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  Staff Interpretation Letter 2003-43
Identification Number 1010
Rule 4350(i)(1)(B):  Each issuer shall require shareholder approval prior to the issuance of designated securities … when the issuance or potential issuance will result in a change of control.
 
Rule 4350(i)(1)(D)(ii):  Each issuer shall require shareholder approval prior to the issuance of designated securities … in connection with a transaction other than a public offering involving the sale, issuance or potential issuance by the company of common stock (or securities convertible into or exercisable [for] common stock) equal to 20% or more of the common stock or 20% or more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock.
 
Relevant Facts:  A company proposes to conduct a tender offer to exchange previously issued convertible notes from a particular series for a combination of new convertible notes and common stock (the “Exchange Offer”).  The company represented that the conversion price of the new notes will be at a significant premium to the market price of the common stock on the last day prior to the commencement of the Exchange Offer.  The company also stated that the shares of common stock will be at issued a price (the “Reference Price”), which is set at market value prior to the expiration of the tender offer based on the closing bid price.  In no event will the conversion price of the notes be less than the Reference Price.  In the event of early redemption of the new notes, the company will be required to pay an early call fee in cash or in stock; however, in no event will any issuance of such stock be at a price less than the Reference Price.  The company also stated that no one holder will own more than 20% of the outstanding common stock or voting power on a post-transaction basis.
 
Issue:  Is shareholder approval required for the proposed transaction?
 
Determination:  No.  Since the issuance of common stock will not be at a price that is less than the greater of book or market value, and the conversion price for the new notes similarly will not be below the common stock offer price (Reference Price), the transaction does not require shareholder approval pursuant to Listing Rule 4350(i)(1)(D)(ii).  In addition, the transaction will not result in a change of control because no one holder would own more than 20% of the outstanding common stock or voting power on a post-transaction basis.  As a result, the Exchange Offer would not require shareholder approval pursuant to Listing Rule 4350(i)(1)(B).
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 1010
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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