First Data 2008 Annual Report Download - page 162

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Management Agreement
On September 24, 2007 and in connection with the merger, First Data entered into a management agreement with affiliates of KKR (the "Management
Agreement") pursuant to which KKR will provide management, consulting, financial and other advisory services to the Company. Pursuant to the
Management Agreement, KKR is entitled to receive an aggregate annual base management fee of $20 million, which amount will increase 5% annually, and
reimbursement of out-of-pocket expenses incurred in connection with the provision of services. The Management Agreement has an initial term expiring on
December 31, 2019, provided that the term will be extended annually thereafter unless the Company provides prior written notice of its desire not to
automatically extend the term. The Management Agreement provides that KKR also will be entitled to receive a fee equal to a percentage of the gross
transaction value in connection with certain subsequent financing, acquisition, disposition, merger combination and change of control transactions, as well as
a termination fee based on the net present value of future payment obligations under the Management Agreement in the event of an initial public offering or
under certain other circumstances. The Management Agreement shall terminate automatically upon the consummation of an initial public offering and may be
terminated at any time by mutual consent of the Company and KKR. The Management Agreement also contains customary exculpation and indemnification
provisions in favor of KKR and its affiliates. During 2008 and the successor 2007 period, the Company incurred $20.4 million and $5.3 million, respectively,
of management fees. In addition, pursuant to the Management Agreement, the Company paid KKR transaction fees of $260 million in 2007 for certain
services provided in connection with the merger and related transactions.
Subsequent to the merger, certain members of the Company's new Board of Directors are affiliated with KKR.
Transactions and Balances Involving Company Executives
The Company has engaged in the following transactions with The Labry Companies and Plane Fish, LLC. Mr. Labry, an executive officer of First Data,
is the sole shareholder of The Labry Companies, Inc. and sole member of Plane Fish, LLC.
On January 31, 2006, First Data Merchant Services Corporation ("FDMS"), a wholly owned subsidiary of the Company, entered into a four year, eight
month sublease agreement with The Labry Companies, Inc. for approximately 3,600 square feet of office space in Memphis, Tennessee, including furniture,
fixtures and equipment, on customary terms. During 2008, 2007 and 2006, the Company paid approximately $71,000, $170,846, and $159,916, respectively,
to The Labry Companies, Inc. under the sublease. On June 1, 2008, FDMS terminated the sublease agreement and paid a fee to The Labry Companies of
approximately $220,000 pursuant to the sublease agreement. First Data Merchant Services Corporation entered into a direct lease agreement with the landlord
for additional space and a longer term as of June 1, 2008. The Labry Companies, Inc. will retain the furniture, fixtures and equipment following the expiration
or termination of the lease, or upon Mr. Labry's separation from the Company.
The Company has engaged in a transaction associated with Plane Fish, LLC, of which Mr. Labry, an executive officer of the Company, is the sole
member. Plane Fish, LLC owned an aircraft which it leased to a charter company. The charter company made the aircraft available to its customers, including
the Company, which used the aircraft solely in connection with business-related travel by Mr. Labry and other company employees. On March 17, 2008, a
third party leasing company acquired the aircraft from Plane Fish, LLC for $8.5 million and the Company now leases the plane from the third party leasing
company through a capital lease. The Company negotiated the $8.5 million purchase price with Plane Fish, LLC and arranged for the third party leasing
company to purchase the aircraft with the Company's commitment to lease the aircraft. The Company also reimbursed Plane Fish, LLC for
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