A is an officer and director of Y corporation, a wholly-owned subsidiary of registrant X. A is not an officer or director of X and holds only a nominal amount of X's shares. Y does business in an amount in excess of $120,000 with B, A's brother. That relationship need not be disclosed in X's reports under Item 404(a), since A is not a person described in Instruction 1 to Item 404(a). [Mar. 13, 2007]

A corporation enters into a lease in an amount substantially in excess of $120,000 with a lessor completely unaffiliated with the corporation. The lease, however, is negotiated through a related person specified in Instruction 1 to Item 404(a), who is paid a commission that is less than $120,000 by the lessor for those services. Since the amount of that person's commission is dependent upon the value of the lease, that person is considered to have an interest in the lease transaction, and the transaction, together with the commission, should be reported if the interest is determined to be a direct or indirect material interest. [Mar. 13, 2007]

Y, the President and a director of Z Corporation, a supplier of the registrant, is a member of the registrant's board of directors. The registrant solicited bids from Z and various other companies on a supply contract involving an amount in excess of the $120,000 threshold of Item 404(a). The registrant plans to award the contract to Z, even though this supplier did not submit the lowest bid in what purportedly was a competitive bidding contest. Under these circumstances, the registrant cannot avail itself of the exclusion in Instruction 7.a. to Item 404(a) for transactions where the rates or charges involved are determined by competitive bids. [Mar. 13, 2007]

Instruction 7.a. to Item 404(a) of Regulation S-K does not permit non-disclosure of an equipment lease transaction between a company owned by a director of a reporting company and the reporting company, simply because the reporting company solicited proposals from other unrelated persons and selected the director's company only after an internal analysis of the available terms. The procedure used was not deemed to be a competitive bid because it did not involve the formal procedures normally associated with competitive bidding situations. There were no specifications established for the lease being bid upon and there was no indication of the basis upon which a bid was accepted. [Mar. 13, 2007]

A contract between a reporting company and the fund manager of the company's pension plan, who is also a more than 5 percent beneficial owner under Rule 13d-3, should be disclosed under Item 404(a) where the amount involved in the contract exceeds $120,000. [Mar. 13, 2007]

X is a director of the registrant. X's child is employed by the registrant and receives yearly compensation exceeding $120,000. The child's compensation is not reported under Item 402 since the child is not one of the registrant's named executive officers, nor is the child an officer or director. The child's compensation is required to be disclosed under Item 404(a) because the child is a related person and has a material interest in his or her yearly compensation. [Aug. 14, 2009]

An agreement by a company with a related person to repurchase company shares from the related person's estate upon death with the proceeds of a life insurance policy paid for by the company should be disclosed pursuant to Item 404(a). [Mar. 13, 2007]

In connection with a move of company headquarters, a company purchased and resold the homes owned by all affected employees. The price paid was determined by an independent appraiser. The company was advised that the Division staff will raise no objection if the company discloses under Item 404(a) only the general features of the program (including how the price was determined) and the total amount spent by the company on the program. [Mar. 13, 2007]

Item 404(a) requires disclosure of nonaccrual, past due, restructured and potential problem loans from banks, savings and loan associations or broker-dealers extending credit under Federal Reserve Regulation T. Instruction 4.c. of Item 404(a) refers to Industry Guide 3, Statistical Disclosure by Bank Holding Companies, for determining if loans are nonaccrual, past due, restructured or potential problem loans. Guide 3 requires disclosure of loans in these categories the end of each "reported period." In a proxy statement, therefore, where the reported period is the last fiscal year, only those loans which were in these categories at the end of the last fiscal year are required to be reported. [Mar. 13, 2007]

A parent and its subsidiary are both Exchange Act reporting companies. Some of the executive officers of the parent may receive a portion of their compensation from the subsidiary corporation. The Division staff advised that if an executive spends 100% (or near 100%) of the executive's time for the subsidiary but is paid by the parent, then the compensation paid by the parent has to be reported in the executive compensation table of the subsidiary. However, if an allocation of the monies paid by the parent would be necessary because the executive officer splits time between the parent and the subsidiary, the payments allocable to services to the parent need not be included in the subsidiary's executive compensation table. In addition, in the event that the subsidiary pays a management fee to the parent for use of the executives, disclosure of the structure of the management agreement and fees would have to be reported under Item 404. Compensation paid by the subsidiary to executives of the parent company must be included in the parent's executive compensation table if such payments are paid directly by the subsidiary. If the payments are part of a management contract, disclosure of the structure of the management agreement and fees would have to be reported under Item 404. [July 3, 2008] [same as C&DI 217.08]

When the transaction under consideration is an employment arrangement, "the amount involved in the transaction" includes all compensation, not just the salary of the employee. [Aug. 8, 2007]

The compensation of an executive officer who is not a named executive officer is approved by the Board's compensation committee, and the executive officer's compensation is not disclosed under Item 404(a) pursuant to Instruction 5.a to Item 404(a). An immediate family member of this executive officer also is employed by the company. The immediate family member's compensation is disclosed under Item 404(a). In this regard, Instruction 5.a to Item 404(a) does not apply to the immediate family member because she was not an executive officer. [Aug. 8, 2007]