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  Staff Interpretation Letter 2003-28
Identification Number 998
Rule 4350(a):  NASDAQ will provide exemptions to the extent that a rule requires any foreign issuer to do any act that is contrary to a law, rule or regulation of any public authority exercising jurisdiction over such issuer or the rule is contrary to generally accepted business practices in the issuer’s country of domicile.
Rule 4350(i)(1)(B):  Each issuer shall require shareholder approval prior to the issuance of designated securities … when the issuance or potential issuance will result in a change of control.
Relevant Facts:  A Canadian company has arranged a loan transaction with a third party lender that will provide funds to allow the company to make a tender offer for its currently outstanding debentures.  As part of the transaction, the company will also issue warrants to the lender to purchase common stock of the company with an exercise price greater than book and market value of the stock.  If all debentures are tendered, and the loan is drawn in full, approximately 33% of the company’s outstanding stock would be issued.  As a result, the potential issuance of common stock upon the exercise of the warrants could result in a change of control; thereby requiring shareholder approval under NASDAQ’s rules.  As a foreign issuer, the company is requesting an exemption from the shareholder approval rules under Listing Rule 4350(a).
Issue:  Is the company eligible for an exemption from NASDAQ’s shareholder approval rules?
Determination:  Yes.  The company stated that it would seek approval of a majority of the voting shares, excluding any votes by or on behalf of the third party lender, through written consent consistent with Canadian law and the requirements of the Toronto Stock Exchange.  In addition, the company has provided notice to all of its shareholders regarding the pending transaction.  The company’s Canadian counsel indicated that as a Foreign Private Issuer, the company is not required to comply with Sections 14(a) and 14(c) of the Securities Exchange Act, and thus the written consent procedure does not have to comply with the SEC’s proxy or information statement requirements.  Finally, the company’s Canadian counsel stated that to obtain shareholder approval as required by the NASDAQ Rules for a transaction of this kind would be contrary to generally accepted business practices in Canada.  Based on these representations, NASDAQ granted the requested exemption to Listing Rule 4350(i)(1)(B).
Publication Date*: 7/31/2012 Mailto Link Identification Number: 998
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