Once the company is listed on The NASDAQ Stock Market, it must comply with the quantitative and qualitative continued listing requirements, including the corporate governance provisions. NASDAQ's Listing Qualifications is responsible for monitoring continued compliance. This section addresses questions regarding these continued listing requirements.

What are NASDAQ's continued listing requirements?
For continued listing, NASDAQ requires listed companies to meet specific quantitative requirements and stringent corporate governance standards. NASDAQ's continued listing standards are transparent to companies and investors alike, and are rigorously enforced.

NASDAQ has three marketplaces, The NASDAQ Global Select Market, The NASDAQ Global Market and The NASDAQ Capital Market. For detailed information on the continued listing standards for each marketplace, please see Listing Standards & Fees.

What happens if my company fails to meet the continued listing criteria?
If a company is unable to maintain compliance with the continued listing criteria, it will be notified, in writing, of the nature of the deficiency and the action necessary to regain compliance. Receipt of such a notification must be disclosed in a press release and a Form 8-K within four business days. If the company does not regain compliance, it will be issued a delisting letter. In addition, in some circumstances, the failure to meet the continued listing criteria could immediately result in the issuances of a delisting letter. However, if the company receives a delisting letter, it will have the opportunity to appeal to the Hearings Panel. See Hearings Process for additional information. The company should contact its Listing Qualifications analyst to discuss the specifics of its particular situation. (Updated: May 5, 2009)

How does NASDAQ communicate that a company does not comply with a continued listing standard?
Since August 2005, NASDAQ has broadcast an indicator over its market data dissemination network, noting when a NASDAQ-listed company failed to submit its regulatory filings on time, failed to meet NASDAQ's continued listing standards, and/or filed for bankruptcy. The indicator will be displayed with quotation information related to the company's securities on NASDAQ.com and NASDAQOMXTrader.com and may be displayed by other third party providers of market data information. NASDAQ also posts a list of all non-compliant NASDAQ companies and the reason(s) for such non-compliance on our website. Click here to view the list. (Updated: August 4, 2009)

Does NASDAQ publish a list of non-compliant companies?
Yes. Each trading day, NASDAQ publishes a list of companies that are non-compliant with its continued listing standards. In the event of a bankruptcy, a company is added to the list two business days after notification by NASDAQ. In all other instances of non-compliance, a company is added to the list five business days after notification. Companies are removed from the list one business day after NASDAQ determines that it has regained compliance, or the company no longer trades on NASDAQ. Click here to view the list.

In addition, NASDAQ will broadcast an indicator over its market data dissemination network noting the company's non-compliance. The indicator will be displayed with quotation information related to the company's securities on NASDAQ.com and NASDAQOMXTrader.com and may be displayed by other third party providers of market data information.

Investors seeking further information may view the company's filings on the SEC and/or company's website. NASDAQ's continued listing standards can be viewed at Listing Standards & Fees. (Updated: August 4, 2009)

What is NASDAQ's compliance process for companies failing to meet the $1.00 minimum bid price requirement?
NASDAQ uses the consolidated closing bid price to determine whether a company complies with this requirement. If a company trades for 30 consecutive business days below the $1.00 minimum closing bid price requirement, NASDAQ will send a deficiency notice to the company, advising that it has been afforded a "compliance period" of 180 calendar days to regain compliance with the applicable requirements.

Thereafter, Capital Market companies can receive an additional 180-day compliance period if they meet all initial inclusion requirements for the Capital Market, except for the bid price requirement. If a Global Select Market or Global Market company is unable to comply with the bid price requirement prior to the expiration of its 180-day compliance period, it may transfer to The NASDAQ Capital Market, so as to take advantage of the additional compliance period offered on that market, provided it meets all requirements for initial listing on The NASDAQ Capital Market, except for the bid price requirement.

In order to achieve compliance with the bid price requirement, a security must maintain a closing $1.00 bid price for a minimum of 10 consecutive business days. Although an automated computer system tracks each company's bid price on a daily basis, it is suggested that the company contact its Listing Qualifications analyst when it believes compliance has been achieved. NASDAQ will provide all compliance determinations, in writing, to the company.

