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Exempt and Hybrid Securities Offerings (2nd Edition)
 by James R. Tanenbaum, Anna T. Pinedo
 
 Copyright: 2011-2012
 Last Updated: December 2012

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  • ISBN Number: 9781402416941
  • Page Count: 2816
  • Number of Volumes: 3
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  • The purchase of PLI titles may include Basic Upkeep Service, whereby
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Exempt transactions and hybrid transactions are among the key financing methodologies in the U.S. capital markets. Exempt and Hybrid Securities Offerings, Second Edition provides you with comprehensive guidance on how to structure these offerings.

Packed with checklists, transactional timelines, SEC guidance, and a wealth of time-saving sample documents, Exempt and Hybrid Securities Offerings describes the relative advantages and drawbacks of the most commonly used forms of exempt and hybrid offerings, while clearly explaining the mechanics of conducting private placements, traditional PIPE transactions, structured PIPE transactions, institutional (debt) private placements, Rule 144A offerings, Regulation S offerings, expedited shelf takedowns and wall-crossed or pre-marketed offerings, registered directs, and at-the-market offerings.

The new Second Edition tackles timely issues.  New chapters focus on the basics of Regulation A and the Regulation A reform debate; private secondary trading markets; the use of special purpose vehicles to invest in the securities of privately held companies; the issues that arise for companies that choose to defer becoming a public company, such as the 500-holder rule; and the current debate regarding private placement reform.

Written by Anna T. Pinedo and James R. Tanenbaum, Exempt and Hybrid Securities Offerings, compiles their expertise as noted securities practitioners responsible for creating several of today’s leading exempt and hybrid offering methodologies.

Exempt and Hybrid Securities Offerings includes practice pointers, extensive appendices and a separate forms volume. A CD-ROM containing the forms is included.

  Introduction
Chapter 1: Why an Exempt Offering or a Hybrid Offering?
  • § 1:1 : Introduction1-2
  • § 1:2 : Exempt Offerings and Hybrid Offerings1-4
    • § 1:2.1 : Exempt Offerings1-4
    • § 1:2.2 : Hybrid Offerings1-4
  • § 1:3 : Growth of Exempt Offerings and Hybrid Offerings1-5
  • § 1:4 : Securities Regulatory Framework—In Brief1-6
  • § 1:5 : Initial Public Offering and Exchange Act Registration1-8
  • § 1:6 : Being Public1-10
    • § 1:6.1 : Proxy Rules1-10
    • § 1:6.2 : Reporting for Significant Security Holders1-10
    • § 1:6.3 : Sarbanes-Oxley1-11
    • § 1:6.4 : Investment Company Act1-12
    • § 1:6.5 : Trust Indenture Act1-12
    • § 1:6.6 : Securities Exchange Regulations1-13
    • § 1:6.7 : State Blue Sky Laws1-13
    • § 1:6.8 : Enhanced Disclosure Requirements Post Sarbanes-Oxley1-13
    • § 1:6.9 : Regulation FD1-15
    • § 1:6.10 : Liability Concerns1-15
  • § 1:7 : IPO or No IPO—Considerations1-17
    • § 1:7.1 : Larger Companies Make Better Public Companies1-17
    • § 1:7.2 : Compliance Costs1-18
    • § 1:7.3 : Foreign Issuers May Choose to Avoid U.S. Reporting1-19
    • § 1:7.4 : Limited Flexibility1-19
    • § 1:7.5 : The IPO Process Is Expensive1-20
    • § 1:7.6 : Alternative Financing Options1-21
    • § 1:7.7 : The Growth of Private Equity and Hedge Funds1-21
    • § 1:7.8 : The Increased Value of Restricted Securities1-22
    • § 1:7.9 : Alternative Liquidity Events and the Availability of Hedging Transactions1-23
  • § 1:8 : Exempt Offering Alternatives1-23
    • § 1:8.1 : Section 4(a)(2) and Regulation D1-23
    • § 1:8.2 : Rule 144A1-24
    • § 1:8.3 : Regulation S1-25
    • § 1:8.4 : Combined Rule 144A/Regulation S Offerings1-26
    • § 1:8.5 : Rule 1441-26
  • § 1:9 : Restricted Securities and the Illiquidity Discount1-28
  • § 1:10 : Private Placement Reform1-30
  • § 1:11 : Shelf Registration and Improvements to Capital Formation1-30
  • § 1:12 : Reporting Issuers Turning to Exempt Offerings and Hybrid Offerings1-33
Chapter 2: Private Placements--An Overview
  • § 2:1 : Registration Requirements2-3
  • § 2:2 : Exemptions from Section 5 Registration Requirements2-3
    • § 2:2.1 : Section 4(a)(2)2-3
      • [A] : Background2-3
      • [B] : Scope of the Private Placement Exemption2-5
        • [B][1] : Statutory Private Placement2-5
        • [B][2] : Case Law Relating to Private Placements2-5
      • [C] : Rule 1462-12
    • § 2:2.2 : Regulation D2-13
      • [A] : Background2-13
      • [B] : Overview of Regulation D2-14
      • [C] : Rule 501: Definitions2-14
        • [C][1] : “Accredited Investor”2-14
        • [C][2] : Calculation of Purchasers2-16
        • [C][3] : Proposed “Large Accredited Investor” Definition2-17
        • [C][4] : Determination of Individual Net Worth2-20
      • [D] : Rule 502: General Conditions2-24
        • [D][1] : Integration2-25
        • [D][2] : Information Requirements2-26
          • [D][2][a] : When Must Information Be Furnished?2-26
          • [D][2][b] : Type of Information to Be Furnished2-26
        • [D][3] : Limitations on Manner of Offering2-29
          • [D][3][a] : Express Exclusions from the Prohibition Against General Solicitation2-32
          • [D][3][b] : Relaxation of Offering Communication Rules2-33
          • [D][3][c] : Filing a Shelf Registration Statement2-34
          • [D][3][d] : Filing a Resale Registration Statement2-34
          • [D][3][e] : Internet-Related Issues2-35
          • [D][3][f] : Broker-Dealers and Use of the Internet2-36
          • [D][3][g] : Concerns Regarding the General Solicitation Prohibition2-36
          • [D][3][h] : Relaxation of the Prohibition on General Solicitation2-37
        • [D][4] : Limitations on Resales2-40
      • [E] : Rule 503: Notice2-40
      • [F] : Rule 504: Exemption for Offerings and Sales Up to $1 Million2-42
      • [G] : Rule 505: Exemption for Offerings and Sales Up to $5 Million2-44
      • [H] : Rule 506: Exemption for Limited Offers and Sales Without Regard to Dollar Amount2-45
      • [I] : Proposed Rule 506(c): “Bad Actors”2-47
        • [I][1] : “Covered Persons”2-48
        • [I][2] : Disqualifying Events2-49
          • [I][2][a] : Criminal Convictions2-49
          • [I][2][b] : Court Injunctions and Restraining Orders2-50
          • [I][2][c] : Final Orders of Certain Regulators2-50
          • [I][2][d] : Commission Disciplinary Orders2-51
          • [I][2][e] : Suspension or Expulsion from SRO Membership or Association with an SRO Member2-52
          • [I][2][f] : Stop Orders and Orders Suspending the Regulation A Exemption2-52
          • [I][2][g] : U.S. Postal Service False Representation Orders2-52
        • [I][3] : Reasonable Care Exception2-53
        • [I][4] : Waivers2-53
        • [I][5] : Transition Issues2-53
          • [I][5][a] : Disqualifying Events that Predate the Rule2-53
          • [I][5][b] : Effect on Ongoing Offerings and Timing of Implementation2-54
        • [I][6] : Amendment to Form D2-54
      • [J] : Rule 507: Disqualification2-54
      • [K] : Rule 508: The Substantial Compliance Rule2-56
      • [L] : State Blue Sky Issues2-57
  • § 2:3 : Other Private Placement Exemptions2-57
  • § 2:4 : State-Specific Private Placement Exemptions2-58
    • § 2:4.1 : General2-58
    • § 2:4.2 : Rule 504 and Rule 505 Offerings2-59
      • [A] : New York2-60
      • [B] : Florida and California2-61
    • § 2:4.3 : Rule 506 Offerings2-63
  • § 2:5 : Restricted Securities2-64
    • § 2:5.1 : General2-64
    • § 2:5.2 : Selling Restricted Securities2-64
      • [A] : Removing the Restrictive Legend2-64
      • [B] : Exemptions2-65
    • § 2:5.3 : Rule 1442-67
Chapter 3: Section 4(1) and Concept of 4(1 1/2)
  • § 3:1 : Overview3-2
  • § 3:2 : Analysis3-3
    • § 3:2.1 : Who Is Involved in the Proposed Transaction?3-3
      • [A] : Analysis of Critical Concepts3-3
        • [A][1] : “Issuer”3-3
        • [A][2] : “Underwriter”3-4
          • [A][2][a] : “Control”3-6
          • [A][2][b] : “Distribution”3-7
          • [A][2][c] : “Dealer”3-8
          • [A][2][d] : “Broker”3-9
      • [B] : Application of Definition of “Underwriter”3-9
        • [B][1] : Persons Who Purchase from an Issuer with a View to Distribution3-9
        • [B][2] : Persons Who Sell for an Issuer in Connection with a Distribution3-11
        • [B][3] : Participants in Any Purchase from or the Sale for an Issuer, with a View to, or in Connection with, a Distribution3-11
        • [B][4] : Participants in the Direct or Indirect Underwriting of Any Such Purchase from or the Sale for an Issuer, with a View to, or in Connection with, a Distribution3-13
    • § 3:2.2 : What is the Status of the Security Subject to the Proposed Transaction?3-13
      • [A] : Control Securities3-13
      • [B] : Restricted Securities3-13
    • § 3:2.3 : What is the Nature of the Proposed Transaction?3-16
      • [A] : Private Sales of Restricted or Control Securities—“Section 4(a)(1½)”3-16
Chapter 4: Section 4(a)(3) and Section 4(a)(4)
  • § 4:1 : Registration Requirements4-2
  • § 4:2 : Section 4(a)(3)—Dealers’ Exemption4-2
    • § 4:2.1 : Background4-2
    • § 4:2.2 : Dealers4-4
      • [A] : Who Is a Dealer?4-4
      • [B] : Dealer versus Underwriter4-6
    • § 4:2.3 : Exempted Dealer Transactions4-9
      • [A] : Ordinary Trading4-9
      • [B] : Affiliates’ Securities4-9
    • § 4:2.4 : Scope of the Dealer Transaction Exemption4-9
      • [A] : Periods During Which the Section 4(a)(3) Exemption Is Unavailable4-10
        • [A][1] : Forty-Day Compliance Period—Illegal Distributions4-10
        • [A][2] : Forty-Day or Ninety-Day Compliance Period—Registered Offerings4-10
        • [A][3] : Dealer Buying Additional Securities of Outstanding Class of Securities4-11
      • [B] : Rule 1744-11
      • [C] : Unsold Allotment or Subscription—Participating Dealer4-12
    • § 4:2.5 : Relationship with Rule 144A4-13
