a)(2) or 6(b)(2) shall be paid when annual bonuses for the applicable fiscal years are paid to other executive officers of the Company, but in no event later than March 15 of the year following the year in respect of which such bonuses were earned; and ( iii ) any amount payable pursuant to Section 6(a)(3) shall be paid in equal monthly installments during the two-year period following the Date of Termination, except that all installments that would ha ve been paid during the first 60 days following the Date of Ter mination shall be paid on the 60 th day following the Date of Termination . I n addition, if on the Date of Termination Executive is a “ specified employee , ” as defined in Treasury Regulation Section 1.409A-1(i) and determined using the identification methodology selected by the Company from time to time, or if none, the default methodology, any or all amounts payable under this Agreement on account of such termination of employment that would (but for this provision) be payable within six months following the Date of Termination, shall instead be paid in a lump sum on the first day of the seventh month following the Date of Termination or, if earlier, upon Executive ’ s death, except ( A ) to the extent of amounts that do not constitute a “ deferral of compensation ” within the meaning of Treasury Regulation Section 1.409A-1(b) (including without limitation by reason of the safe harbor set forth in Treasury Regulation Section 1.409A-1(b)(9)(iii), as determined by the Company in its reasonable good faith discretion); ( B ) benefits which qualify as excepted welfare benefits pursuant to Treasury Regulation Section 1.409A 1(a)(5); and ( C ) other amounts or benefits that are not subject to the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “ Code ” ).

(d) Continuation of Benefits . I n the event Executive is entitled to the severance benefits under Section 6(a), then ( i ) for 18 months following the Date of Termination, subject to Executive ’ s enrollment for COBRA continuation coverage and payment of the applicable monthly COBRA premium amounts (the “ Monthly COBRA Premium Amount ” ), the Company will cause a monthly reimbursement to be made to Executive such that, after payment of applicable taxes, Executive retains an amount of such reimbursement equal to the employer contribution for active employees for the COBRA coverage so elected as in effect immediately pr ior to the Date of Termination; and ( ii ) if by the end of such 18-month period Executive and his covered dependents have not become covered by a plan of a subsequent employer offering the same type of benefits, then, for the shorter of (A) six months and (B) the end of the month in which Executive obtains such coverage from a subsequent employer, the Company will cause Executive to be paid a monthly amount such that, after payment of applicable taxes, Executive retains an amount of such payment equal to 100% of the Monthly COBRA Premium Amount . I n addition, in the event Executive is entitled to the severance benefits under Section 6(a), then for 24 months following the Date of Termination Executive shall continue to be eligible for Company-provided life insurance upon the same terms and otherwise to the same extent as such coverage is offered to the exec utive officers of ServiceMaster , and the Company and Executive shall share the costs of the continuation

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of such insurance coverage in the same proportion as such costs are shared by the Company and its executive officers.

(e) Exclusive Severance . A ny amount paid pursuant to Section 6(a) or 6(b) or 6(d) shall be paid in lieu of any other amount of severance relating to salary continuation or bonus payments or health, welfare and life insurance coverage to be received by Executive upon termination of employment of Executive under any severance plan, policy or arrangement of ServiceMaster or its affiliated companies . N otwithstanding the foregoing, in the event that Executive ’ s employment hereunder is terminated hereunder for any reason, Executive shall be entitled to continuation of Benefits subject to the terms and conditions of such benefit plans or programs for terminated employees.

(f) Equity-Based Compensation . E ach share of Common Stock and all Equity Awards held by Executive on the Date of Termination or date of death shall be subject to the terms and conditions of the applicable Equity Award Agreement and Stock Incentive Plan, including, without limitation, the restriction periods, vesting and forfeiture schedules, and termination provisions ; provided, however , that for the avoidance of doubt, the Restricted Stock shall become 100% vested on Executive’s date of death or Disability , to the extent not previously vested by its terms .

(g) Release ; Compliance with Restrictive Covenants . N otwithstanding anything to the contrary in this Section 6, in the event the Company is obligated to make payments pursuant to Sections 6(a)(3), 6(a)( 5), 6(a)(6 ) and 6(d), it shall be a condition to such payments that : (i) , within forty-five (45 ) days following the Date of Termination, Executive enter into a general re lease of claims, containing the provisions attached hereto as Exhibit E and such other provisions , if any, as the parties may mutually agree, waiving any and all claims against the Company, its subsidiaries, their affiliates and their respective officers, directors, employees, agents, representatives, stockholders, members and partners relating to this Agreement and to his employment during the term hereof and (ii) Executive materially complies with the covenants set forth in Section 7 (a), (b) and (d) during the S everance P eriod .

(h) Notice of Termination . Executive shall be required to provide the Company with thirty (30) days ’ advance written notice , and the Company may provide notice at any time, of the intention to terminate Executive ’ s employment for any reason, other than a termination by the Company for Cause or termination by Executive with Good Reason, each of which shall be subject to the applicable notice and cure time periods set forth in Exhibit A .

(i) In the event the Company gives Executive notice of non-automatic extension of th is Agreement at any time pursuant to Section 2, such termination shall be treated as a termination without Cause immediately prior to the expiration of the Term.

7. Covenants . For good and valuable consideration, including without limitation the grant of Equity Awards and the severance benefits provided for in Section 6 above, the sufficiency of which Executive hereby acknowledges, Executive agrees to the following:

(a) No n-Competition, Non-Solicitation . F rom and after the Effective Date and through and including the date that is two years after the Date of Termination,

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Executive shall not do any of the following, directly or indirectly, without the prior written consent of the Board:

(1) directly or indirectly (whether as owner, stockholder, director, officer, employee, principal, agent, consultant, independent contractor, partner or otherwise), in North America or any other geographic area in which ServiceMaster or any subsidiary of ServiceMaster is then conducting business, own, manage, operate, control, participate in, perform services for, or otherwise carry on, a business similar to or competitive with a business conducted by ServiceMaster or any subsidiary of ServiceMaster (a “ Competitive Enterprise ” ), provided that the foregoing shall not prohibit (x) Executive ’ s passive ownership of less than 1% of any class of voting securities of a publicly held company which would otherwise be prohibited under this Section 7(a)(1) or (y) Executive ’ s providing services to either (A) a separate division or operating unit of a multi-divisional Competitive Enterprise if such division or operating unit is not competitive with the business conducted by ServiceMaster or any subsidiary of ServiceMaster or (B) a Competitive Enterprise where the revenues derived from the divisions or operating units that, if standing alone, would be a Competitive Enterprise (I) account in the aggregate for less than 20% of the aggregate consolidated revenue of the entire Competitive Enterprise (or, if applicable, the portion of the Competitive Enterprise for which Executive is responsible (including, for the avoidance of doubt, subsidiary entities)) and (II) on a business unit by business unit basis are 35% or less than the revenue of the corresponding business unit of ServiceMaster (except that, for purpose of the clause (II), any ServiceMaster business unit that accounts for 10% or less of the aggregate consolidated revenue of ServiceMaster shall be disregarded), in the case of each of (I) and (II) for the fiscal year prior to Executive ’ s commencement of employment therewith; or

(2) other than in the good faith performance of Executive ’ s duties to ServiceMaster, directly or indirectly attempt to induce any employee of ServiceMaster or any subsidiary of ServiceMaster to terminate his or her employment with ServiceMaster or any subsidiary of ServiceMaster for any purpose whatsoever, or attempt directly or indirectly, in connection with any business to which Section 7(a)(1) applies, to solicit the trade or business of any current or prospective customer, supplier or partner of ServiceMaster or any subsidiary of ServiceMaster; provided , that this Section 7(a)(2) shall not be violated by ( i ) general advertising or solicitation not specifically targeted at ServiceMaster related persons or entities or (ii) Executive serving as a reference, upon request.

(b) Confidentiality ; Work Product . Executive agrees that, during Executive ’ s employment with the Company and its subsidiaries and thereafter, other than in the good faith performance of his duties to the Company and its subsidiaries, Executive will not disclose confidential or proprietary information, or trade secrets, related to any business of the Company or its subsidiaries, including without limitation, and whether or not such information is specifically designated as confidential or proprietary : all business plans and marketing strategies; information concerning existing and prospective markets, suppliers and customers; financial information; information concerning the development of new products and services; and technical and non-technical data related to software programs, design, specifications, compilations, inventions, improvements, patent

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applications, studies, research, methods, devices, prototypes, processes, procedures and techniques . N otwithstanding the foregoing, Executive may disclose confidential information to the extent required by law, regulation or order of a regulatory body, in each case so long as Executive gives the Company written notice of the disclosure as soon as practicable under the circumstances to enable the Company to seek a protective order, confidential treatment or other appropriate relief (except that notice to the Company need not be given during any period that such disclosure is prohibited by applicable law) . Executive ’ s obligations under this Section are indefinite in term. Executive hereby assign s , transfer s and release s , without royalty or any other consideration except as expressly set forth herein, all worldwide right, title and interest Executive may have or acquire (including copyright and “moral rights”) in and to all work product, inventions, discoveries, know ‐ how, processes, data and other items (“ Materials ”) resulting from Executive’s services under this Agreement. To the extent any Materials are not assignable, Executive waive s , disclaim s and agree s that Executive will not enforce against ServiceMaster any rights Executive may have to such Materials .

(c) Non-Disparagement . At all times during the Term and for two years thereafter, Executive agree s that Executive will refrain from making public statements, written or oral, which criticize, disparage or defame the business, goodwill or reputation of ServiceMaster (including its products and services), its directors, officers, executives, subsidiaries, parent entities, and/or employees or making statements which could adversely affect the morale of other employees. At all times during the Term and for two years thereafter, the Company agrees that its active members of the Board and active named executive officers (each as in effect from time to time) will refrain from making public statements, written or oral, which criticize, disparage or defame Executive. Nothing in this Agreement, however, shall be construed to prevent Executive or the Company (including any of its representatives) from providing truthful testimony or information in response to any valid subpoena, court order, the request of any government agency or as otherwise required by law (including in connection with any whistleblower laws) , from rebutting false or misleading statem ents about the party by others or making normal competitive-type statements not in violation of Section 7(a) above . There shall be no third-party b eneficiaries of this Section 7(c) , other than applicable subsidiaries of the Company .

(d) Cooperation . D uring and after Executive ’ s employment, Executive shall reasonably cooperate with ServiceMaster with respect to any matter (including without limitation any investiga tion, governmental proceeding and litigation, including the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of ServiceMaster or its affiliates ) that relate s to events or occurrences that transpired while Executive was employed by ServiceMaster . E xecutive ’ s reasonable cooperation in connection with such claims or actions shall include, but not be limited to, being reasonably available to meet with counsel to prepare for discovery or trial and to act as a witness on beha lf of ServiceMaster at mutually convenient times . D uring and after Executive ’ s employment, Executive also shall reasonably cooperate with ServiceMaster or its affiliates in connection with any investigation or review of any Federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while Executive was employed by ServiceMaster . S erviceMaster shall reimburse Executive for any

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reasonable out-of-pocket expenses incurred in connection with Executive ’ s performance of obligations pursuant to this Section 7( d ).

8. Reimbursement of Executive Expenses . T he Company shall reimburse Executive for reasonable legal fees incurred related to this Agreement , not to exceed $4 5,000 in the aggregate . S uch reimbursement shall be made within thirty (30) days after Executive provides an invoice for such services to the Company (which invoice shall be provided within sixty days following the Effective Date), but in any event no later than March 15 of the year following the year in which the fees are incurred.

9. Indemnification . Effective as of the Effective Date, the Company and Executive shall enter into an indemnification agreement in the form attached as Exhibit F . D uring the Term and thereafter, the Company shall indemnify Executive with respect to his services to the Company and its subsidiaries as an officer and director, including as a fiduciary of Company benefit plans, at levels not less than as provided in the Bylaws of the Company in effect on the Effective Date . I n addition, (i) Executive shall both during the Term and thereafter be covered by directors and officers liability insurance to the same extent that such coverage is then maintained for officers or directors of the Company in active service, and (ii) any “ tail ” policy providing directors and officers liability coverage that covers a period of service in which Executive is or was in active service with the Company and/or any of its subsidiaries shall cover such s ervice .

