A. Scope of Regulation. This regulation prescribes the form and content of the prospectus required to be filed as part of a registration statement for registration of securities by qualification or notification, and to be used in connection with the offering of securities so registered.
B. Registration by Qualification. A prospectus filed as part of a registration statement for registration of securities by qualification shall contain all the information required by Schedule A.
C. Registration by Notification. A prospectus filed as part of a registration statement for registration of securities by notification shall contain the information required by Schedule A except that the information required by §§F(4), I(2), J, K, L, Q, S(1)(c), and S(2) may be omitted.
D. Legibility of Prospectus. The prospectus may be printed, mimeographed, or typewritten, or prepared by any similar process which will result in clear, legible copies. If printed, it shall be set in clear Roman type at least as large as 10 point modern type, with financial data or other statistical or tabular matter at least as large as 8 point. All type shall be leaded at least 2 points.
E. Presentation of Information in Prospectus.
(1) The prospectus shall contain the information called for by all items of Schedule A required to be answered, except that no reference need be made to inapplicable items, and negative answers to any item may be omitted. None of the other information or documents filed as a part of the registration statement need be included in the prospectus.
(2) Unless clearly indicated otherwise, information set forth in any part of the prospectus need not be duplicated elsewhere in the prospectus. When it is deemed necessary or desirable to call attention to the information in more than one part of the prospectus, this may be accomplished by appropriate cross-references. Instead of restating information in the form of notes to the financial statements, references may be made to other parts of the prospectus where the information is set forth.
(3) The information required in the prospectus need not follow the order of the items in Schedule A. All information contained in the prospectus shall be set forth under appropriate captions or headings reasonably indicative of the principal subject matter set forth under it.
(4) Every prospectus shall include in its forepart a reasonably detailed table of contents showing the subject matter of the various sections or subdivisions and the page number on which each section or subdivision begins.
F. Date of Prospectus.
(1) Each prospectus used after the effective date of the registration statement shall be dated approximately as of the effective date, provided, however, that a revised or amended prospectus used after it need only bear the approximate date of its issuance.
(2) Each supplement to a prospectus shall be separately dated with the approximate date of its issuance.
G. Exchange Offers. If any of the securities being registered are to be offered in exchange for securities of any other issuer, the prospectus shall also include the information which would be required by §§FO of Schedule A if the securities of an issuer were being registered.
H. Preliminary Prospectus. A prospectus filed as part of a registration statement is a preliminary prospectus until the registration statement has become effective. Every preliminary prospectus shall bear on the outside front cover page the following caption underscored or in red ink, "Preliminary Prospectus", and the following statement, in type as large as that generally in the body of the prospectus:
"A registration statement relating to these securities has been filed with the Division of Securities of the Department of Law of Maryland, but has not yet become effective. Information contained herein is subject to completion or amendment. These securities may not be sold, nor may offers to buy be accepted prior to the time the registration statement becomes effective."
I. Required Legend. Every prospectus shall bear the following legend in capital letters on the outside front cover page:
"THESE SECURITIES ARE OFFERED FOR SALE IN THE STATE OF MARYLAND PURSUANT TO REGISTRATION WITH THE DIVISION OF SECURITIES OF THE DEPARTMENT OF LAW OF MARYLAND, BUT REGISTRATION IS PERMISSIVE ONLY AND DOES NOT CONSTITUTE A FINDING THAT THIS PROSPECTUS IS TRUE, COMPLETE, AND NOT MISLEADING, NOR HAS THE DIVISION OF SECURITIES PASSED IN ANY WAY UPON THE MERITS OF, RECOMMENDED, OR GIVEN APPROVAL TO THESE SECURITIES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE."
J. Use of Prospectus.
(1) It is a condition of registration of securities by qualification or notification that a prospectus satisfying the requirements of this regulation shall be sent or given to each person to whom an offer is made as required by §11-502(c) or 11-504(d) of the Maryland Securities Act.
(2) When a prospectus is used more than 9 months after the effective date of the registration statement, the information contained in it shall be as of a date not more than 16 months before the use, so far as the information is known to the user of the prospectus or can be furnished by the user without unreasonable effort or expense.
