NYSE rules require shareholder approval before a listed company issues company securities in various circumstances. The waivers apply to issuances to related parties of the listed company under Section 312.03(b) and transactions involving 20% or more of the company’s common stock or voting power under Section 312.03(c) of the NYSE Listed Company Manual.

Related Party Issuances. Section 312.03(b) generally requires shareholder approval if the number of company securities to be issued by the company to a related party exceeds either 1% of the number of shares of common stock outstanding or 1% of the voting power of the company’s common stock outstanding before the issuance. “Related party” includes (1) a director, officer or substantial security holder of the company; (2) a subsidiary, affiliate or other closely-related person of a related party; and (3) any company or entity in which a related party has a substantial direct or indirect interest.

Section 312.03(b) provides an exception if the company issues the securities at a price (or with a conversion or exercise price, as applicable) at least as great as the minimum price (as defined by Section 312.04(i)), provided that the number of securities to be issued does not exceed either 5% of the number of shares outstanding or 5% of outstanding voting power. This exception is available only for transactions involving a related party that has that status solely because it is a substantial security holder of the company.

The extension of the Section 312.03(b) waiver permits listed companies to continue to sell securities to related parties and other persons that are subject to Section 312.03(b) without complying with the numerical limitations of the rule, as long as the sale meets the following requirements:

• the company’s securities must be sold for cash at a price that meets the minimum price requirement as set forth in Section 312.04; and
• the company’s audit committee or a comparable committee comprised solely of independent directors must review and approve the transaction.

This waiver does not affect shareholder approval requirements under any other applicable NYSE rule, such as the requirements of Section 303A.08 that apply to certain equity compensation arrangements, or the change of control requirements of Section 312.03(d). This waiver is not available for transactions that involve the stock or assets of another company where any director, officer or substantial security holder of the company has a 5% or greater interest (or such persons collectively have a 10% or greater interest), directly or indirectly, in the company or the assets to be acquired or in the consideration to be paid in the transaction or series of related transactions if the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in outstanding common shares or voting power of 5% or more.

Transactions Involving 20% or More. Section 312.03(c) requires shareholder approval if the number of company securities to be issued by the company exceeds 20% of the number of shares of common stock outstanding or 20% of outstanding voting power. Section 312.03(c) provides an exception for issuances where the securities will be issued for cash at a price (or having a conversion or exercise price, as applicable) at least as great as the minimum price, as defined, in a “bona fide private financing.” As defined in Section 312.04(g), a bona fide private financing is a sale in which either (1) a registered broker-dealer purchases the securities from the company with a view to the private sale of the securities to one or more purchasers; or (2) the company sells the securities to multiple purchasers, and no single purchaser, or group of related purchasers, acquires, or has the right to acquire more than 5% of the shares of the company’s common stock or more than 5% of the company’s voting power before the sale upon exercise or conversion of the securities.

The extension of the Section 312.03(c) waiver exempts listed companies from the shareholder approval requirement for private placement transactions that exceed the 20% requirement of Section 312.03(c), regardless of the size of the transaction, the number of participating investors or the amount of securities purchased by any single investor, as long as the transaction is a sale of the company’s securities for cash at a price that meets the minimum price requirement. Specifically, the extension of the Section 312.03(c) waiver waives the 5% limitation for any sale to an individual investor in a bona fide private financing pursuant to Section 312.03(c) and permits companies to undertake a bona fide private financing in which there is only a single purchaser.

Like the Section 312.03(b) waiver, the company’s audit committee or a comparable committee comprised solely of independent directors must review and approve the transaction if any purchaser in the transaction is a related party or other person subject to Section 312.03(b). Also like the Section 312.03(b) waiver, this waiver does not affect shareholder approval requirements under any other applicable NYSE rule, such as the requirements of Section 303A.08 that apply to certain equity compensation arrangements or the change of control requirements of Section 312.03(d).