Securities Lawyer's Deskbook                          published by The University of Cincinnati College of Law

Item 508 -- Plan of Distribution

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1. Underwriters and underwriting obligations. If the securities are to be offered through underwriters, name the principal underwriters, and state the respective amounts underwritten. Identify each such underwriter having a material relationship with the small business issuer and state the nature of the relationship. State the nature of the obligation of the underwriter(s) to take the securities, i.e., firm commitment, best efforts. The small business issuer must disclose the offering expenses specified in Item 511 of this Regulation S-B. If there is an arrangement under which the underwriter may purchase additional shares in connection with the offering, such as an over- allotment option, describe that arrangement and disclose information on the total offering price, underwriting discounts and commissions, and total proceeds assuming the underwriter purchases all of the shares subject to that arrangement.
   
   
2. New underwriters. Describe the business experience of managing or principal underwriters that have been in business less than three years, state their principal business function and identify any material relationships between the promoters of the issuer and the underwriter(s). This information need not be given if:
   
   
   1. The issuer is a reporting company; and
      
      
   2. An offering has no material risks.
      
      
3. Other distributions. Outline briefly the plan of distribution of any securities to be registered that are to be offered otherwise than through underwriters.
   
   
4. Underwriter's representative on the board of directors. Describe any arrangement whereby the underwriter has the right to designate or nominate a member or members of the board of directors of the small business issuer. Identify any director so designated or nominated and indicate any relationship with the small business issuer.
   
   
5. Indemnification of underwriters. If the underwriting agreement provides for indemnification by the small business issuer of the underwriters or their controlling persons against any liability arising under the Securities Act, furnish a brief description of such indemnification provisions.
   
   
6. Dealers' compensation. State briefly the discounts and commissions to be allowed or paid to dealers, including all cash, securities, contracts or other considerations to be received by any dealer in connection with the sale of the securities.
   
   
7. Finders. Identify any finder and describe the nature of any material relationship between such finder and the small business issuer or associates or affiliates of the small business issuer.
   
   
8. Discretionary accounts. If the small business issuer is not a reporting company, identify any principal underwriter that intends to sell to any discretionary accounts and include an estimate of the amount of securities so intended to be sold. The response to this paragraph shall be contained in a pre-effective amendment which shall be circulated if the information is not available when the registration statement is filed.
   
   
9. Passive market making. If the underwriters or any selling group members intend to engage in passive market making transactions as permitted by Rule 103 of Regulation M, indicate such intention and briefly describe passive market making.
   
   
10. Stabilization and other transactions.
    
    
    1. Briefly describe any transaction that the underwriter intends to conduct during the offering that stabilizes, maintains, or otherwise affects the market price of the offered securities. Include information on stabilizing transactions, syndicate short covering transactions, penalty bids, or any other transaction that affects the offered security's price. Describe the nature of the transactions clearly and explain how the transactions affect the offered security's price. Identify the exchange or other market on which these transactions may occur. If true, disclose that the underwriter may discontinue these transactions at any time;
       
       
    2. If the stabilizing began before the effective date of the registration statement, disclose the amount of securities bought, the prices at which they were bought, and the period within which they were bought. If you use Rule 430A of this chapter, the final prospectus must contain information on the stabilizing transactions that took place before the public offering price was set; and
       
       
    3. If you are making a warrant or rights offering of securities to existing security holders and the securities not purchased by existing security holders are to be reoffered to the public, disclose the following information in the reoffer prospectus:
       
       
       1. The amount of securities bought in stabilization activities during the offering period and the price or range of prices at which the securities were bought;
          
          
       2. The amount of the offered securities subscribed for during the offering period;
          
          
       3. The amount of the offered securities purchased by the underwriter during the offering period;
          
          
       4. The amount of the offered securities sold by the underwriter during the offering period and the price or range of prices at which the securities were sold; and
          
          
       5. The amount of the offered securities that will be reoffered to the public and the offering price.

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