This is in response to your correspondence regarding whether Marketplace Listing Rule 4350(i)(1)(A) and IM-4350-5 (collectively, the “Rule”) would require shareholder approval of the company’s proposed amendments (the “Amendments”) to its stock option
plans, specifically, its Employee Plan and its Director Plan (collectively, the “Plans”). Your question also relates to the voting rights requirements of Listing Rule 4351 (the “Voting Rights Rule”). Pursuant to the Amendments, in connection with a special
stock dividend (the “Dividend”), there would be an adjustment to: (i) the maximum number of shares available under the Plans (the “Share Reserve Increase”), and (ii) the maximum number of shares that may be subject to award for an individual participant under
the Employee Plan in any one year (the “Award Increase”).
The company has three series of common stock: Series A with one vote per share, a higher voting Series B, and a non-voting Series C, which has no voting power except as required by applicable state law. In 2005, the company’s board of directors approved
the Dividend consisting of one share of Series C for each share of Series A and Series B resulting in the doubling of the aggregate common shares outstanding. Prior to the payment of the Dividend, there had been no shares of Series C outstanding.
According to the information you submitted, the Employee Plan and the Director Plan each provide a maximum number of shares of common stock that may be issued, subject to the anti-dilution and other adjustment provisions of the Plans. In addition, the
Employee Plan provides that no person may be granted in any calendar year awards covering more than a certain number of shares of common stock. The Plans do not otherwise limit the number of shares of any series of common stock that may be the subject of
awards.
Pursuant to the Share Reserve Increase, the company proposes to double the shares available under the Plans. Pursuant to the Award Increase, the company proposes to double the maximum number of shares that may be awarded to an individual participant in
a calendar year. The increases would reflect the doubling of the number of common shares outstanding resulting from the Dividend. Notwithstanding the increases that would result from the Amendments, the number of shares of Series B that may the subject of
awards will be limited to the number that would have been available prior to the Amendments (the “Series B Limitation”).
You stated that both the Share Reserve Increase and the Award Increase are specifically permitted under the provisions of the Employee Plan and the Director Plan, which provide that adjustments can be made to preserve the benefits or potential benefits
intended to be made available under the plan following any stock dividend or similar corporate event, including adjustments to any or all of: (i) the number and kind of shares or stock which thereafter may be awarded, optioned, or otherwise made subject to
the benefits contemplated by the Plan; and (ii) the number and kind of shares of stock subject to outstanding Awards.
Following our review of the information you provided, we have determined that the Rule does not require shareholder approval of either the Share Reserve Increase or the Award Increase because both are specifically permitted by provisions of the Plans.
As stated in IM-4350-5, if a plan permits a specific action without further shareholder approval, then no such approval would generally be required. The Voting Rights Rule is not implicated because, as a result of the Series B Limitation, the Amendments cannot
increase the number of outstanding shares of the high vote stock.