10. Successors and Assigns . T his Agreement shall inure to the benefit of and be enforceable by ServiceMaster and its successors and assigns , and upon any such assignment, all references to “ServiceMaster” or the “Company” shall be deemed to refer to such successor or assignee, and by Executive and Executive ’ s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees . Notwithstanding the foregoing, any assignment of this Agreement by ServiceMaster, other than to Spinco (as such term is defined in the PRSU Agreement) or any parent entity or subsidiary thereof (or any other subsidiary of Parent established for the purpose of furthering the Spin-Off (as such term is defined in the PRSU Agreement)), in each such case in connection with the implementation of the Spin-Off, shall be subject to Executive’s consent . T his Agreement shall not be terminated by any merger or consolidation of ServiceMaster whereby ServiceMaster is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of ServiceMaster . I n the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred.

11. Notice . A ll notices and other communications required or permitted under this Agreement (including the notice required by the definition of Good Reason as set forth in Exhibit A) shall be in writing, shall be given by personal delivery, overnight delivery by an established courier service, or by certified mail, return receipt required, and shall be deemed to have been duly given when delivered, addressed ( a ) if to Executive, at his address in the records of the Company, and if to ServiceMaster, to Servic eMaster Global Holdings, Inc. , 860 Ridge Lake Blvd., Memphis, TN 38120, attention Senior Vice President, Human Resources, or ( b ) to such other address as either party may have furnished to the other in writing in accordance herewith.

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12. Entire Agreement; Amendments . E xcept as otherwise specified herein, this Agreement and the Exhibits constitute the entire agreement and understanding between the parties with respect to the subject matter hereof and supersede and preempt any prior understandings, agreements or representations by or between the parties, written or oral, which may have related in any manner to the subject matter hereof.

13. Modification or Waiver . N o provision of this Agreement may be modified or waived unless such modification or waiver is agreed to in writing and signed by Executive and a member of the Board . N o waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time . F ailure by Executive or ServiceMaster to insist upon strict compliance with any provision of this Agreement or to assert any right which Executive or ServiceMaster may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

14. Governing Law; Validity . T he interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without regard to the principle of conflicts of laws . T he invalidity or enforceability of any provision of this Agreement shall not affect the validity or enforceability of any of the other provisions of this Agreement, which other provisions shall remain in full force and effect.

15. Withholding . A ny payments provided for herein shall be reduced by any amounts required to be withheld by the Company from time to time under applicable Federal, state or local income or employment tax laws or similar statutes or other provisions of law then in effect.

16. Payments by Subsidiaries . E xecutive acknowledges that one or more payments hereunder may be paid by one or more of the Company ’ s subsidiaries, and Executive agrees that any such payment made by such subsidiary shall satisfy the obligations of the Company hereunder with respect to (but only to the extent of) such payment.

17. Section 409A ; Section 280G .

(a) T o the extent that any reimbursement, fringe benefit, or other similar plan or arrangement in which Executive participates during the term of Executive ’ s employment under this Agreement or thereafter provides for a “ deferral of compensation ” within the meaning of Section 409A of the Code, ( i ) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; ( ii ) the amount eligible for reimbursement or payment under such plan or arrangement in one calendar year may not affect the amount eligible for reimbursement or payment in any other calendar year (except that a plan providing medical or health benefits may impose a generally applicable limit on the amount that may be reimbursed or paid); ( iii ) subject to any shorter time periods provided in any expense reimbursement policy of the Company, any reimbursement or payment of an expense under such plan or arrangement must be made on or before the last day of the calendar year following the calendar year in which the expense was incurred; and ( iv ) the reimbursements shall be made pursuant to objectively determinable and nondiscretionary Company policies and procedures regarding such reimbursement of expenses . I n addition, with respect to any

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payments or benefits subject to Section 409A, reference to Executive ’ s “ Date of Termination ” (and corollary terms) with the Company shall be construed to refer to Executive ’ s “ separation from service ” (as determined under Treas . R eg . Section 1.409A-1(h), as uniformly applied by the Company) with the Company . W henever a provision under this Agreement specifies a payment period with reference to a number of days, the actual date of payment within the specified period shall be within the sole discretion of the Company . E xecutive ’ s right to receive any installment payments hereunder shall, for purposes of Section 409A, be treated as a right to receive a series of separate and distinct payments . A ny tax gross-up payment provided for under this Agreement shall in no event be paid to Executive later than the December 31 of the calendar year following the calendar year in which such taxes are remitted by Executive .

(b) T o the extent that any of the payments and benefits provided for under this Agreement together with any payments or benefits under any other agreement or arran gement between the Company and Executive (collectively, the “Payments”) would constitute a “parachute payment” within the meaning of Section 280G of the Code, the amount of such Payments shall be reduced to the amount that would result in no portion of the Payments being subject to the excise tax imposed pursuant to Section 4999 of the Code if and only if such reduction would provide Executive with an after-tax amount greater than if there was no reduction. Any reduction shall be done in a manner that maximizes the amount to be retained by Executive, provided that to the extent any order is required to be set forth herein, then such reduction shall be applied in the following order: (i) payments that are payable in cash that are valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced (if necessary, to zero), with amounts that are payable last reduced first; (ii) payments due in respect of any equity valued at full value under Treasury Regulation Section 1.280G-1, Q&A 24(a) will be reduced next (if necessary, to zero), with amounts that are payable or deliverable last reduced first; (iii) payments that are payable in cash that are valued at less than full value under Treasury Regulation Section 1.280G- 1, Q&A 24 will be reduced next (if necessary, to zero), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24); (iv) payments due in respect of any equity valued at less than full value under Treasury Regulation Section 1.280G-1, Q&A 24 will be reduced next (if necessary, to zero), with the highest values reduced first (as such values are determined under Treasury Regulation Section 1.280G-1, Q&A 24); and (v) all other non-cash benefits not otherwise described in clauses (ii) or (iv) of this Section 7(b) will be next reduced prorata.

18. Counterparts . T his Agreement may be executed in counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to be one and the same instrument.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed the day and year first written above.


SERVICEMASTER GLOBAL HOLDINGS, INC.


By:		/s/ John Corness
	Name:	John Corness
	Title:	Chairman, Compensation Committee of the Board of Directors



EXECUTIVE


By:		/s/ Nikhil M. Varty
	Name:	Nikhil M. Varty

[ Signature Page to Employment Agreement ]

Exhibit A

As used in this Agreement, the following terms shall have the respective meanings set forth below:

(a) “ Cause ” means:

(1) a material breach by Executive of his duties and responsibilities (other than as a result of incapacity due to physical or mental illness) which is demonstrably willful and deliberate on Executive ’ s part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of ServiceMaster and which is not remedied within thirty (30) days after receipt of written notice from ServiceMaster specifying such breach; or

(2) Executive ’ s indictment for, conviction of or pleading guilty or nolo contendere to a felony or misdemeanor involving any act of fraud, embezzlement, or dishonesty, or any other intentional misconduct by Executive that adversely and significantly affects the business affairs or reputation of ServiceMaster or an affiliated company; or

(3) any failure by Executive to reasonably cooperate with any investigation or inquiry into Executive ’ s business practices, whether internal or external, including, but not limited to Executive ’ s refusal to be deposed or to provide testimony at any trial or inquiry.

Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless he has : ( i ) had ten (10) days ’ written notice setting forth the reasons for ServiceMaster ’ s intention to terminate for Cause; ( ii ) had an opportunity to be heard before the Board; and ( iii ) received a notice of termination from the Board stating that in the opinion of a majority of the full Board (excluding Executive) that Executive is responsible for conduct of a type set forth above and specifying in reasonable detail the particulars thereof.

(b) “ Change in Control ” shall have the meaning set forth in the Stock Incentive Plan; provided that in the event such definition shall be modified or revised in the Stock Incentive Plan, then the definition of Change in Control for purposes of this Agreement shall be so modified or revised .

(c) “ Disability ” f or purposes of this Agreement, shall be defined as the inability of Executive to have performed Executive’s material duties hereunder due to a physical or mental injury, infirmity or incapacity for one hundred eighty (180) days (including weekends and holidays) in any 365-day period.

(d) “ Good Reason ” means, without Executive ’ s written consent, the occurrence of any of the following events:

(1) any of ( i ) the reduction in any material respect in Executive ’ s position(s), authorities or respo nsibilities with ServiceMaster, ( ii ) Executive no longer

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reporting directly to a board of directors of a publicly traded company or ( iii ) any failure to appoint Executive to serve as CEO of a publicly traded company ;

(2) a material reduction in Executive ’ s Base Salary or Target Bonus , each as in effect on the Effective Date or as the same may be increased from time to time thereafter; except for any reduction by not more than 10 percent from Executive’s highest Base Salary or Target Bonus, to the extent a 10 percent reduction is applied equally to all named executive officers of the Company;

(3) a material change in the location of Executive ’ s location of work which will be at least more than 50 miles from ServiceMaster ’ s corporate offices as of the Effective Date; or

(4) any action or inaction by ServiceMaster that constitutes a material breach of the terms of this Agreement.

If Executive determines that Good Reason exists, Executive must notify ServiceMaster in writing, within ninety (90) days following the initial existence of such grounds which Executive determines constitutes Good Reason, or such event shall not constitute Good Reason under the terms of Executive ’ s employment . I f ServiceMaster remedies such event within thirty (30) days following receipt of such notice, Executive may not terminate employment for Good Reason as a result of such event (the “ Cure Period ”) . In the event ServiceMaster does not timely remedy such event, Ex ecutive must terminate his employment ninety ( 90 ) days following the end of the Cure P eriod. For the avoidance of doubt, in no event shall “Good Reason” exist solely as a result of Executive either (x) remaining CEO of ServiceMaster, as the same may exist immediately following the Spin-Off (as such term is defined in the PRSU Agreement) or (y) upon the Spin- O ff, becoming CEO of Spinco (as such term is defined in the PRSU Agreement), as the same may exist immediately following the Spin-Off.

(e) “ Stock Incentive Plan ” shall mean that certain Amended and Restated Company 2014 Omnibus Incentive Plan (and any successor plan) .

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Exhibit B

Form of Employee Performance Restricted Stock Unit Agreement

( see Exhibit 10.2 to ServiceMaster’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2017 )

Exhibit C

Form of Employee Restricted Stock Agreement

(see Exhibit 10.3 to ServiceMaster’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2017)

Exhibit D

Form of Employee Stock Option Agreement .

(see Exhibit 10.4 to ServiceMaster’s Quarterly Report on Form 10-Q
for the quarter ended June 30, 2017)

Exhibit E

Release Provisions

Release and Waiver of Claims . I n consideration of the payments and benefits to which you are entitled under the Employment Agreement, dated as of July 26, 2017 , to which you and ServiceMaster Global Holdings, Inc. (the “ Company ” ) are parties (the “ Employment Agreement ” ), you hereby waive and release and forever discharge the Company and its respective parent entities, subsidiaries, divisions, limited partnerships, affiliated corporations, successors and assigns and their respective past and present directors, managers, officers, stockholders, partners, agents, employees, insurers, attorneys, and servants each in his, her or its capacity as such, and each of them, separately and collectively (collectively, “ Releasees ” ), from any and all existing claims, charges, complaints, liens, demands, causes of action, obligations, damages and liabilities, known or unknown, suspected or unsuspected, whether or not mature or ripe, that you ever had and now have against any Releasee including, but not limited to, claims and causes of action arising out of or in any way related to your employment with or separation from the Company, to any services performed for the Company, to any status, term or condition in such employment, or to any physical or mental harm or distress from such employment or non-employment or claim to any hire, rehire or future employment of any kind by the Company, all to the extent allowed by applicable law . T his release of claims includes, but is not limited to, claims based on express or implied contract, compensation plans, covenants of good faith and fair dealing, wrongful discharge, claims for discrimination, harassment and retaliation, violation of public policy, tort or common law, whistleblower or retaliation claims; and claims for additional compensation or damages or attorneys ’ fees or claims under federal, state, and local laws, regulations and ordinances, including but not limited to Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act ( “ WARN ” ), or equivalent state WARN act, the Employee Retirement Income Security Act, and the Sarbanes-Oxley Act of 2002 . You understand that this release of claims includes a release of all known and unknown claims through the date on which this release of claims becomes irrevocable (the “ Effective Date ”). However, nothing in this Agreement prevents you from making any reports to or receiving any awards from the SEC or OSHA based upon the your reporting of violations of laws or regulations containing whistleblower provisions.

