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Frequently Asked Questions
  Staff Interpretation Letter 2007-1
Identification Number 777
This is in response to your correspondence regarding the company’s proposal to establish an international employee stock purchase plan (the “IESPP”).  You asked whether the adoption of this plan and the related amendment to the company’s existing employee stock purchase plan (the “ESPP”) would require shareholder approval pursuant to Marketplace Listing Rule 4350(i)(1)(A) and IM-4350-5 (collectively, the “Rule”).
According to the information you provided, the ESPP is a shareholder-approved plan designed to qualify under Section 423 of the Internal Revenue Code.  The ESPP is a payroll-deduction based plan that enables employees of the company to purchase shares of the company’s common stock at a discount.  Under the IESPP, employees of the company’s foreign subsidiaries would be entitled to purchase shares of the company’s stock at substantially the same terms as those of the ESPP but subject to the laws of the foreign jurisdictions.  The share reserve previously approved by the shareholders for the ESPP would be used for issuances under both the ESPP and the IESPP.  The Amendment would specify that each share of stock issued under the IESPP would automatically reduce, on a one-for-one basis, the number of shares available under the ESPP.
You stated that while employees of the company’s foreign subsidiaries are eligible to participate in the ESPP, the company has determined to establish the IESPP to allow certain differences from the ESPP to comply with applicable local laws relating to tax, securities, and employment.  For example, the securities or employment laws in some countries require that separate bank accounts be created for each employee’s payroll deductions while other countries may prohibit such segregation of funds.  You stated that it is not permissible under Section 423 to provide different terms or conditions for one or more subgroups of employees and that the company therefore needs to establish the IESPP to ensure that its employees in the United States can continue to purchase shares under the ESPP on a tax-favored basis.
Following our review of the information you provided, we have determined that the Amendment and the adoption of the IESPP will not require shareholder approval under the Rule.  In that regard, we note that all shares issued under the IESPP will come from the same share reserve that shareholders approved for the ESPP.  Further, the terms of the IESPP are substantially the same as the terms of the ESPP.  The IESPP will be broadly available to employees of the company’s foreign subsidiaries.  These employees can purchase shares through a payroll deduction, at a discount that cannot exceed 15%, identical to the terms of the ESPP, and subject to a limitation on the maximum purchase size that is identical to the limit on the ESPP.  As such, the IESPP provides non-U.S. employees with substantially the same benefits as a comparable tax qualified, non-discriminatory employee benefit plan that the company provides to its U.S. employees (the ESPP).  The Amendment will not result in an increase in the number of shares available for issuance, a material increase in the benefits to participants, a material expansion of the class of eligible participants, or an expansion in the types of awards available.  Therefore, the Amendment (and the creation of the IESPP) is not a material amendment to the ESPP.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 777
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