December 12, 2007

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Securities Law Update


The Securities and Exchange Commission ("SEC") voted to approve changes to Form D, Notice of Sale of Securities Pursuant to Regulation D, Section 4(6), and/or Uniform Limited Offering Exemption, on December 11, 2007. The adopted revisions will require electronic filing of Form D. Additionally, Form D's content has been revised. Form D will be modified to include:

• Requiring filers to identify all issuers in a multiple-issuer offering;

• Deleting the current requirement to identify as "related persons" owners of 10 percent or more of a class of equity securities;

• Replacing the current requirement to provide a business description with a requirement to provide industry group information from a pre-established list;

• Requiring revenue range information for operating companies and net asset value information for hedge funds (subject to an option to decline to disclose);

• Requiring reporting the date of first sale;

• Specifying that material mistakes of fact or errors in a previously filed Form D require an amendment and when changes in a previously filed Form D or the passage of time require amendments;

• Requiring that amendments contain current information in response to all information requirements;

• Revising the minimum investment amount disclosure requirement to specify that it relates to outside investors only;

• Replacing the current requirement to disclose information on a wide variety of expense and use of proceeds items with a requirement to disclose expenses only as to amounts paid for sales commissions and, separately stated, finders' fees and disclose use of proceeds only as to the amount of gross proceeds used or proposed to be used for payments to related persons; and

• Permitting a limited amount of free writing to the extent necessary to clarify responses.

Permissive electronic filing will begin on September 15, 2008 and mandatory electronic filing will begin on March 16, 2009. Revised Form D will become effective on September 15, 2008. The revisions to and use of electronic filing for Form D are intended to reduce filing burdens and thus, improve capital formation, particularly for smaller issuers.

The SEC also adopted amendments to the eligibility requirements for Form S-3 and its counterpart for foreign issuers, Form F-3. Companies that do not meet the current public float requirement will become eligible to use Forms S-3 and F-3 to register primary offerings of their securities. The SEC estimates that approximately 1,400 smaller reporting companies will become eligible under the new eligibility requirements. Smaller reporting companies, with less than $75 million in public float, will be limited to selling not more than one-third of their public float in primary offerings in any period of 12 calendar months.

Smaller reporting companies, with less than $75 million in public float will be eligible to use Forms S-3 and F-3 so long as they meet all the other requirements of the respective form, are not shell companies and have not been a shell company for at least 12 calendar months prior to the filing of the registration statement, have a class of common equity securities listed and registered on a national securities exchange and do not exceed the one-third of public float limitation.

Because Forms S-3 and F-3 allow for short form registration, smaller issuers will have greater flexibility in accessing the capital markets. The effective date for revised Forms S-3 and F-3 will be 30 days after their publication in the Federal Register.

If you have any questions or to obtain additional information about SEC regulatory developments, please contact James Brophy or Jessica Benford.