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This excerpt taken from the AN DEF 14A filed Mar 23, 2009. Does
the Board have a written policy with regard to related party
transactions?
Yes. Our Board’s written policy requires that transactions
with related parties must be entered into in good faith on fair
and reasonable terms that are no less favorable to us than those
that would be available in a comparable transaction in
arm’s-length dealings with an unrelated third party. Based
on our experience, we believe that each of the transactions
described below complied with our Board’s policy at the
time the transaction was effected. Our Board, by a vote of the
disinterested directors, must approve all related party
transactions valued over $500,000, while our Audit Committee
must approve all related party transactions valued between
$100,000 and $500,000 and review with management all other
related party transactions. The following is a summary of
related party transactions since January 1, 2008.
We enter into commercial transactions with Sears Holdings
Corporation and its affiliates (collectively,
“Sears”), which are related to ESL Investments, Inc.,
in the ordinary course of business. As of March 11, 2009,
ESL Investments, Inc., together with its investment affiliates
(collectively, “ESL”), beneficially owns approximately
45% of the outstanding shares of our common stock, and
Mr. Crowley, one of our directors, is the President and
Chief Operating Officer of ESL Investments, Inc. In 2008, we
paid Sears approximately $375,000 primarily for automotive parts
and accessories, and Sears paid us approximately $15,000
primarily for automotive parts, accessories and services. ESL
owns approximately 53% of the outstanding common stock of Sears
(based on publicly available data as of March 11, 2009),
and Edward S. Lampert, the Chairman, Chief Executive Officer and
controlling principal of ESL Investments, Inc., serves as the
Chairman of the Board of Directors of Sears. Additionally,
Mr. Crowley serves as a director, Executive Vice President
and Chief Administrative Officer of Sears, and as the Chairman
of the Board of Sears Canada Inc.
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We also enter into commercial transactions with AutoZone, Inc.
(“AutoZone”) in the ordinary course of business. ESL
owns approximately 41% of the outstanding common stock of
AutoZone (based on publicly available data as of March 11,
2009), and Messrs. Crowley and Grusky, two of our
directors, serve as directors of AutoZone. In 2008, we paid
AutoZone approximately $13,000 primarily for automotive parts
and accessories, and AutoZone paid us approximately $560,000
primarily for automotive parts and accessories.
In January 2009, our Board authorized and approved letter
agreements with certain automotive manufacturers in order to,
among other things, eliminate any potential adverse consequences
under our framework agreements with those manufacturers in the
event that ESL acquires 50% or more of our common stock. The
letter agreements with American Honda Motor Co., Inc.
(“Honda”) and Toyota Motor Sales, U.S.A., Inc.
(“Toyota”) also contain governance-related and other
provisions as described below. Also a party to both the Honda
and Toyota Agreements is ESL, our largest stockholder.
Under the terms of the Honda Agreement, Honda has agreed not to
assert its right to purchase our Honda and Acura franchises
and/or
similar remedies under the manufacturer framework agreement
between Honda and the Company in the event that ESL acquires 50%
or more of our common stock. If ESL acquires more than 50% of
our common stock, ESL has agreed to vote all shares in excess of
50% in the same proportion as all non-ESL-owned shares are
voted. In addition, we have agreed to ensure that a majority of
our Board is independent of both the Company and ESL under
existing NYSE listing standards. Furthermore, the Honda
Agreement provides that Honda’s consent does not apply to a
“going private” transaction under
Rule 13e-3
of the Exchange Act. The terms and conditions of the Honda
Agreement will only apply at such time and for so long as ESL
owns more than 50% of our common stock.
Under the terms of the Toyota Agreement, Toyota has agreed not
to assert its right to purchase our Toyota and Lexus franchises
and/or
similar remedies under the manufacturer framework agreement
between Toyota and the Company in the event that ESL acquires
50% or more of our common stock. If ESL acquires more than 50%
of our common stock, ESL has agreed to vote all shares in excess
of 50% in the same proportion as all non-ESL-owned shares are
voted. Furthermore, we have agreed that a majority of our Board
will be independent from both the Company and from ESL under
existing NYSE listing standards. We have also agreed not to
merge, consolidate, or combine with any entity owned or
controlled by ESL unless Toyota consents thereto. In addition,
the Toyota Agreement provides that in the event that we appoint
a Chief Operating Officer who, in the good faith judgment of our
Board, does not have sufficient breadth and depth of experience,
a relevant, successful automotive track record, and extensive
successful automotive experience, ESL shall be required to
divest its shares in excess of 50% within nine months or its
voting interest will be limited to 25%, and if ESL does not
divest such shares within 18 months, it will lose all
voting rights until it divests such shares. The terms and
conditions of the Toyota Agreement will only apply at such time
and for so long as ESL owns more than 50% of our common stock
and will terminate on December 31, 2009 with respect to
future stock acquisitions by ESL, provided that ESL may seek
successive annual one-year extensions, and Toyota may not
unreasonably withhold or delay its consent thereto.
In connection with the Toyota and Honda agreements described
above, in January 2009, our Board authorized and approved a
separate letter agreement between the Company and ESL in which
ESL has agreed to vote shares of our common stock owned by ESL
in excess of 45% in
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the same proportion as all non-ESL-owned shares are voted. The
ESL Agreement expires on January 28, 2010, unless extended
by mutual agreement of the parties.
We have also entered into separate letter agreements with
certain other manufacturers that eliminate any potential adverse
consequences under our framework agreements with those
manufacturers in the event that ESL acquires 50% or more of our
common stock. ESL is not a party to any of those agreements.
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