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  Staff Interpretation Letter 2003-51
Identification Number 1018
Rule 4350(a):  NASDAQ shall have the ability to provide exemptions from Listing Rule 4350 to a Foreign Private Issuer when provisions of this Rule are contrary to a law, rule or regulation of any public authority exercising jurisdiction over such issuer or contrary to generally accepted business practices in the issuer’s country of domicile.
Rule 4350(i)(1)(A):  Each issuer shall require shareholder approval … when a stock option or purchase plan is to be established or materially amended or other equity compensation arrangement made or materially amended, pursuant to which stock may be acquired by officers, directors, employees, or consultants.
Relevant Facts:  An Israeli company that lists its ordinary shares on NASDAQ proposes an amendment (the “Amendment”) to its employee stock option plan (the “Plan”).  Pursuant to the Amendment, the company would cancel and re-issue options subject to the consent of each affected employee.  The terms of the new options would be identical to those of the cancelled options with regards to exercise price, vesting period, and expiration date.  The purpose of the Amendment is to enable the option holders to utilize favorable tax treatment under the Israeli Income Tax Ordinance, resulting in the new options being taxed at a lower rate.
The company requests an exemption from NASDAQ’s shareholder approval requirement to the extent it would otherwise apply based on Listing Rule 4350(a).
Issue:  Is the company eligible for an exemption from NASDAQ’s shareholder approval rules?
Determination:  Yes.  The company's home country counsel represented that the laws, rules, and regulations of Israel do not require the company to obtain additional shareholder approval.  In determining generally accepted business practices in the Foreign Private Issuer’s country of domicile, NASDAQ may look to the home country marketplace.  The company’s home country counsel noted that the Tel Aviv Stock Exchange did not require shareholder approval of the Amendment, and that in this instance, NASDAQ's shareholder approval requirements are contrary to generally accepted business requirements in Israel.  Based on these representations, NASDAQ granted the requested exemptions to Listing Rule 4350(i)(1)(A) to the extent it would otherwise apply.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 1018
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