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COVID-19 Updates for Public

Companies: Nasdaq and NYSE

Provide Temporary Relief

Measures

ALERTS

April 27, 2020

In light of the continued market uncertainty caused by the novel coronavirus (COVID-19) pandemic,The Nasdaq Stock Market LLC (Nasdaq) and the New York Stock Exchange (NYSE) have tolledcompliance periods for certain of their price-based continued listing requirements. In addition, theNYSE has provided temporary relief from the application of its proxy delivery requirements.

Nasdaq Tolls Compliance Period for Price-Based Requirements

On April 17, the U.S. Securities and Exchange Commission (SEC) approved the immediateeffectiveness of Nasdaq's proposal to provide a longer period of time for companies to regaincompliance with Nasdaq's bid price and market value of publicly held shares continued listingrequirements.

Generally, companies that do not meet the applicable bid price or the market value of publicly heldshares continued listing requirements, in either case, for a period of 30 consecutive days, will be

notified by Nasdaq and will have 180 calendar days to regain compliance.1 In light of the issues thatsome companies are facing as a result of the COVID-19 pandemic, Nasdaq has provided the followingtemporary relief:

Companies in Existing Compliance Periods. For Nasdaq-listed companies that are currently incompliance periods, Nasdaq tolled the compliance period through and including June 30, 2020.For example, if a company is 90 days into its 180-day compliance period when the tolling periodstarts, then commencing on July 1, 2020, the company would have an additional 90 days toregain compliance.New Compliance Issues During Tolling Period. Nasdaq will continue to monitor compliancewith the bid price and market value of publicly held shares continued listing requirementsduring the tolling period. Any Nasdaq-listed companies falling out of compliance during thetolling period will be notified by Nasdaq of such non-compliance and will be required to disclosereceipt of this notification by filing a Form 8-K, where required by SEC rules, or by issuing a

press release.2 However, the compliance period for these companies to regain compliance willnot commence until July 1, 2020.Companies in Hearings Process. Companies that were involved in the hearings process before aNasdaq Hearings Panel will return to the same stage of the hearings process that they were inwhen the tolling period began. If a company received an exception from a Hearing Panelpermitting more time for the company to regain compliance, then this time would be tolledthrough and including June 30, 2020, and the company would receive the remainder of theexception period starting on July 1, 2020.

CONTRIBUTORS

Michael Nordtvedt

Richard C. Blake

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Notably, in October 2008, Nasdaq suspended the bid price and market value of publicly held sharescontinued listing requirements through January 16, 2009, and extended this suspension throughApril 19, 2009. Thus, because these listing requirements were suspended rather than tolled,companies were not notified or cited for any new bid price or market value of publicly held sharesdeficiencies during the suspension period. Companies already in a compliance period for failure tocomply with these price-based listing requirements were able to toll their compliance periods untilthe end of the suspension period.

NYSE Tolls Compliance Period for $50 Million and Dollar Price Standards

On April 21, the SEC approved the immediate effectiveness of the NYSE's proposal to provide alonger period of time for companies to regain compliance with the following NYSE continued listingstandards. NYSE-listed companies will be considered below compliance if 1) their average globalmarket capitalization over a consecutive 30 trading day period is less than $50 million and, at thesame time, stockholders' equity is less than $50 million or 2) the average closing price of their

securities is less than $1.00 over a consecutive thirty trading day period.3 Generally, companies thatdo not meet the $50 million standard or the dollar price standard will be notified by the NYSE and

will have 18 months or six months, respectively, to regain compliance.4

In light of the foregoing, the NYSE has provided the following temporary relief from the $50 millionstandard and the dollar price standard:

Companies in Existing Compliance Periods. For NYSE-listed companies that are currently incompliance periods, the NYSE tolled the compliance period through and including June 30, 2020.New Compliance Issues During Tolling Period. The NYSE will continue to monitor complianceduring the tolling period. Any NYSE-listed companies falling out of compliance during the tollingperiod will be notified by the NYSE of such non-compliance, will be required to meet the

applicable press release requirements,5 and, where applicable, will be required to file a Form 8-K. However, the applicable compliance period for these companies to regain compliance will notcommence until July 1, 2020.

Notwithstanding the tolling periods discussed above, companies in a compliance period for non-compliance with the $50 million standard will continue to be required to submit compliance planswithin the applicable time frames set forth in Sections 802.02 and 802.03 of the NYSE ListedCompany Manual, and the NYSE will continue to review the progress under those plans on aquarterly basis.

Notably, in March 2009, the NYSE suspended the dollar price standard through June 30, 2009,and extended this suspension through July 31, 2009. Thus, because this standard was suspendedrather than tolled, companies were not notified or cited for any new events of noncompliance withthe dollar price standard. Companies already in a compliance period for being below compliance withthe dollar price standard were able to toll their compliance periods until the end of the suspensionperiod.

In addition to tolling the compliance periods for the $50 million standard and the dollar pricestandard, the NYSE previously suspended until June 30, 2020, the application of its continued listingrequirement that companies maintain an average global market capitalization over a consecutive 30

trading day period of at least $15 million.6 Generally, once a company is identified as noncompliantwith this standard, trading in its shares is immediately suspended and the company is subject todelisting. During this relief period, companies will not be notified of any new events ofnoncompliance with this continued listing standard and any new events of noncompliance will bedetermined based on a consecutive 30 trading day period commencing on or after July 1, 2020. Formore information, please see our prior Alert.