If the company does not demonstrate compliance within the compliance period, it will be issued a delisting letter, which it may appeal at that time. See Hearings Process for additional information. (Updated: November 19, 2008)

How does NASDAQ measure the bid price of a security?
NASDAQ uses the consolidated closing bid price to determine whether a company complies with the bid price requirements for continued listing. A NASDAQ issuer can view its security's consolidated closing bid price by accessing "Trading History" on the www.nasdaq.net website.

How does a company regain compliance with the minimum bid price requirement?
In order to regain compliance with the minimum bid price requirement, a security must have a closing bid price of $1.00 or more for 10 consecutive business days.

NASDAQ uses the consolidated closing bid price to determine whether a company complies with the bid price requirements for continued listing. A NASDAQ issuer can view its security's consolidated closing bid price by accessing "Trading History" on the www.nasdaq.net website.

Although an automated computer system tracks each company's bid price on a daily basis, it is suggested that the company contact its Listing Qualifications analyst when it believes compliance has been achieved. NASDAQ will provide all compliance determinations, in writing, to the company.

Under certain circumstances, to ensure that the company can sustain long-term compliance, NASDAQ may require the closing bid price to equal or to exceed the $1.00 minimum bid price requirement for more than 10 consecutive business days before determining that a company complies. In determining whether to look beyond the 10 days, NASDAQ will consider, but is not limited to, the following factors:

• Margin of compliance (the amount by which the price is above the $1.00 minimum standard);
• Trading volume (a lack of trading volume may indicate a lack of bona fide market interest in the security at the posted bid price);
• The market maker montage (e.g., if only one of eight market makers is quoting at or above the minimum bid price and the quote is only for 100 shares, then added scrutiny may be appropriate); and
• The trend of the stock price (is it up or down?).

Does NASDAQ accept reverse stock splits as a method to regain compliance with the minimum bid price requirement?
Yes. NASDAQ views reverse stock splits as an acceptable method to regain compliance. If the company determines to implement a reverse stock split, it will need to provide certain information to NASDAQ. See the following Frequently Asked Question for additional information. Furthermore, to inform the market of the reverse stock split, NASDAQ will append a suffix character, "D", to the company's symbol for approximately 20 trading days following the reverse stock split. (Updated: June 3, 2009)

What happens if a company does not regain compliance with the minimum bid price requirement during the compliance period?
If a company is unable to resolve its bid price deficiency during the applicable compliance period, NASDAQ Staff will issue a delisting letter. At that time, the company may request a hearing before a Listing Qualifications Panel, which will stay the delisting.

The company will have the opportunity to present its plan to regain compliance to the Panel. This plan of compliance should include implementation of a reverse stock split in the near term. In appropriate cases, and so long as a company commits to implementation of a reverse split within 180 days of the delisting notification, Panels may also consider other factors, such as the company's fundamental financial strengths and weaknesses, the overall market, the company's historical bid price, and impending disclosures, corporate actions and strategic business plans that the company believes may impact its bid price.

How is market value of publicly held shares ("MVPHS") calculated?
MVPHS is calculated by multiplying the publicly held shares, which is total shares outstanding less any shares held by officers, directors, employee stock ownership plans, or beneficial owners of 10% or more, by the closing inside bid price.

What is NASDAQ's compliance process for companies failing to meet the minimum market value of publicly held shares requirement?
NASDAQ companies listed on the Global and Global Select Markets must maintain either $5,000,000 or $15,000,000 market value of publicly held securities (MVPHS) depending on the listing standard they qualify under. Companies listed on the Capital Market must maintain $1,000,000 MVPHS. If a NASDAQ-listed company trades below the applicable MVPHS requirement for 30 consecutive business days, it will be notified of the deficiency and afforded a 180 calendar day compliance period to regain compliance with the applicable standard.

In order to achieve compliance with the market value of publicly held shares requirement, a company must demonstrate compliance with the applicable standard for a minimum of 10 consecutive business days.

Although an automated computer system tracks each company's bid price and MVPHS on a daily basis, it is suggested that the company contact its Listing Qualifications analyst when it believes compliance has been achieved. NASDAQ will provide all compliance determinations, in writing, to the company.