Limitation of Release : Notwithstanding the foregoing, this release of claims will not prohibit you from filing a charge of discrimination with the National Labor Relations Board, the Equal Employment Opportunity Commission or an equivalent state civil rights agency, but you agree and understand that you are waiving your right to monetary compensation thereby if any such agency elects to pursue a claim on your behalf . F urther, nothing in this release of claims shall be construed to waive any right that is not subject to waiver by private agreement under federal, state or local employment or other laws, such as claims for workers ’ compensation or unemployment benefits or any claims that may arise after the Effective Date . I n addition, nothing in this release of claims will be construed to affect any of the following claims, all rights in respect of which are reserved:

(a) Any payment or benefit set forth in this Employment Agreement;

(b) Reimbursement of unreimbursed business expenses properly incurred prior to the termination date in accordance with Company policy;

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(c) Claims under the Equity Awards Agreements (as defined in the Employment Agreement) in respect of vested Equity Awards (as defined in the Employment Agreement) then held by you and claims in respect of Common Stock solely in your capacity as a holder of Common Stock;

(d) Vested benefits under the general Company employee benefit plans (other than severance pay or termination benefits, all rights to which are hereby waived and released);

(e) Any claim for unemployment compensation or workers ’ compensation administered by a state government to which you are presently or may become entitled;

(f) Any claim that the Company has breached this release of claims; and

(g) Indemnification as a current or former director or officer of the Company or any of its subsidiaries (including as a fiduciary of any employee benefit plan), or inclusion as a beneficiary of any insurance policy related to your service in such capacity.

Covenants Not to Sue. To the extent that any c laims covered by the scope of the release

herein is not subject to waiver by applicable law (including, without limitation, any c laims arising under or related to FMLA, FLSA, and any other local, state or federal statute governing employment and/or the payment of wages and benefits), you hereby covenant and agree not to sue or otherwise seek any remedy or other form of relief against any of the Releasees relating to such c laims .

Representations . You represent that you have been provided all benefits due under the Family and Medical Leave Act and that you have received all wages due, including overtime pay, premium pay, vacation pay, bonus pay, commissions, or other compensation, and that you have received all appropriate meals and rest breaks to which you were entitled, in compliance with the Fair Labor Standards Act and applicable state and local law, that you have no known workplace injuries or occupational diseases, and that you have not made any report of or opposed any fraud or other wrong doing at the Company and that you have not been retaliated against for reporting or opposing any alleged fraud or other wrongdoing at the Company.

Return of ServiceMaster Property . Not later than the Effective Date, you agree to return, or hereby represent that you have returned as of such date (if you have not signed this Agreement by such date), to ServiceMaster all ServiceMaster property, equipment and materials, including, but not limited to, any company vehicle, any laptop computer and peripherals; any cell phone or other portable computing device; any telephone calling cards; keys; ServiceMaster identification card; any credit or fuel cards; and all tangible written or graphic materials (and all copies) relating in any way to ServiceMaster or its business, including, without limitations, documents, manuals, customer lists and reports, as well as all data contained on computer files, “thumb” drives, “cloud” services, or other data storage device, or home or personal computers and/or e ‑mail or internet accounts. Provided, however, Executive m ay retain his address book to the extent i t only contai ns contact information and the C o m pany shall cooperate with E xecuti ve on the transfer of his cell phone number to Executive.

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Exhibit F

Form of Indemnification Agreement

(see Exhibit 10.71 to ServiceMaster’s Registration Statement on Form S-1, filed June 19, 2014)

Exhibit 10.2

EXECUTION VERSION

Performance Restricted Stock Unit Agreement

This Performance Restricted Stock Unit Agreement (this “ Award Agreement ”), dated as of July 26, 2017 (the “ Grant Date ”), between ServiceMaster Global Holdings, Inc., a Delaware corporation (the “ Company ”), and Nikhil M. Varty (the “ Participant ”), is being e ntered into pursuant to Article IX of the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “ Plan ”) . The meaning of capitalized terms that are not defined in this Award Agreement may be found in the Plan. Reference is made to that certain Employment Agreement between the Company and the Associate, dated July 26, 2017 (the “ Employment Agreement ”).

The Company and the Participant hereby agree as follows:

Section 1. Confirmation of Grant . Subject to the terms of this Award Agreement, the Company hereby evidences and confirms, effective as of the Grant Date, its grant to the Participant of Performance Shares representing the right to receive 35,562 Shares, which represents the number of Shares tha t would be earned under Section 2 of this Award Agreement upon the occurrence of a Vesting Date as set forth in Section 2 . This Award Agreement is entered into pursuant to, and the terms of the Performance Shares are subject to, the terms of the Plan . If there is any conflict between this Award Agreement and the terms of the Plan, the terms of the Plan shall govern.

Section 2. Vesting and Forfeiture . The Performance Shares shall vest on the earli er to occur of the following events on or prior to March 31, 2019 (the period between and including the Grant Date and such date, the “ Performance Cycle ”) : (a) the Spin-Off, and (b) a Change in Control ( any such event, the “ Vesting Date ”), subject to the Participant’s continued employment with the Company or any Subsidiary through the Vesting Date . For purposes of the forgoing, (i) “ Spin-Off ” means the date on which the separation of (a) the American Home Shield business or (b) the Terminix and Franchise Services Group businesses of the Company Group (as defined in Section 6(a) below) (either of (a) or (b), a “ Separated Business ”) from the remainder of the Company Group businesses is completed by means of (i) any merger or other business combination pursuant to which any Separated Business is combined with that of a third party; (ii) the acquisition by a third party, directly or indirectly, of a majority of the capital stock or assets of any Separated Business; or (iii) any spin-off, split-off or other extraordinary dividend of a majority of the capital stock, cash or assets of any Separated Business .

Any Performance Shares that do not become vested as of March 31, 2019 , shall be forfeited.

Section 3. Effect of Termination of Employment . Upon termination of the Participant’s employment with the Company and its Subsidiaries for any reason prior to the Vesting Date, the Performance Shares evidenced by this Award Agreement shall be forfeited, provided that if the Participant’s employment is terminated :

(a) in a “ Special Termination ” ( i.e. , by reason of the Participant’s death or Disability (as defined in the Employment Agreement ) that occurs prior to the Vesting Date, then the Participant’s Performance Shares evidenced by this Award Agreement shall

become vested as to the number of such Performance Shares that would have vested under Section 2, multiplied by a fraction, the numerator of which is the number of days elapsed from the Grant Date through the date of the Special Termination and the denominator of which is the number of days in the Performance Cycle ; and

(b) In a termination of employment pursuant to Section 6(a) of the Employment Agreement that occurs prior to the Vesting Date (a “Qualifying Termination”), then the Participant’s Performance Shares evidenced by this Award Agreement shall become vested as to 100% of such Performance Shares that would have vested under Section 2 .

The Participant, or the Participant’s estate or beneficiary, shall receive one Share in respect of each such ves ted Performance Share within 75 days following , as applicable, the date of the Special Termination or, subject to the Participant’s satisfaction of his obligations under Section 6(g) of the Employment Agreement, a Qualifying Termination .

Section 4. Dividend Equivalents . If the Company pays any cash dividend or similar cash distribution on the Company Common Stock, the Company shall credit to the Participant with an additional number of Performance Shares (“ Dividend Share s ”) equal to the (A) product of ( x ) the number of Performance Shares plus the number of additional Dividend Shares held by the Participant as of the record date for such distribution times ( y ) the per share amount of such dividend or similar cash distribution on Company Common Stock divided by (B) the Fair Market Value of a Share on the dividend payment date, rounded down to the nearest whole number . If the Company makes any dividend or other distribution on the Company Common Stock in the form of Shares or other securities, the Company will credit to the Participant with that number of additional Dividend Shares or other securities that would have been distributed with respect to the Number of Shares plus the number of additional Dividend Shares held by the Participant as of the record date for such distribution . Any additional Dividend Shares or other securities shall be subject to the same terms and conditions as apply to the related Performance Shares that resulted in the crediting of such Dividend Shares or other securities.

Section 5. Settlement ; Taxes .

(a) Except as otherwise provided in Article XIV of the Plan and in Section 4, promptly following the date on which the number of Performance Shares that vest is certified by the Administrator pursuant to Section 2 of this Award Agreement, but in any event not later than March 15 of the calendar year following the calendar year of the Vesting Date , the Participant shall receive one Share in respect of each such vested Performance Share .

(b) In connection with the vesting and settlement of the Performance Shares as provided in this Award Agreement, the Company or one of its Subsidiaries may require the Participant to remit to the Company an amount in cash sufficient to satisfy any applicable Withholding Taxes that may arise in connection therewith, in accordance with the provisions of Section 15.11 of the Plan; provided, however, that if at such time of vesting and settlement, the Participant is prohibited from trading or otherwise selling Shares due to the application of any trading policy of the Company or applicable law, the Company shall withhold Shares that would otherwise be issued to the Participant pursuant to Section 5(a) above to satisfy the Withholding Taxes , in accordance with the provisions of Section 15.11 that apply to such net settlement of Withholding Taxes .

Section 6. Miscellaneous .

(a) Restrictive Covenants . In consideration of the grant of the Performance Shares, during the Participant’s employment with the Company and its Subsidiaries (the “ Company Group ”) and for a period of twenty-four (2 4 ) months following the termination of the Participant’s employment (whether such termination is initiated by the Participant or the Participant’s employer) , the Participant shall be subject to the restrictive covenants set forth in Section 7 of the Employment Agreement .

(b) Dispute Resolution . Any dispute or controversy between the Participant and any member of the Company Group, whether arising out of or relating to this Award Agreement, the breach of this Award Agreement, or otherwise, shall be resolved in acc ordance with the dispute resolution provision s set forth in the Employment Agreement .

(c) Incorporation of Forfeiture Provisions . The Participant acknowledges and agrees that, pursuant to the Plan, the Participant shall be subject to the Company’s Clawback Policy and any generally applicable disgorgement or forfeiture provisions set forth in Article XIII of the Plan as of the date of this Award Agreement or as required by applicable law after the date of this Award Agreement.

(d) Authorization to Share Personal Data . The Participant authorizes any Affiliate of the Company that employs the Participant or that otherwise has or lawfully obtains personal data relating to the Participant to divulge such personal data to the Company if and to the extent appropriate in connection with this Award Agreement or the administration of the Plan.

(e) No Right to Continued Employment . Nothing in this Award Agreement shall be deemed to confer on the Participant any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.

(f) Binding Effect; Benefits . This Award Agreement shall be binding upon and inure to the benefit of the parties to this Award Agreement and their respective successors and assigns . Nothing in this Award Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Award Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(g) Waiver; Amendment . The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Award Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder . This Award Agreement may not be amended, modified or supplemented, except ( i ) by a written instrument executed by the P articipant and the Company or ( ii ) as authorized under the Plan (including under Se ction 4.3 of the Plan) .

(h) Applicable Law . This Award Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws

of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction. Subject to the dispute resolution provision contained herein, any judicial action to enforce, interpret or challenge this Award Agreement shall be brought in the federal or state courts located in the State of Delaware, which shall be the exclusive forum for resolving such disputes. Both parties irrevocably consent to the personal jurisdiction of such courts for purposes of any such action.

(i) Section 409A . Section 15.12 of the Plan shall apply to this Award and is incorporated herein by reference.

(j) Section and Other Headings, etc. The section and other headings contained in this Award Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Award Agreement.

(k) Counterparts . This Award Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Company and the Participant have executed this Agreement as of the date first above written.


SERVICEMASTER GLOBAL HOLDINGS, INC.


By:		/s/ James T. Lucke
	Name:	James T. Lucke
	Title:	Senior Vice President, General Counsel and Secretary



THE PARTICIPANT:


		/s/ Nikhil M. Varty

[ Signature Page to Performance Restricted Stock Unit Agreement ]

Exhibit 10.3

EXECUTION VERSION

Employee Restricted Stock Agreement

Thi s Employee Restricted Stock A greement, dated as of July 26, 2017 (the “ Grant Date ”), between ServiceMaster Global Holdings, Inc., a Delaware corporation (the “ Company ”), and the associate whose name appears on the signature page hereof and who is employed by the Company or one of its Subsidiaries (the “ Associate ”) , is being entered into pursuant to the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “ Plan ”) . The meaning of capitalized terms may be found in the Plan. Reference is made to that certain Employment Agreement between the Company and the Associate, dated July 26, 2017 (the “ Employment Agreement ”).

