Regulation S

Regulation S provides an exclusion from the Section 5 registration requirements of the Securities Act for offers made outside the United States by both U.S. and foreign issuers to non-U.S. persons. A securities offering, whether private or public, made by an issuer outside of the United States in reliance on Regulation S is not required to be registered under the Securities Act of 1933, as amended (the “Securities Act”). Regulation S provides safe harbors that are non-exclusive; as a result, an issuer that relies on Regulation S also may claim the availability of another applicable exemption from registration. Regulation S is available for offerings of both equity and debt securities.

Market participants may rely on the issuer and resale safe harbors of Regulation S only if (1) the offer or sale is made as part of an “offshore transaction” and (2) none of the parties make any “directed selling efforts” in the United States. The “parties” in an initial issuance, under Rule 903, would be the issuer, a distributor, any of their respective affiliates or any person acting on behalf of any of the foregoing. In a resale transaction under Rule 904, the “parties” would be any person other than the issuer, a distributor, any of their respective affiliates (except any officer or director who is an affiliate solely by virtue of holding such position), and any person acting on behalf of any of the foregoing. In addition, offerings made in reliance on Rule 903 are subject to additional restrictions that are connected with the level of risk that securities in a particular type of transaction will flow back into the United States.

Rule 903 prescribes three categories of transactions (summarized below) based on the type of securities being offered and sold, whether the issuer is domestic or foreign, whether the issuer is a reporting issuer under the Exchange Act and whether there is a “substantial U.S. market interest,” or “SUSMI.”

“Category 1” transactions are those in which the securities are least likely to flow back into the United States. Therefore, the only restrictions are that the transaction must be an “offshore transaction” and that there be no “directed selling efforts” in the United States.

“Category 2” and “Category 3” transactions are subject to an increasing number of offering and transactional restrictions for the duration of the applicable “distribution compliance period.” A “distribution compliance period” is the period following the offering when any offers or sales of Category 2 or 3 securities must be made in compliance with the requirements of Regulation S in order to prevent the flow back of the offered securities into the United States. The period ranges from 40 days to six months for reporting issuers or one year for equity securities of non-reporting issuers.