If the compliance period expires without compliance being achieved, the company will be issued a delisting notification. The company may appeal NASDAQ's determination to delist at that time. See Hearings Process for additional information. (Updated: February 4, 2010)

My company's market value of listed securities has fallen below the minimum requirement. Will we be delisted?
NASDAQ-listed companies not qualifying for continued listing based on market value of listed securities ("MVLS") are notified of a deficiency after 30 consecutive trading days of non-compliance with the applicable standard and are afforded a 180 calendar day compliance period to regain compliance.

In order to achieve compliance with the market value of listed securities requirement, a company must demonstrate compliance with the applicable standard for a minimum of 10 consecutive business days. Although an automated computer system tracks each company's bid price and MVLS on a daily basis, it is suggested that the company contact its Listing Qualifications analyst when it believes compliance has been achieved. NASDAQ will provide all compliance determinations, in writing, to the company.

If the compliance period expires without compliance being achieved, the company will be issued a delisting notification. The company may appeal NASDAQ's determination to delist at that time. See Hearings Process for additional information. (Updated: February 4, 2010)

Does NASDAQ look to the underlying shares for American Depositary Receipts ("ADRs") and American Depositary Shares ("ADS") to determine compliance?
Excluding bid price, NASDAQ will look to the underlying shares if the ADRs or ADS do not qualify on their own merits. For example, in calculating the market value of listed securities, NASDAQ will include the value of all ordinary securities listed on the company's home market, not just the value of the ADRs or ADS. Listing Rule 5215(b) addresses this issue. (Updated: April 13, 2009)

My company has less than the required number of market makers. Will we be delisted?
The company must have fewer than the minimum number of maker makers required for 10 consecutive trading days before NASDAQ sends an initial notification letter. The company will be provided 30 calendar days to regain compliance, which can be demonstrated by maintaining the minimum number of market makers for 10 consecutive trading days. If the 30-day compliance period expires, the company will be issued a delisting letter, which it may appeal at that time. See Hearings Process for additional information. Please note that an Electronic Communications Network ("ECN") is not considered a market maker for the purposes of this rule.

My company has fallen below the stockholders' equity, total assets and total revenue, net income from continuing operations, publicly held shares or shareholders requirement. Will we be delisted?
Not immediately. Based on the company's periodic public filings, NASDAQ will determine if it is still in compliance with these requirements. If NASDAQ determines that the company no longer complies with an applicable requirement, then NASDAQ will issue a letter requesting that the company submit a plan of compliance within 45 calendar days. Upon review of the company's plan of compliance, NASDAQ will determine whether:

• It has regained compliance;
• An extension of time is warranted; or
• To delist the company's securities.

In each circumstance, NASDAQ will notify the company of the decision in writing. For further information, please see Listing Rule 5810 regarding Staff review of deficiencies. If NASDAQ determines to delist the securities, the company may appeal at that time. See Hearings Process for additional information. (Updated: February 4, 2010)

Our company has been cited for a deficiency in shareholders' equity. We would like to sell additional shares to regain compliance, but are unable to do so given existing market conditions. How can we gain additional time to regain compliance?
The NASDAQ Listing Qualification Staff and the NASDAQ Hearings Panels are aware of the difficulties that current market conditions present for companies attempting to raise additional capital. If a company submits a plan of compliance that involves raising capital, and despite taking all reasonable steps, is unable to execute the plan in the near term due to market conditions, then the NASDAQ Staff and/or the Hearings Panel will take that into account in determining whether to grant the company an exception to the full extent of its discretion. (Initial Posting: November 19, 2008)

What factors should our company consider when preparing the plan of compliance?
In your submission to the Listing Qualifications Staff, please note the following suggested guidelines:

• Your submission should be definitive, concise and directly address your company's plan to regain compliance in the near term and maintain compliance over the long term.

• NASDAQ's Listing Rules allow Staff to provide a company up to 180 calendar days from the date of the deficiency notice to regain compliance. The company should take this into consideration when drafting its plan of compliance. In addition, the plan should discuss the company's ability to sustain compliance for the next six to twelve months. Note that the 180 day extension is not automatic. Extensions of time may vary and are not granted in all cases.

• If the company's plan of compliance includes a private placement involving common stock, or any securities convertible or exercisable into common stock, a merger, a debt conversion, or other similar transactions, please ensure that the proposed action complies with NASDAQ's corporate governance requirements, particularly the shareholder approval rules, and other provisions of the Listing Rules. Please contact your Listing Analyst for further guidance on these matters.

