Rul;e 144A - Rule 230.144A USA Security Laws

CHAPTER II--SECURITIES AND EXCHANGE COMMISSION

PART 230_GENERAL RULES AND REGULATIONS, SECURITIES ACT OF 1933--Table of

Sec. 230.144A Private resales of securities to institutions.

Preliminary Notes: 1. This section relates solely to the application
of section 5 of the Act and not to antifraud or other provisions of the
federal securities laws.
2. Attempted compliance with this section does not act as an
exclusive election; any seller hereunder may also claim the availability
of any other applicable exemption from the registration requirements of
the Act.
3. In view of the objective of this section and the policies
underlying the Act, this section is not available with respect to any
transaction or series of transactions that, although in technical
compliance with this section, is part of a plan or scheme to evade the
registration provisions of the Act. In such cases, registration under
the Act is required.
4. Nothing in this section obviates the need for any issuer or any
other person to comply with the securities registration or broker-dealer
registration requirements of the Securities Exchange Act of 1934 (the
Exchange Act), whenever such requirements are applicable.
5. Nothing in this section obviates the need for any person to
comply with any applicable state law relating to the offer or sale of
securities.
6. Securities acquired in a transaction made pursuant to the
provisions of this section are deemed to be restricted securities within
the meaning of Sec. 230.144(a)(3) of this chapter.
7. The fact that purchasers of securities from the issuer thereof
may purchase such securities with a view to reselling such securities
pursuant to this section will not affect the availability to such issuer
of an exemption under section 4(2) of the Act, or Regulation D under the
Act, from the registration requirements of the Act.

(a) Definitions. (1) For purposes of this section, qualified
institutional buyer shall mean:
(i) Any of the following entities, acting for its own account or the
accounts of other qualified institutional buyers, that in the aggregate
owns and invests on a discretionary basis at least $100 million in
securities of issuers that are not affiliated with the entity:
(A) Any insurance company as defined in section 2(13) of the Act;

Note: A purchase by an insurance company for one or more of its
separate accounts, as defined by section 2(a)(37) of the Investment
Company Act of 1940 (the ``Investment Company Act''), which are neither
registered under section 8 of the Investment Company Act nor required to
be so registered, shall be deemed to be a purchase for the account of
such insurance company.

(B) Any investment company registered under the Investment Company
Act or any business development company as defined in section 2(a)(48)
of that Act;
(C) Any Small Business Investment Company licensed by the U.S. Small
Business Administration under section 301(c) or (d) of the Small
Business Investment Act of 1958;
(D) Any plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees;
(E) Any employee benefit plan within the meaning of title I of the
Employee Retirement Income Security Act of 1974;
(F) Any trust fund whose trustee is a bank or trust company and
whose participants are exclusively plans of the types identified in
paragraph (a)(1)(i) (D) or (E) of this section, except trust funds that
include as participants individual retirement accounts or H.R. 10 plans.
(G) Any business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
(H) Any organization described in section 501(c)(3) of the Internal
Revenue Code, corporation (other than a bank as defined in section
3(a)(2) of the Act or a savings and loan association or other
institution referenced in section 3(a)(5)(A) of the Act or a foreign
bank or savings and loan association or equivalent institution),
partnership, or Massachusetts or similar business trust; and
(I) Any investment adviser registered under the Investment Advisers
Act.
(ii) Any dealer registered pursuant to section 15 of the Exchange
Act, acting for its own account or the accounts of other qualified
institutional buyers, that in the aggregate owns and invests on a
discretionary basis at least $10 million of securities of issuers that
are not affiliated with the dealer, Provided, That securities
constituting the whole or a part of an unsold allotment to or
subscription by a dealer as a participant in a public offering shall not
be deemed to be owned by such dealer;


(iii) Any dealer registered pursuant to section 15 of the Exchange
Act acting in a riskless principal transaction on behalf of a qualified
institutional buyer;

Note: A registered dealer may act as agent, on a non-discretionary
basis, in a transaction with a qualified institutional buyer without
itself having to be a qualified institutional buyer.

