1. 1252529 Securities Offering Reform (Part II) Presentation to Colorado Bar Association Securities Subsection Luncheon October 20, 2005

2. 1252529 Areas of Major Reform Communications surrounding registered public offerings New flexibility in the registration process Liability

3. 1252529 Background Modernization SOX reforms affecting the ’34 Act Comfort with forward looking information

4. 1252529 Nature of Reform Evolutionary, not revolutionary ’34 Act is the centerpiece of disclosure Less risk of rescission liability, but more risk of liability for misstatements and omissions?

5. 1252529 Categories of Issuers WKSI’s Seasoned issuers Unseasoned issuers Non-reporting issuers

6. 1252529 Communications Reform – Legal Background Pre-Filing PeriodWaiting Period Post-Effectiveness Period No oral or written offers permitted Oral offers permitted Written offers only by preliminary prospectus Any offering materials OK so long as accompanied or preceded by final prospectus

7. 1252529 Communications Reforms – Highlights Safe harbors for ordinary course communications Safe harbor for communications more than 30 days before filing registration statement Free writing prospectus

8. 1252529 Registration Flexibility Reforms – Legal Background Filing and effectiveness of shelf registration statement with base prospectus Prospectus supplement or post-effective amendment at time of offering or to make changes Numerous mechanical restrictions on using shelf

9. 1252529 Registration Flexibility Reforms – Highlights Automatic effectiveness for WKSIs Easing restrictions for all seasoned issuers Access equals delivery

10. 1252529 Liability Reforms – Legal Background Securities Act Section 11 –Materially deficient disclosure in registration statement –Strict liability for issuers –Liability for others subject to due diligence defense Securities Act Section 12(a)(2) –Materially deficient disclosure in any prospectus or oral communication –Only “seller” of securities liable –Reasonable care is a defense

11. 1252529 Liability Reforms – Highlights For section 12(a)(2) purposes, only what is “conveyed” to investor at “time of sale” matters Issuer is a “seller” even if does not directly solicit investor Each prospectus supplement will be deemed part of registration statement and subject to Section 11

12. 1252529 ’34 Act Reforms Risk factors in periodic reports Disclosure of outstanding SEC staff comments 10-K cover page

13. 1252529 Communications Reforms Adoption of safe harbors for communications –communications 30 days before filing –ordinary course communications Expand use of Rule 134 notices Adoption of the “free writing prospectus”

14. 1252529 30-day Prefiling Period Rule 163A – issuer’s communications more than 30 days prior to filing a registration statement will not be deemed “offers” Conditions – –no reference to securities offering –by or on behalf of issuer –reasonably prevent distribution during 30 day prefiling period Exclusions – –certain issuers not eligible –communications regarding business combination transactions

15. 1252529 Business Communication Safe Harbors Rule 169 – safe harbor for non-reporting issuer’s release of factual business information Rule 168 – safe harbor for reporting issuer’s release of factual business information and forward-looking information

16. 1252529 Business Communications Factual business information –Factual information about issuer, its business or financial developments –Advertisements and information about products or services –Dividend notices (reporting issuers only) Forward-looking information –Projections of financial performance (revenue, income, EPS, etc.) –Management’s plans for future operations –Future economic performance –Assumptions related to the foregoing

17. 1252529 Safe Harbor Conditions Authorization – by issuer or agent or representative (other than underwriter or dealer) No reference to offering – may not include information about offering or information released as part of offering Regularly released – in the ordinary course of business Time/manner/form – consistent with past practice Target audience for non-reporting issuers – persons not in the capacity of investors or potential investors

18. 1252529 Changes to Rule 134 Existing Rule 134 – safe harbor from gun-jumping for limited public notices about an offering after registration statement is filed Amendments - –permit increased information regarding the issuer, the securities and the offering –slightly reduce required disclosures –use of active hyperlink to statutory prospectus

19. 1252529 Communications by WKSIs Rule 163 – Permits oral and written offers to sell securities during prefiling period Prefiling free writing prospectus – written offers permitted before a registration statement is filed: –considered a free writing prospectus –require a legend –must be filed with SEC

20. 1252529 Written Communications Written communications – any communication that is written, printed, a radio or television broadcast, or a “graphic communication” Exception to “graphic” – communications that originate live, in real-time to a live audience and do not originate in recorded form Relevance – After filing a registration statement, Section 5(b) generally requires “written communications” that make offers to be in the form of a statutory prospectus; “oral communications” are not covered

21. 1252529 Free Writing Prospectuses Definition – written communication that constitutes an offer to sell securities that does not otherwise satisfy the statutory prospectus requirement Offering participants – underwriters and dealers can use FWPs when issuer is eligible, except prior to filing statutory prospectus in the case of a WKSI

22. 1252529 Conditions on Use of FWPs Use of FWP – can be used to make an offer, subject to: –Prospectus delivery/availability WKSIs: any time, including before filing statutory prospectus Seasoned issuers: statutory prospectus must be on file Non-reporting and unseasoned issuers: statutory prospectus must be on file and delivered with or prior to FWP –Legend referring to registration statement –Restrictions on content –Filing requirement – FWP must be filed if it: is an issuer FWP contains issuer information broadly distributed by an offering participant comprises description of final terms of securities –Record retention

23. 1252529 Special Rules for Certain Communications Media publications and broadcasts –Offers provided or approved by offering participants will be FWPs –If offering participant didn’t pay for the publication statutory prospectus need not precede or accompany publication the publication or information provided to media must be filed within 4 days of discovery

24. 1252529 Special Rules for Certain Communications Road shows –Not a written communication if live, in real-time to a live audience, including live electronic road shows –Prerecorded electronic road shows are FWPs, but no filing requirement except: IPO issuers registering common or convertible equity must file, unless a version of the electronic road show is made available to all potential investors without restriction

25. 1252529 Special Rules for Certain Communications Web postings –Historical information on issuer’s Web site is neither a current offer nor a FWP if the information is: identified as historical information and located in a separate area of the site not incorporated by reference to issuer’s prospectus and not otherwise referred to in the offering

26. 1252529 Research Reports –Rules 137, 138 and 139 provide a safe harbor from gun-jumping for the distribution of research by broker- dealers –Not a safe harbor for issuer –Amendments to Rules 137, 138 and 139 expand permitted issuers and relax restrictions –Research reports in connection with Rule 144A and Reg. S offerings

27. 1252529 Changes to Regulation FD Existing Reg FD - general exemption for communications made in connection with a registered securities offering Exemption narrowed –enumerated communications regulated by other offering related rules –communications that do not constitute “offers” are not exempt Clarifications about offering by selling shareholders

28. 1252529 The SEC's New Securities Offering Reform Rules An Introduction to the Most Significant Changes to the Securities Offering Process in Decades