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Frequently Asked Questions
  Staff Interpretation Letter 2006-42
Identification Number 851
This is in response to your correspondence regarding whether shareholder approval pursuant to Marketplace Listing Rule 4350(i)(1)(A) (the “Rule”) would be required of certain proposed actions (the “Proposal”)  involving the Plan.
 
According to the information you provided, pursuant to the Proposal the company would offer to purchase for cash stock options that have been previously granted to six of the company’s senior executives (the “Designated Executives”). The purchase price would equal the par value of the shares of common stock underlying the options ($0.001 per share), and all options that are purchased would be cancelled. Pursuant to the terms of the Plan, the shares underlying the cancelled options would remain available for issuance in connection with future awards under the Plan. Following the cancellation, the company would grant additional stock options to employees other than the Designated Executives, utilizing the shares that would remain available as a result of the cancellation, in an effort to provide retention and performance incentives to those individuals. You stated that Designated Executives whose options are purchased would not be entitled to or promised any future consideration for their cancelled options and would not be provided any assurance that they will receive the same number of, or any, future equity awards.
 
The company intends to continue to grant new awards under the Plan to employees, including the Designated Executives, in connection with the company’s regularly scheduled annual performance reviews. These grants would be made according to criteria that are consistent with its past practices of reviewing and determining the size of annual awards. The number of shares underlying the options that may be granted to the Designated Executives in connection with the annual performance reviews would be unaffected by the purchase and cancellation and would be based solely on the previously established criteria for such annual awards (which do not consider any prior exercises or cancellations of previously granted options).  You stated that nothing contained in the Proposal will constitute a repricing for purposes of generally accepted accounting principles (“GAAP”).
 
Following our review of the information you provided, we have determined that the Rule does not require shareholder approval of the Proposal.  In that regard, in the purchase of the outstanding options, the Designated Executives would receive cash and not additional stock options or any other form of equity. Further, the Plan provides that shares underlying cancelled options remain available for issuance under the Plan for future awards. In addition, you stated that that the Designated Executives will not receive replacement awards for the awards that are purchased and cancelled and that there is nothing in the Proposal that would constitute a repricing under GAAP. As such, the Proposal will not require shareholder approval under Listing Rule 4350(i)(1)(A).
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 851
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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