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Frequently Asked Questions
  Staff Interpretation Letter 2006-32    
Identification Number 842
This is in response to your correspondence regarding whether a reduction in the exercise price of outstanding stock options (the “Reduction”) under the company’s equity compensation plans (the “Plans”) would require shareholder approval pursuant to Marketplace Listing Rule 4350(i)(1)(A) and IM-4350-5 (collectively, the “Rule”).
 
According to the information you provided, pursuant to the Reduction, the company would offer option holders under the Plans the opportunity to have the exercise price of “underwater” options reduced to the fair market value of the company’s common stock on the date of the Reduction.  Each of the Plans provides that the company’s board of directors has the authority, in its discretion, to determine the terms and provisions of each option granted and, “with the consent of the holder thereof, modify or amend any provisions (including provisions relating to exercise price)” of any option granted.
 
Following our review of the information you provided, we have determined that the Reduction would not be a material amendment under the Rule because each Plan specially authorizes the company’s board to modify or amend provisions relating to the exercise price of outstanding options.  Pursuant to IM-4350-5, if a plan permits a specific action without further shareholder approval, then no such approval would generally be required.  Accordingly, the Rule does not require shareholder approval for the Reduction.
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 842
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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