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SEMINÁRIO DE PRIVATE EQUITY: EMISSÃO DE AÇÕES NO EXTERIOR. Headline goes here. DONALD BAKER Tel: 55-11-3147-5601 Dec 13, 2006 E-mail: dbaker@whitecase.com. Topics. The Initial Decision: Do You Want to Be a Public Company Planning for the Offering Starting the Process

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  1. SEMINÁRIO DE PRIVATE EQUITY: EMISSÃO DE AÇÕES NO EXTERIOR Headline goes here DONALD BAKER Tel: 55-11-3147-5601 Dec 13, 2006 E-mail: dbaker@whitecase.com

  2. Topics • The Initial Decision: Do You Want to Be a Public Company • Planning for the Offering • Starting the Process • U.S. Securities Laws • Registration Process • The Underwriting Process • Keys to Success

  3. I. The Initial Decision: Do You Want to Be a Public Company Benefits: • Access to Capital • Liquidity of Securities • Exit Strategies for stockholders • Employee incentive arrangements • Currency for acquisitions • Marketing of Brand

  4. I. The Initial Decision: Do You Want to Be a Public Company Burdens: • Expenses • Regulation • Market Pressure to Perform • Fiduciary duties • Risks of aborted offering

  5. II. Planning for the Offering • Corporate Governance Structure • Corporate Structure - “Novo Mercado” • Committees – Audit vs. Fiscal Council • Independent Directors • Whether to adopt “anti-takeover” provision • Investor Relations • Director • Public Relations/Media Relations Firm • Website

  6. II. Planning for the Offering Remuneration of Members of Board of Directors (Conselho da Administração) and Directors (Diretoria) • Profit Sharing Plan • Long-term incentive plan : Stock Option vs. Phantom Stock vs. Bonus • Participants as shareholders, not just employees • Attract talented management • Do not generate cash expenses (vs. dilution)

  7. II. Planning for the Offering Selecting an Underwriter: • Analysts in the Industry • Personal Relationship • Underwriter Horsepower • Valuation • Commitment to your transaction Selecting Others in Team: • Attorneys • Auditors

  8. III. Starting the Process • All Hands Organizational Meeting • Scheduling the offering: • Timetable • Financial Statements to be included/Timetable for delivery • Structuring the offering • Primary vs. Secondary • Status Check on Acquisitions and other Developments • “Quiet Period” Begins

  9. IV. U.S. Securities Laws • General • Under the Securities Act of 1933, generally each offer and sale of a security must be registered or exempt • Some limited security exemptions, including: • Rule 144A • Regulation S • Regulation D

  10. IV. U.S. Securities Laws To Whom May Offer Be Made 144A Offering • Qualified Institutional Buyers “QIBs” • US$100 million in securities assets • US$25 million for broker dealers • Determine status from published source or by certificate No General Advertising or Solicitation

  11. IV. U.S. Securities Laws Regulation S Offering Rule 903: Two basic conditions: 1. Offshore transaction 2. No directed selling efforts in U.S.

  12. V. Registration Process (cont.) • Drafting the Prospectus • Industry precedents are helpful • Underwriters’ Preferences • Methodology • Painstaking care • Verification of each sentence • Capturing the essence of the company • Timing • Allocation of resources to process • Due diligence point person • Chief financial officer – projections and financial information

  13. V. Registration Process (cont.) • Prepare Registration Statement • Front cover • Due Diligence Process (include all material information and no material misstatements) • Prior preparations is key • Legal due diligence vs. management due diligence

  14. V. Registration Process Due Diligence Defense • Underwriters must conduct a due diligence investigation in order to benefit from certain defenses under the U.S. Securities Act of 1933 in the event of material misstatements or omissions in the Offering Document. • There is no due diligence defense for Issuers: Issuers are strictly liable (without defenses) for errors and omissions in Offering Document. • Expertized (e.g., audited financials) vs. non-expertized portion

  15. (cont.) V. Registration Process • What constitutes a reasonable investigation? It depends on the circumstances, including: • Nature of Issuer (i.e., size, type, stability of business, whether it is regulated, financial condition, earnings history) • Type of offering; • Quality of management, auditors and outside counsel; and • Time available for investigation.

  16. V. Registration Process (cont.) • Plain English • Non-Financial Disclosure • MD&A (Management Discussion and Analysis) • Financial Statements • Audited financial statements required • Income/Cash Flow Statements - three most recent fiscal years • Balance Sheet - two most recent fiscal years

  17. VI. The Underwriting Process • Signing an underwriting agreement • Day of pricing • Close 3-5 business days thereafter • Comfort letter • Bring-Down Due Diligence • Deliveries at closing • Accountant’s comfort letter • Attorneys opinions – “10b-5” opinion • Shares • Certificates, etc. • Green-shoe closing: Over-allotment of 15% • “Lock-Up”: 180 days

  18. VI. The Underwriting Process Representations and warranties • Typically, an underwriter in an IPO will seek extensive reps and warranties from: • Company • Selling Shareholders Representations and warranties • “Insiders” vs. “Non-insiders” • Registration Rights Agreement - provisions

  19. VII. Keys to Success • Advance Preparation • Anticipate due diligence requests • Anticipate accounting issues • Complete acquisitions/intellectual property work and other major corporate developments

  20. VII. Keys to Success (cont.) • Depth and Expertise in Management • Market expectations • Challenges of workload and timing • Road show presentations • Selecting the Right Deal Team

  21. Worldwide. For Our Clients. www.whitecase.com White & Case, a New York State registered limited liability partnership, is engaged in the practice of law directly and through entities compliant with regulations regarding the practice of law in the countries and jurisdictions in which we have offices.

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