This is in response to your correspondence regarding the applicability of NASDAQ’s shareholder approval and voting rights requirements to the company’s proposed issuance of securities (the “Transaction”). Specifically, you asked about the potential applicability
of Marketplace Rules 4350(i)(1)(B), 4350(i)(1)(D), 4351 and IM-4350-2 (the “Rules”).
According to the information you provided, in the Transaction the company would issue shares of non-voting exchangeable preferred stock (the “Preferred Stock”) to the Investor in a private placement. Although the final terms have not been reached, the
number of common shares that could be issued in the event of an exchange could exceed 20% of the pre-transaction total shares outstanding at a price that is less than market value. The Preferred Stock would be exchangeable for common stock only if shareholder
approval is first obtained. The holder of the Preferred Stock would have no voting rights other than the right to consent to any amendment of the terms or to the creation or issuance of any capital stock or debt securities that rank senior to or equal with
the Preferred Stock, or as otherwise required by applicable state law.
The Investor would have the right to designate one member of the company’s seven-member board of directors for so long as it owns at least 50% of the Preferred Stock, or in the event of an exchange for common, for so long as it owns at least: (i) 10% of
the company’s total stock outstanding or (ii) 50% of the common stock acquired pursuant to the Exchange. If shareholder approval is not received within one year of closing, the Preferred Stock would be entitled to receive cumulative cash dividends at an annual
rate of 10%. If still outstanding after four years, the Preferred Stock would become redeemable for cash at the option of either the company or the holder. The holder may require the company to redeem the Preferred Stock for cash upon the occurrence of certain
events, such as liquidation or a change of control.
Following our review of the information you provided, we have concluded that the Transaction, structured as you described, would comply with the Rules because no common shares or voting power (except limited voting power as describe above) could be issued
until after shareholder approval is obtained. Specifically, the Transaction would comply with: (i) Listing Rule 4350(i)(1)(B) because a change in control could not occur without shareholder approval, and (ii) Listing Rule 4350(i)(1)(D) because the issuance
could not reach 20% of the pre-transaction outstanding shares or voting power without shareholder approval. Further, IM-4350-2 is not implicated because no shares of common stock could be issued prior to the shareholder vote. In addition, the right to designate
one director would be consistent with the voting rights provisions of Listing Rule 4351 because the percentage of the board of directors that may be appointed by the Investor would not exceed its percentage economic contribution to the company. Please be
advised that you have not asked us to reach, and we have not reached, a conclusion as to whether any director designated by the Investor would be eligible to be an independent director or to