F R E Q U E N T L Y AS K E D Q U E S T I O N S AB O U T R ...

1 F R E Q U E N T L Y A S K E D Q U E S t i o n S A B O U t r u l e 1 4 4 a Understanding Rule 144A What is Rule 144A? Ru le 144A is a safe h arbor exem p tion from th e registration requ irem en ts of Section 5 of the Secu rities Act for certain offers an d sales of qu alifying secu rities by certain p erson s oth er th an th e issu er of th e securities. The exemption applies to resales of securities to qu alified in stitu tion al bu yers, w h o are com m on ly referred to as QIBs. QIBs m u st be in stitu tion s, an d can n ot be in d ivid u als n o m atter h ow w ealth y or sophisticated. See What is a QIB ? below. Th e secu rities eligible for resale u n d er Ru le 144A are secu rities of an d foreign issu ers th at are n ot listed on a secu rities exch an ge or qu oted on a au tom ated in ter-d ealer qu otation system.

2 See Wh at is th e d efin ition of a n ation al secu rities exch an ge or au tom ated in ter-d ealer qu otation system for p u rp oses of Rule 144A? below. Ru le 144A p rovid es th at reoffers and resales in com p lian ce w ith th e ru le are n ot d istribu tion s an d that the reseller is therefore not an underwriter within th e m ean in g of Section 2(a)(11) of th e Secu rities Act. A reseller that is not the issuer, an underwriter, or a dealer can rely on th e exem p tion p rovid ed by Section 4(1) of th e Secu rities Act. Resellers th at are d ealers can rely on th e exem p tion p rovid ed by Section 4(3) of th e Secu rities Act. See Who may rely on Rule 144A? below. Who may rely on Rule 144A? An y p erson oth er th an an issu er m ay rely on Rule 144A. Issu ers m u st fin d an oth er exem p tion for th e offer an d sale of u n registered secu rities.

3 Typ ically th ey rely on Section 4(2) (often in relian ce on Regu lation D) or Regu lation S u n d er th e Secu rities Act. Affiliates of th e issuer may rely on Rule 144A. See Prelim in ary N ote N o. 7 to Ru le 144A; Telephone In terp retation N o. 5S of th e March 1999 Su p p lem en t of th e Division of Corp oration Fin an ce s Man u al of Publicly Available Telephone Interpretations. What types of transactions are conducted under Rule 144A? Th e follow in g typ es of tran saction s often are con d u cted under Rule 144A: offerin gs of d ebt or p referred secu rities by p u blic companies; offerin gs by foreign issu ers th at d o n ot w an t to becom e su bject to rep ortin g requ irem en ts; and offerin gs of com m on secu rities by n on-reporting issuers ( , backdoor IPOs ).

4 1 An issu er th at in ten d s to en gage in m u ltip le offerin gs may have a Rule 144A program. Rule 144A programs are p rogram s establish ed for offerin g secu rities (u su ally d ebt secu rities) on an on goin g or con tin u ou s basis to p oten tial offerees. Th ey are similar to medium-term n ote p rogram s, bu t th ey are u n registered , an d th e secu rities are offered on ly to QIBs. Th ese p rogram s often are u sed by fin an cial in stitu tion an d in su rance company issuers to offer securities, through one or more broker-d ealers, to in stitu tion al in vestors in con tin u ou s offerings. Am on g th e ad van tages of u sin g Ru le 144A p rogram s are (1) n o p u blic d isclosu re of in n ovative stru ctu res or sen sitive in form ation; (2) lim ited FINRA filin g requ irem en ts; an d (3) red u ced p oten tial for liability under the Securities Act.

5 What are the conditions that a reseller of restricted securities must satisfy to rely on Rule 144A? There are four conditions to reliance on Rule 144A: Th e reoffer or resale is m ad e on ly to QIBs (see Wh at is a QIB ? below) or to an offeree or purchaser that the reseller (and any person acting on its beh alf) reason ably believes is a QIB (see H ow d oes a reseller establish a reason able belief that a person is a QIB? below); Th e reseller (or an y p erson actin g on its beh alf) m u st take reason able step s to en su re th at th e bu yer is aw are th at th e reseller m ay rely on Ru le 144A in con n ection w ith th e resale (see Reseller s Reason able Step s So Bu yer is Aw are of Rule 144A Reliance below); Th e secu rities reoffered or resold (a) w h en issu ed were not of the same class as securities listed on a n ation al secu rities exch an ge or qu oted on a au tom ated in ter-d ealer qu otation system (see Wh at is th e d efin ition of a n ation al secu rities exch an ge or au tom ated inter-dealer qu otation system for p u rp oses of Ru le 144A?)