The Company and the Associate hereby agree as follows:

Section 1. Grant of Restricted Stock . Subject to the terms of this Agreement, the Company hereby evidences and confirms, effective as of the date hereof, its grant to the Ass ociate of the number of shares of Company Common Stock specified on the signature page hereof that are subject to the vesting restrictions specified in Section 2 below (the “ Restricted Stock ”) . This Agreement is entered into pursuant to, and the ter ms of the Restricted Stock are subject to, the terms of the Plan . If there is any conflict between this Agreement and the terms of the Plan, the terms of the Plan shall govern.

Section 2. Vesting and Forfeiture .

(a) Based on Continued Employment . The Ass ociate’s Restricted Stock shall vest in full on the first anniversary of the Grant Date, subject to the Associate’s continued employment with the Compan y or any Subsidiary through such date (the “ Vesting Date ”) .

(b) Discretionary Acceleration . The Administrator, in its sole discretion, may accelerate the vesting of all or a porti on of the Restricted Stock at any time and from time to time.

(c) Effect of Termination of Employment . Upon a termination of the Associate’s employment with the Company and its Subsidiaries for any reason (whether initiated by the Company or by the Associate), any unvested Restricted Stock shall be forfeited, provided that upon a termination of the Associate’s employment by the Company without Cause (as defined in the Employment Agreement), a resignation by the Associate for Good Reason (as defined in the Employment Agreement) or a termination of the Associate’s employment by reason of death or Disability (as defined in the Employment Agreement), subject to the Associate’s satisfaction of his obligations under Section 6(g) of the Employment Agreement, the Restricted Stock shall vest in full as of the date of such termination .

(d) Change in Control .

(i) Vesting and Cancellation . Except as otherwise provided in Section 2 ( d ) (ii) , in the event of a Change in Control, any then unvested Restricted Stock shall be canceled in exchange for a payme nt having a value equal to the

( x ) the product of the Change in Control Price, multiplied by ( y ) the aggregate number of shares of Restricted Stock outstanding immediately prior to the Change in Control, to be paid as soon as reasonably practicable, but in no event later than 30 days following the Change in Control.

(ii) Alternative Award . Notwithstanding Section 2(d)(i), no cancellation, termination, or settlement or other payment shall occur with respect to any Restricted Stock if the Administrator reasonably determines prior to the Change in Control that the Associate shall receive an Alternative Award meeting the requirements of the Plan; provided , however , that if Section 2(d)(i) becomes operative, but if the Associate is terminated without Cause or resigns with Good Reason , and such termination occurs between the date a definitive agreement is signed by the Company contemplating transactions which, if consummated, would result in a Change in Control and the date that is twenty-four (24) months following the Change in Control, all then outstanding unvested Restricted Stock , if any, shall become immediately vested and exercisable.

Section 3. Dividend Equivalents . If the Company pays any cash dividend or similar cash distribution on the Company Common Stock, the Company shall credit to an account established for the benefit of the Associate’s an amount equal to the product of ( x ) the number of shares of the As sociate’s Restricted Stock as of the record date for such distribution times ( y ) the per share amount of such dividend or similar cash distribution on Company Common Stock . Any cash amounts credited to the Associate’s account shall be subject to the same restrictions as app ly to the Restricted Stock and shall be paid to the Associate if and when the related Vesting Date occurs . If the Company makes any dividend or other distribution on the Company Common Stock in the form of Company Common Stock or other securities, the Company will credit the Associate’s account with that number of additional shares of Company Common Stock or other securities that would have been distributed with respect to that number of shares of Company Common Stock underlying the As sociate’s Restricted Stock as of the record date thereof . Any such additional shares of Company Common Stock or other securities shall be subject to the same restrictions as app ly to the Restricted Stock and shall be paid to the Associate if and when the related Vesting Date occurs.

Section 4. Vesting . Subject to Section 6(a), promptly following the date on which a Restricted Stock becomes vested on the Vesting Date, the Company shall deliver to the Associate , without payment, all shares of then-vested Restricted Stock .

Section 5. Restriction on Transfer; Non-Transfera bility of Restricted Stock . The Restricted Stock is not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) . Any purported transfer in violation of this Section 5 shall be void ab initio .

Section 6. Miscellaneous .

(a) Withholding . The Company or one of its Subsidiaries shall require the Associate to remit to the Company an amount in cash sufficient to satisfy any applicable Withholding Taxes that may arise in connection with the vesti ng of the Restricted Stock

and the related deliver y of the Shares to the Associate , in accordance with Section 15.11 of the Plan . Notwithstanding the preceding sentence, if the Associate elects not to remit cash in respect of such obligations and a facility is not available to the Associate by which the Associate may sell a number of Shares in the public market to satisfy such obligations, the Company shall reta in a number of Shares of the Re stricted Stock then vesting that have an aggregate Fair M arket Value as of the Vesting Date equal to the amount of such taxes required to be withheld (and the Associate shall thereupon be deemed to have satisfied his or her obligations under this Section 6(a)); provided that the number of Shares retained shall not be in excess of the minimum amount required to satisfy the statutory withholding tax obligations (it being understood that the value of any fractional share of Company Common Stock shall be paid in cash) ; and provided , further , however , that if at the time the Restricted Stock becomes vested , the Associate is prohibited from trading or otherwise selling Shares due to the application of any trading policy of the Company or applicable law, the n, notwithstanding the foregoing, the Company shall withhold Shares that would otherwise be issued to the Associate pursuant to Section 4 above to satisfy the Withholding Taxes, in accordance with the provisions of Section 15.11 that apply to such net settlement of Withholding Taxes . The number of Shares to be issued shall thereupon be reduced by the number of Shares so retained .

(b) Incorporation of Forfeiture Provisions . Th e Associate acknowledges and ag re e s that, pursuant to the Plan, he or she shall be subject to the Company’s Clawback Policy and any generally applicable disgorgement or forfeiture provisions set forth in Article XIII of the Plan as of the date of this Agreement or as required by applicable law after the date of this Agreement.

(c) Restrictive Covenants . In consideration of the grant of the Restricted Stock , during the Associate ’s employment with the Company and its Subsidiaries (the “ Company Group ”) and for a period of twenty-four (24) months following the termination of the Associate ’s employment (whether such termination is initiated by the Associate or the Associate ’s employer), the Associate shall be subject to the restrictive covenants set forth in Section 7 of the Employment Agreement.

(d) Dispute Resolution . Any dispute or controversy between Associate and the Company, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, shall be resolved in with the dispute resolution provisions set forth in the Employment Agreement .

(e) Authorization to Share Personal Data . The Associate authorizes any Affiliate of the Company that employs the Associate or that otherwise has or lawfully obtains personal data relating to the Associate to divulge such personal data to the Company if and to the extent appropriate in connection with this Agreement or the administration of the Plan.

(f) No Rights as Stockholder; No Voting Rights . The Associate shall have no rights as a stockholder of the Company with respe ct to any Restricte d Stock until the vesting of the Shares.

(g) No Right to Continued Employment . Nothing in this Agreement shall be deemed to confer on the Associate any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.

(h) Binding Effect; Benefits . This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(i) Waiver; Amendment .

(i) Waiver . Any party hereto or beneficiary hereof may by written notice to the other parties ( A ) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, ( B ) waive compliance with any of the conditions or covenants of the other parties cont ained in this Agreement and ( C ) waive or modify performance of any of the obligations of the other parties under this Agreement . Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.

(ii) Amendment . This Award Agreement may not be amended, modified or supplemented, except (i) by a written instrument executed by the Associate and the Company or (ii) as authorized under the Plan (including under Section 4.3 of the Plan).

(j) Assignability . Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Associate without the prior written consent of the other.

(k) Applicable Law and Forum . This Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction. Subject to the dispute resolution provision contained herein, any judicial action to enforce, interpret or challenge this Agreement shall be brought in the federal or state courts located in the State of Delaware, which shall be the exclusive forum for resolving such disputes . Both parties

irrevocably consent to the personal jurisdiction of such courts for purposes of any such action.

(l) Section and Other Headings, etc. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

(m) Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

[signature page follows]

IN WITNESS WHEREOF, the Company and the Associate have executed this Agreement as of the date first above written.


SERVICEMASTER GLOBAL HOLDINGS, INC.


By:		/s/ James T. Lucke
	Name:	James T. Lucke
	Title:	Senior Vice President, General Counsel and Secretary



ASSOCIATE:


		/s/ Nikhil M. Varty
	Name :	Nikhil M. Varty

Total Number of Shares
of Company Common Stock
Which Have B een Granted
Pursuant Hereto:

11,854

[ Signature Page to Restricted Stock Agreement ]

Exhibit 10.4

EXECUTION VERSION

Employee Stock Option Agreement

This Employee Stock Option Agreement, dated as of July 26, 20 17 (“the Grant Date”) , between ServiceMaster Global Holdings, Inc., a Delaware corporation (the “ Company ”), and the associate whose name appears on the signature page hereof and who is employed by the Company or one of its Subsidiaries (the “ Associate ”) , is being entered into pursuant to the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “ Plan ”). The meaning of capitalized terms used, but not otherwise defined, in this Agr eement may be found in the Plan. Reference is made to that certain Employment Agreement between the Company and the Associate, dated July 26, 2017 (the “ Employment Agreement ”).

The Company and the Associate hereby agree as follows:

Section 1. Grant of Options .

(a) Confirmation of Grant . The Company hereby evidences and confirms, effective as of the date hereof, its grant to the Associate of Options to purchase the number of shares of Company Common Stock specified on the signature page hereof . The Options are not intended to be Incentive Stock Options . This Agreement is entered into pursuant to, and the terms of the Options are subject to, the terms of the Plan . If there is any inconsistency between this Agreement and the terms of the Plan, the terms of the Plan shall govern.

(b) Option Price . Each share covered by an Option shall have the Option Price specified on the signature page hereof.

Section 2. Vesting and Exercisability .

(a) Vesting Schedule . Except as otherwise provided in the Plan or Section 2(b) of this Agreement, the Options shall become vested in four equal annual installments on each of the first through fourth anniversaries of the Grant Date, subject to the continuous employment of the Associate with the Company through each applicable vesting date; provided that if , subject to the Associate’s compliance with his obligations under Section 6(g) of the Employment Agreement :

(i) the Associate’s employment with the Company is terminated by reason of the Associate’s death or Disability (as defined in the Employment Agreement) , any Options held by the Associate shall immediately vest as of the effective date of such termination, and

(ii) t he Associate’s employment is terminated by the Company without Cause (as defined in the Employment Agreement) or the Associate resigns with Good Reason (as defined in the Employment Agreement) , in either event prior to March 31, 2019, the first installment of the Option s that would have vested on the first anniversary of the Grant Date as provided above , to the extent unvested as of the date of such termination, shall immediately vest as of the effective date of such termination.

(b) Discretionary Acceleration . The Administrator, in its sole discretion, may accelerate the vesting or exercisability of all or a portion of the Options, at any time and from time to time.

(c) Exercise . Once vested in accordance with the provisions of this Agreement, the Options may be exercised at any time and from time to time prior to the date such Option s terminate pursuant to Section 3 . Options may only be exercised with respect to whole shares and must be exerc ised in accordance with Section 4.

Section 3. Termination of Options .

(a) Normal Termination Date . Unless earlier terminated pursuant to Section 3(b) or the Plan, the Options shall terminate on the tenth anniversary of the Grant Date (the “ Normal Termination Date ”), if not exercised prior to such date.

(b) Early Termination . If the Associate’s employment with the Company terminates for any reason, any Options held by the Associate that have not vested before the effective date of such termination of employment (determined without regard to any statutory or deemed or express contractual notice period) or that do not become vested on such date in accordance with Section 2 shall terminate immediately upon such termination of employment (determined without regard to any statutory or deemed or express contractual notice period) and, if the Associate’s employment is terminated for Cause, all Options (whether or not then vested or exercisable) shall automatically terminate immediately upon such termination . All vested Options held by the Associate following the effective date of a termination of employment shall remain exercisable until the first to occur of ( i ) the one-year anniversary in the case of a termination by reason of the Associate’s death or Disability or a retirement from active service on or after the Associate reaches normal retirement age, or in the event of any other termination of employment, the three-month anniversary of the effective date of the Associate’s termination of employment (determined without regard to any deemed or express statutory or contractual notice period) , ( ii ) the Normal Termination Date or ( iii ) the cancellat ion of the Options pursuant to Section 5(a), and if not exercised within such period the Options shall automatically terminate upon the expiration of such period.

