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  Staff Interpretation Letter 2015-1
Identification Number 1137
This is in response to your correspondence regarding the application of Nasdaq’s shareholder approval rules to certain equity grants. You asked if the Company may rely upon the exception set forth in Listing Rule 5635(c)(4) (the “Rule”) to the shareholder approval requirement for equity grants made in connection with the appointment of a director of a Company subsidiary as an executive officer of the Company.
The Company has a majority owned subsidiary, a master limited partnership (the “Subsidiary”), whose general partner (the “GP”) is an indirect wholly-owned subsidiary of the Company. The Subsidiary is listed and publicly traded on a U.S. stock exchange. You stated that, in connection with consideration by the Company’s board of directors of a potential change in management, the board approached a director of the GP to assess that individual’s interest in becoming an executive officer of the Company (the “New Executive Officer”). The board of directors of the GP has determined that the director is an independent director under the rules of the exchange where the Subsidiary is listed. Shortly thereafter, the Company and the New Executive Officer agreed to a framework for compensation, subject to final documentation prepared with the assistance of the Company’s compensation committee. You further stated that the agreed-upon compensation structure included the issuance of options and performance stock units. You asked whether the fact that the New Executive Officer is an independent director of the Subsidiary precludes the availability of the “inducement” grant exception under the Rule.
Following our review of the information provided, and subject to the disclosure requirements in the Rule, we determined that the New Executive Officer’s role as an independent director of the Subsidiary does not preclude the availability of the “inducement” grant exception under the Rule. Our determination is based on facts as you described them to us, including that the New Executive Officer was neither an employee nor a director of the Company and that the agreed-upon compensation structure included equity grant(s) to the New Executive Officer.
Publication Date*: 3/16/2015 Mailto Link Identification Number: 1137
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