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Libraries:
Staff Interpretation Letters
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Filters:
All Years; Shareholder Approval; All
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Identification Number
821
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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 increase the size of automatic awards to non-employee directors and change the grant date for the automatic annual awards to non-employee directors.
Currently, the Plan provides that each non-employee director shall receive, upon joining the board of directors, an option to purchase shares (the “Initial Award”), and, thereafter, an annual award (the “Annual Award”) of an option to purchase shares.
Pursuant to the Amendment, the Initial Award would increase to 150% of the current award, and the Annual Award, would increase to 120% of the current award. Currently, the Plan provides that the Annual Award shall be made on the last business day of the company’s
fiscal year. You stated that changes in accounting rules have made this grant date administratively burdensome. Pursuant to the Amendment, the Annual Award would be made a few weeks before, or possibly one week after, the end of the fiscal year. You indicated
that the Amendment to the Initial Award would be applied to the non-employee directors who joined the company’s board of directors since the most recent annual meeting. As a result, these directors will receive the adjusted number of options as part of their
Initial Award, although the exercise price of the increased amount will be set at 100% of the fair market value of the stock on the grant date, rather than the date these directors joined the board. The Amendment would not affect the maximum number of shares
available under the Plan. You stated that the company believes the Amendment is necessary because the company’s director compensation package was below the desired market position and could lead to difficulty in attracting directors.
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 notwithstanding the increase in the size of the Initial Award and the Annual Award, the
aggregate number of shares of common stock available under the Plan is not affected by the Amendment. In addition, the Amendment would not expand either the class of participants eligible to participate or the types of awards available. Accordingly, the Rule
does not require shareholder approval for the Amendment. Further, in this case, we believe it is not inappropriate to apply the Initial Award to the individuals appointed since the company’s last annual meeting of shareholders prior to the submission of your
request, given that they were appointed “mid-term”, and, at that time, the company was concerned about its director compensation package and had discussed making a change such as the Amendment.
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Publication Date*:
7/31/2012
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Identification Number:
821
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