American Home Shield 2011 Annual Report Download - page 101

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 9. Commitments and Contingencies (Continued)
such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified.
The Company has guarantees on certain bonds issued on behalf of divested companies associated with TruGreen LandCare, primarily performance type
bonds. The maximum payments the Company could be required to make if the buyer of the divested companies is unable to fulfill their obligations is
approximately $11.9 million as of December 31, 2011. The TruGreen LandCare purchase agreement requires that the buyer replace the bonds at the bond's
expiration date. Substantially all of the bonds are scheduled to expire prior to 2015, but may be extended depending on the completion of the related projects.
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 judicial, administrative and regulatory
proceedings involving both private parties and governmental authorities. These proceedings include, on an individual, collective, representative and class
action basis, regulatory, insured and uninsured employment, general and commercial liability, wage and hour and environmental proceedings. The Company
has entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court approval. If
one or more of the Company's settlements are not finally approved, the Company could have additional or different exposure, which could be material. At this
time, the Company does not expect any of these proceedings to have a material effect on its reputation, business, financial position, results of operations or
cash flows; however, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial
position, results of operations and cash flows.
Note 10. Related Party Transactions
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 on-going consulting and management advisory services. The annual management fee payable under the consulting agreement with CD&R
is $6.25 million. Under this agreement, the Company recorded management fees in each of the years ended December 31, 2011, 2010 and 2009 of
$6.25 million, which is included in Selling and administrative expenses in the Consolidated Statements of Operations. The consulting agreement also provides
that CD&R may receive additional fees in connection with certain subsequent financing and acquisition or disposition transactions. The consulting agreement
will terminate on July 24, 2017, unless terminated earlier at CD&R's election.
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 provide the Company with on-going consulting and
management advisory services through June 30, 2016 or the earlier termination of the existing consulting agreement between the Company and CD&R. On
September 30, 2010, Citigroup transferred the management responsibility for certain investment funds that own shares of common stock of Holdings to
StepStone and Lexington Partners Advisors LP. Citigroup also assigned its obligations and rights under its consulting agreement to StepStone, and beginning
in the fourth quarter of 2010, the consulting fee otherwise payable to Citigroup became payable to StepStone. The Company paid annual management fees of
$0.5 million, $0.5 million and $0.25 million to StepStone, BAS and JPMorgan, respectively. The Company recorded consulting
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