  • § 4:3 : Section 4(a)(4)—Brokers’ Exemption4-14
    • § 4:3.1 : Background4-14
    • § 4:3.2 : Brokers4-14
      • [A] : Who Is a Broker?4-14
    • § 4:3.3 : Exempted Brokers’ Transactions4-15
      • [A] : Ordinary Brokers’ Transactions4-15
      • [B] : Interrelationship Between Section 4(a)(4) and Rule 144(g)4-15
    • § 4:3.4 : Scope of the Brokers’ Transaction Exemption4-16
      • [A] : Broker-Dealer as Agent4-17
      • [B] : Usual and Customary Broker’s Commission4-19
      • [C] : No Solicitation of Customers’ Orders4-19
      • [D] : Duty to Investigate4-21
      • [E] : Orders Executed on an Exchange or in the Over-the-Counter Market4-22
Chapter 5: Rule 144
  • § 5:1 : The Rule 144 Safe Harbor5-2
    • § 5:1.1 : Securities Subject to Rule 1445-3
      • [A] : Restricted Securities Under Rule 144(a)(3)5-3
      • [B] : Control Securities5-4
      • [C] : Unavailability of Rule 144 for Securities of Shell Companies5-6
    • § 5:1.2 : Development of Rule 1445-6
    • § 5:1.3 : 2007 Amendment to Rule 1445-8
  • § 5:2 : Conditions Under Rule 1445-10
    • § 5:2.1 : Distinction Between Affiliates and Non-Affiliates5-10
      • [A] : Sales by Non-Affiliates5-10
      • [B] : Sales by Affiliates5-10
    • § 5:2.2 : The Five Conditions5-10
      • [A] : Adequate Current Public Information5-11
      • [B] : Holding Period5-11
        • [B][1] : Tacking Issues5-12
          • [B][1][a] : The Tacking Concept5-12
          • [B][1][b] : Specific Tacking and Aggregation Situations5-14
            • [B][1][b][i] : Stock Dividends, Splits and Recapitalizations5-14
            • [B][1][b][ii] : Conversions5-15
            • [B][1][b][iii] : Contingent Stock5-15
            • [B][1][b][iv] : Pledges5-16
            • [B][1][b][v] : Gifts5-17
            • [B][1][b][vi] : Trusts5-17
            • [B][1][b][vii] : Estates5-18
            • [B][1][b][viii] : Cashless Exercise of Options and Warrants5-19
            • [B][1][b][ix] : Affiliated Fund’s Distribution-in-Kind of Portfolio Company Securities to Fund Investors5-19
      • [C] : Volume Limitations5-20
        • [C][1] : Equity Securities5-20
        • [C][2] : Debt Securities5-21
        • [C][3] : Convertible Securities5-21
        • [C][4] : Aggregation5-21
      • [D] : Manner of Sale5-22
        • [D][1] : “Unsolicited Brokers’ Transaction” Within the Meaning of Section 4(4) of the Securities Act5-23
        • [D][2] : Transaction Directly with a Market Maker5-24
        • [D][3] : Riskless Principal Transactions5-24
      • [E] : Form 1445-25
  • § 5:3 : Compliance with Rule 1445-25
    • § 5:3.1 : Responsibility for Complying with Rule 1445-25
    • § 5:3.2 : Consequences of Non-Compliance with Rule 1445-26
  • § 5:4 : Special Situations5-26
    • § 5:4.1 : Employee Benefit Plans5-26
    • § 5:4.2 : Short Sales of Restricted Securities5-27
  • § 5:5 : Rule 1455-27
  • § 5:6 : Hedging Transactions and Risk Mitigation5-28
    • § 5:6.1 : Hedging Transactions5-28
    • § 5:6.2 : Tolling Provisions Related to Hedging Transactions5-28
  • § 5:7 : Financing Transactions—Private Placements and PIPEs5-30
Chapter 6: Rule 144A
  • § 6:1 : Introduction6-2
    • § 6:1.1 : Proposed Rule 144A6-3
    • § 6:1.2 : Adopted Rule 144A6-4
  • § 6:2 : Rule 144A Safe Harbor6-5
  • § 6:3 : Persons Who May Rely on Rule 144A6-6
    • § 6:3.1 : Any Persons, Other Than Issuers6-6
    • § 6:3.2 : Broker-Dealers6-6
    • § 6:3.3 : Domestic Issuers6-7
    • § 6:3.4 : Foreign Issuers6-7
  • § 6:4 : Rule 144A’s Relationship to Section 4(a)(2), Rule 144, and Reg S6-7
  • § 6:5 : Rule 144A Requirements6-8
  • § 6:6 : Eligible Purchasers6-9
    • § 6:6.1 : QIBs6-9
      • [A] : Registered Investment Companies6-11
      • [B] : Banks and Savings and Loan Associations6-11
      • [C] : Broker-Dealers6-11
    • § 6:6.2 : Qualifying Amount6-12
      • [A] : Valuation of Securities6-12
      • [B] : Excluded Securities6-12
    • § 6:6.3 : Reasonable Belief of QIB Status6-13
    • § 6:6.4 : Offerings to Non-QIBs6-14
  • § 6:7 : Notice Requirements6-15
    • § 6:7.1 : Legend6-15
    • § 6:7.2 : Offering Memorandum6-15
  • § 6:8 : Eligible Securities—Fungibility6-16
    • § 6:8.1 : Time of Determination of Eligibility6-17
    • § 6:8.2 : Types of Eligible Securities6-17
      • [A] : Debt Securities6-17
      • [B] : Equity Securities6-17
        • [B][1] : American Depository Receipts6-18
        • [B][2] : Convertible or Exchangeable Securities6-19
        • [B][3] : Warrants and Options6-20
  • § 6:9 : Information Requirements6-20
    • § 6:9.1 : Overview6-20
    • § 6:9.2 : Reasonably Current Information6-22
    • § 6:9.3 : How Is the “Right to Obtain” Established?6-22
    • § 6:9.4 : Foreign Issuers6-23
  • § 6:10 : Permitted Communications6-24
    • § 6:10.1 : Screen-Based and Other “Offers”6-24
    • § 6:10.2 : Research Reports6-25
    • § 6:10.3 : Rule 135c6-26
  • § 6:11 : Rule 144A Offerings of Equity Securities6-26
  • § 6:12 : Foreign Issuers6-27
    • § 6:12.1 : ADRs6-28
  • § 6:13 : Registration of Securities Issued in a Rule 144A Transaction6-30
    • § 6:13.1 : A/B Exchange Offers6-31
      • [A] : Structure6-31
      • [B] : Broker-Dealers and A/B Exchange Offers6-33
      • [C] : Advantages6-34
      • [D] : Developments in A/B Exchange Offers6-34
  • § 6:14 : Resales6-36
  • § 6:15 : PORTAL and PORTAL Alliance6-37
  • § 6:16 : DTC6-39
  • § 6:17 : Other Issues Under Rule 144A6-40
    • § 6:17.1 : Liability in Rule 144A Transactions6-40
      • [A] : Section 12 Liability6-41
      • [B] : Section 11 Liability6-42
    • § 6:17.2 : Regulation M6-42
    • § 6:17.3 : Investment Company Act6-43
    • § 6:17.4 : FINRA6-44
    • § 6:17.5 : State Blue Sky Laws and Section 18 of the Securities Act6-45
    • § 6:17.6 : Trust Indenture Act6-46
Chapter 7: Regulation S
  • § 7:1 : Introduction7-2
  • § 7:2 : Reg S Exclusion from Registration Requirements7-5
  • § 7:3 : Conditions of Reg S7-6
    • § 7:3.1 : Offshore Transactions7-7
    • § 7:3.2 : Directed Selling Efforts7-8
      • [A] : Activity Not Covered by Directed Selling Efforts7-9
      • [B] : Internet Postings7-11
      • [C] : Foreign Offerors7-12
      • [D] : Domestic Offerors7-12
      • [E] : Foreign Press-Related Activity7-12
      • [F] : Research Reports7-14
      • [G] : Notices of Unregistered Offerings7-15
      • [H] : Advertising7-15
      • [I] : Miscellaneous Activities7-16
      • [J] : Registered or Exempt Offers Excluded7-16
  • § 7:4 : Conditions for Reliance on Rule 901: Morrison and the End of the Conduct and Effects Tests7-16
  • § 7:5 : Who Can Rely on Reg S?7-18
    • § 7:5.1 : U.S. Persons7-19
    • § 7:5.2 : Non-U.S. Persons7-20
  • § 7:6 : Issuer Safe Harbor—Rule 9037-21
    • § 7:6.1 : Category 1 Transactions7-21
      • [A] : Offerings for Which There Is Believed to Be No SUSMI7-22
      • [B] : Overseas Directed Offerings7-22
      • [C] : Securities Backed by a Foreign Government7-23
      • [D] : Securities Offered Pursuant to an Employee Benefit Plan7-23
    • § 7:6.2 : Category 2 Transactions7-24
      • [A] : Offering Restrictions7-25
      • [B] : Transactional Restrictions7-26
    • § 7:6.3 : Category 3 Transactions7-26
      • [A] : Additional Category 3 Transactional Restrictions7-27
        • [A][1] : Debt Securities7-27
        • [A][2] : Equity Securities7-28
  • § 7:7 : Resale Safe Harbor—Rule 9047-29
  • § 7:8 : Distribution Compliance Periods7-31
    • § 7:8.1 : Measurement of Distribution Compliance Periods and Potential Issues with Continuous Offerings, Unsold Allotments, and ADRs7-31
      • [A] : Medium-Term Notes7-32
      • [B] : American Depositary Shares7-32
      • [C] : Warrants7-32
      • [D] : Convertible Securities7-33
  • § 7:9 : Concurrent Private Placements in the United States and Reg S Offerings7-33
  • § 7:10 : Reg S Offerings of Debt Securities7-34
    • § 7:10.1 : Category 1 Safe Harbor for Debt7-34
    • § 7:10.2 : Category 2 Safe Harbor for Debt7-35
    • § 7:10.3 : Category 3 Safe Harbor for Debt7-35
  • § 7:11 : Reg S Offerings of Equity Securities7-35
    • § 7:11.1 : Category 1 Safe Harbor for Equity7-36
    • § 7:11.2 : Category 2 Safe Harbor for Equity7-36
    • § 7:11.3 : Category 3 Safe Harbor for Equity7-37
  • § 7:12 : Problematic Practices7-37
    • § 7:12.1 : Pre-1998 Amendments7-37
    • § 7:12.2 : Adoption of Rule 905—Resale Limitations7-39
    • § 7:12.3 : Other 1998 Amendments7-40
  • § 7:13 : Consequences of Non-Compliance with Reg S7-40
    • § 7:13.1 : Applicability of Securities Act Liability Provisions7-40
      • [A] : Section 12 Liability7-40
      • [B] : Section 11 Liability7-41
    • § 7:13.2 : Applicability of Exchange Act Liability and Anti-Fraud Provisions, and State Blue Sky Laws7-42
  • § 7:14 : Other Issues7-42
    • § 7:14.1 : Regulation M7-42
    • § 7:14.2 : Investment Company Act of 19407-43
    • § 7:14.3 : FINRA7-45
    • § 7:14.4 : State Blue Sky Laws7-45
    • § 7:14.5 : Trust Indenture Act of 19397-45
    • § 7:14.6 : Regulation S-K and Disclosure of Sales of Unregistered Securities7-45
Chapter 8: Rule 701
  • § 8:1 : Introduction8-1
    • § 8:1.1 : Original Rule 7018-1
    • § 8:1.2 : Limitations of Original Rule 7018-2
  • § 8:2 : Amended Rule 7018-3
    • § 8:2.1 : Conditions for Rule 7018-4
    • § 8:2.2 : Impact of the JOBS Act8-4
  • § 8:3 : Eligible Issuers8-5
  • § 8:4 : Exempt Compensatory Arrangements and Transactions8-5
  • § 8:5 : Eligible Participants8-6
  • § 8:6 : Aggregate Amount of Securities8-8
    • § 8:6.1 : Amounts That May Be Sold8-8
    • § 8:6.2 : Calculating the Aggregate Sales Price8-9
    • § 8:6.3 : Time of the Calculation8-10
    • § 8:6.4 : Calculating the Outstanding Securities8-10
  • § 8:7 : Disclosure Requirements8-10
  • § 8:8 : Foreign Private Issuers8-12
  • § 8:9 : No Integration with Other Offerings8-13
  • § 8:10 : Resale Limitations8-13
  • § 8:11 : Failure to Comply with Rule 7018-14
  • § 8:12 : State Blue Sky Laws8-15
    • § 8:12.1 : Florida8-15
    • § 8:12.2 : California8-16
    • § 8:12.3 : New York8-17
Chapter 9: Conditional Small Issues Exemption: Regulation A
  • § 9:1 : Overview9-2
