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Frequently Asked Questions
  Staff Interpretation Letter 2005-37
Identification Number 884
This is in response to your letter regarding Marketplace Rules 4200(a)(15)(B) and 4200(a)(15)(D) (the “Rules”).  You asked whether Mr. X (the “Director”) would be eligible to be an independent director following a purchase and sale transaction (the “Transaction”) and a leasing agreement (the “Leasing Agreement”) involving the company and the Director as described below.
 
According to the information you provided, Mr. X has been a member of the company’s board of directors (the “Board”) since 2002.  In the Transaction, a wholly-owned subsidiary (the “Subsidiary”) of the company will sell an office building (the “Office Building”) to the Director for an amount that is higher than either of two appraisals obtained by the Subsidiary. In the Leasing Agreement, the Subsidiary will lease space in the Office Building currently occupied by the Subsidiary as a bank branch, resulting in annual lease payments to the Director of less than $60,000, an amount which you stated is in line with the rates mentioned in the aforementioned appraisals. The Board and the audit committee of the Board have approved the Transaction.
 
Following our review of the information you provided, we have determined the company’s Board would not be precluded by the Rules from finding that the Director is independent. With respect to the sale of the Office Building, Listing Rule 4200(a)(15)(D) does not preclude the Director from being independent because the payment in the Transaction is less than 5% of the revenues of the recipient (which is the company). Further, Listing Rule 4200(a)(15)(B) does not preclude the Director from being independent, provided the payments the Director will receive pursuant to the Leasing Agreement are less than $60,000 during any period of twelve consecutive months. We are not making a determination regarding the eligibility to qualify as an independent director under any other provision of Listing Rule 4200(a)(15). In addition, pursuant to 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.
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 884
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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