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Preliminary Notes
1.
This section relates to transactions exempted from the
registration requirements of
section 5 of the Act. These
transactions are not exempt from the antifraud, civil liability, or other
provisions of the federal securities laws. Issuers and persons acting on
their behalf have an obligation to provide investors with disclosure adequate
to satisfy the antifraud provisions of the federal securities laws.
2.
In addition to complying with this section, the issuer also
must comply with any applicable state law relating to the offer and sale of
securities.
3.
An issuer that attempts to comply with this section, but fails
to do so, may claim any other exemption that is available.
4.
This section is available only to the issuer of the securities.
Affiliates of the issuer may not use this section to offer or sell
securities. This section also does not cover resales of securities by any
person. This section provides an exemption only for the transactions in which
the securities are offered or sold by the issuer, not for the securities
themselves.
5.
The purpose of this section is to provide an exemption from the
registration requirements of the Act for securities issued in compensatory
circumstances. This section is not available for plans or schemes to
circumvent this purpose, such as to raise capital. This section also is not
available to exempt any transaction that is in technical compliance with this
section but is part of a plan or scheme to evade the registration provisions
of the Act. In any of these cases, registration under the Act is required
unless another exemption is available.
a.
Exemption. Offers and sales made in compliance with all of the
conditions of this section are exempt from section 5 of the Act.
b.
Issuers eligible to use this section.
1.
General. This section is available to any issuer that is not
subject to the reporting requirements of section 13 or 15(d) of the
Securities Exchange Act of 1934 (the "Exchange Act") and is not an investment
company registered or required to be registered under the Investment Company
Act of 1940.
2.
Issuers that become subject to reporting. If an issuer becomes
subject to the reporting requirements of section 13 or 15(d) of the Exchange
Act after it has made offers complying with this section, the issuer may
nevertheless rely on this section to sell the securities previously offered
to the persons to whom those offers were made.
3.
Guarantees by reporting companies. An issuer subject to the
reporting requirements of section 13 or 15(d) of the Exchange Act may rely on
this section if it is merely guaranteeing the payment of a subsidiary's
securities that are sold under this section.
c.
Transactions exempted by this section. This section exempts
offers and sales of securities (including plan interests and guarantees
pursuant to paragraph (d)(2)(ii) of this section) under a written
compensatory benefit plan (or written compensation contract) established by
the issuer, its parents, its majority-owned subsidiaries or majority-owned
subsidiaries of the issuer's parent, for the participation of their
employees, directors, general partners, trustees (where the issuer is a
business trust), officers, or consultants and advisors, and their family
members who acquire such securities from such persons through gifts or
domestic relations orders. This section exempts offers and sales to former
employees, directors, general partners, trustees, officers, consultants and
advisors only if such persons were employed by or providing services to the
issuer at the time the securities were offered. In addition, the term
"employee" includes insurance agents who are exclusive agents of the issuer,
its subsidiaries or parents, are or derive more than 50% of their annual
income from those entities.
1.
Special requirements for consultants and advisors. This section
is available to consultants and advisors only if:
i.
They are natural persons;
ii.
They provide bona fide
services to the issuer, its parents, its majority- owned subsidiaries or
majority-owned subsidiaries of the issuer's parent; and
iii.
The services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market
for the issuer's securities.
2.
Definition of "Compensatory Benefit Plan." For purposes of this
section, a compensatory benefit plan is any purchase, savings, option, bonus,
stock appreciation, profit sharing, thrift, incentive, deferred compensation,
pension or similar plan.
3.
Definition of "Family Member." For purposes of this section,
family member includes any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law,
father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law,
including adoptive relationships, any person sharing the employee's household
(other than a tenant or employee), a trust in which these persons have more
than fifty percent of the beneficial interest, a foundation in which these
persons (or the employee) control the management of assets, and any other
entity in which these persons (or the employee) own more than fifty percent
of the voting interests.
d.
Amounts that may be sold.
1.
Offers. Any amount of securities may be offered in reliance on
this section. However, for purposes of this section, sales of securities
underlying options must be counted as sales on the date of the option grant.
2.
Sales. The aggregate sales price or amount of securities sold
in reliance on this section during any consecutive 12-month period must not
exceed the greatest of the following:
i.
$1,000,000;
ii.
15% of the total assets of
the issuer (or of the issuer's parent if the issuer is a wholly-owned
subsidiary and the securities represent obligations that the parent fully and
unconditionally guarantees), measured at the issuer's most recent annual
balance sheet date (if no older than its last fiscal year end); or
iii.