  • § 9:2 : Background9-3
    • § 9:2.1 : Legislative History and Purpose of Regulation A9-3
    • § 9:2.2 : Regulation A Offering Abuses and Legislative Evolution of Regulation A9-5
    • § 9:2.3 : Use of Regulation A9-9
  • § 9:3 : Regulation A Requirements9-10
    • § 9:3.1 : Introduction9-10
    • § 9:3.2 : Eligible Issuers and Offerings9-11
      • [A] : Issuers9-11
      • [B] : Offerings9-12
      • [C] : Resales9-12
    • § 9:3.3 : Bad Boy Provisions9-12
      • [A] : Issuers, Predecessors, and Affiliated Issuers9-13
      • [B] : Officers, Directors, General Partners, 10% Holders, and Promoters9-14
      • [C] : Underwriters or Partners, Officers, and Directors of the Underwriter9-15
      • [D] : Waiver of Bad Boy Provisions9-15
    • § 9:3.4 : Offering Threshold9-16
      • [A] : Maximum Offering Price9-16
      • [B] : Computation and Valuation9-17
        • [B][1] : Aggregate Offering Price9-17
        • [B][2] : Prior Twelve Months’ Reduction9-18
      • [C] : Integration9-18
    • § 9:3.5 : The Offering Statement9-20
      • [A] : Preparation and Filing9-20
        • [A][1] : FINRA Review9-21
        • [A][2] : Qualification9-21
      • [B] : Disclosure Requirements9-21
        • [B][1] : Notification9-21
        • [B][2] : Offering Circular9-22
        • [B][3] : Financial Statements9-24
        • [B][4] : Exhibits9-26
      • [C] : Supplemental Information9-27
    • § 9:3.6 : Offering Communications9-27
      • [A] : Pre-Filing Period—Testing the Waters9-27
      • [B] : Waiting Period9-28
      • [C] : Post-Effective Period9-29
        • [C][1] : Updating the Offering Circular9-30
      • [D] : Reports of Periodic Sales9-30
      • [E] : Use of Advertising and Sales Literature—General Solicitation9-31
    • § 9:3.7 : Suspension of the Regulation A Exemption9-32
    • § 9:3.8 : Substantial and Good-Faith Compliance9-35
  • § 9:4 : Considerations in Conducting a Regulation A Offering9-36
    • § 9:4.1 : Advantages9-36
      • [A] : Costs and Timing9-36
      • [B] : Financial Statements9-37
      • [C] : No Limitation on Offerees9-38
      • [D] : Nature of Securities9-38
      • [E] : Testing the Waters, Advertising, and General Solicitation9-39
    • § 9:4.2 : Disadvantages9-40
      • [A] : Offering Threshold9-40
      • [B] : Requirement of State Registration9-41
      • [C] : Underwriting9-42
    • § 9:4.3 : Liability in Regulation A Offerings9-43
      • [A] : Section 11 Liability9-43
      • [B] : Antifraud Provisions of the Federal Securities Laws9-43
  • § 9:5 : Proposed Regulation A Reform9-44
    • § 9:5.1 : Background9-44
    • § 9:5.2 : Proposed Legislation9-46
    • § 9:5.3 : JOBS Act Changes9-47
Chapter 10: Shelf Registration Statements
  • § 10:1 : What Is Shelf Registration?10-2
    • § 10:1.1 : Advantages of Shelf Registration Statements10-5
    • § 10:1.2 : Types of Offerings on a Shelf Registration Statement10-9
  • § 10:2 : Rule 41510-10
    • § 10:2.1 : Difference Between a Delayed Offering and a Continuous Offering10-10
    • § 10:2.2 : Securities Eligible for Issuance Under Rule 41510-11
    • § 10:2.3 : Expiration of Shelf Registration Statements10-12
  • § 10:3 : Eligibility for Use of Form S-310-14
    • § 10:3.1 : Registrant Requirements10-14
    • § 10:3.2 : Transaction Requirements10-17
    • § 10:3.3 : Smaller Public Companies—2007 Amendments to Form S-310-21
      • [A] : Shell Restrictions10-24
      • [B] : Listing Requirement10-24
      • [C] : One-Third of Public Float Limitation10-25
      • [D] : Different Methods of Calculating Public Float10-26
      • [E] : Effect of Fluctuations in Public Float10-26
      • [F] : Failure to Satisfy Form S-3 Eligibility Requirements10-27
      • [G] : Effect of 2007 Amendments on Exchange Approval Requirements for Private Offerings of Twenty Percent or More of Outstanding Shares10-28
    • § 10:3.4 : Automatic Shelf Offerings by Well-Known Seasoned Issuers10-28
      • [A] : Benefits of Being a Well-Known Seasoned Issuer10-28
      • [B] : Definition of WKSI10-30
        • [B][1] : Majority-Owned Subsidiaries10-31
        • [B][2] : Timing of WKSI Determination10-32
        • [B][3] : Public Float10-32
    • § 10:3.5 : Ongoing Satisfaction of Eligibility Requirements10-33
      • [A] : Impact of Late Filings of Exchange Act Reports10-34
      • [B] : Ineligible Issuer Concerns for WKSIs10-35
  • § 10:4 : Primary Offerings and Secondary Offerings10-36
    • § 10:4.1 : Differences Between Primary and Secondary Offerings10-36
    • § 10:4.2 : Disguised Primary Offering10-37
  • § 10:5 : Plan of Distribution10-38
  • § 10:6 : Shelf Registration Statements on Form S-110-40
  • § 10:7 : Liability for Shelf Registration Statements10-41
  • § 10:8 : Blackout Periods10-42
  • § 10:9 : Other Issues10-43
    • § 10:9.1 : FINRA Filings10-43
    • § 10:9.2 : Regulation FD10-44
    • § 10:9.3 : Trust Indenture Act10-47
Chapter 11: Securities Offering Reform
  • § 11:1 : Overview11-2
    • § 11:1.1 : Background of Securities Offering Reform11-4
  • § 11:2 : New Categories of Issuers11-6
    • § 11:2.1 : WKSIs11-8
    • § 11:2.2 : Seasoned Issuers11-9
    • § 11:2.3 : Unseasoned Issuers11-11
    • § 11:2.4 : Non-Reporting Issuers11-12
    • § 11:2.5 : Ineligible Issuers11-12
  • § 11:3 : Revamping the Communications Regime11-15
    • § 11:3.1 : Overview11-15
    • § 11:3.2 : Safe Harbors for Regularly Released Information11-22
      • [A] : Rule 16811-22
      • [B] : Rule 16911-24
    • § 11:3.3 : Safe Harbor for Communications Made More Than Thirty Days Before Filing a Registration Statement11-25
    • § 11:3.4 : Research Report Safe Harbors11-27
      • [A] : Overview of the Expansion of Research Safe Harbors11-27
        • [A][1] : Definition of Research Report11-29
        • [A][2] : Rule 144A and Regulation S Offerings11-30
        • [A][3] : Issuer-Based Exclusions11-30
      • [B] : Rule 137—Broker-Dealers Not Participating in the Distribution11-31
      • [C] : Rule 138—Broker-Dealers Participating in the Distribution of a Different Security11-32
      • [D] : Rule 139—Broker-Dealers Participating in the Distribution of the Same Security11-33
        • [D][1] : Issuer-Specific Reports11-33
        • [D][2] : Industry-Specific Reports11-34
  • § 11:4 : Liability and the Time of Sale Concept11-35
  • § 11:5 : Other Securities Offering Reform Changes11-38
  • § 11:6 : Practical Effects of Securities Offering Reform11-38
    • § 11:6.1 : Underwriting Agreements11-39
    • § 11:6.2 : Legal Opinions11-39
    • § 11:6.3 : SEC Review Process11-40
Chapter 12: Private Placement Reform
  • § 12:1 : Introduction12-1
  • § 12:2 : Advisory Committee on Smaller Public Companies12-6
    • § 12:2.1 : Establishment of Advisory Committee12-6
      • [A] : Agenda and Initial Comments12-7
    • § 12:2.2 : Advisory Committee Recommendations12-8
      • [A] : Recommendation IV.P.312-10
      • [B] : Recommendation IV.P.512-11
      • [C] : Recommendation IV.P.612-12
      • [D] : Recommendation IV.S.712-12
      • [E] : Recommendation IV.S.912-13
      • [F] : Recommendation IV.S.1112-13
  • § 12:3 : ABA Recommendations12-14
  • § 12:4 : SEC Adoption of Amendments to Rules Affecting Smaller Reporting Companies and the Private Placement of Securities12-18
  • § 12:5 : The Future of Private Placement Reform12-20
    • § 12:5.1 : Proposed Revisions to Regulation D— August 200712-20
    • § 12:5.2 : Comments to Proposed Revisions to Regulation D12-22
    • § 12:5.3 : Proposed AB II Release12-24
    • § 12:5.4 : Post-Dodd-Frank Act Proposed Changes12-25
  • § 12:6 : The JOBS Act and Private Placement Reform12-27
    • § 12:6.1 : Overview12-27
    • § 12:6.2 : Relaxation of the Ban on General Solicitation12-29
    • § 12:6.3 : Matchmaking Sites12-30
    • § 12:6.4 : Crowdfunding12-30
    • § 12:6.5 : Distinctions Between Private and Public Offerings12-31
Chapter 13: Staying Private
  • § 13:1 : Introduction13-2
  • § 13:2 : Exchange Act Reporting13-2
    • § 13:2.1 : History of Section 12(g) of the Exchange Act13-3
      • [A] : Prior to the JOBS Act13-3
      • [B] : JOBS Act Changes to Sections 12(g) and 15(d)13-4
    • § 13:2.2 : Total Assets13-5
    • § 13:2.3 : Equity Security13-6
      • [A] : Excluding Optionholders13-6
      • [B] : Other Equity Compensation13-9
    • § 13:2.4 : Holders of Record13-12
    • § 13:2.5 : Suspension of Filing Obligation—Rule 12h-313-14
    • § 13:2.6 : State Law Matters13-16
  • § 13:3 : Ownership Limitations13-16
    • § 13:3.1 : Transfer Restrictions13-17
    • § 13:3.2 : Rights of First Refusal and Co-Sale13-18
    • § 13:3.3 : Fees and Legal Opinions13-18
    • § 13:3.4 : Insider Trading Policies13-19
    • § 13:3.5 : Right to Redeem13-20
    • § 13:3.6 : Legality of the Restrictions13-20
  • § 13:4 : Use of Special Purpose Investment Vehicles13-22
  • § 13:5 : Liquidity Opportunities13-24
    • § 13:5.1 : Employee Sales13-25
    • § 13:5.2 : Structured Secondary Sales13-26
    • § 13:5.3 : Private Placement Exemption and Tender Offer Rules13-26
  • § 13:6 : Private Secondary Trading Markets13-27
    • § 13:6.1 : History and Market Size13-27
    • § 13:6.2 : SecondMarket13-29
    • § 13:6.3 : SharesPost13-30
    • § 13:6.4 : The PORTAL Alliance13-31
    • § 13:6.5 : Legal Considerations13-34
      • [A] : SEC Supervision13-34
      • [B] : Alternative Trading System13-34
      • [C] : Passive Bulletin Board13-36
      • [D] : FINRA13-38
      • [E] : Compliance13-39
      • [F] : Insider Trading13-40
    • § 13:6.6 : Other Issues13-41
      • [A] : Liquidity13-41
      • [B] : Valuation and Section 409A13-41
      • [C] : Valuation in an IPO13-43
      • [D] : Legal Risks13-43
Chapter 14: Venture Private Placements
  • § 14:1 : Introduction14-2
  • § 14:2 : Structuring a Venture Private Placement14-3
    • § 14:2.1 : Section 4(a)(2)/Regulation D14-3
    • § 14:2.2 : Other Considerations14-6
  • § 14:3 : Offering Process14-7
    • § 14:3.1 : Initial Preparations14-7
    • § 14:3.2 : Determining the Type of Security14-8
    • § 14:3.3 : Identifying and Contacting Investors14-9
    • § 14:3.4 : Offering Document14-10
