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Frequently Asked Questions
  Staff Interpretation Letter 2006-8
Identification Number 819
This is in response to your correspondence regarding whether a proposed amendment (the “Amendment”) to the company’s stock option plan (the “Plan”) would require shareholder approval pursuant to Marketplace Listing Rule 4350(i)(1)(A) and IM-4350-5 (collectively, the “Rule”).  Pursuant to the Amendment, the company would permit the cashless exercise of stock options.
 
According to the information you provided, the Plan currently provides that the exercise price for options shall be paid: (i) in cash, by certified check or money order, or such cash equivalent as is approved by the board of directors or any committee thereof, (ii) by the assignment of the proceeds of a sale of some or all of the ordinary shares being acquired upon the exercise of an option, or (iii) by a combination thereof.
 
Pursuant to the Amendment, an exercise of options could be settled by the company’s issuing to the optionee that number of ordinary shares, or American Depository Shares (“ADS”), equal in value to the difference between the value of the ordinary shares underlying the options and the aggregate cost to exercise the options.  As a result, the optionee would receive the same value that would be obtained by exercising all of the stock options and selling that number of ordinary shares (or ADS) to cover the cost of exercise as is currently permitted under the Plan.  The company’s board of directors would have the choice of whether to include this cashless exercise feature in any given option award.
 
Following our review of the information you provided, we have determined that the Amendment is not a material amendment under the Rule.  In that regard, we note that the cashless exercise would not provide a material increase in benefits to participants as compared to the methods of exercise currently permitted under the Plan.  In addition, the Amendment would not result in an increase in the number of shares available for issuance under the Plan, an expansion of the class of eligible participants, or an expansion of the types of awards available.  Accordingly, the Rule does not require shareholder approval for the Amendment.
 
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 819
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