referencelibrarybanner
Board Diversity
Reference Library - Advanced Search
Find
 


Library 
 
Timeframe
Category
 
Sub-Category
** To make multiple selections, select the first criterion and then press and hold the Ctrl Key **
 
1- 1 of 1 Search Results for:
Libraries:   Staff Interpretation Letters
Filters:   All Years; Shareholder Approval; All
 
Search   Clear


Expand All Printer Friendly View Mailto Link 
Page: 1 of 1
Frequently Asked Questions
  Staff Interpretation Letter 2014-2
Identification Number 1114

This is in response to your correspondence asking whether the issuance of preferred shares in a proposed acquisition (the “Acquisition”) would comply with the shareholder approval requirements in Listing Rule 5635(a) and IM-5635-2 (together, the “Rules”).

In the Acquisition the Company will purchase a privately-held target (the “Target”) for a combination of cash and securities. The amount of stock issued in the Acquisition will depend on the amount of cash consideration paid at closing. No director, officer, or Substantial Shareholder of the Company has a direct or indirect interest in the Target. In order to reduce the amount of securities to be issued in the Acquisition, the Company plans to complete a public offering consummated in accordance with IM-5635-3.

If the stock consideration to be issued in the Acquisition exceeds 20% of the Company’s voting power or total shares outstanding prior to the issuance, all of the stock consideration issued by the Company would be non-voting Preferred Stock (the “Convertible Preferred Stock”). The Convertible Preferred Stock would pay an annual cash dividend and the Convertible Preferred Stock holders would have approval rights with respect to certain corporate actions impacting the rights of the preferred shareholders.

Following consummation of the Acquisition, the Company would seek shareholder approval to convert the Convertible Preferred Stock into shares of the Company’s common stock. If shareholder approval is not obtained, the Company may call additional shareholder meetings to obtain approval of the conversion of the Convertible Preferred Stock into the shares of the Company’s common stock. Alternatively, the Convertible Preferred Stock may be converted, without shareholder approval, into a combination of shares of the Company’s common stock equal to 19.99% of the Company’s outstanding common stock prior to the issuance and shares of a different series of non-voting, non-convertible Preferred Stock (the “Non-Convertible Preferred Stock”). The Non-Convertible Preferred Stock would pay an annual cash dividend and the holders of the Non-Convertible Preferred Stock would have approval rights with respect to certain corporate actions impacting the preferred stock holders. You stated that following the conversion of the Convertible Preferred Stock into shares of common stock and Non-Convertible Preferred Stock, the Company will not seek shareholder approval for the conversion of the Non-Convertible Preferred Stock into shares of the Company’s common stock.

Following our review of the information you provided, we have determined that the structure of the securities issued in connection with the Acquisition comply with the Rules. Our conclusion is based on certain facts, including but not limited to the following: (i) no director, officer or Substantial Shareholder has a direct or indirect interest in the Target; (ii) the Convertible Preferred Stock and Non-Convertible Preferred Stock are non-voting; (iii) the Convertible Preferred Stock cannot be converted into greater than 19.99% of the voting power or total shares outstanding prior to the issuance unless shareholder approval is obtained; (iv) if shareholder approval is not obtained and the Company determines not to seek shareholder approval at subsequent meetings, the Convertible Preferred Stock will convert into a combination of the Non-Convertible Preferred Stock and an amount of common stock not greater than 19.99% of the voting power or total shares outstanding prior to the issuance; and (v) the Company will not seek shareholder approval to convert the Non-Convertible Preferred Stock into common stock. You did not ask and we have made no determination as to whether or not the proposed equity offering is a public offering in accordance with IM-5635-3.

Publication Date*: 8/4/2014 Mailto Link Identification Number: 1114
Page: 1 of 1
home_footer_links
Copyright_statement
App Store       Google Play       Listing Center Content RSS Feed
The Nasdaq Stock Market, Nasdaq, The Nasdaq Global Select Market, The Nasdaq Global Market, The Nasdaq Capital Market, ExACT and Exchange Analysis and Compliance Tracking system are trademarks of Nasdaq, Inc.
FINRA® and Financial Industry Regulatory Authority, Inc.® are registered trademarks of Financial Industry Regulatory Authority, Inc.