    • § 14:3.5 : Preparing the Term Sheet14-11
    • § 14:3.6 : Due Diligence14-12
    • § 14:3.7 : Preparing Transaction Documentation14-14
    • § 14:3.8 : Corporate Approvals14-14
    • § 14:3.9 : Offering and Sale of the Securities14-15
    • § 14:3.10 : Closing14-15
    • § 14:3.11 : Filing Form D14-16
  • § 14:4 : Documentation for a Venture Private Placement14-17
    • § 14:4.1 : Term Sheet14-18
      • [A] : Non-Binding Nature of the Term Sheet14-19
      • [B] : Confidentiality14-19
      • [C] : Exclusive Dealing14-19
    • § 14:4.2 : Stock Purchase Agreement14-20
    • § 14:4.3 : Amended and Restated Certificate of Incorporation14-22
      • [A] : Dividends14-23
      • [B] : Liquidation Preference14-23
      • [C] : Voting Rights14-24
        • [C][1] : Electing Directors14-24
        • [C][2] : Protective Provisions14-25
      • [D] : Conversion14-26
        • [D][1] : Mandatory Conversion14-26
          • [D][1][a] : Qualified Initial Public Offering14-26
          • [D][1][b] : Pay-to-Play Provision14-26
        • [D][2] : Optional Conversion14-27
      • [E] : Anti-Dilution Protection14-27
      • [F] : Redemption14-28
    • § 14:4.4 : Investor Rights Agreement14-29
      • [A] : Registration Rights14-29
        • [A][1] : Demand Registration Rights14-30
        • [A][2] : Piggyback Registration Rights14-30
        • [A][3] : Form S-3 Rights14-30
        • [A][4] : “Haircuts,” Stand-Asides, and Lockups14-31
      • [B] : Information and Observer Rights14-31
        • [B][1] : Delivery of Financial Statements14-31
        • [B][2] : Observer Rights14-31
      • [C] : Right of First Offer14-32
      • [D] : Affirmative Covenants14-32
      • [E] : Negative Covenants14-33
    • § 14:4.5 : Voting Agreement14-34
    • § 14:4.6 : Right of First Refusal and Co-Sale Agreement14-34
    • § 14:4.7 : Case Law Related to Venture Capital Transaction Documents14-35
Chapter 15: Traditional PIPE Transactions
  • § 15:1 : What Is a PIPE Transaction?15-4
    • § 15:1.1 : Growth of PIPE Transactions15-5
    • § 15:1.2 : Traditional PIPE Transactions Compared to Structured PIPE Transactions15-5
      • [A] : Securities Offered15-5
      • [B] : Pricing15-5
      • [C] : Covenants15-6
      • [D] : Market for Traditional PIPE Transactions versus Structured PIPE Transactions15-6
    • § 15:1.3 : Why Use a PIPE Transaction?15-6
      • [A] : Advantages of a PIPE Transaction for the Issuer15-6
        • [A][1] : Lower Transaction Expenses15-6
        • [A][2] : Expand Accredited Investor Base15-7
        • [A][3] : Less Incentive to Hedge15-7
        • [A][4] : Disclosure Only After Definitive Agreements15-7
        • [A][5] : Streamlined Offering Materials and Documentation15-8
      • [B] : Advantages of a PIPE Transaction for Investors15-9
        • [B][1] : Shares Sold at a Discount15-9
        • [B][2] : Funding After Resale Registration Statement Is Available15-9
    • § 15:1.4 : Why Wouldn’t an Issuer Use a PIPE Transaction?15-10
      • [A] : Disadvantages of a PIPE Transaction for the Issuer15-10
        • [A][1] : Shares Sold at a Discount15-10
        • [A][2] : Restrictions on “Blackout” Periods15-10
        • [A][3] : Limitations on Marketing15-10
        • [A][4] : Limitations on Number of Shares Sold15-11
        • [A][5] : Delays in Effectiveness of Resale Registration Statement15-11
      • [B] : Disadvantages of a PIPE Transaction for Investors15-12
        • [B][1] : Pricing Risk15-12
        • [B][2] : Liquidity Risk15-12
    • § 15:1.5 : Why a PIPE Transaction and for Which Issuers?15-12
      • [A] : Factors to Consider When Evaluating a PIPE Transaction15-12
      • [B] : Smaller Public Companies15-13
      • [C] : Technology, Life Sciences and Biotechnology Issuers15-13
      • [D] : Distressed Issuers15-14
      • [E] : More Larger and Well-Established Issuers15-14
      • [F] : Shelf Eligibility for PIPE Issuers15-15
        • [F][1] : Form S-3 and Form S-115-15
        • [F][2] : Using Form S-315-16
        • [F][3] : Rule 415 and Secondary Offerings15-16
    • § 15:1.6 : What Types of Investors Invest in PIPE Transactions?15-16
      • [A] : Fundamental and Technical Investors15-17
        • [A][1] : Fundamental Investors15-17
        • [A][2] : Technical Investors15-18
  • § 15:2 : Federal Legal and Regulatory Framework15-18
    • § 15:2.1 : Discussion of Legal Structure15-18
      • [A] : Information Requirements15-19
      • [B] : General Solicitation15-19
      • [C] : Limitations on Resale15-20
      • [D] : Integration15-20
        • [D][1] : Initial Sale to Purchasers15-20
        • [D][2] : Rule 152 and Resale Registration Statement Issues15-21
      • [E] : State Blue Sky Laws15-22
  • § 15:3 : Placement Agents15-23
    • § 15:3.1 : Engaging a Placement Agent15-23
    • § 15:3.2 : Engagement Letter Issues15-24
      • [A] : Fees15-24
      • [B] : Comfort Letter, Opinion, and Other Closing Deliveries15-24
      • [C] : Issuer Lock-Up15-25
      • [D] : Tails, Right of First Refusal, and Other Terms15-25
      • [E] : Indemnification15-25
    • § 15:3.3 : Placement Agent’s Role15-26
      • [A] : Contacting Investors15-26
        • [A][1] : No General Solicitation15-26
        • [A][2] : How Are Investors Solicited?15-26
        • [A][3] : When Is a Confidentiality Agreement Required?15-27
      • [B] : Preparation of Documents15-28
    • § 15:3.4 : Placement Agent Best Practices15-29
      • [A] : Watch Lists and Chinese Walls15-29
      • [B] : Marketing Efforts15-30
      • [C] : Execution Issues15-31
  • § 15:4 : Information Requirements15-31
    • § 15:4.1 : What Is Disclosed in a Private Placement Memorandum?15-31
      • [A] : Relying on the Issuer’s Exchange Act Filings15-31
        • [A][1] : Important Considerations15-32
        • [A][2] : Summary of the Offering15-32
        • [A][3] : Forward-Looking Statements15-33
        • [A][4] : Overview15-33
        • [A][5] : Risk Factors15-33
        • [A][6] : Use of Proceeds15-33
        • [A][7] : Capitalization15-33
    • § 15:4.2 : Confidential Information in the Private Placement Memorandum15-33
    • § 15:4.3 : Additional Disclosure Concerns15-34
      • [A] : Regulation FD15-34
      • [B] : Insider Trading15-34
  • § 15:5 : Due Diligence15-35
    • § 15:5.1 : Placement Agent Due Diligence15-35
      • [A] : Reasons to Conduct Due Diligence15-35
      • [B] : Level of Due Diligence15-35
    • § 15:5.2 : Investors15-36
  • § 15:6 : Documentation15-36
    • § 15:6.1 : What Is in the Purchase Agreement for Issuers?15-36
      • [A] : Representations and Warranties of the Issuer15-36
      • [B] : Covenants15-38
      • [C] : Indemnification15-39
    • § 15:6.2 : What Is in the Purchase Agreement for Investors?15-39
      • [A] : Transferability Restrictions and Investment Representations and Warranties15-39
      • [B] : Other Representations and Warranties15-41
      • [C] : Covenants15-41
    • § 15:6.3 : Securities Exchange Issues15-41
      • [A] : Sales Limitations15-41
        • [A][1] : New York Stock Exchange15-41
        • [A][2] : NYSE MKT15-42
        • [A][3] : Nasdaq15-42
      • [B] : Integration Issues15-43
    • § 15:6.4 : Resale Registration Statement on Form S-315-43
      • [A] : Filing Commitments15-43
        • [A][1] : Failure to File or Be Declared Effective Within Prescribed Periods15-44
      • [B] : Blackout Periods15-44
      • [C] : Content and Potential Concerns15-44
  • § 15:7 : Closing Conditions15-44
    • § 15:7.1 : Typical Deliverables and Other Closing Conditions15-44
      • [A] : Opinions15-45
        • [A][1] : Purpose of Legal Opinions in Traditional PIPE Transactions15-45
        • [A][2] : Process15-45
        • [A][3] : Corporate Legal Opinion15-46
          • [A][3][a] : Introduction15-46
          • [A][3][b] : Qualifications and Exceptions15-46
          • [A][3][c] : Jurisdiction15-47
          • [A][3][d] : Opinion Points15-47
          • [A][3][e] : Relationships15-49
          • [A][3][f] : Reliance15-49
          • [A][3][g] : Special Opinions15-49
        • [A][4] : Negative Assurance15-49
          • [A][4][a] : Diligence15-49
          • [A][4][b] : Negative Assurance15-50
      • [B] : Opinion of Counsel to the Placement Agent15-50
      • [C] : Comfort Letters15-50
        • [C][1] : Purpose15-50
        • [C][2] : Content15-51
      • [D] : Officer’s Certificate15-51
  • § 15:8 : Legends and Stop Orders15-51
    • § 15:8.1 : SEC Release on Use of Legends15-52
    • § 15:8.2 : Lifting Legends15-52
  • § 15:9 : Pricing and Settlement Issues15-53
    • § 15:9.1 : Pricing Issues15-53
      • [A] : Signed Documents15-53
    • § 15:9.2 : Settlement Issues15-54
Chapter 16: Structured PIPE Transactions
  • § 16:1 : What Is a Structured PIPE Transaction?16-3
    • § 16:1.1 : Typical Structured PIPE Transactions16-4
      • [A] : Common Stock with Warrant Coverage16-4
      • [B] : Convertible Preferred Stock16-6
      • [C] : Convertible Notes or Debentures16-7
  • § 16:2 : Why a Structured PIPE Transaction Versus a Traditional PIPE Transaction?16-8
    • § 16:2.1 : Differences Between a Structured PIPE and a Traditional PIPE Transaction16-8
      • [A] : Advantages to Issuer16-9
      • [B] : Advantages to Investor16-9
      • [C] : Disadvantages to Issuer16-10
      • [D] : Disadvantages to Investor16-10
    • § 16:2.2 : Issuer Profile16-10
    • § 16:2.3 : Investor Profile16-12
  • § 16:3 : Investor Perspective16-13
  • § 16:4 : Convertible Structures16-14
    • § 16:4.1 : Considerations Relating to Convertible Securities16-14
    • § 16:4.2 : Registration Issues16-15
  • § 16:5 : Process for Conducting a Structured PIPE Transaction16-16
    • § 16:5.1 : Engaging the Placement Agent16-16
    • § 16:5.2 : Role of the Placement Agent16-16
      • [A] : Launch of the Transaction16-16
      • [B] : Preliminary Matters16-17
      • [C] : Private Placement Memorandum and Other Offering Materials16-17
    • § 16:5.3 : Soliciting Investors16-18
    • § 16:5.4 : Investor Term Sheets16-18
      • [A] : Purpose16-18
      • [B] : Contents16-19
      • [C] : Binding Effect16-20
