First Data 2008 Annual Report Download - page 225

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, the Company incurred $20.4 million of management fees.
The Labry Company and its Subsidiaries
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, the Company paid approximately $71,000 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 $589,282 of
additional expense incurred in operating the aircraft from September 24, 2007 until the date of purchase that previously had not been reimbursed. In 2008 the
Company incurred $290,704 in expenses to the charter company for the charter of the aircraft.
Independence of Directors
The Company is privately held and none of the members of the Board of Directors are independent under the standards of the New York Stock
Exchange. Mr. Capellas is not independent as he is employed by the Company and Messrs. Fisher, Nuttall, and Olson are not independent due to their
affiliation with KKR.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The Company retained Ernst & Young LLP to audit the accounts of the Company and its subsidiaries for 2007 and 2008. Ernst & Young LLP has
served as the independent registered public accounting firm for the Company or its predecessor entities since 1980.
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