(iv) Any investment company registered under the Investment Company
Act, acting for its own account or for the accounts of other qualified
institutional buyers, that is part of a family of investment companies
which own in the aggregate at least $100 million in securities of
issuers, other than issuers that are affiliated with the investment
company or are part of such family of investment companies. Family of
investment companies means any two or more investment companies
registered under the Investment Company Act, except for a unit
investment trust whose assets consist solely of shares of one or more
registered investment companies, that have the same investment adviser
(or, in the case of unit investment trusts, the same depositor),
Provided That, for purposes of this section:
(A) Each series of a series company (as defined in Rule 18f-2 under
the Investment Company Act [17 CFR 270.18f-2]) shall be deemed to be a
separate investment company; and
(B) Investment companies shall be deemed to have the same adviser
(or depositor) if their advisers (or depositors) are majority-owned
subsidiaries of the same parent, or if one investment company's adviser
(or depositor) is a majority-owned subsidiary of the other investment
company's adviser (or depositor);
(v) Any entity, all of the equity owners of which are qualified
institutional buyers, acting for its own account or the accounts of
other qualified institutional buyers; and
(vi) Any bank as defined in section 3(a)(2) of the Act, any savings
and loan association or other institution as referenced in section
3(a)(5)(A) of the Act, or any foreign bank or savings and loan
association or equivalent institution, acting for its own account or the
accounts of other qualified institutional buyers, that in the aggregate
owns and invests on a discretionary basis at least $100 million in
securities of issuers that are not affiliated with it and that has an
audited net worth of at least $25 million as demonstrated in its latest
annual financial statements, as of a date not more than 16 months
preceding the date of sale under the Rule in the case of a U.S. bank or
savings and loan association, and not more than 18 months preceding such
date of sale for a foreign bank or savings and loan association or
equivalent institution.
(2) In determining the aggregate amount of securities owned and
invested on a discretionary basis by an entity, the following
instruments and interests shall be excluded: bank deposit notes and
certificates of deposit; loan participations; repurchase agreements;
securities owned but subject to a repurchase agreement; and currency,
interest rate and commodity swaps.
(3) The aggregate value of securities owned and invested on a
discretionary basis by an entity shall be the cost of such securities,
except where the entity reports its securities holdings in its financial
statements on the basis of their market value, and no current
information with respect to the cost of those securities has been
published. In the latter event, the securities may be valued at market
for purposes of this section.
(4) In determining the aggregate amount of securities owned by an
entity and invested on a discretionary basis, securities owned by
subsidiaries of the entity that are consolidated with the entity in its
financial statements prepared in accordance with generally accepted
accounting principles may be included if the investments of such
subsidiaries are managed under the direction of the entity, except that,
unless the entity is a reporting company under section 13 or 15(d) of
the Exchange Act, securities owned by such subsidiaries may not be
included if the entity itself is a majority-owned subsidiary that would
be included in the consolidated financial statements of another
enterprise.

(5) For purposes of this section, riskless principal transaction
means a transaction in which a dealer buys a security from any person
and makes a simultaneous offsetting sale of such security to a qualified
institutional buyer, including another dealer acting as riskless
principal for a qualified institutional buyer.
(6) For purposes of this section, effective conversion premium means
the amount, expressed as a percentage of the security's conversion
value, by which the price at issuance of a convertible security exceeds
its conversion value.
(7) For purposes of this section, effective exercise premium means
the amount, expressed as a percentage of the warrant's exercise value,
by which the sum of the price at issuance and the exercise price of a
warrant exceeds its exercise value.

(b) Sales by persons other than issuers or dealers. Any person,
other than the issuer or a dealer, who offers or sells securities in
compliance with the conditions set forth in paragraph (d) of this
section shall be deemed not to be engaged in a distribution of such
securities and therefore not to be an underwriter of such securities
within the meaning of sections 2(11) and 4(1) of the Act.

(c) Sales by Dealers. Any dealer who offers or sells securities in
compliance with the conditions set forth in paragraph (d) of this
section shall be deemed not to be a participant in a distribution of
such securities within the meaning of section 4(3)(C) of the Act and not
to be an underwriter of such securities within the meaning of section
2(11) of the Act, and such securities shall be deemed not to have been
offered to the public within the meaning of section 4(3)(A) of the Act.

(d) Conditions to be met. To qualify for exemption under this
section, an offer or sale must meet the following conditions:

