203.01 An issuer may extend the exercise period for warrants and/or reduce the warrant exercise price through the filing and issuance of an appropriate Rule 424(b) prospectus supplement prior to the initial expiration date of the warrants. The issuer may not permit the exercise of such modified warrants, however, unless a current prospectus under Section 10(a)(3) with respect to the shares underlying the warrants is delivered. [Nov. 26, 2008]

203.02 A holding company reorganization is to be carried out pursuant to Section 251(g) of the Delaware General Corporation Law and would not trigger a shareholder vote or appraisal rights. The purpose of the reorganization is to obtain more favorable tax treatment for an acquisition transaction with a third party, and its consummation is a condition to closing the acquisition. When the reorganization is viewed together with the acquisition, the overall transaction changes the nature of the shareholders’ investment. Thus, such reorganization may involve a “sale” or “offer to sell” for the purposes of Section 2(a)(3) and Rule 145. [Nov. 26, 2008]

203.03 An issuer eligible to use Form S-3 proposes to sell debt securities convertible into the common stock of an unaffiliated reporting company. The shares of common stock are restricted securities but may be resold freely in the public market under Rule 144. The registration statement for the offering need only cover the debt securities if the exemption provided by Section 4(1) is available for the sale of the common stock of the unaffiliated reporting company upon conversion of the debt securities. With respect to the information to be provided regarding the issuer of the underlying common stock, see the Morgan Stanley & Co., Incorporated no-action letter (June 24, 1996) issued by the Division. [Nov. 26, 2008]

203.04 Company A purchased approximately 52% of the outstanding common stock of Company B in a tender offer. Company A proposes to complete the acquisition by means of a reverse statutory merger whereby Company B will become an indirect wholly-owned subsidiary of Company A. The plan of merger provides that each remaining share of Company B’s common stock will be exchanged for cash and a note to be issued by Company B. As soon as possible after the merger, a reorganization will be effected in which Company B will be liquidated, its assets distributed to approximately 50 indirect wholly-owned subsidiaries of Company A, and its liabilities (including the notes issued in connection with the merger) assumed by another wholly-owned subsidiary of Company A, New Company B, whose assets will consist of stock of the 50 operating subsidiaries. Because Company A already owns the requisite number of shares of Company B common stock to approve the merger, Company B will not solicit proxies in connection with the merger and therefore no commission or remuneration will be paid in connection with a solicitation. Shareholders will receive an information statement containing the information required to be provided by Regulation 14C and Rule 13e-3.

Since Company B will exist before and after the merger and will exchange notes with its own security holders, counsel took the position that Section 3(a)(9) would exempt the exchange from registration. Counsel also took the view that the assumption of the notes by New Company B in connection with the reorganization would not require registration under the Securities Act since such assumption did not constitute a “sale” or “offer to sell” as defined in Section 2(a)(3). Counsel’s no-sale theory was based on the fact that the noteholders would neither exchange the notes for new notes nor give up any value, since they would not have relinquished any rights attached to the notes. Further, the terms of the notes permit substitution of a successor obligor. Finally, counsel argued that Rule 145 would be inapplicable to the reorganization, since noteholders will not vote on or consent to the reorganization or assumption of the notes by New Company B.

Counsel’s position was premised on treating the merger and reorganization as discrete, independent transactions or, alternatively, as one transaction in which New Company B would be substantially similar to Company B and thereby be a successor issuer. The staff viewed the merger and reorganization as one transaction in which New Company B’s corporate structure, operations and financial condition might differ materially from Company B’s. Because the merger and reorganization may result in a substantial change, Company B and New Company B were viewed as different issuers for purposes of Section 3(a)(9). Furthermore, given the time proximity between the merger and reorganization, New Company B could be viewed as the issuer of the notes. Therefore, the notes were required to be registered prior to presenting the proposal at the special shareholder’s meeting. [Nov. 26, 2008]

203.05 A letter to be sent to holders of limited partnership units in various oil and gas programs, for the purpose of determining their interest in converting the smaller programs into one new large program, may involve the offer of a security of the new program within the meaning of Sections 2(a)(3) and 5. Any such communication, if it is an offer, would either have to be registered under the Securities Act or exempt from Securities Act registration. For registered offerings, Rule 135 would permit a simple notice describing the purpose and terms of such an offering, but would not allow the solicitation of indications of interest. [Nov. 26, 2008]

203.06 Statutory mergers by means of security holders’ vote are defined by Rule 145(a)(2), for purposes of Section 2(a)(3), as events of sale. The rule excludes from this definition mergers for the sole purpose of changing the issuer's state of incorporation. The exclusion itself is limited to migratory transactions occurring exclusively within the United States, from one state to another. Despite the rule’s express domestic limitation, similar transactions changing a foreign issuer’s domicile from one political subdivision of a country to another (such as reincorporation from one Canadian province to another) likewise should not be treated as a sale. However, if a non-U.S. corporation undertakes a merger to incorporate within the United States, the migratory transaction is an event of sale that must be registered with the Commission or exempt from registration. [Nov. 26, 2008]