Related-person transactions can present potential or actual conflicts of interest and create the appearance that decisions are based on considerations other than the best interests of the Company and its stockholders. However, there are situations where related-person transactions may be in, or may not be inconsistent with, the best interests of the Company and its stockholders. Therefore, the Company has adopted the procedures set forth below for the review, approval or ratification of related-person transactions.
1. “Immediate Family Member” with respect to any individual means any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law of such individual, and any person (other than a tenant or employee) sharing the household of such individual.
Related Person. “Related Person” means
a director or executive officer (as defined in Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as amended) of the Company or a nominee to become a director of the Company;
any Immediate Family Member of a person described in clause (a);
any firm, company or other entity in which any of the persons described in clauses (a) and (b) is employed or is a general partner or principal or in a similar position or in which such person has a more than 5% beneficial ownership interest;
each charitable or non-profit organization for which any person described in clauses (a) and (b) serves as an executive officer, director, trustee, or in a similar capacity;
any person who was in any of the foregoing categories at any time since the beginning of the Company’s last fiscal year;
a security holder who is known by the Company to be the beneficial owner of more than 5% of any class of the Company’s voting securities; and
any Immediate Family Member of a person described in clause (f).
“Related-Person Transaction” is a proposed, existing, or completed transaction, arrangement, or relationship (or any series of similar transactions, arrangements, or relationships) (a “Transaction”) in which the Company (including any of its consolidated subsidiaries) was, is, or will be a participant, in which the amount involved exceeds $120,000, and in which any Related Person had since the beginning of the Company’s last fiscal year, has, or will have a direct or indirect material interest. “Related- Person Transaction” includes contributions by the Company to any Related Person that is a charity or non-profit organization in an aggregate amount in excess of $120,000 in any fiscal year of the Company.
4. Transactions Not Deemed to be Related-Person Transactions. For purposes of this Policy, the Committee has determined that in the following circumstances the Related Persons do not have a direct or indirect material interest in the transactions, arrangements, and relationships. Accordingly, the following are not Related-Person Transactions:
where the Related Person’s interest arises (i) only from such person’s position as a director of a company or other entity; (ii) only from such person’s direct or indirect ownership of a 5% or less equity interest in another company (other than a partnership); or (iii) from both such position and such ownership;
where the Related Person’s interest arises only from such person’s position as a limited partner in a partnership in which such person has an interest of 5% or less and the person is not a general partner of and does not hold another position in the partnership;
where the rates charged are determined by competitive bids; where the transaction involves the rendering of services as a common or contract carrier (including any airline), or a public utility, at rates or charges fixed in conformity with law or governmental authority; or where the transaction involves services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services;
where the Related Person’s interest arises only from the ownership of a class of equity securities of the Company, and all holders of that class receive the same benefits on a pro-rata basis;;
where an Immediate Family Member’s interest arises from his/her status as an employee of a firm, company or other entity for which he/she is not also an executive officer, director, general partner, or principal;
where the Related Person is not an Immediate Family Member of a director, executive officer, or nominee to become a director of the Company and where the Related Person’s interest arises from such person’s position as an executive officer of the Company and such person’s compensation arrangements have been approved by the Company’s Board;
where an Immediate Family Member’s interest arises from employment by the Company or any of its consolidated subsidiaries in the ordinary course of business consistent with customary employment practices used by the Company, provided that the total annual compensation received by such Immediate Family Member from the Company does not exceed $120,000;
where the Related Person’s interest is an interest in a standard financial services product offered by the Company or any of its consolidated subsidiaries in the ordinary course of business;
where the Related Person’s interest is an interest in ordinary business travel and expense payments, including expenses incurred in attending the Company’s events, Board or Board-committee meetings; and
where the Related Person’s interest arises from a relationship with another company or entity (i) in which the Company or any of its consolidated subsidiaries makes investments or (ii) which invests in securities issued by the Company or any of its consolidated subsidiaries or securities backed by any product issued by the Company or any of its consolidated subsidiaries, all in the ordinary course of such entity’s investment business and on terms and under circumstances similar to those available to or from entities unaffiliated with such Related Person.
Directors, Executive Officers and Nominees. Each director, executive officer, and nominee for director shall provide such information as the Company may request from time to time to identify Related-Persons Transactions. The Company shall request such information from each director and executive officer no less frequently than annually. Each director and executive officer is expected promptly to notify the Company of any change in his/her family, employment, investment, or other relationships that might result in Related-Person Transactions or the identification of new Related Persons.