    • § 16:5.5 : Lead Investor Role16-20
    • § 16:5.6 : Investor Counsel16-21
  • § 16:6 : Information Requirements16-21
  • § 16:7 : Documentation16-22
    • § 16:7.1 : Documentation16-22
      • [A] : Securities Purchase Agreement16-22
      • [B] : Certificates of Designations/Convertible Notes/Convertible Debentures16-23
        • [B][1] : Floors and Ceilings16-23
        • [B][2] : Conversion Adjustments—Antidilution Provisions for Subsequent Sales of Equity16-23
      • [C] : Mandatory Conversion16-26
      • [D] : Redemptions/Prepayments16-26
    • § 16:7.2 : Ongoing Covenants/Financial Covenants16-27
      • [A] : Negative Covenants16-27
      • [B] : Affirmative Covenants16-29
    • § 16:7.3 : Registration Rights16-29
      • [A] : Time Periods16-30
      • [B] : Blackouts16-30
      • [C] : Penalty Provisions16-30
    • § 16:7.4 : Transfer Agent Issues16-31
      • [A] : Instructions16-31
      • [B] : Legends and Blanket Opinions16-31
      • [C] : Penalty Shares for Not Processing Transfers; Buy-Ins16-31
    • § 16:7.5 : Additional Documents16-32
      • [A] : Debentures/Notes16-32
      • [B] : Certificate of Designations (or Board Resolution)16-33
      • [C] : Warrant16-33
      • [D] : Security Agreements/Pledge Agreements16-34
    • § 16:7.6 : Closing Documents16-34
      • [A] : Additional Opinions16-34
      • [B] : Comfort Letter16-35
      • [C] : Officers’ Certificate/Secretary’s Certificate16-35
    • § 16:7.7 : InvestmentRepresentations/HedgingTransactions16-35
    • § 16:7.8 : Group Issues16-35
      • [A] : Effects of Being Deemed a Group16-36
      • [B] : Contractual Provisions to Disclaim Group Status16-37
      • [C] : Other Steps to Avoid Being Deemed a Group16-38
    • § 16:7.9 : Public Announcements of PIPE Transactions16-38
      • [A] : Press Release16-38
      • [B] : Current Report on Form 8-K16-39
    • § 16:7.10 : European PIPE Transactions16-39
      • [A] : England16-40
      • [B] : Germany16-40
      • [C] : The Netherlands16-42
      • [D] : France16-42
Chapter 17: Questions Arising in Connection with PIPE Transactions
  • § 17:1 : Questions Arising in Connection with PIPE Transactions17-2
    • § 17:1.1 : Completed PIPEs17-2
      • [A] : Timing of Registration of Privately Placed Securities17-2
        • [A][1] : Closing Conditions17-3
        • [A][2] : Determination of Purchase Price17-6
        • [A][3] : Filing of Registration Statement in Close Proximity with Closing17-6
        • [A][4] : Transaction Must Be “Closed”17-7
        • [A][5] : Securities Must Be Fully Paid17-8
          • [A][5][a] : Payment of Purchase Price17-8
          • [A][5][b] : Payment Finality17-9
        • [A][6] : Securities Must Be Outstanding17-10
  • § 17:2 : Formula Pricing17-11
    • § 17:2.1 : Death Spirals17-11
    • § 17:2.2 : Equity Lines of Credit17-12
  • § 17:3 : Multiple Tranche Deals17-14
    • § 17:3.1 : Integration of Offerings17-14
      • [A] : Regulation D17-15
      • [B] : Employee Benefit Plan Offerings17-15
      • [C] : Regulation A17-15
      • [D] : Rule 144A17-15
      • [E] : Regulation S17-15
  • § 17:4 : The Primary Offering versus the Secondary Offering Issue and the Ability to Issue Shares on a Continuous Basis Pursuant to Rule 41517-16
    • § 17:4.1 : Determining Whether an Offering Is a Primary or a Secondary Offering17-19
    • § 17:4.2 : Effect of a Resale Being Deemed a Primary Offering17-21
    • § 17:4.3 : Alternatives to Registration As a Primary Offering17-22
  • § 17:5 : Convertible Securities and Registration of Underlying Securities17-22
  • § 17:6 : EITF 00-19 and Warrants and Registration Rights17-23
  • § 17:7 : Accounting Issues Relating to Convertible Securities17-25
  • § 17:8 : Add-ons to Announced Deals17-26
  • § 17:9 : Selling Security Holder Disclosures17-26
    • § 17:9.1 : Issues Arising in Connection with Selling Stockholders That Are Broker-Dealers17-28
    • § 17:9.2 : Hedging Restricted Securities17-29
  • § 17:10 : Shareholder Approval Requirements17-30
Chapter 18: Conducting Institutional "4(a)(2)" Private Debt Placements
  • § 18:1 : Introduction18-2
    • § 18:1.1 : Institutional Debt Placement versus a Rule 144A Offering18-3
    • § 18:1.2 : Institutional Private Placements, Public Offerings and Bank Loans18-4
    • § 18:1.3 : Advantages of Institutional Private Placements18-5
    • § 18:1.4 : The Institutional Private Placement Market18-6
    • § 18:1.5 : Market History18-6
  • § 18:2 : Procedures for Conducting Institutional Private Placements18-7
    • § 18:2.1 : Engage Placement Agent(s)18-8
    • § 18:2.2 : Engage Pre-Designated Investors’ Counsel18-8
      • [A] : Conflicts of Interest18-8
      • [B] : Responsibilities18-9
    • § 18:2.3 : Other Advisors18-10
      • [A] : Issuer’s Counsel18-10
      • [B] : Investor’s In-House Counsel18-10
      • [C] : Local Counsel18-10
    • § 18:2.4 : Due Diligence18-11
    • § 18:2.5 : Consents18-11
    • § 18:2.6 : Documentation and Marketing18-12
      • [A] : Offering Memorandum18-12
      • [B] : Term Sheet18-12
      • [C] : Note Purchase Agreement18-12
        • [C][1] : Notes18-13
        • [C][2] : Guarantee Agreement18-14
        • [C][3] : Marketing18-14
        • [C][4] : Pre-Circle18-14
        • [C][5] : Post-Circle18-15
    • § 18:2.7 : Notes Sold to Investors and the Private Placement Closes18-16
      • [A] : Private Placement Number18-16
      • [B] : Opinions18-16
        • [B][1] : Form of Opinion of Issuer’s Counsel18-16
        • [B][2] : Form of Opinion of Pre-Designated Counsel18-17
      • [C] : Other Closing Deliverables18-17
  • § 18:3 : Standard Form Private Placement Agreement18-18
    • § 18:3.1 : Closing Conditions18-19
    • § 18:3.2 : Issuer Representations and Warranties18-21
    • § 18:3.3 : Investor Representations18-24
    • § 18:3.4 : Information Delivered by the Issuer to Institutional Investors18-24
    • § 18:3.5 : Required and Optional Prepayment of the Notes18-25
      • [A] : Required Prepayments and Maturity18-25
      • [B] : Optional Prepayments with Make-Whole Amount18-26
      • [C] : Make-Whole Amount18-26
    • § 18:3.6 : Affirmative Covenants18-26
    • § 18:3.7 : Negative Covenants18-27
    • § 18:3.8 : Events of Default18-28
  • § 18:4 : Investment Representations18-29
  • § 18:5 : Other Legal Considerations18-30
    • § 18:5.1 : Withholding Tax Issues18-30
    • § 18:5.2 : NAIC Requirements18-31
      • [A] : Ratings and Reserve Requirements18-31
      • [B] : Legal Investment Requirements18-32
    • § 18:5.3 : Trust Indenture Act18-32
  • § 18:6 : Secondary Private Placements18-32
    • § 18:6.1 : Diligence of Documents18-33
    • § 18:6.2 : Secondary Transaction Letters18-34
      • [A] : Purchaser Letter18-34
      • [B] : Seller Letter18-35
      • [C] : Confidentiality Letter18-35
      • [D] : Transfer Agreement—Distressed Securities18-36
Chapter 19: Conducting Rule 144A and Regulation S Offerings
  • § 19:1 : Structuring a Rule 144A Offering19-4
  • § 19:2 : Choosing Between a Rule 144A Offering and a Registered Offering19-7
    • § 19:2.1 : Timing and Efficiency19-7
    • § 19:2.2 : Disclosure19-8
    • § 19:2.3 : Types of Potential Investors19-9
    • § 19:2.4 : Liquidity—Restrictions on Resale and Secondary Trading Market19-10
    • § 19:2.5 : Offering Size19-10
    • § 19:2.6 : Access to U.S. Market by Foreign Issuers Without Becoming a U.S. Reporting Company19-11
    • § 19:2.7 : Continuing Disclosure Obligations and Corporate Governance19-11
    • § 19:2.8 : Liability19-13
    • § 19:2.9 : Rule 144A Offerings Are Exempt from Regulation M19-13
  • § 19:3 : Summary of Rule 144A Conditions19-14
  • § 19:4 : Structuring a Regulation S Offering19-15
  • § 19:5 : Advantages and Disadvantages of a Regulation S Offering19-17
    • § 19:5.1 : Advantages19-17
      • [A] : Bright Line Safe Harbor19-17
      • [B] : No SEC Review or Ongoing U.S. Disclosure Obligations19-17
      • [C] : Alternative Access to Non-U.S. Public Markets19-18
      • [D] : Access to Foreign Investors19-18
      • [E] : Benefits for Foreign Investors19-18
      • [F] : Benefits for Foreign Issuers19-18
    • § 19:5.2 : Disadvantages19-19
  • § 19:6 : Summary of Regulation S Conditions19-20
    • § 19:6.1 : Offshore Transactions19-20
    • § 19:6.2 : Directed Selling Efforts19-21
    • § 19:6.3 : Transactional and Offering Restrictions19-22
      • [A] : Transactional Restrictions19-22
      • [B] : Offering Restrictions19-23
    • § 19:6.4 : Defining a U.S. Person19-24
    • § 19:6.5 : Regulation S Categories and Special Situations19-25
      • [A] : Category 1 Transactions19-25
      • [B] : Category 2 Transactions19-25
      • [C] : Category 3 Transactions19-26
      • [D] : Convertible Securities and Warrants of U.S. Issuers—Different Emphasis from Rule 144A19-26
  • § 19:7 : U.S. Federal Income Tax Issues in Structuring Offerings of Debt Securities19-27
    • § 19:7.1 : OID19-27
      • [A] : In General19-27
      • [B] : AHYDO Rules19-28
    • § 19:7.2 : TEFRA Requirements—Intersection of Federal Income Tax Law with Regulation S19-29
      • [A] : In General19-29
      • [B] : Repeal of TEFRA Exemption19-35
  • § 19:8 : Regulation S—Alone and in Combination with Other Offerings19-37
    • § 19:8.1 : Standalone Regulation S Offerings19-37
    • § 19:8.2 : Combined Rule 144A and Regulation S Offerings19-38
    • § 19:8.3 : Listing on a Non-U.S. Exchange19-39
  • § 19:9 : The Offering Process for a Rule 144A or Combined Rule 144A/Regulation S Transaction19-40
    • § 19:9.1 : Overview19-40
    • § 19:9.2 : Due Diligence19-43
    • § 19:9.3 : Road Shows19-44
      • [A] : Use of the Internet19-45
    • § 19:9.4 : Press Releases19-47
    • § 19:9.5 : Resale Limitations and Transfer Restrictions19-49
      • [A] : Rule 144A Offering Only19-51
      • [B] : Institutional Accredited Investors in a “Side-by-Side” Placement19-51
        • [B][1] : Initial Resale Under Rule 144A19-51
        • [B][2] : Bifurcated Trading19-51
        • [B][3] : Fungible Trading19-52
      • [C] : Regulation S Restrictions19-52
    • § 19:9.6 : Legends19-54
