American Home Shield 2008 Annual Report Download - page 23

Table of Contents
sections of the Colorado Pesticide Applicators' Act, including failure to properly inspect monitoring devices pursuant to the label requirements, failure to
install auxiliary stations and follow self-recruitment procedures, and failure to replace monitoring devices and/or bait in those stations. The maximum
financial penalty for each individual violation could be $1,000 and additional penalties could include the suspension or revocation of the license for Terminix
in the state of Colorado. Terminix served its response to the Colorado Department of Agriculture on March 25, 2008. On or about October 17, 2008, the
parties reached a compromised settlement of all matters and a Consent Order was signed by Terminix and executed by the Commissioner of Agriculture on
November 14, 2008.
Class Action suits brought against the Company and CD&R
Following the announcement of the proposed acquisition of ServiceMaster by CD&R, five (5) complaints were filed against ServiceMaster concerning
the proposed merger: Kaiman v. Spainhour, et al. (filed in Chancery Court in Memphis, Tennessee) ("Kaiman"); Golombuski v. The ServiceMaster Co.,et al.
(filed in Circuit Court in Memphis, Tennessee) ("Golombuski"); Sokol and Bowen v. The ServiceMaster Co., et al.(filed in Circuit Court in Memphis,
Tennessee) ("Sokol"); Palmer v. The ServiceMaster Co.,et al.(filed in Cook County Circuit Court in Chicago, Illinois) ("Palmer"); and Smith v. The
ServiceMaster Co., et al. (filed in Chancery Court for Newcastle County, Delaware) ("Smith").
All of the complaints name ServiceMaster, its Chief Executive Officer and its Board of Directors (the "Board") as defendants. The Kaiman, Golombuski
and Smith complaints additionally name CD&R as a defendant and the Smith complaint also names the investors in CDRSVM Topco, Inc., CDRSVM Topco,
Inc. and CDRSVM Acquisition Co. All of the complaints allege breach of fiduciary duties and seek injunctive relief. The Kaiman complaint also contains a
specific count seeking indemnification of costs. The Golombuski and Smith complaints also allege that CD&R aided and abetted the individual defendants'
breach of fiduciary duties, while the Kaiman complaint generally alleges that "defendants" breached their fiduciary duties or aided and abetted a breach of
fiduciary duty. The Smith complaint also alleges that there are material omissions in the preliminary proxy statement relating to the proposed acquisition that
the Company filed with the Securities and Exchange Commission ("SEC") on April 16, 2007. All five of the complaints challenged and indicated an intent to
enjoin the proposed acquisition of ServiceMaster.
After the plaintiff in the Smith case filed a motion for expedited discovery and for the scheduling of a preliminary injunction hearing, the parties to the
Smith case reached an agreement in principle to settle that case on a class wide basis and entered into a Memorandum of Understanding reflecting that
agreement. The Memorandum of Understanding provides, among other things, for ServiceMaster to include certain additional disclosures in the final Proxy
Statement with respect to the proposed merger (subsequently made) and for a reduction of the Company termination fee from $100 million to $90.8 million
(subsequently made). The Memorandum of Understanding stated that if the settlement contemplated by the Memorandum of Understanding is approved,
plaintiff and his counsel intend to petition the court for an award of fees and expenses. It further stated that the parties reached no agreement with regard to an
appropriate award of fees to plaintiffs' counsel, and defendants reserved all rights to oppose any fee application. Confirmatory discovery has been completed
and, on July 21, 2008, the Stipulation of Settlement was filed with the Court. On September 29, 2008, the Court approved the settlement, and awarded
plaintiffs $500,000 in plaintiffs' attorneys' fees. The judgment is now final and non-appealable, and the Company satisfied the payment of the plaintiffs'
attorneys' fees in November 2008.
Notwithstanding the settlement agreement reached in the Smith case, the plaintiffs in the other four pending actions nonetheless attempted to pursue
those actions. The Kaiman, Golombuski and Sokol complaints were consolidated, and the Tennessee court handling those cases entered an
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