Section 4. Manner of Exercise . Subject to such reasonable administrative regulations as the Administrator may adopt from time to time, the exercise of vested Options by the Associate shall be pursuant to procedures set forth in the Plan or established by the Administrator from time to time and shall include the Associate specifying the proposed date on which the Associate desires to exercise a vested Option (the “ Exercise Date ”), the number of whole shares with respect to which the Options are being exercised (the “ Exercise Shares ”) and the aggregate Option Price for such Exercise Shares (the “ Exercise Price ”) or such other or different requirements as may be imposed by the Company . Unless otherwise deter mined by the Administrator, ( i ) on or before the Exercise Date the Associate shall deliver to the Company full payment for the Exercise Shares in United States dollars in cash, or cash equivalents satisfactory to the Company, in an amount equal to the Exercise Price plus any required withholding taxes or other similar taxes, charges or fees (including, if available, pursuant to a broker-assisted cashless exercise program established by the Company whereby the Associate may exercise vested Options by an exercise-and-sell procedure in which the Exercise Price (together with any required withholding taxes or other similar taxes, charges or fees) is obtained from the sale of shares in the public market) a nd ( ii ) the Company shall register the issuance of the Exercise Shares on its records (or direct such issuance to be

registered by the Company’s transfer agent) . The Company may require the Associate to furnish or execute such other documents as the Company shal l reasonably deem necessary ( i ) t o evidence such exercise or ( ii ) to comply with or satisfy the requirements of the Securities Act, applicable state or non ‑ U.S. securities laws or any other law.

Section 5. Change in Control .

(a) Vesting and Cancellation . Except a s otherwise provided in Section 5(b), in the event of a Change in Control, all then-outstanding Options (whether vested or unvested) shall be canceled in exchange for a payment having a value equa l to the excess, if any, of ( i ) the product of the Change in Control Price multiplied by the aggregate number of shares covered by all such Options immediately prior to the Change in Control over ( ii ) the aggregate Option Price for all such shares, to be paid as soon as reasonably practicable, but in no event later than 30 days f ollowing the Change in Control.

(b) Alternative Award . Notwithstanding Section 5(a), no cancellation, termination, or settlement or other payment shall occur with respect to any Option if the Administrator reasonably determines prior to the Change in Control that the Associate shall receive an Alternative Award meetin g the requirements of the Plan ; provided , however , that if this Section 5(b) becomes operative, but the Associate’s employment is terminate by the Company without Cause or the Associate resigns with Good Reason and any such termination occurs between the date a definitive agreement is signed by the Company contemplating transactions which , if consummated , would result in a Change in Control and the date that is twenty-four (24) months following the Change in Control, all then outstanding unvested Options shall become immediately vested and exercisable .

Section 6. Miscellaneous .

(a) Withholding . In connection with the exercise of any of the Option s as provided in this Award Agreement, the Company or one of its Subsidiaries may require the Associate to remit to the Company an amount in cash sufficient to satisfy any applicable Withholding Taxes that may arise in connection therewith, in accordance with the provisions of Section 15.11 of the Plan; provided, however , that if at such time of exercise , the Associate is prohibited from trading or otherwise selling Shares due to the application of any trading policy of the Company or applicable law, the Company shall withhold Shares that would otherwise be issued to the Associate pursuant to Section 4 above to satisfy the Withholding Taxes, in accordance with the provisions of Section 15.11 that apply to such net settlement of Withholding Taxes.

(b) Incorporation of Forfeiture Provisions . The Associate acknowledges and agrees that, pursuant to the Plan, he or she shall be subject to the Company’s Clawback Policy and any generally applicable disgorgement or forfeiture provisions set forth in Article XIII of the Plan as of the date of this Agreement or as required by applicable law after the date of this Agreement.

(c) Restrictive Covenants . In consideration of the grant of the Option, during the Associate’s employment with the Company and its Subsidiaries (the “ Company Group ”) and for a period of twenty-four ( 24 ) months following the termination of the Associate ’s employment (whether such termination is initiated by the Associate or the

Associate ’s employer), the Associate shall be subject to the restrictive covenants set forth in Section 7 of the Employment Agreement.

(d) Dispute Resolution . Any dispute or controversy between Associate and the Company, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, shall be resolved in accordance with the dispute resolutions in the Employment Agreement.

(e) Authorization to Share Personal Data . The Associate authorizes any Affiliate of the Company that employs the Associate or that otherwise has or lawfully obtains personal data relating to the Associate to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent appropriate in connection with this Agreement or the administration of the Plan.

(f) No Rights as Stockholder; No Voting Rights . The Associate shall have no rights as a stockholder of the Company with respect to any shares covered by the Options until the exercise of the Options and delivery of the shares.

(h) Non-Transferability of Options . The Options may be exercised only by the Associate . The Options are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than by will or by the laws of descent and distribution to the estate of the Associate upon the Associate’s death or with the Company’s consent.

(i) Binding Effect; Benefits . This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(j) Waiver; Amendment .

of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.

(ii) Amendment . This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Associate and the Company.

(k) Assignability . Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Associate without the prior written consent of the other party.

(l) Applicable Law and Forum . This Agreement shall be governed by and construed in accordance with the law of the State of Delaware regardless of the application of rules of conflict of law that would apply the laws of any other jurisdiction. Subject to the dispute resolution provision contained herein, any judicial action to enforce, interpret or challenge this Agreement shall be brought in the federal or state courts located in the State of Delaware, which shall be the exclusive forum for resolving such disputes. Both parties irrevocably consent to the personal jurisdiction of such courts for purposes of any such action.

(m) Waiver of Jury Trial . Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby . Each party ( i ) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enfor ce the foregoing waiver and ( ii ) acknowledges that it and the other parties have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this section.

(n) Section and Other Headings, etc. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

(o) Counterparts . This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

* * * * * *

IN WITNESS WHEREOF, the Company and the Associate have executed this Agreement as of the date first above written.


SERVICEMASTER GLOBAL HOLDINGS, INC.


By:		/s/ James T. Lucke
	Name:	James T. Lucke
	Title:	Senior Vice President, General Counsel and Secretary



ASSOCIATE:


By:		/s/ Nikhil M. Varty
	Name:	Nikhil M. Varty


Total Number of Shares for the Purchase of Which Options have been Granted	Option Price
100,241 Shares	$ 42.18

[ Signature Page to Stock Option Agreement ]

Exhibit 10. 5

ServiceMaster Global Holdings, Inc.

Schedule of Signatories* to a Director Indemnification Agreement

Mark E. Tomkins

Peter L. Cella

John B. Corness

Jerri L. DeVard

Laurie Ann Goldman

Richard P. Fox

Stephen J. Sedita

Nikhil M. Varty (effective July 26 , 201 7 )

* Robert J. Gillette, Thomas C. Tiller, Jr. , John Krenicki, Jr. , David H. Wasserman, Darren M. Friedman, Sarah Kim and Curtis D. Hecht each previously signed a Director Indemnification Agreement, but they are no longer serving on our Board of Directors.

The f orm of Director Indemnification Agreement was filed with the SEC on June 19, 2014 as Exhibit 10.71 to the Registration Statement on Form S-1 of ServiceMaster Global Holdings, Inc.

Exhibit 10.6

Performance Restricted Stock Unit Agreement

This Performance Restricted Stock Unit Agreement (this “ Award Agreement ”), dated as of July 26, 2017 (the “ Grant Date ”), between ServiceMaster Global Holdings, Inc., a Delaware corporation (the “ Company ”), and the participant whose name is set forth on the signature page hereto (the “ Participant ”), is being e ntered into pursuant to Article IX of the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “ Plan ”) . The meaning of capitalized terms that are not defined in this Award Agreement may be found in the Plan.

The Company and the Participant hereby agree as follows:

Section 1. Confirmation of Grant . Subject to the terms of this Award Agreement, the Company hereby evidences and confirms, effective as of the Grant Date, its grant to the Participant of Performance Shares representing the right to receive the number of Shares set forth opposite the Participant’s name on the signature page hereto , which represents the number of Shares tha t would be earned under Section 2 of this Award Agreement upon the occurrence of a vesting date as set forth in Section 2 (any such date, a “ Vesting Date ”) . This Award Agreement is entered into pursuant to, and the terms of the Performance Shares are subject to, the terms of the Plan . If there is any conflict between this Award Agreement and the terms of the Plan, the terms of the Plan shall govern.

Section 2. Vesting and Forfeiture . The Performance Shares shall vest on the Spin-Off (defined below) , subject to the Participant’s continued employment with the Company or any Subsidiary through the Spin-Off . For purposes of the forgoing, “ Spin-Off ” means the date on which the separation of (a) the American Home Shield business or (b) the Terminix and Franchise Services Group businesses of the Company Group (as defined in Section 6(a) below) (either of (a) or (b), a “ Separated Business ”) from the remainder of the Company Group businesses is completed by means of (i) any merger or other business combination pursuant to which any Separated Business is combined with that of a third party; (ii) the acquisition by a third party, directly or indirectly, of a majority of the capital stock or assets of any Separated Business; or (iii) any spin-off, split-off or other extraordinary dividend of a majority of the capital stock, cash or assets of any Separated Business . If the Spin-Off does not occur on or prior to March 31, 2019 (the “ Expiration Date ”), 100% of the Performance Shares shall be forfeited and canceled.

Section 3. Effect of Termination of Employment . Upon termination of the Participant’s employment with the Company and its Subsidiaries for any reason prior to the applicable Vesting Date, any unvested Performance Shares evidenced by this Award Agreement shall be forfeited, provided that if the Participant experiences a Special Termination (defined below) , and such Special Termination occurs prior to the Expiration Date, the Participant will vest in a number of Performance Shares equal to (a) 100% of the number of such Performance Shares that would have vested under Section 2 , multiplied by (b) a fraction, (i) the numerator of which is the number of days elapsed between the Grant Date and the date of s uch Special T ermination and (ii) the denominator of which is the number of days elapsed between the Grant Date and the Expiration Date. The Participant, or the Participant’s estate or beneficiary, shall receive one Share in respect of each such vested Performance Share within 75 days following, as applicable, the date of the Special Termination. A “ Special Termination ” means a termination of the Participant’s employment (i) by the Company without Cause, (ii) due to the Participant’s death or (iii) due to the Participant’s Disability.

of the record date for such distribution times ( y ) the per share amount of such dividend or similar cash distribution on Company Common Stock divided by (B) the Fair Market Value of a Share on the dividend payment date, rounded down to the nearest whole number . If the Company makes any dividend or other distribution on the Company Common Stock in the form of Shares or other securities, the Company will credit to the Participant that number of additional Dividend Shares or other securities that would have been distributed with respect to the number of Shares plus the number of additional Dividend Shares held by the Participant as of the record date for such distribution . Any additional Dividend Shares or other securities shall be subject to the same terms and conditions as apply to the related Performance Shares that resulted in the crediting of such Dividend Shares or other securities.

Section 5. Settlement ; Taxes .

(a) Except as otherwise provided in Article XIV of the Plan and in Section 3 , promptly following the date on which the number of Performance Shares that vest is certified by the Administrator pursuant to Section 2 of this Award Agreement, but in any event not later than March 15 of the calendar year following the calendar year of the applicable Vesting Date , the Participant shall receive one Share in respect of each such vested Performance Share .

(b) In connection with the vesting and settlement of the Performance Shares as provided in this Award Agreement, the Associate (through the stock plan administrator) will sell a number of Shares in the public market to satisfy any applicable Withholding Taxes that may arise in connection with the vesting, or the Company or one of its Subsidiaries may allow the Participant to remit to the Company an amount in cash sufficient to satisfy any applicable Withholding Taxes that may arise in connection therewith, in accordance with the provisions of Section 15.11 of the Plan ; provided, however, that if at such time of vesting and settlement, the Participant is prohibited from trading or otherwise selling Shares due to the application of any trading policy of the Company or applicable law, the Company shall withhold Shares that would otherwise be issued to the Participant pursuant to Section 4 above to satisfy the Withholding Taxes , in accordance with the provisions of Section 15.11 that apply to such net settlement of Withholding Taxes .

Section 6. Miscellaneous .

