Programs to reserve shares in a public offering

• Shares are reserved for sale to employees, customers
  or others with a relationship to the issuer
• Sometimes called a friends and family program

Use of DSPs has raised concerns

• NYSE/NASD IPO Advisory Committee recommended that DSPs be limited to 5% of issue

• Committee report  2003   Item 12 at page 19
• Also recommended that any lock-up also apply to DSP

• Satisfaction of prospectus delivery requirement

• Still an issue even after new SEC rules allow electronic delivery
• See Vonage Customer DSP below

2006

Alphatec Holdings

• S-1 Amendment #6 5.31.06 

• See Underwriting - Directed share program  At page 125
• Underwriting agreement

• 5% reserved for sale to employees and others

VeriChip

• S-1 Amendment #2 5.25.06

• See Underwriting - Directed share program  At page 116
• Underwriting agreement

• 5% reserved for sale to current shareholders

Vonage

• Program for retail customers may trigger rescission rights
• See Vonage Customer DSP Program below

MasterCard

• Final prospectus 5.24.06

• See Underwriting - Directed share program at page 155
• Underwriting agreement

• 1.35mm shares reserved for management and directors

Burger King Holdings

• Final prospectus 5.18.06

• See Underwriting - Directed share program at page 125
• Underwriting agreement

• 10% reserved for management, employees and franchisees

Sealy

• Final prospectus 4.06.06

• See Underwriting - Directed share program at page 125
• Underwriting agreement

• 4.1% reserved for management

Nighthawk Radiology

• Final prospectus 2.08.06

• See Underwriting - Directed share program at page 98
• Underwriting agreement

• 4.6% reserved for management

Vonage IPO used a DSP for its customers

• 13.5% of $531mm offering reserved for customers

• Retail users of its VOIP internet telephone service

• Prospectus description
• Company FAQs
• Underwriting agreement

Company webpage

Notices to DSP participants

Vonage shares have declined over 30% since its IPO

• Shares were sold in IPO at $17 per share on 5.23.06

• Closed at $11.63 on 6.01.06
• VG stock chart

Vonage acknowledges possible DSP rescission right

• Because intitial DSP e-mail and first page of DSP website didn't have an active hyperlink to prospectus

• As required by Rule 433

• Because of issues with a Vonage voice mail pitch

• Final prospectus discussion At page 140   5.23.06
  Vonage claims to have meritorious defenses
• Summary of changes made in S-1 Amendment #6 5.22.06
• Initial DSP e-mail

• Insists that DSP participants are obligated to pay for shares

• Press release 5.31.06

• News items

• BusinessWeek
• BusinessWeek

• Also see Rescission offers

IPO Issues