• If a transaction is being contemplated to remedy the deficiency, please include a balance sheet and income statement evidencing the pro forma effect of the transaction. The financial statements should be based on historical financial information, not more than 45 days old. Please show three columns of data - historical, all adjustments, and the pro-forma totals.

• The submission should include projections, if available, for the next 12 months. Please include balance sheet and income projections. Clearly state all assumptions being made.

• Provide copies of all definitive or draft agreements or contractual arrangements for private placements, mergers, or other financial arrangements. Please include a list of investors for private placements. The company should file all applicable Notifications for Listing of Additional Shares.

• Plans relying on future projected revenues to comply with the equity requirement are generally not accepted unless the company has definitive contracts and the revenue will be received in the near term.

• NASDAQ will consider the company's net losses when reviewing a proposed equity-raising transaction to determine whether the plan is sufficient to regain and sustain compliance with the equity requirement.

• Please direct all questions to your Listing Analyst or contact Listing Qualifications at +1 301 978 8008 and ask to speak with a Continued Listing Analyst for further assistance. (Updated: February 4, 2010)

What are some examples of plans of compliance that have been accepted by NASDAQ?
A Capital Market-listed company provided a definitive agreement for an asset sale, which would raise $50 million in the near term. Based on a pro forma balance sheet, after accounting for projected net losses, the company would have equity of more than $15 million immediately after the transaction and more than $10 million at the end of the fiscal year, in excess of the $2.5 million requirement.

A Global Market-listed company announced its intention to complete a public offering in the near term and provided a press release announcing the pricing of an underwritten firm commitment public offering. Net proceeds of the offering were expected to be approximately $40 million. Subsequently, the company filed a pro forma balance sheet, adjusted to reflect the public offering, showing stockholders equity of approximately $45 million, in excess of the $10 million requirement.

A Global Market-listed company stated that certain holders of the company's warrants had exercised 500,000 warrants for proceeds of $12 million. Staff had concerns with the company's ability to sustain compliance based on the company's history of losses. In that regard, the company provided definitive agreements from the warrant holders relating to the exercise of additional warrants, which when exercised, would result in proceeds to the company of $5,000,000. Based on the exercise, the company stated that stockholders equity had increased to approximately $22 million, on a pro-forma basis, in excess of the $10 million requirement.

A Global Market-listed company announced the acquisition of a target company shortly after receiving notice from NASDAQ that it was not in compliance with the $10 million minimum equity requirement. Therefore, the company believed that it had already achieved compliance with the minimum equity standard and anticipated that it would be able to file audited financial statements and pro forma financial information to reflect compliance within two weeks.

What is an example of a plan of compliance that has not been accepted by NASDAQ?
A Global Market-listed company stated that it was pursuing a potential convertible note offering of between $20 million and $30 million to be completed before the end of the year, followed by an equity offering of up to $30 million. The company was not able to complete the convertible note offering in the near term and did not provide definitive terms for either transaction.

What are my filing obligations with NASDAQ?
The company must comply with the SEC or other federal or state regulatory authority filing requirements. If the company does not submit its filings via the SEC's Electronic Data Gathering, Analysis and Retrieval ("EDGAR") system, then it is required to submit three copies of all documents to NASDAQ Listing Qualifications. The company should refer to Listing Rules 5250(c) and 5250(d). (Updated: April 13, 2009)

Are Section 16 Reports, Schedules 13-D and 13-G and Forms 144 required to be filed with NASDAQ?
Yes. Federal securities laws require the filing with NASDAQ of Section 16 filings (Forms 3, 4 and 5), Schedules 13-D and 13-G and Form 144 filings that relate to NASDAQ-listed securities. NASDAQ has received no-action relief from the Securities and Exchange Commission that allows the electronic filing of these documents through the SEC's EDGAR system to satisfy the obligation to file these reports with NASDAQ. A copy of filings not made using the SEC's EDGAR system should be sent to Listing Qualifications.