(a) Restrictive Covenants . In consideration of the grant of the Performance Shares , during the Participant ’s employment with the Company Group and for a period of twelve (12) months following the termination of the Participant ’s employment (whether such termination is initiated by the Participant or the Participant ’s employer), the Participant shall not (i) become employed by, operate or provide services to any business or other entity that competes with the Company Group; (ii) solicit or sell any product or service in competition with the Company Group to any person, business or other entity that is a customer of the Company Group; (iii) interfere with the Company Group’s relations with any of its customers, franchisees, subcontractors, consultants, vendors or business partners; or (iv) induce or encourage any Company Group employee to leave his/her position or to seek employment or association with any person or entity other than the Company Group. This Agreement is in addition to and does not supersede any other agreements between the Participant and the Company Group prohibiting competition with the Company Group. Nothing in this paragraph shall be construed to restrict the right of an attorney to practice law to the extent protected by statute, common law or applicable rules of professional conduct. “ Company Group ” means the Company and its Subsidiaries.

(b) Dispute Resolution . Any dispute or controversy between the Participant and the Company, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, shall be resolved in accordance with the ServiceMaster We Listen Dispute Resolution Plan then in effect. Notwithstanding the foregoing, the Participant agrees that the Company may seek a temporary restraining order and/or preliminary injunction in any court of competent jurisdiction, without the posting of a bond, in order to preserve the status quo or to enforce the restrictive covenants in Section 6 ( a ) of this Agreement.

(f) No Right to Awards . The Participant acknowledges and agrees that the grant of any Performance Shares (i) is being made on an exceptional basis and is not intended to be renewed or repeated, (ii) is entirely voluntary on the part of the Company and its Subsidiaries and (iii) should not be construed as creating any obligation on the part of the Company or any of its Subsidiaries to offer any Performance Shares in the future.

(g) Binding Effect; Benefits . This Award Agreement shall be binding upon and inure to the benefit of the parties to this Award Agreement and their respective successors and assigns . Nothing in this Award Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Award Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(h) Waiver; Amendment . The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Award Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder . This Award Agreement may not be amended, modified or supplemented, except ( i ) by a written instrument executed by the P articipant and the Company or ( ii ) as authorized under the Plan (including under Se ction 4.3 of the Plan) .

(i) Notices . All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given if delivered personally or sent by certified or express mail, return receipt requested, postage prepaid, or by any recognized international equivalent of such delivery, to the Company or the Participant , as the case may be, at the following addresses or to such other address as the Company or the Participant , as the case may be, shall specify by notice to the other:

if to the Company, to it at:

ServiceMaster Global Holdings, Inc.

860 Ridge Lake Boulevard

Memphis, Tennessee 38120

Attention : General Counsel

Fax: (901) 597-8025

if to the Participant , to the Participant at his or her most recent address as shown on the books and records of the Company or Subsidiary employing the Participant .

All such notices and communications shall be deemed to have been received on the date of delivery if delivered personally or on the third business day after the mailing thereof.

(j) Applicable Law . This Award Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction. Subject to the dispute resolution provision contained herein, any judicial action to enforce, interpret or challenge this Award Agreement shall be brought in the federal or state courts located in the State of Delaware, which shall be the exclusive forum for resolving such disputes. Both parties irrevocably consent to the personal jurisdiction of such courts for purposes of any such action.

(k) Section 409A . Section 15.12 of the Plan shall apply to this Award and is incorporated herein by reference.

(l) Section and Other Headings, etc. The section and other headings contained in this Award Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Award Agreement.

(m) Counterparts . This Award Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Company and the Participant have executed this Agreement as of the date first above written.


	SERVICEMASTER GLOBAL HOLDINGS, INC.


	By:
		Name:
		Title:



	THE PARTICIPANT:



		Name:

Number of Performance Shares: _________

[ Signature Page to Performance Restricted Stock Unit Agreement ]

Exhibit 10.7

Performance Restricted Stock Unit Agreement

This Performance Restricted Stock Unit Agreement (this “ Award Agreement ”), dated as of July 26, 2017 (the “ Grant Date ”), between ServiceMaster Global Holdings, Inc., a Delaware corporation (the “ Company ”), and the participant whose name is set forth on the signature page hereto (the “ Participant ”), is being e ntered into pursuant to Article IX of the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “ Plan ”) . The meaning of capitalized terms that are not defined in this Award Agreement may be found in the Plan.

The Company and the Participant hereby agree as follows:

Section 1. Confirmation of Grant . Subject to the terms of this Award Agreement, the Company hereby evidences and confirms, effective as of the Grant Date, its grant to the Participant of Performance Shares representing the right to receive the number of Shares set forth opposite the Participant’s name on the signature page hereto , which represents the number of Shares tha t would be earned under Section 2 of this Award Agreement upon the occurrence of a vesting date as set forth in Section 2 (any such date, a “ Vesting Date ”) . This Award Agreement is entered into pursuant to, and the terms of the Performance Shares are subject to, the terms of the Plan . If there is any conflict between this Award Agreement and the terms of the Plan, the terms of the Plan shall govern.

Section 2. Vesting and Forfeiture . 50% of the Performance Shares shall vest on the Spin-Off and 50% of the Performance Shares shall vest on the first anniversary of the Spin-Off, subject in each case to the Participant’s continued employment with the Company or any Subsidiary through the applicable Vesting Date. For purposes of the forgoing, “ Spin-Off ” means the date on which the separation of (a) the American Home Shield business or (b) the Terminix and Franchise Services Group businesses of the Company Group (as defined in Section 6(a) below) (either of (a) or (b), a “ Separated Business ”) from the remainder of the Company Group businesses is completed by means of (i) any merger or other business combination pursuant to which any Separated Business is combined with that of a third party; (ii) the acquisition by a third party, directly or indirectly, of a majority of the capital stock or assets of any Separated Business; or (iii) any spin-off, split-off or other extraordinary dividend of a majority of the capital stock, cash or assets of any Separated Business. If the Spin-Off does not occur on or prior to March 31, 2019 (the “ Expiration Date ”), 100% of the Performance Shares shall be forfeited and canceled.

Section 3. Effect of Termination of Employment . Upon termination of the Participant’s employment with the Company and its Subsidiaries for any reason prior to the applicable Vesting Date, any unvested Performance Shares evidenced by this Award Agreement shall be forfeited, provided that if the Participant experiences a Special Termination (defined below) , (a) if suc h Special T ermination occurs on or prior to the Spin-Off and the Expiration Date , the Participant will vest in a number of Performance Shares equal to (i) the number of Performance Shares that would have vested on the Spin-Off (i.e., 50% of the Performance Shares), multiplied by (ii) a fraction, the numerator of which is the number of days elapsed between the Grant Date and t he date of the Special Termination and the denominator of which is the number of days elapsed between the Grant Date and the E xpiration Date and (b) if such Special T erminat ion occurs on or following the S pin-Off, the Participant will vest in a number of Performance Shares equal to (a) the number of Performance Shares that would have vested on the first anniversary of the Spin-Off (i.e., 50% of the Performance Shares), multiplied by (b) a fraction, the numerator of which is the number of days elapsed between the Spin-Off and the date of the Special Termination and the denominator of which is 365 . The Participant, or the Participan t ’s estate or beneficiary, shall

receive one Share in respect of each such ves ted Performance Share within 75 days following , as applicable, the date of the Special Termination. A “ Special Termination ” means a termination of the Participant’s employment (i) by the Company without Cause, (ii) due to the Participant’s death or (iii) due to the Participant’s Disability.

Section 4. Dividend Equivalents . If the Company pays any cash dividend or similar cash distribution on the Company Common Stock, the Company shall credit to the Participant with an additional number of Performance Shares (“ Dividend Share s ”) equal to the (A) product of ( x ) the number of Performance Shares plus the number of additional Dividend Shares held by the Participant as of the record date for such distribution times ( y ) the per share amount of such dividend or similar cash distribution on Company Common Stock divided by (B) the Fair Market Value of a Share on the dividend payment date, rounded down to the nearest whole number . If the Company makes any dividend or other distribution on the Company Common Stock in the form of Shares or other securities, the Company will credit to the Participant that number of additional Dividend Shares or other securities that would have been distributed with respect to the number of Shares plus the number of additional Dividend Shares held by the Participant as of the record date for such distribution . Any additional Dividend Shares or other securities shall be subject to the same terms and conditions as apply to the related Performance Shares that resulted in the crediting of such Dividend Shares or other securities.

Section 5. Settlement ; Taxes .

(b) In connection with the vesting and settlement of the Performance Shares as provided in this Award Agreement , the Associate (through the stock plan administrator) will sell a number of Shares in the public market to satisfy any applicable Withholding Taxes that may arise in connection with the vesting, or the Company or one of its Subsidiaries may allow the Participant to remit to the Company an amount in cash sufficient to satisfy any applicable Withholding Taxes that may arise in connection therewith, in accordance with the provisions of Section 15.11 of the Plan ; provided, however, that if at such time of vesting and settlement, the Participant is prohibited from trading or otherwise selling Shares due to the application of any trading policy of the Company or applicable law, the Company shall withhold Shares that would otherwise be issued to the Participant pursuant to Section 4 above to satisfy the Withholding Taxes , in accordance with the provisions of Section 15.11 that apply to such net settlement of Withholding Taxes .

Section 6. Miscellaneous .

is a customer of the Company Group; (iii) interfere with the Company Group’s relations with any of its customers, franchisees, subcontractors, consultants, vendors or business partners; or (iv) induce or encourage any Company Group employee to leave his/her position or to seek employment or association with any person or entity other than the Company Group. This Agreement is in addition to and does not supersede any other agreements between the Participant and the Company Group prohibiting competition with the Company Group. Nothing in this paragraph shall be construed to restrict the right of an attorney to practice law to the extent protected by statute, common law or applicable rules of professional conduct. “ Company Group ” means the Company and its Subsidiaries.

if to the Company, to it at:

ServiceMaster Global Holdings, Inc.

860 Ridge Lake Boulevard

Memphis, Tennessee 38120

Attention : General Counsel

Fax: (901) 597-8025

if to the Participant , to the Participant at his or her most recent address as shown on the books and records of the Company or Subsidiary employing the Participant .

All such notices and communications shall be deemed to have been received on the date of delivery if delivered personally or on the third business day after the mailing thereof.

(k) Section 409A . Section 15.12 of the Plan shall apply to this Award and is incorporated herein by reference.

IN WITNESS WHEREOF, the Company and the Participant have executed this Agreement as of the date first above written.


	SERVICEMASTER GLOBAL HOLDINGS, INC.


	By:
		Name:
		Title:



	THE PARTICIPANT:



		Name:

Number of Performance Shares: _________

[ Signature Page to Performance Restricted Stock Unit Agreement ]

Exhibit 10.8

EXECUTION VERSION

July 30 , 2017

Robert J. Gillette

Chief Executive Officer
ServiceMaster Global Holdings, Inc.
860 Ridge Lake Blvd.
Memphis, TN 38120

Re: Separation and Consulting Agreement

Dear Rob :

This letter memorializes our recent discussions and confirm s the terms of your separation from ServiceMaster . W e respect and are grateful for your dedicated service to ServiceMaster and appreciate your willingness to continue to provide services to ServiceMaster for a transition period .

This Separation and Consulting Agreement ( this “ Agreement ”) is mad e and entered into by you, Robert J. Gillette (collectively referred to as “ you ”) and ServiceMaster Global Holdings , Inc. (“ ServiceMaster ”). Reference is made herein to your employment agreement with ServiceMaster, dated June 14, 2013, as amended on August 13, 2013 and February 28, 2014 (your “ Employment Agreement ”). Exhibit A to this Agreement contains the general release of claims referenced in Section 6(i) of your Employment Agreement, which you are obligated to sign following your Date of Termination (as such term is defined in your Employment Agreement) in accordance with the terms of your Employment Agreement as a condition to your receipt of the severance payments and benefits provided to you under Sections 6(a)(3) , 6(a)(4), and Section 6(d), of your Employment Agreement (the “ Release ”) .

In consideration of the promises and benefits contained in this Agreement, the parties hereby agree as follows:

1. Separation from Service ; Consulting Period .

(a) Effective as of July 25, 2017, you have ceased to hold the position of Chief Executive Officer and any other officer and director position with any of the entities that comprise ServiceMaster . Effective as of the date set forth above your name on the signature page hereto or such earlier date on which you provided written notice to the Board of Directors of ServiceMaster (the “ Board ”) of your resignation, you have resigned from the Board . You acknowledge that, except as otherwise provided in Sections 1(b) and (d) below, from and after July 25, 2017 , you shall no longer be authorized to conduct business on behalf of ServiceMaster , including , but not limited , to entering into contracts, speaking or otherwise making commitments, on behalf of ServiceMaster . You agree that, as requested by ServiceMaster from time to time following July 25, 2017 , you will execute such other documents as may be necessary to ev idence the foregoing resignation.