15% of the outstanding
amount of the class of securities being offered and sold in reliance on this
section, measured at the issuer's most recent annual balance sheet date (if
no older than its last fiscal year end).
3.
Rules for calculating prices and amounts.
i.
Aggregate sales price. The
term aggregate sales price means the sum of all cash, property, notes,
cancellation of debt or other consideration received or to be received by the
issuer for the sale of the securities. Non-cash consideration must be valued
by reference to bona fide sales of that consideration made within a
reasonable time or, in the absence of such sales, on the fair value as
determined by an accepted standard. The value of services exchanged for
securities issued must be measured by reference to the value of the
securities issued. Options must be valued based on the exercise price of the
option.
ii.
Time of the calculation.
With respect to options to purchase securities, the aggregate sales price is
determined when an option grant is made (without regard to when the option
becomes exercisable). With respect to other securities, the calculation is
made on the date of sale. With respect to deferred compensation or similar
plans, the calculation is made when the irrevocable election to defer is
made.
iii.
Derivative securities. In
calculating outstanding securities for purposes of paragraph (d)(2)(iii) of
this section, treat the securities underlying all currently exercisable or
convertible options, warrants, rights or other securities, other than those
issued under this exemption, as outstanding. In calculating the amount of
securities sold for other purposes of paragraph (d)(2) of this section, count
the amount of securities that would be acquired upon exercise or conversion
in connection with sales of options, warrants, rights or other exercisable or
convertible securities, including those to be issued under this exemption.
iv.
Other exemptions. Amounts
of securities sold in reliance on this section do not affect "aggregate
offering prices" in other exemptions, and amounts of securities sold in
reliance on other exemptions do not affect the amount that may be sold in
reliance on this section.
e.
Disclosure that must be provided. The issuer must deliver to
investors a copy of the compensatory benefit plan or the contract, as
applicable. In addition, if the aggregate sales price or amount of securities
sold during any consecutive 12-month period exceeds $5 million, the issuer
must deliver the following disclosure to investors a reasonable period of
time before the date of sale:
1.
If the plan is subject to the Employee Retirement Income
Security Act of 1974 ("ERISA") (29 U.S.C. 1104-1107), a copy of the summary
plan description required by ERISA;
2.
If the plan is not subject to ERISA, a summary of the material
terms of the plan;
3.
Information about the risks associated with investment in the
securities sold pursuant to the compensatory benefit plan or compensation
contract; and
4.
Financial statements required to be furnished by Part F/S of
Form 1-A (Regulation A Offering Statement) under Regulation A. Foreign
private issuers as defined in Rule 405 must provide a reconciliation to
generally accepted accounting principles in the United States (U.S. GAAP) if
their financial statements are not prepared in accordance with U.S. GAAP
(Item 17 of Form 20-F. The financial statements required by this section must
be as of a date no more than 180 days before the sale of securities in
reliance on this exemption.
5.
If the issuer is relying on paragraph (d)(2)(ii) of this
section to use its parent's total assets to determine the amount of
securities that may be sold, the parent's financial statements must be
delivered. If the parent is subject to the reporting requirements of section
13 or 15(d) of the Exchange Act, the financial statements of the parent
required by Rule 10-01 of Regulation S-X and Item 310 of Regulation S-B, as
applicable, must be delivered.
6.
If the sale involves a stock option or other derivative
security, the issuer must deliver disclosure a reasonable period of time
before the date of exercise or conversion. For deferred compensation or
similar plans, the issuer must deliver disclosure to investors a reasonable
period of time before the date the irrevocable election to defer is made.
f.
No integration with other offerings. Offers and sales exempt
under this section are deemed to be a part of a single, discrete offering and
are not subject to integration with any other offers or sales, whether
registered under the Act or otherwise exempt from the registration
requirements of the Act.
g.
Resale limitations.
1.
Securities issued under this section are deemed to be
"restricted securities" as defined in Rule 144.
2.
Resales of securities issued pursuant to this section must be
in compliance with the registration requirements of the Act or an exemption
from those requirements.
3.
Ninety days after the issuer becomes subject to the reporting
requirements of section 13 or 15(d) of the Exchange Act, securities issued
under this section may be resold by persons who are not affiliates (as
defined in Rule 144) in reliance on Rule 144, without compliance with
paragraphs (c), (d), (e) and (h) of Rule 144, and by affiliates without
compliance with paragraph (d) of Rule 144.
April 26, 2007
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