American Home Shield 2007 Annual Report Download - page 90

1, 2004 due to an administrative error. To our knowledge, all other required reports were filed on time.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in ServiceMaster's proxy statement for the 2007 Annual Meeting of Shareholders under the headings
"Compensation of Directors," "Executive Compensation," "Compensation Committee Interlocks and Insider Participation" and
"Compensation Committee Report" is incorporated by reference in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The information contained in ServiceMaster's proxy statement for the 2007 Annual Meeting of Shareholders under the headings
"Ownership of Our Common Stock" and "Equity Compensation Plan Information" is incorporated by reference in this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Policies and Procedures for Related Person Transaction policy
In February 2007, the Governance and Nominating Committee of our Board approved policies and procedures with respect to the
review and possible approval or ratification of any transaction between ServiceMaster and a "Related Person" (a "Related Person
Transaction"), which we refer to as our "Related Person Transaction Policy". Pursuant to the terms of the Related Person
Transaction Policy, the Audit and Finance Committee must review and decide whether to approve or ratify any Related Person
Transaction. Any Related Person Transaction is required to be reported to our legal department and the legal department will
determine whether it should be submitted to the Audit and Finance Committee for consideration.
For the purposes of the Related Person Transaction Policy, a "Related Person Transaction" is a transaction, arrangement or
relationship (or any series of similar transactions, arrangements or relationships) in which ServiceMaster (including any of its
subsidiaries) was, is or will be a participant and the amount involved exceeds $120,000, and in which any Related Person had, has
or will have a direct or indirect interest.
A "Related Person" as defined in the Related Person Transaction Policy, means any person who is, or at any time since the
beginning of ServiceMaster's last fiscal year was, a director or executive officer of ServiceMaster or a nominee to become a director
of ServiceMaster; any person who is known to be the beneficial owner of more than 5% of ServiceMaster's common stock; any
immediate family member of any of the foregoing persons, including any child, stepchild, parent, stepparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of the director, executive officer,
nominee or more than 5% beneficial owner, and any person (other than a tenant or employee) sharing the household of such
director, executive officer, nominee or more than 5% beneficial owner; and any firm, corporation or other entity in which any of the
foregoing persons is a general partner or, for other ownership interests, a limited partner or other owner in which such person has a
beneficial ownership interest of 10% or more.
Litigation Program
In 2006, ServiceMaster used the legal services of the law firm of Hinshaw & Culbertson. Hinshaw & Culbertson serves as
ServiceMaster's primary counsel in our national litigation program for our general and automobile liability risks. The engagement
letter with Hinshaw & Culbertson for the 2006 and 2007 years under our litigation program was executed prior to the adoption of
the Related Person Transaction policy. Our national services require millions of service transactions at homes and businesses
involving thousands of our employees and approximately 25,000 vehicles. Consequently, we elected in 2004 to manage our entire
litigation program primarily through one law firm, Hinshaw & Culbertson, that had served as one of our casualty program law firms
since 1987. Total fees paid to Hinshaw & Culbertson for 2006 in connection with our national litigation program were
approximately $4.8 million. Donald Mrozek, Esq., Chairman of Hinshaw & Culbertson, is the brother of Ernest Mrozek, our Vice
Chairman and Chief Financial Officer. Hinshaw & Culbertson served as one of our casualty program law firms prior to Ernest
Mrozek's becoming employed by ServiceMaster. Ernest Mrozek does not have management responsibility for our litigation
program.
Independence
Under New York Stock Exchange listing standards, a director does not qualify as "independent" unless the board affirmatively
determines that the director has no material relationship with the company. ServiceMaster's Board adopted categorical standards of
independence to assist it in determining whether a director has a material relationship with ServiceMaster. A director will not be
considered to have a material relationship with ServiceMaster because (1) the director is a partner, principal, counsel or advisor to,
or shareholder, director or officer of, another company that does business with ServiceMaster if the annual sales to, or purchases
from, ServiceMaster are less than 1% of the annual revenue of the other company and the director does not receive any
compensation as a direct result of the other company's business with ServiceMaster or (2) the director is an officer, director or
trustee of a charitable organization, if ServiceMaster's discretionary charitable contributions to the organization are less than 1%
(and no more than $50,000) of that organization's total annual charitable receipts. A director will be considered to have a material
relationship with ServiceMaster if the director is an officer of another company that is not a charitable organization and any of
ServiceMaster's present executives serves on that other company's board of directors.
New York Stock Exchange listing standards also provide that a director is not "independent" if (1) the director is, or
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