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Frequently Asked Questions
  Staff Interpretation Letter 2015-3
Identification Number 1140

This is in response to your correspondence asking if an amendment to a shareholder approved employee stock purchase plan (the “ESPP”) changing certain purchase limitations would be considered a material amendment and, as a result, require shareholder approval under Listing Rule 5635(c) and IM-5635-1 (collectively, the “Rule”).

You stated that the Company has an ESPP that does not satisfy the tax qualification requirement of Section 423 of the Internal Revenue Code because only certain employees of the Company are eligible to participate, and as a result, is an equity compensation plan that requires shareholder approval under the Listing Rules. The ESPP provides an eligible participant (“Participant”) the opportunity to purchase shares of Company common stock on a quarterly basis (the “Offering Period”), subject to certain limits. In a single Offering Period, a Participant is allowed to purchase shares of common stock subject up to a maximum number of shares and the percentage of compensation that a participant may use to purchase shares is capped. The ESPP also contains a calendar year limitation on total payroll deductions.

You stated that the Company is proposing two changes to the ESPP (together, the “Amendment”). First, the Company proposes to reduce the maximum percentage of a Participant’s compensation that may be used to purchase shares during each Offering Period. Second, the Company proposes to increase the maximum dollar amount a Participant may spend to purchase shares during a calendar year. You stated that the proposed Amendment would not increase the maximum number of shares a Participant may purchase during an Offering Period and would not increase the total number of shares authorized and available for purchase under the ESPP.

Following our review of the information you provided, we have determined that the Amendment would not be a material amendment for purposes of the Rule. While the Amendment changes certain purchase limitations, there will be no increase in the maximum number of shares to be issued under the ESPP. As such, while the Amendment may affect the timing of when certain awards could be made, it will not increase the overall dilution possible under the ESPP. Furthermore, the Amendment does not result in any material increase in benefits to the Participants or any material expansion in the class of participants eligible to participate in the ESPP. Finally, the Amendment does not result in any expansion in the types of awards provided under the ESPP.

Publication Date*: 12/2/2015 Mailto Link Identification Number: 1140
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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