(3) In addition to the requirements of §J(2), of this regulation, if a prospectus becomes misleading or inaccurate in any material respect, its use shall be discontinued, and it shall be revised or supplemented in such a way that it may not be misleading or inaccurate in any material respect. Three copies of a revised or supplemented prospectus shall be promptly filed with the Commissioner. Nothing in this paragraph shall be taken to relieve any person from the requirements of §11-502(c) or 11-504(d) of the Maryland Securities Act.
K. Definitions. As used in this chapter, the following terms shall have the meanings indicated:
(1) "Affiliate" of, or person "affiliated" with, a specified person, is a person who directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the person specified.
(2) "Control" (including the terms "controlling," "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract, or otherwise.
(3) "Director" means any director of a corporation or any person performing similar functions with respect to any organization whether incorporated or unincorporated.
(4) "Equity security" means any:
(a) Stock or similar security;
(b) Security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or
(c) Such warrant or right.
(5) "Material", when used to qualify a requirement for the furnishing of information as to any subject, limits the information required to those matters as to which an average prudent investor reasonably ought to be informed before purchasing the security registered.
(6) "Officer" means a president, vice-president, secretary, treasurer or principal financial officer, comptroller or principal accounting officer, and any other person performing similar functions with respect to any organization, whether incorporated or unincorporated.
(7) "Predecessor" means a person, the major portion of the business and assets of which another person acquired in a single succession, or in a series of related successions, in each of which the acquiring person acquired the major portion of the business and assets of the acquired person.
(8) "Promoter" includes any person who:
(a) Acting alone or in conjunction with one or more other persons, directly or indirectly takes initiative in founding and organizing the business or enterprise of an issuer;
(b) In connection with the founding and organizing of the business or enterprise of an issuer, directly or indirectly receives in consideration of services or property, or both services and property, 10 percent or more of any class of securities of the issuer or 10 percent or more of the proceeds from the sale of any class of securities. However, a person who receives the securities or proceeds either solely as underwriting commissions or solely in consideration of property may not be deemed a promoter within the meaning of this subsection if the person does not otherwise take part in founding and organizing the enterprise.
(9) "Significant subsidiary" means a subsidiary meeting any one of the following conditions:
(a) The assets of the subsidiary, or the investments in and advances to the subsidiary by its parent and the parent's other subsidiaries, if any, exceed 15 percent of the assets of the parent and its subsidiaries on a consolidated basis;
(b) The sales and operating revenues of the subsidiary exceed 15 percent of the sales and operating revenues of its parent and the parent's subsidiaries on a consolidated basis;
(c) The subsidiary is a parent of one or more subsidiaries and, together with the subsidiaries would, if considered in the aggregate, constitute a significant subsidiary.
(10) "Subsidiary" of a specified person is an affiliate controlled by that person directly, or indirectly through one or more intermediaries.
(11) "Succession" means the direct acquisition of the assets comprising a going business, whether by merger, consolidation, purchase, or other direct transfer. The term does not include the acquisition of control of a business, unless followed by the direct acquisition of its assets. The terms "succeed" and "successor" have meanings correlative to the foregoing.
L. Additional Information. In addition to the information expressly required to be included in a prospectus or a registration statement by this regulation, or both, there shall be added such further information, if any, as may be necessary in order to make the statements made in a prospectus or a registration statement, or both, in the light of the circumstances under which they are made, not misleading.
M. Guidelines. Registrants should consult releases issued by the Division of Securities from time to time respecting guidelines as to compliance with the procedural, form and contents requirements for a registration statement and a prospectus set forth in this regulation.
A. Distribution Spread.
(1) The information called for by the following table shall be given, in substantially the tabular form indicated, on the outside front cover page of the prospectus as to all securities being offered which are to be offered for cash (estimate, if necessary).
(a) Any variation from the price set forth in the first column of the table at which any proportion of the offering is to be made to any person or class of persons other than the underwriters shall be disclosed following the table with a reference to it in the first column of the table. Specify the person or class and the proposed offering price to that person or class.
(b) "Commissions" means all cash commissions or discounts paid or to be paid, directly or indirectly, by the issuer or selling security holders to the underwriters in respect of the sale of the security to be offered. A commission paid or to be paid in connection with the sale of a security by a person in which the issuer has an interest or which is controlled or directed by, or under common control with, the issuer shall be deemed to have been paid by the issuer. Only commissions paid by the issuer or selling security holders are to be included in the table. Commissions paid by other persons shall be set forth following the table with a reference to it in the second column of the table.