Banks and officers and directors of such listed companies that file with the FDIC must still provide paper copies to NASDAQ. Currently, NASDAQ systems do not have an electronic link with FDICconnect, and therefore NASDAQ is not notified when filings are made through that system. (Updated: December 23. 2008)

What is the compliance process for filing delinquencies?
NASDAQ rules provide a company that is delinquent in its periodic filing obligations with 60 days to submit a plan of compliance to the Listing Qualifications Staff. Based on that plan, the Staff may grant the company up to 180 days from the due date for the periodic report (as extended by Exchange Act Rule 12b-25, if applicable) to regain compliance. In determining whether to grant a company additional time, Staff will consider the company's specific circumstances, including the company's past compliance history, the reasons for the late filing, corporate events that may occur within the exception period, the company's general financial status, the company's disclosures to the market, and the likelihood that the filing can be made within the exception period.

In addition, NASDAQ will broadcast an indicator over its market data dissemination network noting the company's non-compliance. The indicator will be displayed with quotation information related to the company's securities on NASDAQ.com, NASDAQOMXTrader.com and by other third-party providers of market data information. Also, NASDAQ posts a list of all non-compliant NASDAQ companies and the reason(s) for such non-compliance on our website. Click here to view the list. The company will be included in this list commencing five business days from the date of the delinquency notification.

The company can regain compliance with the requirement by filing the late periodic report and any other delinquent reports with due dates falling before the end of the exception period. If a company regains compliance before its plan is due, or during any exception that Staff grants, the company will not receive a delisting determination.

If a company fails to regain compliance prior to the expiration of a Staff exception or if Staff does not accept the plan of compliance, Staff will issue a Staff Determination indicating that the company is subject to delisting. If that occurs, the company may request a hearing before a NASDAQ Listing Qualifications Panel ("Panel") to review the determination. However, in this circumstance only, that request will operate to stay the delisting action for only 15 calendar days from the deadline to request a hearing. In order to obtain a longer stay, the company must, in its request for a hearing, ask that the Panel grant such a longer stay. If it does, the Panel can permit the company to remain listed for up to 180 days from the date of the Staff Determination letter, but in no event more than 360 days from the due date of the company's first late filing. See Hearings Process for additional information.

Should the company fail to comply with the terms of the Panel's exception or the Panel determines not to grant an exception, the Panel will issue a delist letter. The company may then appeal the Panel's decision to the NASDAQ Listing and Hearing Review Council (Listing Council). The request for an appeal will not stay the delisting of the company's securities from NASDAQ. See Appeals Process for additional information. Please note that the Listing Council may not grant an exception for a period to exceed 360 days from the due date of the first such late periodic report. (Updated: November 25, 2008)

What are the repercussions if my company's auditors did not review the quarterly financial statements as required under SAS 100?
If the company is required to have its interim financial statements reviewed under SAS 100 and does not comply, NASDAQ views the company to be delinquent in its filing obligations. Please see the previous FAQ, which outlines the compliance process for filing delinquencies. (Updated: November 19, 2008)

What information should the company include in its plan of compliance submission to the Staff?
In submitting its plan of compliance to the Staff, the company should provide the following information:

• The reasons, including the specific facts and circumstances, for the late filing;
• Whether an investigation into the circumstances underlying the filing delinquency has been initiated by the company's audit committee, auditors, or other internal committee;
• The likelihood that the filing can be made within the initial 180 day exception period;
• The company's past compliance history;
• Whether the company is the subject of any regulatory or judicial investigation;
• Any corporate events that may occur within the exception period;
• The company's general financial status; and
• The company's public disclosures relating to the filing delinquency, any forthcoming restatements, and its financial condition.

The Staff review will be based on information provided by a variety of sources, which may include the company, its audit committee, its outside auditors, the staff of the SEC and any other regulatory body. (Initial Posting: November 19, 2008)

If an investigation into the issues underlying a late periodic report has been initiated by the company's board, audit committee or other investigative committee, what information should the company provide to the Staff?
The company should be prepared to provide the following information to the extent it has been ascertained and to supplement that information in writing upon completion of the investigation:

1. A summary of the investigation, including:

• a description of how and when the issues/improprieties originally came to the attention of management and/or the board of directors or audit committee;

• a description of the particular issues under investigation and the scope of the investigation (years covered, geographical reach, etc.);

• a summary or time line of meetings and actions taken by the board, audit committee, or other investigative committee and the law firms, forensic accountants or other consultants retained to assist in the investigation; and