(b) Commencing on July 25, 2017 and ending on August 24, 2017 (the “ Garden Leave Period ” ), you will remain an employee of ServiceMaster and provide advisory and such other transition services as the Board may reasonably request. During the Garden Leave Period it

is expected that you will provide services in excess of 20% of the average level of your services as an employee of ServiceMaster over the 36-month period prior to July 25, 2017 and accordingly will not have a “separation from service” (as defined below) . D uring the Garden Leave Period, ServiceMaster will continue to pay your base salary and provide you with continued coverage under all employee benefit plans of ServiceMaster in which you participate as of the date of this Agreement, and you will continue to vest in your outstand ing ServiceMaster equity awards .

(c) Your employment with ServiceMaster will terminate on the last day of the Garden Leave Period . Except as provided in Section 1(d) , y our s eparation from service with ServiceMaster on the last day of the Garden Leave Period (your “ Separation ”) shall be treated as a termination “without cause” for purposes of ( i ) your Employment Agreement , ( ii ) any other applicable compensatory agreements to which you and ServiceMaster are parties , and ( iii ) the employee benefit plans of ServiceMaster in which you participate.

(d) Commencing on August 24, 2017 and ending on September 30, 2017 (the “ Consulting Period ”), you will provide ongoing consulting advice and transition services to ServiceMaster (with the nature of such services to be consist ent with the level of your prior position ) , at the reasonable request and direction of the Board. Consistent with the intent that you experience a “separation from service” (within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended ) on August 24, 2017 , your services during each month of the Consulting Period will not exceed 20% of the average level of your services as an employee of ServiceMaster over the 36-month period prior to August 24, 2017. During the Consulting Period, and subject to your continued material compliance with the covenants referenced in Section 4 , 6 , 7 and 8 of this Agreement and your execution without revocation of the Release, all of your ServiceMaster equity awards that are set forth on Schedule I will continue to vest in accordance with their terms as if you had remained an active employee of ServiceMaster . You will receive a monthly consulting fee of $15,000 per month during the Consulting Period , prorated for any partial months of services as a consultant . ServiceMaster also will reimburse your reasonable travel expenses, if any, incurred to provide such consulting and transition services. Except as described in this paragraph or as required under the Employment Agreement as a result of your Separation , during the Consulting Period, you will not receive any other compensation or benefits from ServiceMaster . During the Consulting Period, you will be an independent contractor and nothing contained herein shall be deemed to make you an employee of ServiceMaster or to empower you to bind or obligate ServiceMaster in any way. You are solely responsible for paying all of your own tax obligations, as well as those due for any employee/subcontractor permitted to work for you hereunder.

(e) B y entering into this Agreement, you confirm that your resignation from the Board is not the result of any disagreement with ServiceMaster on any matter relating to Service Master’s operations, policies or practices and know of no violations of law or ServiceMaster policy that have not been reported through the appropriate channels in accordance with ServiceMaster policy.

2. Equity Grants . A ny unvested restricted stock units , performance shares , stock options and other equity awards covering shares of common stock of ServiceMaster that are held by you as of the last day of the Consulting Period will be cancelled . You will retain all right s to vested grants with the last day of the Consulting Period being the last day of providing services for purposes of measuring post termination exercise periods .

3. Separation Entitlements under Employment Agreement .

(a) Accrued Wages and Expense Reimbursement . Y ou will be paid any accrued unpaid wages (including any accrued, unused vacation time) through the last day of the Garden Leave Period , in your final paycheck or in accordance with state law , in accordance with the provisions of Section 6(a)(1) of your Employment Agreement . You will also be reimbursed for any business expenses required to be reimbursed under Section 4(g) of your Employment Agreement, in accordance with the provisions of Section 6(a)( 5 ) of your Employment Agreement. You will be paid any accrued but unused vacation in accordance with ServiceMaster policy.

(b) Current Fiscal Year Bonus . You will receive the bonus, if any, that you would have been paid in respect of ServiceMaster’s current fiscal year pursuant to ServiceMaster’s annual bonus plan in which you participate as of the date of your Separation, as if your Separation had not occurred, prorated for the portion of the year between January 1, 2017 and the date of your Separation, in accordance with and in full satisfaction of the provis ions of Section 6(a)(2)(ii) of your Employment Agreement.

(c) Severance Payments . You will be entitled to (i) continued payment of your monthly Base Salary, at the rate in effect as of immediately prior to the date of your Separation, plus (ii) two times your average annual bonus paid to you in respect of fiscal years 2015 and 2016, for twenty-four (24) months following the date of your Separation, in accordance with , at such times as provided in, and in full satisfaction of the provisions of , Section s 6( a)(3) and 6(a)(4), as applicable, of your Employment Agreement.

(d) Group Health Insurance . I f you participate in ServiceMaster ’s Health and Welfare Benefit Plan, your eligibility to participate will end on the last day of the Garden Leave Period . Y ou will become eligible for continuation of coverage under the Consolidated Omnibus Budget Reconciliation Act (“ COBRA ”) on the first day following the last day of employment . Y ou are solely responsible for the payment of any premiums for COBRA coverage , subject to your entitlements to a monthly reimbursement amount payable to you by ServiceMaster under Section 6(d) of your Employment Agreement , as well as additional post COBRA payment s , specified therein , all at such time and as provided in Section 6(d) .

(e) Deferred Compensation and Incentive Plans . If you participate in any profit sharing, bonus, deferred compensation or incentive plans, your eligibility to participate will end on the last day of the Garden Leave Period. Any amounts to be paid, distributed, rolled over, or held under such plans will be paid, distributed, rolled over, or held in accordance with the terms of such plans and applicable rules and regulations.

4. Confidential Information ; Restrictive Covenants . Y ou acknowledge and agree that your employment with ServiceMaster created a relationship of confidence and trust between you and ServiceMaster with respect to all c onfidential and proprietary i nformation and trade secrets, in each case as described in Section 7(b) of your Employment Agreement (“Confidential Information”) . Y ou represent, warrant and agree that (a) you have not used or disclosed any Confidential Information other than as necessary in the good faith performance of your duties as an employee and director of ServiceMaster for the benefit of ServiceMaster , and (b) you will keep in confidence and trust all Confidential Information known to you, and will not use or disclose such Confidential Information without the prior written consent of ServiceMaster except as

otherwise provided in the Employment Agreement. Nothing in this Agreement or the Employment Agreement , however, shall be construed to prevent you from providing truthful information or testimony in response to a valid subpoena, court order, the request of any government agency or as otherwise required by law.

5. Assignment of Inventions and Copyrights . Y ou hereby assign, transfer and release, without royalty or any other consideration except as expressly set forth herein, all worldwide right, title and interest you may have or acquire (including copyright and “moral rights”) in and to all work product, inventions, discoveries, know-how, processes, data and other items (“ Materials ”) resulting from your services under this Agreement . T o the extent any Materials are not assignable, you waive, disclaim and agree that you will not enforce against ServiceMaster any rights you may have to such Materials.

6. Non - Compete/Non - Solicitation . D uring the Garden Leave Period and the Consulting Period , Sections 7(a) and (b) of your Employment Agreement shall remain in full force and effect. For purposes of Section 7(a) of your Employment Agreement your date of termination shall be the last day of the Garden Leave Period . F ailure to materially abide by th ese provisions or such other similar agreements with ServiceMaster will give ServiceMaster (in addition to any other remedies which may be available to ServiceMaster ) the right, exercised in its good faith discretion, to (a) terminate your employment during the Garden Leave Period without further payment of base salary, at which time your participation in all benefit plans of ServiceMaster shall also terminate and (b) suspend or cancel the benefits provided to you during the Consulting Period specified above . Y ou understand and recognize that, as provided in your Employment Agreement, as a result of your executive and director role s with ServiceMaster, you had contact with, and developed and furthered relationships with, customers and/or prospective customers, and had access to secret, proprietary and confidential information regarding ServiceMaster and its businesses, including Confidential Information (as defined above), and therefore understand and agree that (i) both the nature of this covenant and the scope of this covenant (as well as the covenants in this Agreement) are reasonable and necessary for the protection of ServiceMaster, including its secret, proprietary and confidential information, goodwill and customer relationships and (ii) that ServiceMaster will be irreparably harmed by the breach of any covenants in this Agreement, entitling it to seek injunctive and other equitable relief.

7. No Conflict of Interest . D uring the Consulting Period , you shall not engage in any activity that may constitute a conflict of interest with ServiceMaster . Y ou shall immediately notify ServiceMaster in writing if at any time during the Consulting Period you become aware of a potential conflict of interest as a result of your activities .

8. Non ‐ Disparagement . At all times during the Garden Leave Period and Consulting Period and for two years thereafter, you agree that you will refrain from making public statements, written or oral, which criticize, disparage or defame the business, goodwill or reputation of ServiceMaster (including its products and services) , any of ServiceMaster’s successors , its directors, officers, executives, subsidiaries, parent entities, and/or employees or making public statements which could materially adversely affect the morale of other employees. At all times during the Garden Leave Period and Consulting Period and for two years thereafter, ServiceMaster agrees that the active members of the Board and active named executive officers (each as in effect from time to time) will refrain from making public statements, written or oral, which criticize, disparage or defame you. Nothing in this Agreement, however, shall be construed to prevent you

or ServiceMaster (including any of its representatives) from providing truthful testimony or information in response to any valid subpoena, court order, the request of any government agency or as otherwise required by law (including in connection with any whistleblower laws), from rebutting false or misleading statements about the party by others or making normal competitive-type statements not in violation of Section 4 above. There shall be no third-party beneficiaries of this Section 8, other than applicable subsidiaries of ServiceMaster.

9. Termination .

(a) Cause .

(i) During the Garden Leave Period, ServiceMaster may terminate your employment for Cause (as defined in your Employment Agreement). If ServiceMaster terminates your employment for Cause during the Garden Leave Period, ServiceMaster shall have no further obligations to provide you with compensation and benefits during the Garden Leave P eriod or the Consulting Period and you will forfeit any severance payments and benefits to which you were entitled under your Employment Agreement.

(ii) During the Consulting Period, S erviceMaster may terminate this Agreement for Cause. “Cause” is defined as ( A ) your repeated failure after written notice to attempt in good faith to perform your duties hereunder (other than by reason of a disability or incapacity ); ( B ) your material breach of this Agreement , which is not cured after written notice ; ( C ) your material breach of your Employment Agreement , which is not cured after written notice ; or ( D ) your intentional misconduct, illegal conduct, or gross negligence which is materially injurious to ServiceMaster . If ServiceMaster terminates this Agreement for Cause, this Consulting Period will terminate and ServiceMaster shall have no further obligation to provide you with any compensation and benefits during the Consulting Period . For the avoidance of doubt, ServiceMaster acknowledges and agrees that any obligations it may owe to you under the Employment Agreement as a result of your Separation shall continue in effect without regard to the early termination of the Consulting Period .

(iii) If ServiceMaster terminates your employment during the Garden Leave Period or your consulting services during the Consulting Period without Cause, for purposes of any equity or options that you have in ServiceMaster or its affiliates , you shall be treated as if you provided services through the end of the C onsulting Period. This is in addition to any other remedies that you may have at law.

(b) Survival of Provisions . T he provisions set forth in para graphs 4 (Confidential Information), 5 (Assignment of Inventions and Copyrights), 6 (Noncompetition/ Non-solicitation), 8 (Non ‐ Disparagement) and Exhibit A (Release) shall survive any expiration or termination of this Agreement.

10. Reimbursement of Legal Fees . ServiceMaster will reimburse you for reasonable legal fees incurred related to the negotiation of this Agreement , in an amount not to exceed $25,000 . Such reimbursement will be made within thirty ( 30 ) days after you provide ServiceMaster with an invoice for such services (which invoice shall be provided within sixty (60) days following the acceptance and execution of this Agreement ), but in any event no later than March 15 , 2018 .

11. Severability . Y ou and ServiceMaster agree that to the extent that any portion of this Agreement may be held to be invalid or legally unenforceable, the remaining portions will not be affected and will be given full force and effect.