(1) The securities are offered or sold only to a qualified
institutional buyer or to an offeree or purchaser that the seller and
any person acting on behalf of the seller reasonably believe is a
qualified institutional buyer. In determining whether a prospective
purchaser is a qualified institutional buyer, the seller and any person
acting on its behalf shall be entitled to rely upon the following non-
exclusive methods of establishing the prospective purchaser's ownership
and discretionary investments of securities:
(i) The prospective purchaser's most recent publicly available
financial statements, Provided That such statements present the
information as of a date within 16 months preceding the date of sale of
securities under this section in the case of a U.S. purchaser and within
18 months preceding such date of sale for a foreign purchaser;
(ii) The most recent publicly available information appearing in
documents filed by the prospective purchaser with the Commission or
another United States federal, state, or local governmental agency or
self-regulatory organization, or with a foreign governmental agency or
self-regulatory organization, Provided That any such information is as
of a date within 16 months preceding the date of sale of securities
under this section in the case of a U.S. purchaser and within 18 months
preceding such date of sale for a foreign purchaser;
(iii) The most recent publicly available information appearing in a
recognized securities manual, Provided That such information is as of a
date within 16 months preceding the date of sale of securities under
this section in the case of a U.S. purchaser and within 18 months
preceding such date of sale for a foreign purchaser; or
(iv) A certification by the chief financial officer, a person
fulfilling an equivalent function, or other executive officer of the
purchaser, specifying the amount of securities owned and invested on a
discretionary basis by the purchaser as of a specific date on or since
the close of the purchaser's most recent fiscal year, or, in the case of
a purchaser that is a member of a family of investment companies, a
certification by an executive officer of the investment adviser
specifying the amount of securities owned by the family of investment
companies as of a specific date on or since the close of the purchaser's
most recent fiscal year;
(2) The seller and any person acting on its behalf takes reasonable
steps to ensure that the purchaser is aware that
the seller may rely on the exemption from the provisions of section 5 of
the Act provided by this section;
(3) The securities offered or sold:
(i) Were not, when issued, of the same class as securities listed on
a national securities exchange registered under section 6 of the
Exchange Act or quoted in a U.S. automated inter-dealer quotation
system; Provided, That securities that are convertible or exchangeable
into securities so listed or quoted at the time of issuance and that had
an effective conversion premium of less than 10 percent, shall be
treated as securities of the class into which they are convertible or
exchangeable; and that warrants that may be exercised for securities so
listed or quoted at the time of issuance, for a period of less than 3
years from the date of issuance, or that had an effective exercise
premium of less than 10 percent, shall be treated as securities of the
class to be issued upon exercise; and Provided further, That the
Commission may from time to time, taking into account then-existing
market practices, designate additional securities and classes of
securities that will not be deemed of the same class as securities
listed on a national securities exchange or quoted in a U.S. automated
inter-dealer quotation system; and
(ii) Are not securities of an open-end investment company, unit
investment trust or face-amount certificate company that is or is
required to be registered under section 8 of the Investment Company Act;
and
(4)(i) In the case of securities of an issuer that is neither
subject to section 13 or 15(d) of the Exchange Act, nor exempt from
reporting pursuant to Rule 12g3-2(b) (Sec. 240.12g3-2(b) of this
chapter) under the Exchange Act, nor a foreign government as defined in
Rule 405 (Sec. 230.405 of this chapter) eligible to register securities
under Schedule B of the Act, the holder and a prospective purchaser
designated by the holder have the right to obtain from the issuer, upon
request of the holder, and the prospective purchaser has received from
the issuer, the seller, or a person acting on either of their behalf, at
or prior to the time of sale, upon such prospective purchaser's request
to the holder or the issuer, the following information (which shall be
reasonably current in relation to the date of resale under this
section): a very brief statement of the nature of the business of the
issuer and the products and services it offers; and the issuer's most
recent balance sheet and profit and loss and retained earnings
statements, and similar financial statements for such part of the two
preceding fiscal years as the issuer has been in operation (the
financial statements should be audited to the extent reasonably
available).
(ii) The requirement that the information be reasonably current will
be presumed to be satisfied if:
(A) The balance sheet is as of a date less than 16 months before the
date of resale, the statements of profit and loss and retained earnings
are for the 12 months preceding the date of such balance sheet, and if
such balance sheet is not as of a date less than 6 months before the
date of resale, it shall be accompanied by additional statements of
profit and loss and retained earnings for the period from the date of
such balance sheet to a date less than 6 months before the date of
resale; and
(B) The statement of the nature of the issuer's business and its
products and services offered is as of a date within 12 months prior to
the date of resale; or
(C) With regard to foreign private issuers, the required information
meets the timing requirements of the issuer's home country or principal
trading markets.

(e) Offers and sales of securities pursuant to this section shall be
deemed not to affect the availability of any exemption or safe harbor
relating to any previous or subsequent offer or sale of such securities
by the issuer or any prior or subsequent holder thereof.

[55 FR 17945, Apr. 30, 1990, as amended at 57 FR 48722, Oct. 28, 1992]

http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=17&PART=230&SECTION=144A&TYPE=TEXT