      • [A] : Rule 144A19-54
      • [B] : Regulation S19-54
    • § 19:9.7 : Clearance and Settlement19-54
      • [A] : Clearing Systems19-55
      • [B] : Global Securities in Combined Offerings19-56
  • § 19:10 : Rule 144A and Regulation S Transaction Documents19-59
    • § 19:10.1 : Overview19-59
      • [A] : In General19-59
      • [B] : “Disclosure Package”19-60
    • § 19:10.2 : Offering Memorandum19-62
      • [A] : Form and Style19-62
      • [B] : Regulation FD and Other Disclosure Matters19-64
      • [C] : Content19-65
    • § 19:10.3 : Purchase Agreement19-71
    • § 19:10.4 : Registration Rights Agreement19-74
      • [A] : A/B Exchange Offer19-74
      • [B] : Resale Shelf Registration Statements19-76
      • [C] : Changes to Registration Rights Arrangements19-78
    • § 19:10.5 : Comfort Letters19-79
    • § 19:10.6 : Legal Opinions and Other Legal Letters19-80
  • § 19:11 : Debt Offerings19-81
    • § 19:11.1 : In General19-81
    • § 19:11.2 : High Yield Debt Offerings19-81
    • § 19:11.3 : Continuous Offering Programs for Debt Securities19-83
    • § 19:11.4 : Convertible Debt Offerings19-84
    • § 19:11.5 : Indenture and Description of Notes19-85
    • § 19:11.6 : Trust Indenture Act19-86
  • § 19:12 : Equity Securities Offerings19-86
    • § 19:12.1 : Non-Fungibility19-86
    • § 19:12.2 : Private “IPOs”19-87
    • § 19:12.3 : Depositary Receipts19-89
      • [A] : Secondary Market for ADRs19-89
        • [A][1] : Subsequent Filing of Form F-619-90
        • [A][2] : Rule 12g3-2(b)19-92
  • § 19:13 : Private Investment Companies19-94
    • § 19:13.1 : “Investment Company” Under the Investment Company Act of 194019-94
    • § 19:13.2 : Section 3(c)(1) Exemption—100 Owners19-94
    • § 19:13.3 : Section 3(c)(7) Exemption—Qualified Purchasers19-95
    • § 19:13.4 : Difficult Choice19-97
    • § 19:13.5 : Monitoring the Exemption19-97
      • [A] : Reasonable Belief19-97
      • [B] : SIFMA Procedures19-99
      • [C] : Lawyers’ Approach19-99
    • § 19:13.6 : Recommended Section 3(c)(7) Offering Procedures19-101
      • [A] : U.S. Issuers19-102
        • [A][1] : U.S. Non-fund Issuers of Debt Securities19-102
        • [A][2] : U.S. Non-fund Issuers of Equity Securities19-105
        • [A][3] : U.S. Classic Investment Companies (Fund Issuers) Issuing Debt Securities19-106
        • [A][4] : U.S. Classic Investment Companies (Fund Issuers) Issuing Equity Securities19-106
      • [B] : Non-U.S. Issuers19-107
        • [B][1] : Non-U.S. Non-fund Issuers of Debt Securities19-107
        • [B][2] : Non-U.S. Non-fund Issuers of Equity Securities19-107
        • [B][3] : Non-U.S. Classic Investment Companies (Fund Issuers) Issuing Debt or Equity Securities19-110
Chapter 20: Conducting Shelf Takedowns
  • § 20:1 : Introduction20-2
  • § 20:2 : Preparing for a Shelf Registration Statement Filing20-3
    • § 20:2.1 : Contents of a Shelf Registration Statement20-4
    • § 20:2.2 : The “Base” Prospectus20-5
      • [A] : Information That May Be Omitted from the Base Prospectus20-6
        • [A][1] : Issuers Eligible to File Form S-3 for a Primary Offering20-6
        • [A][2] : WKSIs20-7
        • [A][3] : Secondary Offerings20-7
      • [B] : Supplying Omitted Information20-9
    • § 20:2.3 : The Undertakings20-10
    • § 20:2.4 : Exhibits20-12
      • [A] : Legality Opinion20-13
      • [B] : Consents of Accountants and Others20-14
    • § 20:2.5 : FINRA Filings and Exchange Listings20-15
    • § 20:2.6 : Declaration of Effectiveness20-16
  • § 20:3 : The Takedown20-17
    • § 20:3.1 : Prospectus Supplement20-17
    • § 20:3.2 : Free Writing Prospectus—Relation to “Time of Sale”20-19
    • § 20:3.3 : Due Diligence20-22
    • § 20:3.4 : Underwriting Agreements20-23
      • [A] : Firm Commitment Underwriting Agreement20-25
      • [B] : Agency or Best Efforts Agreement20-26
    • § 20:3.5 : Legal Opinions and Other Legal Letters20-27
      • [A] : Legal Opinions20-27
      • [B] : Rule 10b-5 or Negative Assurance Letter20-28
    • § 20:3.6 : Comfort Letter20-29
  • § 20:4 : Alternative Methods of Shelf Takedowns20-30
    • § 20:4.1 : Underwritten Takedowns20-30
      • [A] : Bought Deals and Overnighters20-30
      • [B] : Wall-Crossed or Confidentially Marketed Public Offerings20-32
      • [C] : Block Trades20-34
    • § 20:4.2 : Agency Takedowns20-36
      • [A] : Registered Direct Offerings20-37
      • [B] : At-the-Market Offerings or Equity Distribution Programs20-37
        • [B][1] : Compliance-Related Issues20-40
          • [B][1][a] : Restricted Lists20-40
          • [B][1][b] : Research Coverage20-42
        • [B][2] : Conflicts Issues20-44
        • [B][3] : Application of Regulation M20-45
  • § 20:5 : Smaller Public Company Concerns20-45
Chapter 21: Public Hybrid Transactions
  • § 21:1 : What Is a Public Hybrid Transaction?21-3
  • § 21:2 : Registered Direct Offerings21-4
  • § 21:3 : Why a Registered Direct Offering Instead of a PIPE Transaction or a Traditional Follow-On Offering?21-5
    • § 21:3.1 : Advantages of a Registered Direct Offering21-5
      • [A] : Efficient Marketing21-5
      • [B] : Prompt Pricing and Closing21-6
      • [C] : Better Pricing21-6
      • [D] : Less Hedging Activity21-7
    • § 21:3.2 : Disadvantages of a Registered Direct Offering21-7
      • [A] : Not Widely Distributed21-7
      • [B] : Not a Public Offering Under Securities Exchange Rules21-8
  • § 21:4 : Issuer Profile21-8
  • § 21:5 : Investor Profile21-8
  • § 21:6 : Treatment of Registered Direct Offerings by Securities Exchanges21-8
    • § 21:6.1 : Shareholder Approval Rules21-8
    • § 21:6.2 : Is a Registered Direct Offering a Public Offering?21-9
      • [A] : Nasdaq Marketplace Rules21-10
      • [B] : NYSE MKT Company Guide21-11
      • [C] : NYSE Listed Company Manual21-11
  • § 21:7 : Registering the Registered Direct Offering21-12
    • § 21:7.1 : Selling Security Holder Securities21-12
    • § 21:7.2 : Bullet Registration Statements21-13
  • § 21:8 : FINRA Filings21-14
  • § 21:9 : Possible Structures of a Registered Direct Offering21-15
    • § 21:9.1 : All or None Offerings21-15
    • § 21:9.2 : Minimum/Maximum Offerings21-16
    • § 21:9.3 : Any or All Offerings21-17
    • § 21:9.4 : Effect of Rule 10b-921-17
  • § 21:10 : Escrow Account21-18
  • § 21:11 : Placement Agent21-19
    • § 21:11.1 : Engaging the Placement Agent21-20
    • § 21:11.2 : Engagement Letter Issues21-20
      • [A] : Fees21-20
      • [B] : Comfort Letter, Opinion and Other Closing Deliverables21-20
      • [C] : Issuer Lock-Up21-20
      • [D] : Indemnification21-21
    • § 21:11.3 : Placement Agent’s Role21-21
      • [A] : Contacting Investors21-21
        • [A][1] : How Are Investors Solicited?21-22
        • [A][2] : When Is a Confidentiality Agreement Required?21-23
      • [B] : Preparation of Documents21-23
    • § 21:11.4 : Placement Agent Best Practices21-23
      • [A] : Watch Lists and Chinese Walls21-23
      • [B] : Execution Issues21-24
  • § 21:12 : Due Diligence21-24
  • § 21:13 : The Placement Agency Agreement21-24
    • § 21:13.1 : What Is in the Placement Agency Agreement?21-24
      • [A] : Representations and Warranties of the Issuer21-25
      • [B] : Covenants of the Issuer21-26
      • [C] : Closing Conditions21-27
      • [D] : Indemnification21-27
    • § 21:13.2 : Typical Deliverables and Other Closing Conditions21-27
      • [A] : Opinions of Counsel to the Issuer; Negative Assurance Letter21-28
      • [B] : Opinion of Counsel to the Placement Agent21-28
      • [C] : Comfort Letter21-28
      • [D] : Officer’s and Secretary’s Certificates21-28
    • § 21:13.3 : Investment Agreements21-28
  • § 21:14 : Pricing and Settlement Issues21-29
    • § 21:14.1 : Pricing and Closing21-29
  • § 21:15 : Equity Lines of Credit21-30
    • § 21:15.1 : Advantages21-32
      • [A] : Quick Source of Capital21-32
      • [B] : Ability to Control Financing21-33
    • § 21:15.2 : Disadvantages21-33
      • [A] : Dilutive Form of Financing21-33
      • [B] : Negative View of Equity Lines of Credit21-33
    • § 21:15.3 : Who Invests in Equity Lines of Credit?21-33
  • § 21:16 : Treatment of Equity Lines of Credit21-33
    • § 21:16.1 : Treatment by the SEC21-33
      • [A] : Status of Investor21-33
      • [B] : Form of Registration Statement21-34
      • [C] : Broker-Dealer21-34
    • § 21:16.2 : Treatment by Securities Exchanges21-35
    • § 21:16.3 : Treatment by FINRA21-36
  • § 21:17 : Common Stock Purchase Agreement21-36
    • § 21:17.1 : What Is in the Purchase Agreement?21-36
      • [A] : Sale21-36
      • [B] : Representations and Warranties21-36
      • [C] : Covenants of the Issuer21-36
      • [D] : Closing Conditions21-37
      • [E] : Conditions to Obligations to Accept a Draw Down21-38
      • [F] : Indemnification21-38
    • § 21:17.2 : Typical Deliverables and Other Closing Conditions21-39
      • [A] : Warrant21-39
      • [B] : Additional Listing Application21-39
  • § 21:18 : Registration Rights Agreement21-39
  • § 21:19 : Pricing and Settlement Issues21-40
  • § 21:20 : Draw Down Procedures21-40
    • § 21:20.1 : Deliverables by Issuer21-40
    • § 21:20.2 : Public Filings21-40
Chapter 22: Continuous Private Placements and Other Unregistered Programs
  • § 22:1 : Overview22-3
  • § 22:2 : Medium-Term Note Programs22-5
    • § 22:2.1 : What Is a Medium-Term Note Program?22-5
      • [A] : Growth of the MTN Market22-5
    • § 22:2.2 : What Are the Benefits of an MTN Program?22-5
      • [A] : Funding Gap22-5
      • [B] : Low Cost22-6
      • [C] : Flexibility22-6
      • [D] : Legal Framework22-7
      • [E] : Investor-Driven Market22-7
    • § 22:2.3 : What Types of Issuers Use MTN Programs?22-8
  • § 22:3 : MTN Program Structures22-8
    • § 22:3.1 : MTN Program Structures in the United States22-8
      • [A] : Rule 144A Programs22-8
        • [A][1] : Information Requirements22-9
        • [A][2] : Sales Only to QIBs22-9
        • [A][3] : Benefits of a Rule 144A Program22-9
        • [A][4] : In Tandem with a Regulation S Program22-10
      • [B] : Bank Note Programs22-10
