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Frequently Asked Questions
  Staff Interpretation Letter 2011-2    
Identification Number 692
This is in response to your correspondence asking whether securities to be issued in a proposed private placement (the “Proposed Transaction”) would be aggregated with certain prior security issuances (the “Prior Transactions”) in determining whether shareholder approval would be required of the Proposed Transaction under Listing Rule 5635.
 
The Prior Transactions related to the company’s acquisition of Target, which closed approximately two weeks ago.  In the Prior Transactions, the company issued securities directly to Target’s shareholders as consideration for the acquisition and, additionally, to other investors in a private placement, the closing of which was contingent on the closing of the acquisition. The proceeds from the private placement were used primarily to pay down Target’s debt, which was assumed by the company in the acquisition. In the aggregate, the number of shares of common stock issuable in the Prior Transactions is less than 20% of the company’s pre-transaction outstanding shares of common stock. The agreements relating to the acquisition and the private placement were entered into approximately one month ago and three weeks ago, respectively.
 
While the company did not contemplate another transaction when it completed the Prior Transactions, approximately one week later the company received unsolicited correspondence from the Investor expressing interest in investing in the company. The ensuing discussions resulted in the Proposed Transaction pursuant to which the company would issue to the Investor less than 20% of its pre-transaction outstanding shares of common stock at a price less than market value. The proceeds from the Proposed Transaction would be used for working capital and to fund the company’s growth strategy.  The Investor did not participate in the Prior Transactions. The company expects that the Proposed Transaction would close approximately four to six weeks after the closing of the Prior Transactions.
 
Following our review of the information you provided, we have determined that the Proposed Transaction would not be aggregated with the Prior Transactions for purposes of determining whether shareholder approval would be required under Listing Rule 5635. We have reached this conclusion because: (i) there is no commonality of investors between the transactions; (ii) the transactions are not contingent on each other; (iii) the funds from the transactions will be used for different purposes; (iv) the Proposed Transaction was not contemplated at the time of the closing of the Prior Transactions; and (v) the opportunity for the Proposed Transaction arose unexpectedly after the closing of the Prior Transaction and was at the initiation of the Investor, not the company. Please note that you have not asked us to reach, and we have not reached, a conclusion as to the applicability of the shareholder approval requirements in any way other than as addressed herein.
 
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 692
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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