American Home Shield 2011 Annual Report Download - page 22

Table of Contents
cards themselves, all of which can put payment card data at risk, are central to meeting standards set by the payment card industry ("PCI"). The Company is
evaluating and updating its systems and protocols to establish compliance with these industry standards as they currently exist, and going forward will
continue to evaluate its systems and protocols in a continued effort to comply with industry standards, as such standards may change from time to time in the
future. Activities by third parties, advances in computer and software capabilities and encryption technology, new tools and discoveries and other events or
developments may facilitate or result in a compromise or breach of our systems. Any compromises, breaches or errors in application related to our systems or
failures to comply with standards set by the PCI could cause damage to our reputation and interruptions in our operations, including our customers' ability to
pay for our services and products by credit card or their willingness to purchase our services and products and could result in a violation of applicable laws,
regulations, orders, industry standards or agreements and subject us to costs, penalties and liabilities which could have a material adverse impact on our
reputation, business, financial position, results of operations and cash flows.
Our business process outsourcing initiatives have increased our reliance on third-party contractors and may expose our business to harm upon the
termination or disruption of our third party contractor relationships.
Our strategy to increase profitability, in part, by reducing our costs of operations includes the implementation of certain business process outsourcing
initiatives. As a result, our future operations are expected to significantly rely on third party vendors to provide certain services that we previously performed
internally. Any disruption, termination or substandard performance of these outsourced services, including possible breaches by third party vendors of their
agreements with us, could adversely affect our brands, customer relationships, financial position, results of operations and cash flows. Also, to the extent a
third party outsourcing provider relationship is terminated, there is a risk that we may not be able to enter into a similar agreement with an alternate provider
in a timely manner or on terms that we consider favorable, and even if we find an alternate provider, or choose to insource such services, there are significant
risks associated with any transitioning activities. We expect to phase out a significant portion of our use of information technology services provided by
International Business Machines Corporation by the end of 2013. In the event a third party outsourcing relationship is terminated and we are unable to replace
it, there is a risk that we may not have the capabilities to perform these services internally, resulting in a disruption to our business, which could adversely
impact our reputation, business, financial position, results of operations and cash flows.
We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.
Our ability to compete effectively depends in part on our rights to service marks, trademarks, trade names and other intellectual property rights we own
or license, particularly our registered brand names, ServiceMaster, Terminix, TruGreen, Merry Maids, ServiceMaster Clean, American Home Shield,
AmeriSpec and Furniture Medic. We have not sought to register or protect every one of our marks either in the United States or in every country in which
they are or may be used. Furthermore, because of the differences in foreign trademark, patent and other intellectual property or proprietary rights laws, we
may not receive the same protection in other countries as we would in the United States. If we are unable to protect our proprietary information and brand
names, we could suffer a material adverse impact on our reputation, business, financial position, results of operations and cash flows.
Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties
that our products, services or
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