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  Staff Interpretation Letter 2012-1
Identification Number 1040
This is in response to your interpretive request regarding an issuance of shares of common stock in the conversion of notes (the "Notes").  You asked whether the conversion would be considered to be at market value for purposes of determining the applicability of the shareholder approval requirements of Listing Rules 5635(c) and 5635(d) (the "Rules").
You advised us as follows.  The Notes were issued several years ago and are convertible, at the option of the holder, into a fixed number of shares of common stock for each $1,000 principal amount.  This conversion ratio would result in conversion at a premium to the common stock's closing market value at the time the company agreed to issue the Notes (the "Market Value").  The company's book value was less than the Market Value at that time.
In the proposed transaction, the company would offer all holders of the Notes the opportunity to receive for each $1,000 dollars in principal ("Par Value"): (i) the same number of shares into which the Notes are already convertible, plus (ii) a cash payment per Note equal to any accrued but unpaid interest (the "Accrued Interest"), plus (iii) an additional payment in cash designed to induce conversion (the "Additional Payment").   
Following our review of the information you provided, we have determined that, for the purposes of the Rules, the price at which the shares would be issued (the "New Conversion Price") would be calculated as (i) the Par Value minus the Additional Payment divided by (ii) the number of shares per Note issued to the tendering holder.  The Accrued Interest, also payable to the holder, would not be included in the calculation because, according to the information you provided, a holder is currently able to collect interest accrued on the Notes (normally payable semiannually) by effecting the conversion immediately after receiving the payment.  Under the Rules, shareholder approval would not be required for the proposed transaction if the New Conversion Price equals or is greater than the Market Value.  Please note that you have not asked us to reach, and we have not reached, a conclusion as to the applicability of the shareholder approval requirements in any way other than as addressed herein.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 1040
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