12. Notices . A ll notices required hereunder will be in writing and will be deemed given upon receipt if delivered personally (receipt of which is confirmed) or by courier service promising overnight delivery (with delivery confirmed the next day) or three (3) business days after deposit in the U.S. Mail, certified with return receipt requested . A ll notices will be addressed as follows:


	If to you:	If to ServiceMaster:

	Robert J. Gillette	ServiceMaster Global Holdings, Inc.
	At the most recent address on file	860 Ridge Lake Boulevard
	with ServiceMaster	Memphis, TN 38120
		Attn: SVP, Human Resources

Or to such other address as either party will have furnished to the other in writing.

13. Governing Law and Venue . The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without regard to the principle of conflicts of laws. The invalidity or enforceability of any provision of this Agreement shall not affect the validity or enforceability of any of the other provisions of this Agreement, which other provisions shall remain in full force and effect.

14. Income Taxation . Payments provided for herein shall be reduced by any amounts required to be withheld by ServiceMaster from time to time under applicable Federal, state or local income or employment tax laws or similar statutes or other provisions of law then in effect. Y ou understand that ServiceMaster has not provided any advice regarding the tax liability resulting from this Agreement and you shall not rely upon any representations or policies of ServiceMaster related to taxation . Y ou are advised to seek the advice of your own personal tax advisor or counsel as to the taxability of the compensation provided under this Agreement .

15. Successors and Assigns . T his Agreement shall inure to the benefit of and be enforceable by ServiceMaster and its successors and assigns and by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees . T his Agreement shall not be terminated by any merger or consolidation of ServiceMaster whereby ServiceMaster is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of ServiceMaster . I n the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred.

16. Entire Agreement . Y ou and ServiceMaster agree that this Agreement , your Employment Agreement, any award agreements applicable to your equity awards , set forth on Schedule I , and any agreements with regard to indemnification and director and officer liability i nsurance coverage constitute the complete understanding between you and ServiceMaster regarding the matters herein and that no other promises or agreements, express or implied, will be binding between you and ServiceMaster unless signed in writing by you and ServiceMaster . T his

Agreement fully supersedes and replaces any and all prior agreements or understandings, if any, between you and ServiceMaster on any matter that is addressed in this Agreement, except with respect to those applicable provisions of your Employment Agreement, as referenced in this Agreement .

[signatures on next page]

[ Signature page to Separation and Consulting Agreement ]

Rob, we wish you well in your future endeavors.


	Sincerely,


	/s/ John Corness
	John Corness
	Chairman, Compensation Committee
	of the Board of Directors
	ServiceMaster Global Holdings, Inc.

[ Signature page to Separation and Consulting Agreement ]

Accepted and agreed as of July 30 , 2017


/s/ Robert J. Gillette
Robert J. Gillette

Schedule I

Except as set forth in the table below, none of your outstanding ServiceMaster equity awards will vest between the date of the Agreement and the last day of the Consulting Period. Accordingly, except as set forth below, all of your unvested outstanding stock options, restricted stock unit awards and performance stock unit awards will be forfeited upon the completion of the Garden Leave Period , other than those stock options identified below, which shall be eligible to continue to vest in accordance with their terms as set forth in the Agreement:

Grant Date	Number of Vested Equity Awards	Number of Unvested Equity Awards Vesting in 2017/2018	Exercise Price	Expiration Date	Vesting
September 13, 2013	541,407	180,4 6 8	$11.43	September 13, 2023	Subject to material compliance with the terms of this Agreement , through September 13 , 2017 , these unvested options will become vest ed on September 13, 2017 .

Exhibit A

Form of Release of Claims and Covenant Not to Sue (the “ Release ”)

(a) Release . In consideration of the payments and benefits to which Robert Gillette, on behalf of himself , his heirs, executors, administrators, successors and assigns (“ Executive ”) is entitled under that certain Separation and Consulting Agreement dated as of July 30 , 2017 (the “ Separation Agreement ”) and that certain Employment Agreement (as defined in the Separation Agreement), Executive hereby waives and releases and forever discharges ServiceMaster Global Holdings, Inc., its parent entities, subsidiaries, divisions, limited partnerships, affiliated corporations, related companies, predecessors, successors, assigns, and their respective past and present directors, managers, officers, stockholders, partners, agents, employees, insurers, attorneys, and servants each in his, her or its capacity as such, and each of them, separately and collectively (collectively, “ Releasees ”), from any and all existing claims, charges, complaints, liens, demands, causes of action, obligations, damages and liabilities, known or unknown, suspected or unsuspected, whether or not mature or ripe, that Executive ever had and now has against any Releasee including, but not limited to, claims and causes of action arising out of or in any way related to Executive’s employment with or separation from ServiceMaster, to any services performed for ServiceMaster, to any status, term or condition in such employment, or to any physical or mental harm or distress from such employment or non-employment or claim to any hire, rehire or future employment of any kind by ServiceMaster, all to the extent allowed by applicable law. This release of claims includes, but is not limited to, claims based on express or implied contract, compensation plans, covenants of good faith and fair dealing, wrongful discharge, claims for discrimination, harassment and retaliation, violation of public policy, tort or common law, whistleblower or retaliation claims; and claims for additional compensation or damages or attorneys’ fees or claims under federal, state, and local laws, regulations and ordinances, including but not limited to Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act, or equivalent state WARN act, the Employee Retirement Income Security Act, and the Sarbanes-Oxley Act of 2002. Executive understands that this release of claims includes a release of all known and unknown claims through the date on which this release of claims becomes irrevocable.

(b) Limitation of Release . Notwithstanding the foregoing, this Agreement will not prohibit Executive from filing a charge of discrimination with the National Labor Relations Board, the Equal Employment Opportunity Commission or an equivalent state civil rights agency, but Executive agrees and understands that Executive is waiving his right to monetary compensation thereby if any such agency elects to pursue a claim on his behalf. Further, nothing in this release of claims shall be construed to waive any right that is not subject to waiver by private agreement under federal, state or local employment or other laws, such as claims for workers’ compensation or unemployment benefits or any claims that may arise after the effective date of this release. In addition, nothing in this release of claims will be construed to affect any of the following claims, all rights in respect of which are reserved:

(i) Any payment or benefit set forth in the Employment Agreement or this Agreement ;

(ii) Reimbursement of unreimbursed business expenses properly incurred prior to the termination date in accordance with ServiceMaster policy;

(iii) Claims under the Management Equity Agreements (as defined in the Employment Agreement) in respect of vested ServiceMaster equity held by Executive;

(iv) Vested benefits under the general ServiceMaster employee benefit plans (other than severance pay or termination benefits, all rights to which are hereby waived and released);

(v) Any claim for unemployment compensation or workers’ compensation administered by a state government to which Executive is presently or may become entitled;

(vi) Any claim that ServiceMaster has breached this release of claims; and

(vii) Indemnification as a current or former director or officer of ServiceMaster or any of its subsidiaries (including as a fiduciary of any employee benefit plan), or inclusion as a beneficiary of any insurance policy related to Executive’s service in such capacity.

(c) Covenant Not To Sue . To the extent that any claims covered by the scope of the release herein are not subject to waiver by applicable law (including, without limitation, any claims arising under or related to the Family and Medical Leave Act, the Fair Labor Standards Act, and any other local, state or federal statute governing employment and/or the payment of wages and benefits), Executive hereby covenants and agrees not to sue or otherwise seek any remedy or other form of relief against any of the Releasees relating to such claims.

(d) Representations . Executive represents that Executive has been provided all benefits due under the Family and Medical Leave Act and that Executive has received all wages due , other than as accrued but unpaid as of the date of this Release , including overtime pay, premium pay, vacation pay, bonus pay, commissions, or other compensation, and that Executive has received all appropriate meals and rest breaks to which Executive was entitled, in compliance with the Fair Labor Standards Act and applicable state and local law, that Executive has no known workplace injuries or occupational diseases, and that Executive has not made any report of or opposed any fraud or other wrong doing at ServiceMaster and that Executive has not been retaliated against for reporting or opposing any alleged fraud or other wrongdoing at ServiceMaster.

(e) Return of ServiceMaster Property . Not later than the last day of the Consulting Period (as such term is defined in the Separation Agreement), Executive agrees to return to ServiceMaster all ServiceMaster property, equipment and materials, including, but not limited to, any company vehicle, any laptop computer and peripherals; any cell phone or other portable computing device; any telephone calling cards; keys; ServiceMaster identification card; any credit or fuel cards; and all tangible written or graphic materials (and all copies) relating in any way to ServiceMaster or its business, including, without limitation, documents, manuals, customer lists and reports, as well as all data contained on computer files, “thumb” drives, “cloud” services, or other data storage device, or home or personal computers and/or e-mail or internet accounts . Provided, however, Executive may retain his address book to the extent it only contains

contact information and ServiceMaster shall cooperate with Executive on the transfer of his cell phone number to Executive

(f) Executive acknowledges that ServiceMaster has specifically advised Executive of the right to seek the advice of an attorney concerning the terms and conditions of this Release. Executive further acknowledges that Executive has been furnished with a copy of this Release, and Executive has been afforded forty-five ( 45 ) calendar days in which to consider the terms and conditions set forth above prior to executing this Release. By executing this Release, Executive affirmatively states that Executive has had sufficient and reasonable time to review this Release and to consult with an attorney concerning Executive’s legal rights prior to the final execution of this Release. Executive further agrees that Executive has carefully read this Release and fully understands its terms. Executive acknowledges that Executive has entered into this Release, knowingly, freely and voluntarily. Executive understands that Executive may revoke this Release within seven (7) calendar days after signing this Release . Revocation of this Release must be made in writing and must be received by the General Counsel at ServiceMaster Global Holdings, Inc., 860 Ridge Lake Blvd., Memphis, TN 38120 , within the time period set forth above.

(g) This Release will be governed by and construed in accordance with the laws of the State of Delaware , without giving effect to any choice of law or conflicting provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the laws of any jurisdiction other than the State of Delaware to be applied. In furtherance of the foregoing, the internal law of the State of Delaware will control the interpretation and construction of this agreement, even if under such jurisdiction’s choice of law or conflict of law analysis, the substantive law of some other jurisdiction would ordinarily apply. The provisions of this Release are severable, and if any part or portion of it is found to be unenforceable, the other paragraphs shall remain fully valid and enforceable.

(h) This Release shall become effective and enforceable on the eighth (8 th ) day following its execution by Executive, provided Executive does not timely exercise Executive’s right of revocation as described above. If Executive fails to sign and deliver this Release on or before the forty-fifth day following Executive’s receipt of this Release, or if Executive timely revokes this Release, this Release will be without force or effect, and Executive shall not be entitled to receive the severance payments and benefits pursuant to Sections 6(a)(3), 6(a)(4) and 6(d) of the Employment Agreement, or to the continued vesting of certain stock options pursuant to Section 2 of the Separation Agreement .

(i) To signify Executive’s agreement to the terms of this Release, Executive has signed this Release on the date set forth below .

Executed this ___ day of ______, 2017



Robert J. Gillette

Exhibit 31.1

CERTIFICATIONS

I, Nikhil M. Varty , certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ServiceMaster Global Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 1 , 2017


	/s/ Nikhil M. Varty
	Nikhil M. Varty
	Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Anthony D. DiLucente , certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ServiceMaster Global Holdings, Inc.;

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 1 , 2017


	/s/ Anthony D. DiLucente
	Anthony D. DiLucente
	Senior Vice President and Chief Financial Officer

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to Section 1350 of Chapter 63 of Title 18 of The United States Code

I, Nikhil M. Varty , the Chief Executive Officer of ServiceMaster Global Holdings, Inc., certify that (i) the Quarterly Report on Form 10-Q for the quarter ended June 30 , 2017 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceMaster Global Holdings, Inc.

cto
	/s/ Nikhil M. Varty
	Nikhil M. Varty
	August 1 , 2017

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to Section 1350 of Chapter 63 of Title 18 of The United States Code

I, Anthony D. DiLucente , the Senior Vice President and Chief Financial Officer of ServiceMaster Global Holdings, Inc., certify that (i) the Quarterly Report on Form 10-Q for the quarter ended June 30 , 2017 , fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceMaster Global Holdings, Inc.

z
	/s/ Anthony D. DiLucente
	Anthony D. DiLucente
	August 1 , 2017