NYSE Provides Temporary Relief from Application of Proxy Delivery Requirements

On April 23, 2020, the SEC approved the immediate effectiveness of the NYSE proposal to modify theapplication of Rule 451(b)(1) of the NYSE Listed Company Manual. Rule 451(b)(1) generally does notpermit NYSE member organizations (for example, brokers) to vote uninstructed shares on "routine"matters unless that member organization has transmitted the applicable proxy and voting materialsto the beneficial owner of those shares at least 15 calendar days prior to the shareholder meeting.

Most investors in public companies hold their shares in an account with a member organization,such as a brokerage firm, in "street name." Investors that hold their shares in "street name" are

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considered the beneficial owners, rather than the record holders, of those shares, and receive proxyand voting materials for shareholder meetings from the broker, rather than directly from thecompany. NYSE Rule 452 permits brokers to submit votes on "routine" matters without votinginstructions from the beneficial owner if 1) the beneficial owner has not provided voting instructionsto the broker and 2) the requirements of NYSE Rule 451 are met, including the 15-calendar daydelivery requirement discussed above. As long as companies have one "routine" matter to be votedupon at the shareholder meeting (in the case of the annual meeting, this is typically an advisory voteto ratify the selection of the independent auditor), these brokers can submit votes for the "routine"matter, which will count toward the overall quorum for the meeting. Without these votes, somepublic companies may struggle to reach a quorum for their shareholder meetings.

In its proposal, the NYSE notes that the primary intermediary for these brokers notified the NYSEthat it is having difficulty meeting this 15-day delivery requirement due to delays in receiving printedmaterials from companies and also due to its own reduced staffing levels caused by COVID-19. Ifbrokers are unable to vote on "routine" matters, then companies may find it difficult to reach aquorum for their annual meetings.

Thus, the NYSE has provided temporary relief from the application of Rule 451(b)(1) for shareholdermeetings occurring on or before May 31, 2020. Specifically, during this relief period, brokers will bepermitted to vote uninstructed shares "as long as proxy materials are transmitted to beneficialowners no later than 10 days prior to the shareholder meeting, rather than the fifteen day periodrequired by the text of the rule." [Emphasis added.]

In its proposal, the NYSE stated that it "expects that best efforts will be made to ensure thattransmissions of proxy materials will continue to be made prior to the fifteenth day before themeeting whenever possible, either in whole or in part." In particular, it expects "electronictransmissions of proxy materials to continue to be made within the normal time frames provided bythe rule."

In addition, the NYSE imposed certain conditions on this relief. The intermediary acting as agent forthe brokers and banks "will be required to post prominently on its website the following disclosures:

that it is experiencing operational challenges as a result of the disruptive effects of COVID-19 andis therefore experiencing difficulty in some cases in transmitting proxy materials to beneficialowners at least 15 days prior to shareholder meeting dates;as a consequence, it is relying on relief provided by the NYSE to shorten from 15 days to 10 daysthe period required under Rule 451(b)(1) that proxy materials must be transmitted to beneficialowners in order for the member organization to be permitted to vote its customers' uninstructedshares on routine matters;a list of the companies whose proxy distributions are affected, including the meeting date and thedate on which the transmission was completed; anda statement encouraging beneficial owners to submit their voting instructions through theelectronic or telephonic means, if any, described in the request for voting instructions sent by themember organization to ensure that such instructions are received in advance of theshareholder meeting."

Also, the form of letter that the broker is required to send to beneficial owners when soliciting votinginstructions must include the following provision emphasizing the ability of the beneficial owner toprovide voting instructions up to the time of the meeting:

"If we do not hear from you by the tenth day before the meeting, we may vote your shares in ourdiscretion to the extent permitted by the rules of the Exchange. If you are unable to communicatewith us by such date, we will, nevertheless follow your voting instructions, even if our discretionaryvote has already been given, provided your instructions are received prior to the stockholders'meeting."

While the foregoing relief is targeted primarily at brokers and their intermediaries (for example,Broadridge) that must distribute proxy and voting materials to beneficial owners, this relief mayprovide some solace for companies who are delayed in providing their proxy materials to theseintermediaries and thus may have concerns with ensuring a quorum is present or represented byproxy at their shareholder meetings.

For more information on the temporary relief measures implemented by Nasdaq and the NYSE, orany related matter, please contact any member of the firm's public company or capitalmarkets group.

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Wilson Sonsini continues to monitor the global impact of COVID-19 on various industries. WilsonSonsini's COVID-19 Client Advisory Resource is a collection of alerts, advisories, and programs—all ofwhich are intended to help the management, boards of directors, and in-house counsel of our clientsmaintain key operational and business functions, despite pressing challenges caused by the COVID-19 pandemic.

[1] See Nasdaq Listing Rules 5810(c)(3)(A) and 5810(c)(3)(D).

[2] See Nasdaq Listing Rule 5810(b).

[3] See NYSE Listed Company Manual Sections 802.01B and 802.01C.

[4] See NYSE Listed Company Manual Sections 802.03 and 802.01C.

[5] See NYSE Listed Company Manual Sections 802.02 and 802.03 for the $50 million standard, andSection 801.02C for the dollar price standard.

[6] NYSE Listed Company Manual Section 802.01B.