• the findings of the investigation, including a description of all questionable, improper and/or fraudulent actions or practices identified and the names of all individuals found to be responsible for, or have participated in, such conduct (by act or omission), the status of those individuals' employment with the company, and a description of any sanctions or remedial actions taken against those individuals;

2. A description of internal control and/or accounting weaknesses identified during the course of the investigation;

3. A description of all remedial measures that have been or will be implemented by the company (including a schedule for the implementation of those measures not yet adopted);

4. A description of any and all remedial measures and/or internal controls that the company does not plan to implement, which were recommended by the investigatory committee, or by any law, accounting or consulting firm involved in the investigation; and

5. A description of any and all investigations or inquiries by other regulatory authorities. (Initial Posting: November 19, 2008)

How long can a company remain listed if it is late in filing its periodic reports because of an internal investigation, accounting issues, restatements, or other similar concerns?
A company may remain listed while deficient in its filing obligations for a maximum period of 360 days from the due date of the initial late periodic report (as extended by Exchange Act Rule 12b-25, if applicable).

When a company is late in filing a required periodic report with the SEC, NASDAQ Staff will request that it submit a plan of compliance within 60 days. Upon review of the plan of compliance, Staff may allow the company to remain listed for up to 180 days from the due date of the filing. If the company is not current in its filings at the end of the 180 day period, Staff will send a delisting determination in a letter to the company.

The company may appeal the delisting determination to a Hearings Panel, which is comprised of individuals who are independent of NASDAQ. A request for a hearing before the Panel will automatically stay the delisting for a period of 15 days from the date the request for an appeal is due. The company may request that the Panel extend the stay for a longer period. After review of the company's plan of compliance and a hearing, the Panel may grant the company additional time to remain listed. The Panel may not, however, grant an extension which would exceed 360 days from the due date of the initial late filing. See Hearings Process for additional information.

A company may appeal a Panel decision to the NASDAQ Listing and Hearing Review Council. The Listing Council, which is comprised of individuals who are independent of NASDAQ, reviews all decisions of the Panel and advises the NASDAQ Board on questions relating to company listings. An appeal to the Listing Council does not stay the Panel's decision to delist the company's securities. See Appeals Process for additional information.

In addition, all Panel decisions are subject to a "call for review" by the Listing Council. In connection with a call for review, the Listing Council has the discretion to stay the Panel's decision. Should the Listing Council grant a stay, then the company would remain listed during the pendency of the Listing Council's review. If the Listing Council determines it is appropriate, it may grant the company additional time to regain compliance. This exception and any stay granted by the Listing Council may not exceed 360 days from the due date of the first late periodic report.

Finally, the NASDAQ Board of Directors may call a Panel or Listing Council decision for review. Like the Listing Council process, the Board has the discretion to stay the Panel or Listing Council's decision in connection with a call for review. Should the Board grant a stay, then the company would remain listed during the pendency of the Board's review. If the Board determines it is appropriate, it may grant the company additional time to regain compliance while listed. While the rules do not limit the maximum time the Board may provide, it should be noted that the Board has been unwilling to allow a company to remain listed for more than one year from the due date of the company's first delinquent annual report.

The Securities and Exchange Commission has reviewed NASDAQ's actions in connection with an appeal by a company that was late in filing its periodic reports and that did not regain compliance in the time permitted by the NASDAQ Board. The Commission found that the company had not established a likelihood that it would succeed on the merits of its argument challenging the decision to delist the company if it remained delinquent one year after the due date of its first delinquent annual report. See In the Matter of Coherent, Inc. (December 18, 2007)(Updated November 19, 2008)

Under what circumstances is a cure period provided for corporate governance deficiencies?
If a company fails to comply with the majority independent board requirement due to one vacancy on its board, or because one director ceases to be independent due to circumstances beyond the director's reasonable control, the company is provided a cure period until the earlier of its next annual meeting or one year from the occurrence of the event that caused the failure to comply. However, a company is provided a 180 day cure period if the shareholders meeting occurs less than 180 days after the event that caused the failure to comply. (Initial Posting: October 7, 2009)

Under what circumstances is a cure period not provided to remedy corporate governance deficiencies?
As set forth in Listing Rule 5810(c)(2), a company is not provided a cure period and must provide a plan of compliance for violations of, among other things:

• Majority independent board or audit committee composition requirements due to more than one vacancy on the board, or because more than one director ceases to be independent;
• Code of Conduct;
• Quorum;
• Review of Related Party Transactions;
• Shareholder Approval; and
• Voting Rights.