Five-Percent Owners. At the time the Company becomes aware of a security holder’s status as a beneficial owner of more than 5% of any class of the Company’s voting securities, and annually thereafter for so long as such ownership status is maintained, the Company shall request information from such security holder to identify potential Related-Person Transactions.
Related-Persons List. The Committee shall use the information collected pursuant to this section to create and maintain a list of identified Related Persons.
Duty to Notify. Directors and executive officers must (a) inform the Chair of the Committee (or, in the case of said Chair, the Committee) at the earliest practicable time of any plan or proposal to engage in or continue any Transaction that potentially could be a Related-Person Transaction, and (b) supply the Chair (or Committee) with full details regarding the terms and circumstances of the Transaction.
Transactions that are identified as potential Related-Person Transactions prior to the consummation thereof or amendment thereto shall be consummated or amended only if the following steps are taken:
The Chair of the Committee will assess whether the proposed Transaction is a Related Person Transaction for purposes of this policy.
2. If the Chair of the Committee determines that the proposed Transaction is a Related- Person Transaction, the proposed Related-Person Transaction shall be submitted to the Committee for consideration at the next Committee meeting or, in those instances in which the Chair of the Committee, in consultation with the CEO, President, or CFO of the Company, provided that none of such officer and the Immediate Family Members of such officer has or is expected to have a direct or indirect material interest in the proposed Transaction, determines that it is not practicable or desirable for the Company to wait until the next Committee meeting, to the Chair of the Committee (who shall possess the delegated authority to act between Committee meetings).
3. The Committee or Chair of the Committee, as applicable, (the “Reviewer”) shall consider all of the relevant facts and circumstances reasonably available to them. The Reviewer shall approve only those Related-Person Transactions that are in, or are not inconsistent with, the best interests of the Company and its stockholders, as the Reviewer determines in good faith. The Reviewer shall convey its decision to the CEO, President or CFO, who shall convey the decision to the appropriate persons within the Company. Neither the Chair of the Committee, nor any member of the Committee, may participate in any review, consideration, or approval of any Related- Person Transaction with respect to which such member or any of his/her Immediate Family Members is the Related Person.
4. In considering whether to approve or ratify any Related-Person Transaction, the Reviewer shall consider all factors that are relevant to the Related-Person Transaction, including, without limitation, the following:
If the Company’s CEO, President, CFO, or any member of the Committee becomes aware of a Related-Person Transaction that has not been previously approved or previously ratified under this policy, including because a Transaction did not constitute a Related-Person Transaction at the time such Transaction was entered into but thereafter became a Related-Person Transaction prior to full performance thereof:
If the Related-Person Transaction is pending or ongoing, it will be promptly submitted to the Committee or Chair of the Committee, and the Reviewer shall consider all of the relevant facts and circumstances reasonably available to the Reviewer. Based on the conclusions reached, the Reviewer shall evaluate all options, including but not limited to ratification, amendment, or termination of the Related-Person Transaction; and
If the Related Person Transaction has been completed, the Reviewer shall evaluate the Transaction to determine if rescission of the Transaction is appropriate.
In either event, if the Reviewer determines that the Transaction was a Related-Person Transaction at the time it was entered into, the Reviewer shall request that the CEO, President or CFO evaluate the Company’s controls and procedures to ascertain the reason the Related-Person Transaction was not submitted to the Committee or Chair of the Committee for prior approval, and whether any changes to these procedures are recommended.
Annually, the Committee shall review any previously approved or ratified Related-Person Transactions that remain in effect. Based on all relevant facts and circumstances, taking into consideration the Company’s contractual obligations, the Committee shall determine if it is in the best interests of the Company and its stockholders to continue, modify, or terminate the Related- Person Transaction.
All Related-Person Transactions that are required to be disclosed in the Company’s filings with the SEC, as required by the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, shall be so disclosed in accordance with such laws, rules and regulations. The material features of this policy shall be disclosed in the Company’s annual report on Form 10-K or in the Company’s proxy statement, as required by applicable laws, rules and regulations.
Consideration and approval of any particular Transaction by the Reviewer shall not be dispositive in determining whether such Transaction requires disclosure under applicable securities laws.
The Chair of the Committee shall report to the Committee at the next Committee meeting any approval under this policy pursuant to delegated authority. The Committee shall timely advise the Board of Directors of the Company of all Related Person Transactions, if any, approved or ratified by the Committee or the Chairman of the Committee.
This Related-Person Transaction Policy does not replace or supersede any other policies of the Company, including the Company’s Business Conduct & Ethics Code, but rather this policy will work in tandem with other Company policies involving potential or actual conflicts of interest.