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  Staff Interpretation 2021-03
Identification Number 1807

This is in response to your correspondence asking if the Company may satisfy the disclosure requirements set forth in Listing Rule 5635(c)(4) (the “Rule”) related to the exception to the shareholder approval requirement for equity awards issued to certain new employees by issuing a press release disclosing the material terms of the inducement grant prior to the grant’s date.

The Company intends to grant equity awards to employees of certain businesses that the Company is acquiring (the “Acquisitions”), in each case as an inducement material to such employees entering into employment with the Company upon the closing of the Acquisitions (the “Inducement Awards”). The Company’s compensation committee approved the Inducement Awards and the terms of the Inducement Awards will be communicated to employees prior to the closing date of the Acquisitions.

You stated that for administrative reasons, the Inducement Awards will not be granted until approximately three months following the closing date of the Acquisitions. You further stated that such a delay is due to the Company’s preexisting policy of processing equity grants on a quarterly basis rather than on a rolling basis. Pursuant to this policy the Inducement Awards will be issued on the nearest scheduled grant date. You indicated that all material terms of the Inducement Awards will be determined prior the closing date of the Acquisitions and such terms, including the number of shares underlying the Inducement Awards and their vesting schedule, will not be impacted by the delay. There are no material conditions that grantees must satisfy after closing in order to receive an Inducement Award.

You indicated that the Company intends to issue a press release describing the Inducement Awards on the closing date of the Acquisitions, which will be after all material terms are determined and disclosed to the recipients, but before the grant date of the Inducement Awards. You confirmed that, given that the press release will be issued before the Inducement Awards are granted, if there is a subsequent material change with respect to the Inducement Awards, the Company would issue another press release updating the facts of the original press release.

Following our review of the information you provided we have determined that the administrative delay in issuing the Inducement Awards does not preclude the availability of the inducement grant exception under the Rule because the terms of the Inducement Awards will be determined and communicated to the grantees prior to the individual's entering into employment with the Company and such terms, including the number of shares underlying the Inducement Awards, will not be impacted by the delay.  Furthermore, we have determined that the Company may disclose the material terms of the Inducement Awards prior to the actual grant date, but after all material terms have been determined, provided that the Company must issue a clarifying press release “[p]romptly following an issuance” of the Inducement Awards, as required by the Rule, if there is any subsequent material change with respect to the Inducement Awards.
Publication Date*: 9/3/2021 Mailto Link Identification Number: 1807
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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