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Frequently Asked Questions
  Staff Interpretation Letter 2008-15  
Identification Number 760
This is in response to your correspondence regarding whether the establishment of an equity compensation plan (the “Plan”) for the Subsidiary would require the approval of the company’s shareholders under Marketplace Listing Rule 4350(i)(1)(A).
 
According to the information you provided, the Subsidiary is a wholly-owned subsidiary of the company and currently represents less than 10% of the company’s overall revenues.  You stated that in order to provide an incentive to employees of the Subsidiary, the Subsidiary intends to create the Plan, which would authorize the grant of stock options and other equity-based awards based solely on the common stock of the Subsidiary.  No award under the Plan would be exercisable for, or convertible into, any of the company’s equity securities.  Eligible participants would be officers, directors, employees, and consultants of the Subsidiary.  The Plan would be subject to the approval of the Subsidiary’s board of directors and of the company, as the sole stockholder of the Subsidiary.  Generally, awards under the Plan would be exercisable only in connection with a liquidity event, such as an initial public offering of the Subsidiary.
 
Following our review of the information you provided, we have determined that the approval of the Plan by the company’s shareholders is not required pursuant to the Rule because no shares of the company’s equity securities could be issued under the Plan.  In reaching this determination, we also took into account the size of the Subsidiary relative to the size of the company.
 
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 760
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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