(c) If securities, contracts, or anything else of value (other than cash) is to accrue to the underwriters in connection with the offering, the amount and nature of the considerations shall be set forth following the table with a reference to it in the second column of the table.
(d) If any finder's fees are to be paid in connection with the offering, the name and address of each recipient of it, together with the amount and nature of the fee, shall be set forth following the table with a reference to it in the second column of the table.
(e) If the underwriting discounts or commission are variable, set forth their maximum and minimum amounts in the second column of the table and set forth the maximum and minimum proceeds in the third column of the table. The basis of determining the discounts and commissions shall be set forth following the table with a reference to it in the second and third columns of the table.
(f) An estimate of the aggregate selling expenses (other than underwriting discounts and commissions and finder's fees) payable by the issuer or selling security holders shall be set forth following the table with a reference to it in the third column of the table. The estimate shall include printing, legal, engineering, accounting, and other charges.
(g) If it is impracticable to state the price to the public, the method by which it is to be determined shall be explained. In addition, if the securities are to be offered at the market, indicate the market involved and the market price as of the latest practicable date.
(h) If any of the securities being registered are to be offered for the account of security holders, refer on the outside front cover page of the prospectus to the information called for by §H.
B. Plan of Distribution.
(1) If the securities being registered are to be offered through underwriters, give the names and addresses of the underwriters, their relationship, if any, to the issuer and state briefly the nature of the underwriters' obligation to take the securities.
(2) Instruction. All that is required as to the nature of the under writers' obligation is whether it is a "firm commitment" under which the underwriters must take and pay for all of the securities, if any are taken, or whether it is merely an agency or "best efforts" arrangement under which the underwriters are required to take and pay for only such securities as they may sell to the public.
(3) Outline briefly the plan of distribution of any securities being registered which are to be offered otherwise than through an underwriter.
C. Use of Proceeds to Issuer.
(1) State the principal purposes for which the net proceeds to the issuer from the offering are intended to be used, and the approximate amount intended to be used for each purpose.
(a) Details of proposed expenditures are not to be given; for example, there need be furnished only a brief outline of any program of construction or addition of equipment.
(b) Include a statement as to the use of the actual proceeds if they are not sufficient to accomplish the purposes set forth and the order of priority in which they will be applied.
(c) If any material amounts of other funds are to be used in conjunction with the proceeds, state the amounts and sources of the other funds.
(d) If any material amount of the proceeds is to be used to acquire assets, otherwise than in the ordinary course of business, briefly describe the assets and give the names of the persons from whom they are to be acquired. State the purchase price of the assets, the names of any persons who have received or are to receive commissions in connection with the acquisition, the amounts of the commissions and any other expense in connection with the acquisition.
D. Sales Otherwise than for Cash. If any of the securities being registered are to be offered otherwise than for cash, state briefly the general purposes of the distribution, the basis upon which the securities are to be offered, the amount of compensation and other expenses of distribution, and by whom they are to be borne.
E. Capitalization and Long-Term Debt.
(1) Furnish the information called for by the following table, in substantially the tabular form indicated, as to each class of securities of the issuer and each class of securities, other than those owned by the issuer or its totally-held subsidiaries, of all significant subsidiaries of the issuer.
or to be
as of a
Amount to be
(a) Securities held by or for the account of the issuer thereof are not to be included in the amount outstanding, but the amount so held shall be stated in a note to the table.
(b) If any of the securities were issued within the last 2 years or will be issued for a consideration other than cash at least equal to par value, disclose in appropriate footnotes to the table the amount and kind of the consideration.
F. Financial Statements.
(1) Furnish in comparative columnar form a profit and loss statement and analysis of surplus for each of the last 3 fiscal years of the issuer (or for the life of the issuer and its immediate predecessors, if less) preceding the date of the balance sheet furnished and for any period subsequent to the latest of the fiscal years and the date of the balance sheet.
(2) Registration of Securities by Notification.
