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Frequently Asked Questions
  Staff Interpretation Letter 2006-1
Identification Number 812
This is in response to your correspondence regarding Marketplace Rules 4200(a)(15)(A) and 4200(a)(15)(B) (the “Rules”).  You asked whether the Director is eligible to serve as an independent director notwithstanding the duties he performed, and the compensation he received, in connection with carrying out an oversight function of the company’s management as you described.
According to the information you provided, the Director has served as non-executive Chairman of the board of directors and as the Presiding Director.  He is neither an officer nor an employee of the company, nor has he been within the past three years.  The company hired a new chief executive officer (“CEO”) on Date.  The Board felt that due to the unfamiliarity of the CEO with the company and its industry, a Board member should exercise particularly close oversight of management during a transition period (the “Oversight Function”).  On behalf of the Board and in his capacity as Chairman, the Director agreed to perform the Oversight Function.
You stated that as compensation for the additional time required for the Oversight Function, the Director received a cash retainer upon appointment as Chairman and was to receive a monthly retainer in recognition of the expected time commitment.  In addition, the Director received an award of an option (from a shareholder-approved plan) to purchase shares of common stock.  Because the time commitment of the Oversight Function turned out to be less than originally expected, the monthly retainer fee was subsequently reduced.  You stated that all compensation paid by the company to the Director was for Board service only, and that the duties associated with the Oversight Function are board services.  You further stated that this arrangement, including the associated compensation, was approved by the Board’s Nominating and Corporate Governance Committee and Compensation Committee, and by the independent directors other than the Director.
Following our review of the information you provided and based on your representations, we have determined the company’s Board is not precluded by the Rules from finding that the Director is independent.  The Director is not ineligible under Listing Rule 4200(a)(15)(A) because he has not been employed by the company within the past three years.  He is not ineligible under Listing Rule 4200(a)(15)(B) because all payments made by the company to the Director were for Board service only.  Please note that 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: 812
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