Privileged and Confidential Memorandum

{00041178.DOC.1}
PRIVILEGED AND CONFIDENTIAL M E M O R A N D U M
To:
From: Ellenoff Grossman & Schole LLP
Re: Best Practices-- Private Placement In Public Equities (PIPEs)
Date: March 2007
We have prepared this Memorandum in order to provide you with guidance as to
“best practices and procedures” related to its corporate finance activities, namely raising
capital in the form of privately-placed securities, commonly referred to as PIPEs, for
existing publicly-traded issuers (pursuant to the rules and regulations of both the
Securities Act of 1933 and the Exchange Act of 1934).
By their nature, these suggestions are intended to be broad guidelines and are not
exhaustive of the various details that are required to effectuate any proposed financing
engagement. Additionally, while most PIPE engagements have many similarities, we do
recognize that there are also many differences (securities being offered, type of issuer as
well as investor profiles), and consequently, while we would recommend that any NASD
member firm consider all of these policies and procedures-- not all licensed firms
currently conducting PIPE offerings (institutional in particular) strictly follow each of
these suggestions.
Part I. Policies and Procedures with Regard to Implementing a PIPE
We have focused on two different types of PIPE offerings for purposes of this
memorandum, which are generally referred to as the “Retail PIPE” and the “Institutional
PIPE.” A Retail PIPE is a financing being marketed to both institutional and individual
investors. An Institutional PIPE is a financing being marketed solely to institutional
investors, and is usually initiated by a term sheet sent by the placement agent to potential
investors.
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