American Home Shield 2010 Annual Report Download - page 149

Table of Contents
Stockholders Agreement
Holdings has 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 certain 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 (now a designee
of StepStone), 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 CEO to be a director of Holdings, as well as his successor as CEO,
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
Holdings has 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
In connection with the Merger and the related transactions, the Company entered into a consulting agreement with CD&R under which CD&R provided
the Company with ongoing consulting and management advisory services in exchange for an annual management fee of $2.0 million. On July 30, 2009, the
consulting agreement was amended and 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 market rates. Under this agreement, the Company recorded management fees of $6.25 million for the
years ended December 31, 2010 and 2009. The amended consulting agreement also provides that CD&R may receive additional fees in connection with
certain subsequent financing and acquisition or disposition transactions. The amended consulting agreement will terminate on July 24, 2017, unless
terminated earlier at CD&R's election. 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 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
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