As of February 12, 2007, a director is independent under both of those rules if the director is not (1) an executive officer or employee of the company, (2) an affiliated person of the company,1 or (3) any other individual having a relationship which, in the opinion of the Board, would interfere with the independent judgment in carrying out the responsibilities of a director, and the director does not accept directly or indirectly any consulting, advisory, or other compensatory fee from the Company or any subsidiary thereof, other than for service on the Board and the Committee (or any other committee of the Board), and compensation allowed as detailed below.  NASDAQ Marketplace Rule 4200(a)(15) states that any director who falls into one of the following categories is by definition not independent:

  • Has been employed by the company or by any parent or subsidiary of the company during the past three years.
  • Has accepted or has a Family Member2 who has accepted any compensation in excess of $60,0003 during any period of twelve consecutive months within the three years preceding the determination of independence, unless that compensation was: (1) for board or board committee service, (2) paid to a Family Member who is an employee (other than an executive officer of the Company, or (3) benefits under a tax-qualified retirement plan or non-discretionary compensation.
  • Is a Family Member of an individual who is, or at any time during the past three years was, employed by the company as an executive officer.
  • Is, or has a Family Member who is, a partner in, or a controlling shareholder or an executive of, any organization to which the company made, or from which the company received, payments for property or services in the current or any of the past three fiscal years that exceed the larger of (a) five percent (5%) of the recipient’s consolidated gross income of that year or (b) $200,000, other than payments arising solely from investments in the Company’s securities, or payments under non-discretionary charitable contribution matching programs.
  • Is, or has a Family Member who is, employed as an executive officer of another entity where at any time during the past three years any of the executive officers of the issuer serve on the compensation committee of such other entity.
  • Is, or has a Family Member who is, a current partner of the company’s outside auditor, or was a partner or employee of the company’s outside auditor who worked on the company’s audit at any time during any of the past three years.

1According to Rule 10A-3(e)(1): (i) the term affiliate of, or a person affiliated with, a specified person, means a person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.  The rule goes on to specify that an executive officer of an affiliate, a director who is also an employee of an affiliate, a general partner of an affiliate, or a managing member of an affiliate are by definition affiliates.

2“Family Member” is defined by NASDAQ Marketplace Rule 4200(a)(14) as: a person’s spouse, children and siblings, whether by blood, marriage or adoption, or anyone residing in such person’s home.

3This $60,000 threshold is currently under review, and may increase in the near future.