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Frequently Asked Questions
  Staff Interpretation Letter 2008-31  
Identification Number 775
This is in response to your correspondence regarding the applicability of Marketplace Listing Rule 4350(i)(1)(A) (the “Rule”) to the company’s  proposed establishment of an employee stock trust (the “Trust”) and the issuance of shares of the company’s common stock to the Trust.  As described below, shares issued to the Trust (“Trust Shares”) would subsequently be used to fulfill the company’s obligations under certain of its equity compensation plans or arrangements (“Equity Plans”).
 
According to the information you provided, the Trust would be a funding vehicle, allowing the company to set aside funds, primarily in the form of shares of common stock, to satisfy its ongoing obligations under its employee benefit plans.  The company would create the Trust and issue shares of its common stock to the Trust for no consideration.  The Trust would be administered by an independent trustee.  For financial reporting purposes, the Trust would be consolidated with the company.  For tax purposes, assets of the Trust would be treated as assets of the company until distributed to the beneficiary.
 
Shares held in the Trust would be transferred only for uses either approved by the company’s shareholders or for which shareholder approval is not required under NASDAQ rules.  The number of shares available for issuance under an equity plan or arrangement which contains a limit on the number of shares available would be reduced by the number of Trust Shares used to fulfill the company’s obligations under such plan or arrangement.  As such, the Trust could not be used to increase the number of shares that could be issued under any of the company’s Equity Plans.
 
You indicated that the company wishes to establish the Trust to further foster an employee ownership culture and to offer employees an additional level of security with respect to the company’s ability to fund benefits under its employee benefit plans.
 
Following our review of the information you provided, we have determined that the establishment of the Trust, and the issuance of shares of the company’s common stock to the Trust, would not require shareholder approval under the Rule.  We have reached this conclusion because: (i) the Trust Shares would be used for Equity Plans only for which shareholder approval has been obtained or is not required; and (ii) the Trust could not be used to increase the number of shares that could be issued under any of the company’s Equity Plans.  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: 775
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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