American Home Shield 2009 Annual Report Download - page 169

Table of Contents
Stockholders Agreement
On the Closing Date of the Merger, Holdings entered into a stockholders agreement (the "Stockholders Agreement") with investment funds associated
with or designated by the Equity Sponsors. The Stockholders Agreement contains agreements that entitle investment funds associated with each of the Equity
Sponsors to elect (or cause to be elected) all of Holdings' directors. The directors include three designees of investment funds associated with CD&R (one of
whom shall serve as the chairman and each of whom is entitled to three votes), one designee of BAS, and one designee of investment funds associated with
Citigroup, subject to adjustment in the case investment funds associated with or designated by certain of the Equity Sponsors sell more than a specified
amount of their shareholdings in Holdings. The Stockholders Agreement provides for our chief executive officer to be a director of Holdings, as well as his
successor as chief executive officer, subject to the approval of the Holdings board and Clayton, Dubilier & Rice Fund VII, L.P. (the "Lead Investor"). The
Stockholders Agreement grants to investment funds associated with the Equity Sponsors special governance rights, including rights of approval over certain
corporate and other transactions. The Stockholders Agreement also gives investment funds associated with the Equity Sponsors preemptive rights with respect
to certain issuances of equity securities of Holdings and its subsidiaries, including ServiceMaster, subject to certain exceptions, and contains restrictions on
the transfer of shares of Holdings, as well as tag-along rights and rights of first offer.
Registration Rights Agreement
On the closing date of the Merger, Holdings entered into the Registration Rights Agreement with investment funds associated with or designated by the
Equity Sponsors. The Registration Rights Agreement grants to certain of these investment funds the right, in the case of the Lead Investor at any time and in
the case of the other Equity Sponsors at least 18 months following the initial public offering of Holdings common stock, to cause Holdings, at its own
expense, to use its best efforts to register such securities held by the investment funds for public resale, subject to certain limitations. In the event Holdings
registers any of its common stock following its initial public offering, these investment funds also have the right to require Holdings to use its best efforts to
include shares of common stock of Holdings held by them, subject to certain limitations, including as determined by the underwriters. The Registration Rights
Agreement also provides for Holdings to indemnify the investment funds party to that agreement and their affiliates in connection with the registration of
Holdings' securities.
Consulting Agreements; Transaction Fee Agreement; Advisory Agreements
On the closing date of the Merger, Holdings and ServiceMaster entered into a consulting agreement with CD&R, which subsequently was amended,
pursuant to which CD&R provides Holdings and its subsidiaries with financial advisory and management consulting services. Pursuant to the consulting
agreement, Holdings was to pay or cause to be paid to CD&R an annual fee of $2.0 million for such services, plus expenses, unless the Equity Sponsors (or
the disinterested directors of Holdings) agreed to a higher amount. 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. Holdings will also pay to CD&R a fee for certain types of future transactions that Holdings or its subsidiaries complete. If an individual
designated by CD&R
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