6 Below); an d (b) are n ot secu rities of an op en-end in vestm en t com p an y, u n it in vestm en t tru st, or face-am ou n t certificate com p an y th at is, or is requ ired to be, registered u n d er th e Investment Company Act of 1940; and In the case of securities of an issuer that is neither an Exch an ge Act rep ortin g com p an y, or a foreign issu er exem p t from rep ortin g p u rsu an t to Rule 12g3-2(b) of th e Exch an ge Act, or a foreign govern m en t, th e h old er an d a p rosp ective bu yer d esign ated by th e h old er m u st h ave th e righ t to obtain from th e issu er an d m u st receive, u p on request, certain reason ably cu rren t in form ation abou t th e issu er. See Informational Requirements below. Source: Rule 144A(d). Must a reseller of restricted securities rely only on Rule 144A in making exempt resales?

7 No; Ru le 144A is a n on-exclu sive safe h arbor. A reseller m ay rely u p on an y ap p licable exem p tion from th e registration requ irem en ts of th e Secu rities Act in connection with the resale of restricted securities. In ad d ition , Ru le 144A offerin gs often are effected side-by-sid e w ith an offerin g targeted at foreign h old ers in relian ce on Regu lation S. Th is p erm its an issu er to effect a m u ltination al offering w ith a QIB tran ch e an d a Regu lation S tran ch e, an d to sell to an in itial p u rch aser ou tsid e th e Un ited States in relian ce on Regu lation S, even th ou gh th e in itial p u rch aser con tem p lates th e immediate resale to QIBs in reliance on Rule 144A. 2 Typ ically, resellers th at can n ot rely on th e safe h arbor u n d er Ru le 144A w ill attem p t to rely on th e h ybrid Section 4(1 ) exem p tion.

8 See Wh at is th e Section 4(1 ) exem p tion ? below . In ad d ition , the h old er of secu rities p u rch ased u n d er Ru le 144A m ay rely on th e provisions of Rule 144 to sell those securities. Are securities resold under Rule 144A freely tradable after such resale? No. Secu rities acqu ired in a Ru le 144A tran saction are d eem ed to be restricted secu rities w ith in th e m ean in g of Ru le 144(a)(3) of th e Secu rities Act. As a resu lt, th ese secu rities rem ain restricted u n til th e ap p licable h old in g p eriod exp ires an d m ay on ly be p u blicly resold u n d er Rule 144, pursuant to an effective registration statement, or in relian ce on an y oth er available exem p tion u n d er th e Secu rities Act. Exem p t resales of restricted secu rities m ay be m ad e in com p lian ce w ith Ru le 144A, th e so-called Section 4(1 ) exem p tion , or Regu lation S.

9 See What is the Rule 4(1 ) exemption? below. Source: Preliminary Note No. 6 of Rule 144A. What are the holding periods applicable to the sale of Rule 144A and other restricted securities? In Decem ber 2007, th e SEC am en d ed Ru le 144, effective Febru ary 2008, to, am on g oth er th in gs, sh orten th e h old in g p eriod s for restricted secu rities (su bject to certain public information requirements). For n on-affiliate h old ers of restricted secu rities, Ru le 144 p rovid es a safe h arbor for th e resale of su ch secu rities w ithou t lim itation after six m on th s in th e case of issu ers th at are rep ortin g com p an ies that com p ly w ith th e cu rren t in form ation requ irem en ts of Ru le 144(c), an d after on e year in th e case of n on-reporting issuers.

10 (Prior to th e Decem ber 2007 am en d m en ts, th e h old in g p eriod w as on e year.) In each case, after a on e-year h old in g p eriod , resales of th ese secu rities by n on-affiliates w ill n o lon ger be su bject to any oth er conditions under Rule 144. For a rep ortin g issu er, com p lian ce w ith th e ad equ ate cu rren t p u blic in form ation con d ition requ ires th e issu er to h ave filed all requ ired rep orts u n d er Section 13 or Section 15(d ) of th e Exch an ge Act. For a n on-reporting issu er, com p lian ce w ith th e ad equ ate cu rren t p u blic in form ation con d ition requ ires th e p u blic availability of basic in form ation abou t th e issu er, in clu d in g certain financial statements. For affiliate h old ers of restricted secu rities, Ru le 144 p rovid es a safe h arbor p erm ittin g resales of restricted secu rities, su bject to th e sam e six-m on th an d on e-year h old in g p eriod s for n on-affiliates an d to oth er resale con d ition s of am en d ed Ru le 144.