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  Staff Interpretation Letter 2011-6  
Identification Number 696
This is in response to your correspondence regarding whether an issuance of securities in a potential private placement (the “Private Placement”) would be aggregated with an issuance of securities in a recently completed acquisition (the “Acquisition”) for determining whether shareholder approval would be required under Listing Rule 5635(a)(1) (the “Rule”).
You stated that approximately nine months ago, the company and the Target began preliminary discussions, which ultimately led to an agreement pursuant to which the company would acquire the Target for cash and shares of the company’s common stock.  The companies publicly announced the signing of a definitive merger agreement for the Acquisition approximately four months ago, and the Acquisition was completed approximately one month ago.
You stated that approximately six weeks ago, the company began to consider the possibility of the Private Placement to raise funds for general corporate purposes, including working capital and strategic transactions.  The company wishes to complete the Private Placement to strengthen its capital structure, in light of extended payment terms the company had granted to certain customers resulting in lower than expected cash levels, and to fund a major new product initiative. Additionally, the company received advice from its financial advisor that it likely could pursue the Private Placement on favorable terms.  The company’s board of directors (the “Board”) authorized the company to pursue the Private Placement approximately two weeks following the completion of the Acquisition.  The company has not yet entered into an agreement for the Private Placement.
You stated that the Acquisition did not cause the company to need the funds that would be raised in the Private Placement and that the purpose of the Private Placement would not be to fund either the acquisition of, or the ongoing operations of, the Target.  The Private Placement was not a condition of, and there was no financing condition to, the closing of the Acquisition.  Neither the Acquisition nor the Private Placement is contingent on the other.  The company did not even consider the possibility of the Private Placement until more than two months after the Board approved the Acquisition agreement.
Following our review of the information you provided, we have determined that securities issued in the Private Placement would not be deemed to be in connection with the Acquisition for purposes of the Rule.  We have reached the conclusion because the proceeds from the Private Placement would be used for purposes unrelated to the Acquisition and because neither the Private Placement nor the Acquisition would be contingent on the other. Accordingly, the issuances in the Private Placement and the Acquisition would not be aggregated for determining whether shareholder approval would be required under the Rule.  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: 696
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