EGC Corporate Governance Practices (May 2018)

A Survey and Related Resources PAGE E-1 APPENDIX E CONTROLLED COMPANIES A “controlled company” is a company of which more than 50% of the voting power for the election of directors is held by an individual, a group, or another company. 28 The calculation of voting power held by a group can include shares covered under voting agreements between or among shareholders relating to the election of directors. A company elects to be a controlled company in its initial listing application to an exchange. A company that elects to be considered a “controlled company” and relies on the exchange-permitted exemptions must disclose such exemptions in its public filings pursuant to Regulation S-K, Item 407(a), Instruction 1. A “controlled company” is not required to comply with the following exchange requirements:  A company’s board of directors is required to have a majority of independent directors. 29  Independent directors must determine the compensation of the CEO and other executive officers. 30  Independent directors must select or recommend nominees for directors. 31 Phase-In Requirements After Losing Controlled Company Status NASDAQ Rule IM-5615-5 Upon ceasing to be a controlled company, the company must:  have at least one independent director on its Nominating and Corporate Governance Committee and at least one independent director on its Compensation Committee by the date on which the company ceases to be a controlled company (controlled company exemption does not extend to Audit Committee requirements);  have at least a majority of independent directors on each Committee within 90 days of the date on which the company ceases to be a controlled company;  have fully independent committees within one year of the date on which the company ceases to be a controlled company; and  have a majority of independent directors on the Board of Directors within one year of the date on which the company ceases to be a controlled company. NYSE Rule 303A.00 To the extent a controlled company ceases to qualify as such, the company must:  satisfy the majority independent board requirement within one year of the date its status changed;  make committee charters available on or through its website by the date its status changed; and  have at least one independent member on its nominating committee and at least one independent member on its compensation committee by the date its status changed, at least a majority of independent members on each committee within 90 days of the date its status changed, and fully independent committees within one year of the date its status changed. 28 Nasdaq Equity Rule 5615(c)(1) and NYSE Listed Company Manual §303A.00. 29 Nasdaq Equity Rule 5605(b)(1) and NYSE Listed Company Manual §303A.01. 30 Nasdaq Equity Rule 5605(d)(1)(B) and NYSE Listed Company Manual §303A.05. 31 Nasdaq Equity Rule 5605(e)(1) and NYSE Listed Company Manual §303A.04.