First Data 2007 Annual Report Download - page 177

Certain Relationships and Related Transactions
Management Agreement
On September 24, 2007 and in connection with the merger, First Data entered into a management agreement with affiliates of KKR (the "Management
Agreement") pursuant to which KKR will provide management, consulting, financial and other advisory services to the Company. Pursuant to the
Management Agreement, KKR is entitled to receive an aggregate annual management fee of $20 million, which amount will increase 5% annually, and
reimbursement of out-of-pocket expenses incurred in connection with the provision of services. The Management Agreement has an initial term expiring on
December 31, 2019, provided that the term will be extended annually thereafter unless the Company provides prior written notice of its desire not to
automatically extend the term. The Management Agreement shall terminate automatically upon the consummation of an initial public offering and may be
terminated at any time by mutual consent of the Company and KKR. The Management Agreement also contains customary exculpation and indemnification
provisions in favor of KKR and its affiliates. During the successor period from September 25, 2007 through December 31, 2007, the Company incurred $5.3
million of management fees.
In addition, pursuant to the Management Agreement, the Company paid KKR transaction fees of $260 million in 2007 for certain services provided in
connection with the merger and related transactions. The Management Agreement provides that KKR also will be entitled to receive a fee equal to a
percentage of the gross transaction value in connection with certain subsequent financing, acquisition, disposition, merger combination and change of control
transactions, as well as a termination fee based on the net present value of future payment obligations under the Management Agreement in the event of an
initial public offering or under certain other circumstances.
The Labry Company and its Subsidiaries
The Company has engaged in the following transactions with The Labry Companies and Plane Fish, LLC. Mr. Labry, an executive officer of the
Company, is the sole shareholder of The Labry Companies, Inc. and sole member of Plane Fish, LLC.
On January 31, 2006, First Data Merchant Services Corporation, a wholly owned subsidiary of the Company, entered into a four year, eight month
sublease agreement with The Labry Companies, Inc. for approximately 3,600 square feet of office space in Memphis, Tennessee, including furniture, fixtures
and equipment, on customary terms. During 2007, the Company paid approximately $170,846 to The Labry Companies, Inc. under the sublease. On
October 1, 2008, the rent will increase to $14,365 per month. The Labry Companies, Inc. pay the real estate lease, improvements and furnishings costs for the
space to the owner of the property and will retain the furniture, fixtures and equipment following the expiration of the lease. For the first two months of 2008,
the Company paid the Labry Companies, Inc. approximately $28,425 under the sublease. Effective March 1, 2008 the rent increased to $14,213 per month.
Plane Fish, LLC owns a Twin Engine Learjet 60 aircraft which it leases to a charter company. The charter company makes the aircraft available to its
customers, including the Company, which uses the aircraft solely in connection with business-related travel by Mr. Labry and other Company employees. The
Company generally receives a favorable rate from the charter company for the use of the aircraft, which is believed to be below the incremental cost of
operating the aircraft on flights for the Company. On trips in which a significant number of other employees are passengers on the aircraft, however, the
Company receives a rate comparable to the market rate. In 2007, the Company incurred $1,029,999 in expenses to the charter company for the charter of the
aircraft. Plane Fish, LLC received payments from the charter company in 2007 in the net amount of $910,034 for the Company's use of the aircraft, from
which Plane Fish, LLC paid the non-personnel operating costs for these trips. The Company currently is negotiating the potential purchase of the aircraft from
Plane Fish, LLC for approximately $8.5 million.
Independence of Directors
Prior to the September 24, 2007 merger, the Board of Directors determined that former directors Daniel P. Burnham, David A. Coulter, Alison Davis,
Peter B. Ellwood, Courtney F. Jones, Richard P. Kiphart, Charles T. Russell, Joan E. Spero and Arthur F. Weinbach were independent under the requirements
of the New York Stock Exchange. In applying those standards, the Board viewed
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