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Frequently Asked Questions
  Staff Interpretation Letter 2008-22
Identification Number 766
This is in response to your correspondence regarding whether the Director is eligible to be an independent member of the company’s board of directors under Marketplace Listing Rule 4200(a)(15)(B) (the “Rule”) notwithstanding certain payments which the company makes to the Director’s father (the “Director’s Father”) under a retirement plan as described below.  Specifically, you asked whether the payments are “non-discretionary” for purposes of the Rule and, therefore, not included in the Rule’s $120,000 annual limitation (the “Limitation”).
 
According to the information you provided, the Director’s Father is the company’s co-founder and former chief executive officer.  The Director has never been an officer or employee of the company.  Approximately five years ago, the Director’s Father ceased to be employed by the company and began receiving retirement benefits under the company’s Non-Qualified Supplemental Executive Retirement Plan (the “SERP”) which was established approximately ten years ago.  The annual payments under the SERP (the “SERP Payments”) to the Director’s Father are of a fixed amount, not subject to change, and exceed the Limitation.  You stated that the payments are legal obligations of the company not contingent in any way on continued service to the company in any capacity.
 
Following our review of the information you provided, we have determined that for purposes of the Rule, the SERP Payments are non-discretionary and, as such, are not considered in determining if there are payments to the Director or a family member of the Director in excess of the Limitation.  We have reached this conclusion because the SERP Payments are legal obligations of the company under a retirement plan and are not contingent on continued service to the company by the Director’s Father.  Accordingly, under the Rule, the SERP Payments will not preclude the company’s board of directors from finding that the Director is independent.  Notwithstanding this determination, pursuant to Listing Rule 4200(a)(15) and IM-4200, a company’s board has a responsibility to make an affirmative determination that no relationship exists that would impair the independence of any individuals serving as independent directors.  We are not expressing any opinion as to whether it would be appropriate for the company’s Board to make such a finding with respect to the Director.
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 766
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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