      • [C] : Registered MTN Programs22-10
    • § 22:3.2 : MTN Programs in Foreign Jurisdictions22-11
      • [A] : Legal Framework Outside the United States22-11
        • [A][1] : Incorporation by Reference22-12
        • [A][2] : PD-Compliant Prospectus22-12
      • [B] : Regulation S Programs22-13
        • [B][1] : Resale Limitations22-13
        • [B][2] : Bearer Notes22-14
          • [B][2][a] : Closing with Bearer Securities in a Regulation S Offering22-14
    • § 22:3.3 : Posting and Settlement22-15
      • [A] : Posting22-15
      • [B] : Settlement22-15
  • § 22:4 : Arranger and Dealers22-16
    • § 22:4.1 : Role of the Arranger22-16
    • § 22:4.2 : Role of Dealers22-16
      • [A] : Program Dealers22-17
        • [A][1] : Due Diligence Concerns22-17
      • [B] : Adding Dealers22-17
        • [B][1] : New Program Dealers22-17
        • [B][2] : Dealer for a Day22-18
  • § 22:5 : Documentation22-18
    • § 22:5.1 : Disclosure22-18
      • [A] : Offering Memorandum22-18
        • [A][1] : Legends and Other Disclosure22-19
        • [A][2] : Issuer Information22-19
        • [A][3] : Risk Factors22-19
        • [A][4] : Description of the Securities Offered22-19
          • [A][4][a] : Terms of the Debt Securities22-19
          • [A][4][b] : Types of Interest Rates22-20
        • [A][5] : Additional Disclosure22-20
      • [B] : Pricing Supplement/Final Terms22-21
        • [B][1] : Specific Terms of Notes22-21
        • [B][2] : New Issuer Information22-21
        • [B][3] : ICMA Forms22-21
    • § 22:5.2 : Program Agreement22-22
      • [A] : Issuer Representations and Warranties22-22
      • [B] : Issuer Covenants22-24
      • [C] : Indemnification22-24
      • [D] : Administrative Procedures Memorandum22-24
    • § 22:5.3 : Fiscal and Paying Agency Agreements22-25
      • [A] : What Is a Fiscal and Paying Agency Agreement?22-25
      • [B] : How Does a Fiscal and Paying Agency Agreement Differ from an Indenture?22-25
      • [C] : Calculation Agent22-25
      • [D] : Exchange Rate Agent22-26
    • § 22:5.4 : Closing Deliverables22-26
      • [A] : Program Signing22-26
        • [A][1] : Legal Opinion22-26
        • [A][2] : Comfort Letter22-27
        • [A][3] : Forms of Note22-28
      • [B] : At Issuance22-29
  • § 22:6 : Regulation M22-29
    • § 22:6.1 : Rule 144A and Section 4(a)(2)22-30
    • § 22:6.2 : Investment Grade Securities22-30
    • § 22:6.3 : Regulation S22-31
  • § 22:7 : Integration Issues22-31
    • § 22:7.1 : Continuous Private Placements and Regulation D Offerings22-31
    • § 22:7.2 : Continuous Private Placements and the Section 3(3) Commercial Paper Program22-32
  • § 22:8 : Bank Note Programs22-32
    • § 22:8.1 : Exempt Securities22-33
    • § 22:8.2 : Bank Regulatory Concerns22-33
      • [A] : Part 16—Securities Offering Disclosure Rules22-33
  • § 22:9 : Commercial Paper22-34
    • § 22:9.1 : Exemptions22-35
      • [A] : Section 3(a)(3)22-35
      • [B] : Section 4(a)(2)22-35
      • [C] : Regulation S22-36
      • [D] : Section 3(a)(2)22-36
    • § 22:9.2 : Short-Term Funding Requirement22-36
      • [A] : Current Transactions22-37
    • § 22:9.3 : Types of Commercial Paper22-38
      • [A] : “Plain Vanilla”22-38
      • [B] : Asset-Backed22-38
    • § 22:9.4 : Documentation22-39
      • [A] : Information Statement22-39
      • [B] : Dealer Agreement22-39
      • [C] : Settlement22-40
    • § 22:9.5 : Distribution Issues22-40
  • § 22:10 : Comparative Tables22-41
Chapter 23: Communications in Connection with Exempt and Hybrid Offerings
  • § 23:1 : Overview23-2
  • § 23:2 : How Offerees Are Contacted23-3
    • § 23:2.1 : General Solicitation23-4
    • § 23:2.2 : Rule 135c23-6
      • [A] : Eligible Issuers23-7
      • [B] : No Conditioning of U.S. Market23-7
      • [C] : Required Information23-7
    • § 23:2.3 : Rule 135e, Offshore Interviews and General Solicitation23-8
    • § 23:2.4 : Concurrent Public and Private Offerings and General Solicitation23-9
    • § 23:2.5 : Research Reports and Communications with Research Analysts23-10
    • § 23:2.6 : Rule 13723-12
    • § 23:2.7 : Rule 13823-12
    • § 23:2.8 : Rule 13923-13
    • § 23:2.9 : Rule 168 and Rule 169 Safe Harbors23-14
    • § 23:2.10 : The Internet and General Solicitation23-15
    • § 23:2.11 : Rule 43323-16
  • § 23:3 : Information Requirements23-16
    • § 23:3.1 : Regulation FD23-17
      • [A] : Material Information23-18
      • [B] : Non-Public Information23-19
      • [C] : Intentional Versus Non-Intentional Disclosure23-19
      • [D] : Prohibited Persons and the Exclusion Rule23-20
    • § 23:3.2 : Confidentiality Agreements23-21
    • § 23:3.3 : Non-Deal Road Shows and Industry Conferences23-23
    • § 23:3.4 : Regulation FD, Public Disclosure and the Internet23-23
  • § 23:4 : Liability Issues23-25
    • § 23:4.1 : Misuse of Non-Public Information23-25
      • [A] : Rule 10b5-123-26
      • [B] : Rule 10b5-223-27
    • § 23:4.2 : Insider Trading Penalties23-27
    • § 23:4.3 : Court Decisions23-30
      • [A] : SEC v. Cuban23-30
      • [B] : Zacharias v. SEC23-32
      • [C] : Galleon Management, LP, Raj Rajaratnam, Rajat Gupta, and Zvi Goffer23-33
      • [D] : SEC v. Dorozhko23-35
      • [E] : Private Litigation23-36
Chapter 24: Conducting Exempt Offerings Using the Internet
  • § 24:1 : Introduction24-2
  • § 24:2 : SEC Interpretive Guidance on Electronic Communications24-4
  • § 24:3 : Using the Internet to Conduct Different Types of Exempt Offerings24-6
    • § 24:3.1 : General Solicitation Issues24-6
      • [A] : Online Private Offerings Under Section 4(a)(2)/Regulation D24-6
        • [A][1] : General Solicitation Under the JOBS Act24-7
        • [A][2] : Procedures for Qualifying Investors24-8
          • [A][2][a] : Broker-Dealer Websites24-8
          • [A][2][b] : Non-Broker-Dealer Websites24-10
          • [A][2][c] : Issuer Websites24-12
      • [B] : Regulation S Offerings24-12
      • [C] : Rule 144A Offerings24-14
    • § 24:3.2 : Specific Concerns from the Issuer ’s Perspective24-15
      • [A] : Issuers’ Web Content Generally24-15
      • [B] : Information Posted on Third-Party Websites24-16
        • [B][1] : Cul-de-Sac Theory24-18
        • [B][2] : Envelope Theory24-19
        • [B][3] : Disclaimers24-20
      • [C] : Regulation FD and Issuer Websites24-21
    • § 24:3.3 : Specific Concerns from the Broker-Dealer ’s Perspective24-23
      • [A] : Using the Internet for Electronic Delivery of Offering Materials24-23
      • [B] : Information Posted on Third-Party Websites24-25
      • [C] : Research Reports on the Internet24-25
      • [D] : FINRA and the Internet24-26
  • § 24:4 : Pitfalls24-26
    • § 24:4.1 : AgriStar Global Networks, Ltd.24-27
    • § 24:4.2 : In the Matter of CGI Capital24-28
    • § 24:4.3 : In the Matter of Tier One, Inc.24-29
    • § 24:4.4 : SEC v. Elzein24-29
Chapter 25: Issues Arising in Connection with Private Placements and Public Offerings Conducted in Close Proximity
  • § 25:1 : Introduction25-2
  • § 25:2 : History and Development of Integration Concepts25-4
    • § 25:2.1 : Original Statement of Integration Concept25-4
    • § 25:2.2 : Rule 15225-4
      • [A] : Rule 152 and Resale Registration Statement Issues25-6
    • § 25:2.3 : The Five-Factor Test25-7
      • [A] : First Factor: Offerings Are Part of a Single Plan of Financing25-9
      • [B] : Second Factor: Offerings Involve Issuance of the Same Class of Security25-10
      • [C] : Third Factor: Offerings Are Made at or About the Same Time25-12
      • [D] : Fourth Factor: Same Type of Consideration Is to Be Received25-12
      • [E] : Fifth Factor: Offerings Are Made for the Same General Purpose25-12
    • § 25:2.4 : Integration Safe Harbors25-12
      • [A] : Regulation D Integration Safe Harbor25-13
      • [B] : Additional Sale Integration Safe Harbors25-13
        • [B][1] : Employee Benefit Plan Offerings25-13
        • [B][2] : Regulation A25-14
        • [B][3] : Rule 144A25-14
        • [B][4] : Regulation S25-14
        • [B][5] : Intra-State Offerings25-15
    • § 25:2.5 : 1986 Report of the Task Force on Integration25-15
    • § 25:2.6 : 1996 Task Force on Disclosure Simplification and SEC Advisory Committee on the Capital Formation and Regulatory Process25-17
    • § 25:2.7 : 1996 Concept Release25-17
    • § 25:2.8 : Aircraft Carrier Release—Proposed Revisions to Rule 15225-18
      • [A] : Completed Offerings25-18
      • [B] : Abandoned Offerings25-19
      • [C] : Offerings Eligible for Rule 152 Safe Harbor25-19
    • § 25:2.9 : Rule 15525-19
    • § 25:2.10 : General Principles25-20
    • § 25:2.11 : Rule 155(b)—Abandoned Private Offering Followed by a Registered Offering25-21
    • § 25:2.12 : Rule 155(c) Abandoned Public Offering Followed by a Private Offering25-23
    • § 25:2.13 : 2001—ABA Committee on Federal Regulation of Securities; Updated Recommendations25-26
    • § 25:2.14 : Regulation D—Proposing Release; Guidance25-26
  • § 25:3 : Application and Review25-29
  • § 25:4 : Securities Law Integration Versus SRO Integration25-32
  • § 25:5 : Does It Still Make Sense?25-33
  • § 25:6 : ABA Committee on Federal Regulation of Securities—2007 Letter to the SEC25-34
Chapter 26: Liability Considerations
  • § 26:1 : Introduction26-2
  • § 26:2 : Who Can Be Liable?26-4
    • § 26:2.1 : Issuer Liability26-5
    • § 26:2.2 : Selling Security Holder Liability26-6
    • § 26:2.3 : Underwriter Liability and “Underwriter” Status26-6
  • § 26:3 : Securities Act Liabilities26-8
    • § 26:3.1 : Section 1126-8
    • § 26:3.2 : Section 12(a)26-12
      • [A] : Section 12(a)(1)26-13
      • [B] : Section 12(a)(2)26-14
    • § 26:3.3 : Section 17(a)26-19
    • § 26:3.4 : Section 13—Statute of Limitations26-22
  • § 26:4 : Section 10(b) and Rule 10b-5 of the Exchange Act26-22
  • § 26:5 : Debt Versus Equity26-25
  • § 26:6 : Non-U.S. Jurisdictions26-26
  • § 26:7 : Proactive Measures to Defend Against Liability26-26
  • § 26:8 : Due Diligence26-26
    • § 26:8.1 : Standards26-28
    • § 26:8.2 : Process26-34
    • § 26:8.3 : Documentary Protections26-38
