Review and Approval of Related Person Transactions. We review all relationships and transactions in which the company and our directors and executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. The company’s legal staff is primarily responsible for the development and implementation of processes and controls to obtain information from the directors and executive officers with respect to related person transactions and for then determining, based on the facts and circumstances, whether the company or a related person has a direct or indirect material interest in the transaction. As required under SEC rules, transactions that are determined to be directly or indirectly material to the company or a related person are disclosed in the company’s proxy statement. In addition, the Audit Committee reviews and approves or ratifies any related person transaction that is required to be disclosed. As set forth in the Audit Committee’s key practices, in the course of its review and approval or ratification of a disclosable related party transaction, the committee considers:
- the nature of the related person’s interest in the transaction;
- the material terms of the transaction, including, without limitation, the amount and type of transaction;
- the importance of the transaction to the related person;
- the importance of the transaction to the company;
- whether the transaction would impair the judgment of a director or executive officer to act in the best interest of the company; and
- any other matters the committee deems appropriate.
Any member of the Audit Committee who is a related person with respect to a transaction under review may not participate in the deliberations or vote respecting approval or ratification of the transaction, provided, however, that such director may be counted in determining the presence of a quorum at a meeting of the committee that considers the transaction.
Related Party Transactions.Mr. Penske has a direct financial interest in and controls Penske Corporation (PC), which is privately held. Penske Truck Leasing Corporation, a subsidiary of PC, (PTLC) is the general partner of Penske Truck Leasing Co., L.P. (Truck Leasing, L.P.) PTLC and its subsidiary PTLC Holdings Co., LLC (PTLC LLC) currently own 30% of the partnership interests in Truck Leasing, L.P. GE Capital Corporation (GE Capital) owns the remaining 70% interests. GE has consolidated Truck Leasing L.P. in GE’s financial statements since 2004. GE Capital extends acquisition and working capital loans and guarantees to the partnership, and those totaled approximately $6.3 billion as of December 31, 2006. GE Capital provides this funding on the same terms as those extended to its operating subsidiaries.
In June 2006, GE Capital sold to PTLC LLC 9% of its partnership interests in Truck Leasing L.P. for $230 million in cash, reducing the GE Capital limited partnership interest from 79% to 70%. At the same time, the partnership increased the size of its existing revolving credit facility with GE Capital to $6.5 billion from approximately $5 billion. It borrowed $1.23 billion to make a distribution to both the general partner and the limited partners. PTLC LLC paid the purchase price for the 9% interest to GE Capital with internal funds and funds received from the distribution. GE Capital and PTLC extended the partnership agreement an additional ten years, to 2018. GE Plastics BV also purchased a wholly owned subsidiary of the partnership for $23.8 million.
In addition, various GE businesses have arms-length commercial dealings with Penske entities, none of which are material individually or in the aggregate.
Mr. Penske’s son-in-law is a business analyst at GE Real Estate and earned $129,700 in base salary and annual bonus in 2006. His compensation is commensurate with his peers’.
Mr. Wright’s son-in-law is a vice president at GE Asset Management and earned $532,000 in base salary and annual bonus in 2006. He also received equity awards. His compensation is commensurate with his peers’.
The Audit Committee has reviewed and approved or ratified these transactions.
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