Shelf Offerings

1
Shelf Offerings

• What Are They?

2
Secondary Shelf

• 1. Shelf-offerings by selling shareholdersa
  secondary shelf
• 2. Shares acquired in an exempt offering and the
  resale of which is restricted
• 3. Shares are registered by the issuer
• 4. Selling shareholders over time take them down
  and sell them into the market

3
Secondary Shelf Continued

• Shares may have been issued before co. was public
  in exempt transactions
• May include commitment to have them registered
• Ideally some or all included as part of
  underwritten IPOregistration statement on Form
  S-1 covers mainly shares offered by company
  some selling shareholders
• More likely to be covered in subsequent
  registration statement after the IPO

4
Secondary Shelf by Public Company

• Company already a public company
• Does an exempt offering (4(2) or R.506)
• Complies with telephone manual conditions for a
  PIPE offering
• Registers shares for shelf resale by the
  purchasers in the exempt offering
• OR505 exemptwaits 6 months and then obligated
  to file registration statement covering the shares

5
Liberalization of Rule 144 may make secondary
shelfs largely academic

• Holders of restricted shares acquired before IPO
  may have held for 6 months by time company is
  public
• If non-affiliates can sell in unrestricted
  amounts if company a reporting company
• company may want to limit amount so as not to
  hurt secondary market
• Shares acquired by non-affiliates acquired after
  public company if held 6 months can resell
  without restriction if reporting company

6
Shelf by RegistrantPrimary Shelf

• Issuer may consider doing similar shelfselling
  from time to time into the market
• More likelywants to register for the shelf
  securities to be taken down from time to time in
  an underwritten offering
• If unallocated shelfregisters different type of
  securities (e.g. common debt)
• When market right/underwriter(s) available takes
  down from the shelf in underwritten offering

7
Shelfs governed by Rule 415/Availability of Form
S-3

• Rule 415(a)(1)(i) basis for most secondary shelf
  offeringsRule 415 (a) authorizes securities that
  may be registered for an offering to be made on
  a continuous or delayed basis in the
  futureprovided
• (1)(i) securities sold exclusively by persons
  other than the registrant
• 415(a)(1)(x) basis for most primary
  shelfssecurities registered on Form S-3 by
  registrant on immediate, continuous, or delayed
  basis

8
Shelfs/Rule 415/Availability of Form S-3 cont

• We also throw Rule 415(a)(4) into the
  mix-Registration by registrant of equity
  securities made at the market (rather than fixed
  price) must meet (a)(1)(x) conditions i.e. be
  eligible for primary S-3
• We add to the mix without getting into the detail
  view of staff that purported secondary offering
  is primary offering by the issuer if amount over
  1/3rd of public floatgoes to and beyond PIPE
  offerings that we previously noted

9
Availability of Form S-3 Critical

• Given the nature of a shelf would want to use
  Form S-3 not only incorporate 34 Act
  reports-keep utodate by incorporating 34 Act
  reports after reg. statement effective until
  terminate the offering
• Becomes more critical if staff turns secondary
  into primaryFirst, must consider requirements to
  use S-3

10
Any Form S-3General Instruction I.A. registrant
requirements

• 1. Are a reporting company.
• 2. Have filed 34 Act reports for at least 12
  months
• 3. Have filed all 34 Act reports timely (except
  certain specified 8-K reports) during preceding
  12 months
• 4. Not in default on certain indebtedness/preferre
  d dividends.

11
Form S-3Availability to Offering by Registrant

• General Instruction I.B.1primary registrant or
  secondary offering if registrant has a public
  float of 75 million
• Until recently (1/28/2008) was only S-3 primary
  offering available to registrant other than
  certain investment grade debt securities/rights
  offerings etc. that we do not get into.
• General Instruction I.B.6. now permits a company
  without a 75 million float to do a primary or
  secondary offering limited to 1/3rd of public
  float for 12 mos.
• Provided has class of equity listed on an U.S.
  stock exchange

12
Availability of Form S-3 for secondary offerings

• General Instruction I.B.3. Permits
• Offerings by persons other than the issuer
• of outstanding securities if securities of same
  class are listed on a national securities
  exchange
• No per se limit on the amount of the offering but
  we shall see

13
Impact of Staffs One-third Rule

• The SEC will not admit to it and it is buried in
  staff comments, but there is a 1/3rd of public
  float rule that if exceeded turns a secondary
  offering into a primary offering by the company
• Hence, in effect if want to rely on General
  Instruction I.B.3 of S-3 for a secondary offering
  it cannot exceed one-third of float

14
Other Impact of One-Third Rule

• If company not eligible to use S-3 (e.g. doesnt
  meet I.A. registrant requirements
• Wants to file a Form S-1 to cover an offering to
  be made by selling shareholders from time to time
  into the market
• Meets the Rule 14(a)(1)(i) requirements for a
  continuous offering by persons other than the
  registrantaccording to staff if over one-third
  is by registrant under 14(a)(3) registrant can
  make primary offering only on Form S-3

15
Other Shelf Aspects Not Covered

• Use of prospectus supplements for takedowns
• Rule 430 B as to allowed omissions from effective
  registration statement
• Naming of Selling Shareholders
• Item 512 of Regulation S-K re updating of
  prospectus by 34 Act filings

16
(No Transcript)