      • [A] : Comfort Letters26-38
        • [A][1] : Overview26-38
        • [A][2] : Preparation26-40
        • [A][3] : SAS 72 Representation Letter26-41
        • [A][4] : Content of SAS 72 Comfort Letter26-42
        • [A][5] : SAS 76 Comfort Letter26-47
      • [B] : Legal Opinions and Other Legal Letters26-48
  • § 26:9 : Risk Factors, Cautionary Statements, and Known Trends26-48
    • § 26:9.1 : Risk Factors26-49
    • § 26:9.2 : Cautionary Statements26-50
    • § 26:9.3 : Known Trends26-53
  • § 26:10 : Indemnification Protections26-54
  • § 26:11 : Exchange Act Filings26-57
Chapter 27: Big Boy Letters
  • § 27:1 : Overview27-1
  • § 27:2 : Use of Big Boy Letters in Private Securities Actions27-3
    • § 27:2.1 : Section 29(a) of the Securities Exchange Act27-3
    • § 27:2.2 : Related Case Law27-3
      • [A] : Claim Waiver27-3
      • [B] : Reasonable Reliance27-7
    • § 27:2.3 : Recent Application of Big Boy Letters27-8
  • § 27:3 : Use of Big Boy Letters in SEC Enforcement Actions27-9
  • § 27:4 : Practical Applications and Use of Big Boy Letters27-10
Chapter 28: FINRA and the Exchanges
  • § 28:1 : Overview28-2
  • § 28:2 : FINRA Compensation Review28-4
    • § 28:2.1 : Overview28-4
    • § 28:2.2 : Rule 5110 Filing Requirements28-5
    • § 28:2.3 : Rule 5110 Filing Deadline; Same Day Clearance Process28-9
    • § 28:2.4 : Offerings Exempt from Filing Under Rule 511028-12
    • § 28:2.5 : Offerings Exempt from Rule 511028-14
    • § 28:2.6 : Offerings Required to Be Filed28-16
    • § 28:2.7 : Underwriting Compensation28-17
      • [A] : Overview28-17
      • [B] : “Fair and Reasonable”28-18
      • [C] : Items of Value28-19
      • [D] : Pre-Offering Compensation—180-Day Period28-21
    • § 28:2.8 : Exceptions from Underwriting Compensation28-22
    • § 28:2.9 : Valuation of Non-Cash Compensation28-25
    • § 28:2.10 : Lock-Up Requirements28-26
    • § 28:2.11 : Unreasonable Terms and Arrangements28-28
    • § 28:2.12 : Proposed Amendments to Rule 511028-31
    • § 28:2.13 : Direct Participation Programs and REITs28-32
  • § 28:3 : Stock or Warrant Compensation for a Placement Agent28-33
  • § 28:4 : FINRA—Conflicts of Interest Rule28-33
  • § 28:5 : Exchange-Required Shareholder Approval Regulations28-36
    • § 28:5.1 : Overview28-36
    • § 28:5.2 : Summary of the Rules28-37
    • § 28:5.3 : When Is Shareholder Approval Required?28-39
      • [A] : Change of Control28-39
      • [B] : NYSE Rules Regarding Equity Issuances to Related Parties28-42
      • [C] : Nasdaq and NYSE MKT Acquisition Rules28-42
      • [D] : The “20% Rule”28-44
      • [E] : Two-Step Transactions and Use of Share Caps to Comply with the 20% Rule28-48
      • [F] : Use of Warrants for Purposes of the 20% Rule28-50
    • § 28:5.4 : Public Offering Exception28-53
    • § 28:5.5 : Financial Viability Exception28-55
    • § 28:5.6 : Limited Partnership Exception28-57
    • § 28:5.7 : Treasury Stock Exemption Eliminated by NYSE28-57
    • § 28:5.8 : Foreign Issuers28-58
    • § 28:5.9 : Establishment of and Material Amendments to Equity Compensation Plans28-59
      • [A] : Material Amendments28-60
      • [B] : Equity Compensation Plan Exemptions28-60
      • [C] : Formula and Evergreen Plans28-61
      • [D] : Repricings28-62
  • § 28:6 : Disproportionate and Minimum Voting Rights28-62
  • § 28:7 : Required Notices and Applications to the Exchanges28-64
    • § 28:7.1 : Sales of Convertible Securities28-66
    • § 28:7.2 : Sales of Warrants28-66
    • § 28:7.3 : Offerings in Proximity to an Acquisition28-68
  • § 28:8 : Broker-Dealer Diligence Obligations in Regulation D Offerings28-68
    • § 28:8.1 : Federal Antifraud Provisions and FINRA Rules28-70
    • § 28:8.2 : FINRA Suitability Obligations28-71
    • § 28:8.3 : Required Level of Investigation28-73
    • § 28:8.4 : Broker-Dealer Affiliated with Issuer28-74
    • § 28:8.5 : Broker-Dealer Involved in the Preparation of the Private Placement Memorandum28-74
    • § 28:8.6 : Red Flags28-75
    • § 28:8.7 : Reliance on Counsel and Syndicate Members28-75
  • § 28:9 : New FINRA Rule 5123—Participation in Private Placements28-76
    • § 28:9.1 : History of Rule 512328-76
    • § 28:9.2 : Definition of Private Placement28-77
    • § 28:9.3 : Exemption from Filing Under Rule 512328-77
    • § 28:9.4 : Filing with FINRA; Timing28-79
    • § 28:9.5 : Confidentiality28-80
    • § 28:9.6 : Liability28-80
Chapter 29: Application of Regulation M to Exempt and Hybrid Offerings
  • § 29:1 : Overview of Regulation M29-2
    • § 29:1.1 : History29-3
    • § 29:1.2 : Rule 10129-4
      • [A] : Entities29-5
        • [A][1] : Distribution Participant29-5
        • [A][2] : Prospective Underwriter29-5
        • [A][3] : Affiliated Purchaser29-5
      • [B] : “Distribution”29-6
        • [B][1] : “Covered Securities” and “Reference Securities”29-8
        • [B][2] : Restricted Period29-9
          • [B][2][a] : “Sticky Deals”29-11
      • [C] : Excepted Securities29-11
      • [D] : Excepted Activity29-12
        • [D][1] : Research29-13
        • [D][2] : Transactions in Rule 144A Securities29-13
    • § 29:1.3 : Rule 10229-14
      • [A] : Excepted Securities29-14
      • [B] : Excepted Activity29-15
      • [C] : Plans29-15
      • [D] : Rule 10b-1829-16
    • § 29:1.4 : Rule 10329-16
    • § 29:1.5 : Rule 10429-16
    • § 29:1.6 : Rule 10529-17
  • § 29:2 : Shorting and Rule 10529-17
    • § 29:2.1 : Rule 105 Prior to the August 2007 Amendment29-18
    • § 29:2.2 : 2007 Amendments to Rule 10529-19
      • [A] : Limitation to Registered Equity Securities That Are “Subject” Securities; Rejection of Actively Traded Exception29-21
      • [B] : Continued Exclusion of Best Efforts Transactions29-21
    • § 29:2.3 : Rule 105 Exceptions29-22
      • [A] : Excepted Activity29-22
        • [A][1] : Bona Fide Purchases29-22
        • [A][2] : Separate Accounts and Investment Companies29-22
    • § 29:2.4 : Regulatory Actions Relating to Rule 10529-23
      • [A] : In re Palmyra Capital Advisors29-23
      • [B] : In re Carlson Capital29-23
      • [C] : In re Leonard J. Adams and In re Peter G. Grabler29-24
  • § 29:3 : Application of Regulation M to Specific Transactions29-25
    • § 29:3.1 : Private Placements and PIPE Transactions29-25
    • § 29:3.2 : Rule 144A Offerings29-26
      • [A] : Hedging of Rule 144A Convertible Debt Transactions29-27
    • § 29:3.3 : Regulation S Offerings29-28
    • § 29:3.4 : Shelf Takedowns29-28
    • § 29:3.5 : Registered Direct Offerings29-30
    • § 29:3.6 : At-the-Market Offerings29-30
    • § 29:3.7 : Continuous Offering Programs29-32
  • § 29:4 : FINRA Rules Relating to Regulation M29-33
Chapter 30: Investment Representations/Hedging
  • § 30:1 : Background30-2
  • § 30:2 : Investment Intent and Holding Periods30-3
    • § 30:2.1 : Adoption of Rule 14430-4
      • [A] : PIPE Transactions and Investment Intent30-5
      • [B] : Equity Lines of Credit and Investment Intent30-7
    • § 30:2.2 : Holding Periods and Hedging30-8
    • § 30:2.3 : Double-Prints30-15
  • § 30:3 : Short Selling30-16
    • § 30:3.1 : Applicable Regulations30-17
      • [A] : Regulation M30-17
      • [B] : Regulation SHO30-18
    • § 30:3.2 : Regulatory Actions Against Short Selling30-24
    • § 30:3.3 : Rule 10b-2130-27
    • § 30:3.4 : Short Sales and PIPE Transactions30-27
    • § 30:3.5 : SEC Enforcement Actions30-28
      • [A] : SEC v. Langley Partners, L.P.30-29
      • [B] : Gryphon Partners30-31
      • [C] : SEC v. Spiegel30-32
      • [D] : SEC v. TCMP3 Partners, L.P., et al.30-33
    • § 30:3.6 : Court Decisions30-33
      • [A] : SEC v. Mangan30-33
      • [B] : SEC v. Lyon30-36
      • [C] : SEC v. Berlacher30-38
      • [D] : Court Arguments30-40
    • § 30:3.7 : FINRA Enforcement30-41
  • § 30:4 : Practice Pointers30-42
    • § 30:4.1 : Hedging Transaction Practice Pointers30-42
    • § 30:4.2 : Tax Practice Pointers30-43
Chapter 31: Change of Control Transactions
  • § 31:1 : Overview31-2
  • § 31:2 : The Concept of Control31-2
    • § 31:2.1 : Securities Act and Exchange Act Definitions of Change of Control31-3
    • § 31:2.2 : NASDAQ and NYSE Definitions of Change of Control31-5
    • § 31:2.3 : State Law Definitions of Change of Control31-7
  • § 31:3 : Section 13 Reporting Requirements31-8
    • § 31:3.1 : Calculation of Beneficial Ownership Under Section 13(d)31-10
  • § 31:4 : Section 1631-10
    • § 31:4.1 : Section 16(a) Reporting Requirements31-11
    • § 31:4.2 : Section 16(b) Short Swing Profits31-11
    • § 31:4.3 : Calculation of Beneficial Ownership Under Section 1631-12
    • § 31:4.4 : Complications Associated with Determination of Beneficial Ownership31-12
  • § 31:5 : Anti-Takeover Measures31-14
    • § 31:5.1 : DGCL Section 20331-14
      • [A] : To Waive or Not to Waive31-16
        • [A][1] : Incorporation31-16
        • [A][2] : Pre-IPO31-17
        • [A][3] : Post-IPO31-17
    • § 31:5.2 : Change of Control PIPEs31-19
    • § 31:5.3 : Poison Pills31-20
    • § 31:5.4 : Triggering a Poison Pill31-20
  • § 31:6 : Stock Exchange Listing Requirements31-21
  • § 31:7 : Hart-Scott-Rodino Pre-Merger Notifications31-22
Chapter 32: Private Placements and Acquisitions
  • § 32:1 : Overview32-1
  • § 32:2 : Rule 145 Transactions32-5
    • § 32:2.1 : Overview32-5
    • § 32:2.2 : Historical Background32-6
      • [A] : No-Sale Theory32-6
      • [B] : No-Sale Rule—Rule 13332-7
      • [C] : Rejection of No-Sale Rule and Survival of Presumptive Underwriter Doctrine32-9
    • § 32:2.3 : Current Rule 14532-12
      • [A] : Registration of Securities Issued in a Rule 145 Transaction32-13
      • [B] : Communications Before Registration Statement Is Filed32-18
      • [C] : Resales of Securities Acquired in Registered Rule 145 Transactions32-19
Chapter 33: Appendices A1-A30
Chapter 34: Appendix B1: Summary Timeline of Exempt Offering Developments; And Appendix B2: Timeline of Exempt Offering Rules
Chapter 35: Forms 1-59
Chapter 36: Table of Authorities
Chapter 37: Index to Exempt and Hybrid Securities Offerings

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