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Frequently Asked Questions
  Staff Interpretation Letter 2005-21
Identification Number 868
This is in response to your letters regarding the applicability of The NASDAQ Stock Market’s shareholder approval requirements to an issuance of securities in a private placement (the “Transaction”).  Specifically, you asked about the potential applicability of Marketplace Rules 4350(i)(1)(B) and 4350(i)(1)(D) (the “Rules”) to the Transaction.
 
According to the information you provided, in the Transaction, the company expects to issue to institutional investors shares of common stock (the “Shares”) and warrants to purchase additional shares of common stock (the “Investor Warrants”).  The Shares will equal approximately 19.6% of the pre-transaction outstanding shares of common stock, and the warrants, approximately 4.9%.  In addition, the company will issue to the placement agent warrants to purchase shares of common stock (the “Placement Agent Warrants”, and collectively with the Investor Warrants, the “Warrants”). The exercise price of the Warrants will not be less than the closing bid of the common stock immediately preceding the execution of the definitive agreement (the “Market Value”).  The Warrants may not be exercised for 180 days following closing and will not be subject to any adjustment provision that could reduce the exercise price to less than Market Value.  You stated that no officer, director, employee, or consultant of the company will participate in the Transaction.  In addition, no investor individually, or as part of a group, can beneficially own, or have the right to acquire, more than 19.99% of the company’s outstanding common shares or the voting power of the company on a post-transaction basis.
 
Following our review of the information you submitted, we have concluded that the Transaction as described in your correspondence does not require shareholder approval under the Rules.  Specifically, the Transaction does not require shareholder approval under Listing Rule 4350(i)(1)(D) because the issuance of the Shares, although at a price less than market value, will equal less than 20% of the common shares and voting power outstanding on a pre-transaction basis.  The exercise price of the Warrants will be not be less than the greater of book and market value, and the Warrants may not be exercised until 180 days from the date of closing.  Further, given the ownership restrictions described above, the Transaction will not result in a change of control and will not require shareholder approval under Listing Rule 4350(i)(1)(B).
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 868
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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