(a) If the prospectus is filed as part of a registration statement for registration of securities by notification, instead of the profit and loss statement and analysis of surplus required in §(1), above, furnish in comparative columnar form a summary of earnings for each of the 2 fiscal years preceding the date of the balance sheet and for any period between the close of the last fiscal year and the date of the balance sheet, or for the period of the issuer's and any predecessor's existence if less than 2 years.
(b) The summary shall cover a representative period and, subject to appropriate deviation to correspond to significant characteristics of the issuer, the following items shall be included:
(i) Net sales or operating revenues;
(ii) Cost of goods sold or operating expenses (or gross profit);
(iii) Interest charges;
(iv) Income taxes;
(v) Net income;
(vi) Special items;
(vii) Net income and special items.
(c) The summary shall reflect the retroactive adjustment of any material items affecting the comparability of the results.
(d) Appropriate footnotes to the summary, including references to other parts of the prospectus, shall be furnished whenever necessary to reflect information or explanations of material significance to investors in appraising the results shown.
(e) If common stock is being registered, the summary shall be prepared to present earnings applicable to common stock.
(f) Earnings per share and dividends declared for each year of the summary shall also be included when appropriate.
(3) Furnish a balance sheet of the issuer as of a date within 4 months before the filing of the registration statement.
(4) If any part of the proceeds of the offering is to be applied to the purchase of any business, furnish with respect to that business, the financial statements required in this section.
G. Organization of Issuer. With respect to the issuer and any significant subsidiary of the issuer, state:
(1) The year in which it was organized;
(2) Its form or organization (such as "a corporation", "an unincorporated association" or other appropriate statement);
(3) The name of the state or other jurisdiction under the laws of which it was organized; and
(4) The address of its principal executive offices.
H. Selling Security Holders. With respect to each person on whose behalf any part of the offering is to be made in a non-issuer distribution, provide the following information:
(1) His name and address;
(2) The amount of securities of the issuer held by him as of the date of the filing of the registration statement; and
(3) A statement of his reasons for making the offering.
I. Description of Business.
(1) Briefly describe the business done and intended to be done by the issuer and its significant subsidiaries, and the general development of the business during the past 5 years. If the business consists of the production or distribution of different kinds of products or the rendering of different kinds of services, indicate, insofar as practicable, the relative importance of each product or service, or class of similar products or services, which contributed 15 percent or more to the gross volume of business done during the last fiscal year.
(a) The description may not relate to the powers and objects specified in the charter, but to the actual business done and intended to be done.
(b) In describing developments, information shall be given as to matters such as the following:
(i) The nature and results of any bankruptcy, receivership, or similar proceedings with respect to the issuer or any of its significant subsidiaries;
(ii) The nature and results of any other materially important reorganization, readjustments, or succession of the issuer or any of its significant subsidiaries;
(iii) The acquisition of any material amount of assets otherwise than in the ordinary course of business;
(iv) Any materially important changes in the types of products produced or services rendered by the issuer and its significant subsidiaries; and
(v) Any materially important changes in the mode of conducting the business, such as fundamental changes in the methods of distribution.
(3) Indicate briefly, to the extent material, the general competitive conditions in the industry in which the issuer and its significant subsidiaries are engaged or intend to engage, and the position of the enterprise in the industry. If several products or services are involved, separate consideration should be given to the principal products or services or classes of products or services.
J. Description of Property.
(1) State briefly the location and general character of the principal plants, mines, and other materially important physical properties of the issuer and its significant subsidiaries. If any such property is not held in fee or is held subject to any major encumbrance, so state and briefly describe how it is held.
(2) Instruction. The description should be limited to information essential to an investor's appraisal of the securities being registered. In the case of a manufacturing enterprise, for example, the answer should be limited to such over-all statements as will reasonably inform investors as to the suitability, adequacy, and productive capacity of the facilities used in the enterprise. In the case of an extractive enterprise, appropriate information should be given as to production and reserves. Detailed descriptions of the physical characteristics of individual properties, or legal descriptions by metes and bounds, are not required and should not be given.
K. Organization Within 3 Years. If the issuer was organized within the past 3 years otherwise than as the successor to one or more predecessors, furnish the following information:
(1) State the names, addresses, and principal occupations for the past 5 years of the promoters; state the nature and amount of anything of value (including money, property, contracts, options, or rights of any kind) received or to be received by each promoter directly or indirectly from the issuer, and the nature and amount of any assets, services, or other consideration therefore received or to be received by the issuer.
