American Home Shield 2009 Annual Report Download - page 170

Table of Contents
serves in an executive management position, Holdings will pay CD&R an additional fee to be reasonably determined by CD&R, but not to exceed the amount
of the annual fee then in effect.
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 management fees of $1.25 million under these agreements in 2009.
In connection with the Merger, Holdings and ServiceMaster entered into a Transaction Fee Agreement, pursuant to which they paid an aggregate fee of
$55 million to the Equity Sponsors and reimbursed certain expenses of the Equity Sponsors and their affiliates.
In connection with the Merger, Holdings and ServiceMaster entered into advisory agreements with the following Equity Sponsors or their affiliates:
Citigroup, BAS, and JPMorgan. Pursuant to these agreements the Company paid an aggregate fee of $24 million to Citigroup, BAS, and JPMorgan and their
affiliates and reimbursed certain expenses of the Equity Sponsors and their affiliates.
Indemnification Agreements
Holdings and ServiceMaster have entered into indemnification agreements with the Equity Sponsors and Holdings stockholders affiliated with the Equity
Sponsors, pursuant to which Holdings and ServiceMaster will indemnify the Equity Sponsors, the Holdings stockholders affiliated with the Equity Sponsors
and their respective affiliates, directors, officers, partners, members, employees, agents, representatives and controlling persons, against certain liabilities
arising out of performance of the consulting agreement, transaction fee agreement and advisory agreements described above under "Consulting Agreements;
Transaction Fee Agreement; Advisory Agreements" and certain other claims and liabilities, including liabilities arising out of financing arrangements and
securities offerings.
Director Independence
Though not formally considered by our Board because our common stock is not registered with the SEC or traded on any national securities exchange,
based upon the listing standards of the NYSE, the national securities exchange upon which our common stock was traded prior to the Merger, we do not
believe that either of our directors would be considered "independent" because of their relationships with CD&R. See "Consulting Agreements; Transaction
Fee Agreement; Advisory Agreements" above.
Debt Purchases
The Company was advised by Holdings that, during the year ended December 31, 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 aggregate open market purchases totaling
$65.0 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
158