Section 3(a)(11) of the Securities Act of 1933 is generally known as the "intrastate offering exemption." It exempts from registration any security which is part of an issue offered and sold only to residents of a single state or territory by an issuer that is both a resident of and doing business within that state or territory. This exemption is intended to facilitate the local financing of local business operations. In order to quality for the intrastate offering exemption, your company must:

• Be incorporated in the state where it is making the offering;
• Carry out a significant amount of its business in that state; and
• Make offers and sales only to residents of that state.

Although there is no fixed limit on the size of the offering or the number of purchasers, your company has the obligation to determine the residence of each purchaser. If any of the securities are offered or sold to one out-of-state purchaser, the exemption will be lost. In addition, if any of the securities are resold by an original resident purchaser to a person resident outside the state within nine months after the offering by the issuer is completed, the entire transaction may be in violation of the Securities Act. Therefore, there is usually no significant after-market for any securities issued in an intrastate offering during the nine-month period following the initial sale.

It is difficult for you as an issuer to rely on the intrastate exemption unless your company knows the purchasers and the sale is directly negotiated with them. A company with some of its assets outside the state, or deriving a substantial portion of its revenues outside the state where it proposes to offer its securities, will probably have a difficult time justifying the exemption.

The SEC has adopted Rule 147, a "safe harbor" rule, which may be followed by companies to be certain they meet the requirements for this exemption. It is possible, however, that transactions not meeting all requirements of Rule 147 may still quality for the exemption.