(2) As to any assets acquired or to be acquired by the issuer from a promoter, state the amount at which acquired or to be acquired and the principle followed or to be followed in determining the amount. Identify the persons making the determination and state their relationship, if any, with the issuer or any promoter. If the assets were acquired by the promoter within 2 years before their transfer to the issuer, state the cost of it to the promoter.
(3) Describe any other material interest of a promoter in any material transaction with the issuer or any significant subsidiary effected or proposed to be effected.
L. Pending Legal Proceedings.
(1) Briefly describe any material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which the issuer or any of its subsidiaries is a party, or of which any of their property is the subject. Include the name of the court in which the proceedings are pending, the date instituted and the principal parties to it. Include similar information as to any proceedings known to be contemplated by governmental authorities.
(a) If the business ordinarily results in actions for negligence or other claims, an action or claim need not be described unless it departs from the normal kind of actions.
(b) Information need not be given with respect to any proceeding which involves primarily a claim for damages if the amount involved, exclusive of interest and costs, does not exceed 15 percent of the current assets of the issuer and its subsidiaries on a consolidated basis. However, if any proceeding presents in large degree the same issues as other proceedings pending or known to be contemplated, the amount involved in the other proceedings shall be included in computing the percentage.
(c) Notwithstanding §L(2)(a) and (b), any bankruptcy, receivership, or similar proceeding with respect to the issuer or any of its significant subsidiaries shall be described. Any proceeding in which any of the following persons has an interest adverse to the issuer of its subsidiaries shall also be described:
(i) Any director, officer, or affiliate of the issuer;
(ii) Any security holder named in answer to §R; or
(iii) Any person having a material relationship with the director, officer, or security holder.
M. Capital Stock Being Registered.
(1) If capital stock is being registered, state the title of the class and furnish the following information:
(a) Outline briefly:
(i) Dividend rights;
(ii) Voting rights;
(iii) Liquidation rights;
(iv) Pre-emptive rights;
(v) Conversion rights;
(vi) Redemption provisions;
(vii) Sinking fund provisions; and
(viii) Liability to further calls or to assessment by the issuer.
(b) If the rights of holders of a stock may be modified otherwise than by a vote of a majority or more of the shares outstanding, voting as a class, so state and explain briefly.
(c) Outline briefly any restriction on the repurchase or redemption of shares by the issuer while there is any arrearage in the payment of dividends or sinking fund installments. If there is no restriction, so state.
(a) Only a brief summary of the pertinent provisions from an investment standpoint is required. A complete legal description of the provisions referred to is not required and should not be given. Do not set forth the provisions of the governing instruments verbatim. Only a succinct resume is required.
(b) If the rights evidenced by the securities being registered are materially limited or qualified by the rights of any other class of securities, include the information regarding such other securities as will enable investors to understand the rights evidenced by securities being registered. Information need not be given, however, as to any class of securities, all of which will be redeemed and retired, provided appropriate steps to assure the redemption and retirement will be taken before or upon delivery by the issuer of the securities being registered.
N. Long-Term Debt Being Registered. If long-term debt is being registered, state the title of the issue and outline any of the following provisions that are relevant:
(1) Provisions with respect to interest, maturity, conversion, redemption, amortization, sinking fund, or retirement;
(2) Provisions with respect to the kind and priority of any lien, restricting the declaration of dividends or requiring the maintenance of any ratio of assets, the creation or maintenance of reserves, or the maintenance of properties;
(3) Provisions permitting or restricting the issuance of additional securities, the incurring of additional debt, the release or substitution of assets securing the issue, the modification of the terms of the security, and similar provisions;
Instruction. Provisions permitting the release of assets upon the deposit of equivalent funds, property no longer required in the business, obsolete property, or property taken by eminent domain, need not be described.
(4) The name of the trustee and the nature of any material relationship with the issuer or any of its affiliates, the percentage of securities of the class necessary to require the trustee to take action, and what indemnification the trustee may require before proceeding to enforce the lien.
Instruction. The instructions to §M of this regulation shall also apply to this item.
