This is in response to your correspondence regarding whether the course of action the company is considering taking under its equity compensation plans (the “Exchange Program”) would require shareholder approval pursuant to Marketplace Listing Rule 4350(i)(1)(A)
and IM-4350-5 (collectively, the “Rule”). Under the Exchange Program, as more fully described below, the company would offer certain of its employees the opportunity to cancel underwater stock options, previously granted under the Plans, in exchange for a
lesser number of restricted stock units (“RSUs”).
According to the information you provided, the Exchange Program is expected to be open for approximately one month and would be available to the company’s employees who are employed throughout the duration of the Exchange Program. However, you stated
that executive officers of the company and members of its board of directors would not be eligible to participate. The exchange ratio has not been set but would be determined based on the exercise price of the exchanged options.
The RSUs would be granted from Plan 1 from its currently authorized share reserve. Pursuant to the provisions of Plan 1, the company may modify, or accept the cancellation of, outstanding options, whether or not granted under Plan 1, in return for new
options at the same or a different exercise price. In addition, each of Plan 2, Plan 3, and Plan 4 provides that the company may replace outstanding options with new options for the same or a different number of shares, at the same or a different exercise
price. As such, each of the Plans permits options to be re-priced.
Plan 1 permits the grant of stock options at a discounted exercise price, provided the exercise price is at least $0.0001 per share. You indicated that the grant of an option issued at such a nominal exercise price is essentially identical to the grant
of an RSU for economic, tax, and accounting purposes.
Following our review of the information you provided, we have determined that the Exchange Program would not require shareholder approval under the Rule because it would not be a material amendment to the Plans. Specifically, while the effect of the Exchange
Program is equivalent to a re-pricing of the options, each of the Plans already permits such a re-pricing. Further, Plan 1, from which the new RSUs would be granted, already allows for the grant of stock units. Plan 1 further provides that the company may
replace outstanding options with new options, whether or not the outstanding options were granted under Plan 1, and such new options could be granted with a nominal exercise price. Given that you have indicated that the economic, accounting, and tax treatment
of options with such a nominal exercise price are the same as RSUs, we do not consider it a material amendment to the Plans to permit the issuance of RSUs in the Exchange Program. In addition, the Exchange Program would not result in an increase in the number
of shares available under the Plans because the RSUs would be granted from the currently authorized share reserve of Plan 1. Finally, the Exchange Program would not expand the class of eligible participants.