American Home Shield 2009 Annual Report Download - page 111

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 10. Commitments and Contingencies (Continued)
obligations subject to guarantee. The fair value of the Company's obligations related to these guarantees is not significant and no liability has been recorded.
In the ordinary course of conducting business activities, the Company and its subsidiaries become involved in other judicial, administrative and
regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured employment, general,
and commercial liability actions (on an individual and class basis) and environmental proceedings. The Company does not expect any of these proceedings to
have a material effect on its financial position, results of operations and cash flows; however, the Company can give no assurance that the results of any such
proceedings may not be material to its financial position, results of operations and cash flows for any period in which costs, if any, are recognized.
Note 11. Related Party Transactions
In connection with the Transactions, the Company paid the Equity Sponsors and certain affiliates thereof approximately $80.0 million in fees and
expenses for financial and transaction structuring advice and analysis as well as assistance with due diligence investigations and debt financing negotiations.
The amount has been included in the purchase price of the Merger. Also in connection with the Transactions, the Company entered into a consulting
agreement with CD&R, which subsequently was amended, under which CD&R provided the Company with on-going consulting and management advisory
services in exchange for an annual management fee of $2.0 million, which was payable quarterly. On July 30, 2009, the annual management fee payable
under the consulting agreement with CD&R was increased from $2.0 million to $6.25 million in order to align the fee structure with current market rates.
Under this agreement, the Company recorded a management fee of $6.25 million for the year ended December 31, 2009 and $2.0 million for the year ended
December 31, 2008. The amended consulting agreement also provides that CD&R may receive additional fees in connection with certain subsequent
financing and acquisition or disposition transactions.
In addition, in August 2009, the Company entered into consulting agreements with Citigroup, BAS and JPMorgan, each of which is an Equity Sponsor or
an affiliate of an Equity Sponsor. Under the consulting agreements, Citigroup, BAS and JPMorgan each will provide the Company with on-going consulting
and management advisory services until June 30, 2016 or the earlier termination of the existing consulting agreement between the Company and CD&R. The
Company will pay annual management fees of $0.5 million, $0.5 million and $0.25 million to Citigroup, BAS and JPMorgan, respectively. The Company
recorded consulting fees related to these agreements of $1.25 million for the year ended December 31, 2009.
The Company was advised by Holdings that, during the first quarter of 2009, Holdings completed open market purchases of $11.0 million in face value
of the Permanent Notes for a cost of $4.5 million. As of December 31, 2009, Holdings has completed open market purchases totaling $65.0 million in face
value of the Permanent Notes for a cost of $21.4 million. The debt acquired by Holdings has not been retired, and the Company has continued to pay interest
in accordance with the terms of the debt. During the years ended December 31, 2009 and 2008, the Company recorded interest expense of $6.9 million and
$0.4 million, respectively, related to Permanent Notes held by Holdings. During the year ended December 31, 2009, the Company made cash payments to
Holdings in the amount of $6.5 million. There were no cash payments by the Company to Holdings in 2008. Interest accrued by the Company and payable to
Holdings as of December 31,
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