O. Other Securities Being Registered. If securities other than capital stock or long-term debt are being registered, outline briefly the rights evidenced by it. If subscription warrants or rights are being registered, state the title and amount of securities called for, the period during which and the prices at which the warrants or rights are exercisable.
Instruction. The instructions to §M shall also apply to this item.
P. Directors and Officers.
(1) List the names and addresses of all directors and officers of the issuer and all persons chosen to become directors or officers. Indicate all positions and offices with the issuer held by each person named, and the principal occupations during the past 5 years of each officer and each person chosen to become an officer. State the amount and type of securities of the issuer held by each person named as of a specified date within 30 days of the filing of the registration statement, and the amount of the securities covered by the registration statement to which he has indicated his intention to subscribe.
(2) Instruction. If any person chosen to become a director or officer has not consented to act as such, so state.
Q. Remuneration of Directors and Officers.
(1) State the amount of the aggregate remuneration which the issuer (together with all predecessors, parents, subsidiaries, and affiliates) paid to, or set aside or accrued for the benefit of all directors and officers as a group during the past 12 months and estimate the remuneration for the next 12 months.
(a) This item applies to any person who was a director or officer of the issuer at any time during the fiscal year. However, remuneration is not to be included for any portion of the period during which the person was not a director or officer of the issuer.
(b) To the extent that the remuneration is to be computed upon the basis of a percentage of profits, it will suffice to state the percentage without estimating the amount of profits to be paid.
(c) State separately the total amount set aside or accrued during the periods pursuant to all pension, retirement or other deferred compensation plans for the benefit of directors or officers.
R. Principal Holders of Equity Securities.
(1) Furnish the following information, in substantially the tabular form indicated, as to each person who owns of record, or beneficially if known, 10 percent or more of the outstanding shares of any class of equity security of the issuer as of a specific date within 30 days before the date of filing.
|Name and Address||Title of
(2) Instruction. Indicate by footnotes the amount of the securities covered by the registration statement to which any person named in the table has indicated his intention to subscribe.
S. Interest of Management and Others in Certain Transactions.
(1) Describe briefly, and where practicable state the approximate amount of any material interest, direct or indirect, of any of the persons specified below in any material transactions during the last 3 years, or in any material proposed transactions, to which the issuer or any of its subsidiaries was or is to be a party:
(a) Any director or officer of the issuer;
(b) Any security holder named in answer to §R;
(c) Any person on whose behalf any part of the offering is to be made in non-issuer distribution;
(d) Any person (other than the issuer or its subsidiaries) with whom any of the foregoing persons had a material relationship.
(2) State the dates of, the parties to, and the general effect of every management or other material contract made or to be made otherwise than in the ordinary course of business, if it is to be performed in whole or in part at, or after, the filing of the registration statement, or was made within the past 2 years.
T. Options to Purchase Securities. Furnish the following information as to options to purchase securities from the issuer or any of its subsidiaries, which are outstanding as of a specified date within 30 days before the date of filing, or which are to be created in connection with the offering.
(1) Describe the options, stating the material provisions including the consideration received, or to be received, by the grantor of it and the market value of the securities called for on the granting date. If, however, the options are "restricted stock options" as defined in §421 of the Internal Revenue Code of 1954 only the following is required:
(a) A statement to that effect;
(b) A brief description of the terms and conditions of the options or the plan pursuant to which they were issued; and
(c) A statement of the provisions of the plan or options with respect to the relationship between the option price and the market price of the securities at the date when the options were granted, or with respect to the terms of any variable price option.
(a) The title and amount of the securities called for by the options;
(b) The purchase prices of the securities called for and the expiration dates of the options; and
(c) The market value of the securities called for by the options as of the latest practicable date.
(3) State the amount of the options held or to be held by each of the following persons:
(a) Any director or officer of the issuer;
(b) Any security holder named in answer to §R;
(c) Any promoter named in answer to §K;
(d) Any person on whose behalf any part of the offering is to be made in a non-issuer distribution;
(e) Any underwriter or recipient of a finder's fee;
(f) Any person who holds or will hold 10 percent or more in the aggregate of the options.
(4) Instruction. The term "options" as used in this section includes all options, warrants, and rights other than those issued to security holders as such on a pro rata basis.