The plan of compliance is due 15 days from the date that the company is notified. After reviewing the company's plan of compliance, Nasdaq may grant the company an extension of time, up to 105 calendar days from the date of the notification, to regain compliance. Note that, unlike the cure period under Rule 5605, this 105 day extension is not automatic. Extensions of time may vary and are not granted in all cases. (Initial Posting: October 7, 2009)

Public Reprimand Letters

What is a Public Reprimand letter?
A Public Reprimand letter is issued when NASDAQ Staff determines that a company has violated NASDAQ rules, but does not believe the circumstances warrant delisting the company. A Public Reprimand is generally issued to address inadvertent violations of NASDAQ's corporate governance rules.

A company that receives a Public Reprimand letter must publicly disclose receipt of the letter by issuing a press release and filing a Form 8-K.

A company that receives a Public Reprimand letter has the opportunity to appeal NASDAQ's determination to a Hearings Panel. See Hearings Process for additional information.

Under what circumstances may NASDAQ issue a Public Reprimand letter?
NASDAQ Staff will issue a Public Reprimand letter when it determines that a company has violated NASDAQ rules, but does not believe the circumstances warrant delisting the company. A Public Reprimand is generally issued to address inadvertent violations of NASDAQ's corporate governance rules.

Some of the factors NASDAQ will consider in determining whether to issue a Public Reprimand letter are as follows:

• Was the violation inadvertent;
• Did the violation have a material adverse impact on shareholders' interests;
• What was the scope of the violation;
• Upon discovery of the violation, was the violation cured and how quickly was it cured;
• Did the company reasonably rely on an independent advisor;
• Has the company demonstrated a pattern of rule violations; and
• Was the violation self reported to NASDAQ?

Examples of situations where NASDAQ has issued a Public Reprimand include:

Example 1: Listing Rules 5605(d) and 5605(e) - Failure to comply with Independent Committee requirements

The company's Proxy indicated that its Chief Executive Officer ("CEO") was a member of its Nominating Committee (the "Committee"). However, as an executive officer, the CEO is precluded from being an Independent Director. In that regard, the company violated the Rules since they require that executive compensation and director nominees must be selected or recommended, either by: (i) a majority of the independent directors; or, (ii) a committee comprised solely of independent directors. Staff was advised that after the company's CEO joined the Committee, it only met once. Upon Staff's notification to the company of the violations, it promptly regained compliance by having the CEO resign from the Committee. (Updated: April 13, 2009)

Example 2: Listing Rules 5605(d) and 5605(e) - Failure to comply with Independent Committee and Controlled Company Exemption requirements

The company's Proxy stated that it was a "Controlled Company" because more than 50% of its voting power was held by a single entity and that it was relying on the Controlled Company exemption to allow a non-independent director to serve on both its Compensation and Nominating Committees. Staff determined that contrary to the disclosure in the Proxy, the company was no longer eligible to rely upon the Controlled Company exemption because an increase in its total shares outstanding had lowered the entity's voting control below 50%. Within a week of Staff bringing this issue to the company's attention, it acted to cure the violation by appointing another independent director to the Compensation and Nominating Committees. However, the company stated that the Board had determined to continue the committee service of the non-independent directors in reliance on the exceptional and limited circumstances exception contained in Listing Rules 5605(d)(3) and 5605(e)(3), which reliance was appropriately disclosed. (Updated: April 13, 2009)

Example 3: Listing Rule 5635(c) - Shareholder Approval Violation

The company notified NASDAQ that as a result of a recent review of its Stock Incentive Plan (the "Plan"), it discovered that stock options had been granted in excess of the number of shares authorized under the shareholder approved plan. To regain compliance with the shareholder approval requirements, the company obtained written waivers from each officer and director holding such awards, pursuant to which they waived the right to exercise their options unless and until the shareholders of the company vote in favor of an increase in the number of shares authorized for issuance under the Plan. This approval would include the excess awards as well as additional equity incentives to provide for future grants. The company expects to solicit the vote of its shareholders at its next annual meeting. (Updated: April 13, 2009)