| (a) The following words and terms, when used in this
section, shall have the following meanings, unless the context clearly
indicates otherwise.
(1) Private Offering Exemptions. The term "Private
Offering Exemptions" refers to §4005.012 and §4005.013 of
the Act.
(2) Limited Offering Exemptions. The term "Limited
Offering Exemptions" refers to the two limited offering exemptions
found in subsections (a)(1) and (a)(2) of §4005.012 of the Act.
The term "Limited Offering Exemption (a)(1)" refers to the exemption
in subsection (a)(1) of §4005.012 of the Act, and the term "Limited
Offering Exemption (a)(2)" refers to the exemption in subsection (a)(2)
of §4005.012 of the Act.
(3) Registration Sections. The term "Registration Sections"
refers to Subchapters A, B, and C of Chapter 4003 of the Act.
(4) Public solicitation. The offer for sale or sale
of the securities of the issuer would not involve the use of public
solicitation under the Private Offering Exemptions if the issuer,
after having made a reasonable factual inquiry has reasonable cause
to believe, and does believe, that the purchasers of the securities
are sophisticated, well-informed investors or well-informed investors
who have a relationship with the issuer or its principals, executive
officers, or directors evincing trust between the parties (namely
close business association, close friendship, or close family ties),
and such purchasers acquire the securities as ultimate purchasers
and not as underwriters or conduits to other beneficial owners or
subsequent purchasers. The use of a registered dealer in a sale otherwise
meeting the requirements of either §4005.0012 or §4005.013
does not necessarily mean that the transaction involves the use of
public solicitation. The offer without advertising to a person who
did not come within the class of persons described in this subsection
does not alone result in public solicitation if the issuer had a reasonable
cause to believe and did believe that such person fell within the
class of persons described, and that such offer was not made indiscriminately.
(5) Well informed. The term "well-informed" could be
satisfied through the dissemination of printed material to each purchaser
prior to his or her purchase, which by a fair and factual presentation
discloses the plan of business, the history, and the financial statements
of the issuer, including material facts necessary in order that the
statements made, in the light of circumstances under which they are
made, not be misleading.
(6) Sophisticated investor. In determining who is a
sophisticated investor at least the following factors should be considered.
(A) The financial capacity of the investor, to be of
such proportion that the total cost of that investor's commitment
in the proposed investment would not be material when compared with
his total financial capacity. It may be presumed that if the investment
does not exceed 20% of the investor's net worth (or joint net worth
with the investor's spouse) at the time of sale that the amount invested
is not material.
(B) Knowledge of finance, securities, and investments,
generally. This criteria may be met by the investor's purchaser representative
if such purchaser representative has such knowledge, so long as such
purchaser representative:
(i) has no business relationship with the issuer;
(ii) represents only the investor and not the issuer;
and
(iii) is compensated only by the investor.
(C) Experience and skill in investments based on actual
participation. This criteria may be met by the investor's purchaser
representative if such purchaser representative has such experience
and skill, so long as such purchaser representative:
(i) has no business relationship with the issuer;
(ii) represents only the investor and not the issuer;
and
(iii) is compensated only by the investor.
(b) Advertisements. The term "advertisements" does
not include the use of the type of printed material as set out in
subsection (a) of this section under the discussion of the term "well-informed."
Further, the main concept to be considered in a definitional analysis
of the term "advertisements," as it is used in the Private Offering
Exemptions is the method of use of the printed material. The following
circumstances, though not intended to be exclusive, will be considered
in determining whether the method of use of any printed material is
within the limits of the Private Offering Exemptions:
(1) limited printing of the material;
(2) limited distribution of the material only to persons
who the issuer, after having made a reasonable factual inquiry has
reasonable cause to believe and does believe are sophisticated investors,
or to persons who have a relationship with the issuer as set forth
in subsection (a) of this section, or to their purchaser representatives;
(3) control of the printing and distribution of the
printed material;
(4) recognition of the necessity of compliance with
the requirements set forth in this subsection on the part of the issuer
and the investor. Such recognition might consist of a printed prohibition
on the front in large type that the circular is for that individual's
confidential use only, and may not be reproduced; and, the use of
a statement warning that any action contrary to these restrictions
may place such individual and the issuer in violation of the Texas
Securities Act.
(c) Number of security holders or purchasers of securities.
In computing the number of purchasers or security holders for the
Private Offering Exemptions, the following criteria shall be used.
(1) There shall be counted as one purchaser or security
holder any purchaser or security holder together with:
(A) any relative or spouse of such purchaser or security
holder who has the same home as such purchaser or security holder;
any relative of such spouse who has the same home as such purchaser
or security holder; any relative or spouse or relative of such spouse
who is a dependent of such security holder;
(B) any trust or estate in which such purchaser or
security holder or any of the persons related to him as specified
in subparagraph (A) or (C) of this paragraph collectively have more
than 50% of the beneficial interest (excluding contingent interests);
and
(C) any corporation or other organization of which
such purchaser or security holder or any of the persons related to
him as specified in subparagraph (A) or subparagraph (B) of this paragraph
collectively are the beneficial owners of more than 50% of the equity
securities (excluding directors' qualified shares) or equity interest.
(2) There shall be counted as one purchaser or security
holder any corporation, partnership, association, joint stock company,
trust, or unincorporated association, organized and existing other
than for the purpose of acquiring securities of the issuer for which
the exemption is claimed under the Private Offering Exemptions.
(3) Any general partner of a limited partnership who
is subject to general liability for the obligations of the limited
partnership and actively engages in the control and management of
the business and affairs of the limited partnership or of the managing
general partner of the partnership shall not be counted as a purchaser
or security holder for purposes of the Private Offering Exemptions.
(4) The Limited Offering Exemptions, as interpreted
in subsections (a) - (j) of this section may not be combined with
the exemptions promulgated pursuant to the Act, §4005.024, contained
in subsections (k) and (l) of this section to exceed sales to 35 unaccredited
investors in a 12-month period.
(5) "Security holders" or "purchasers of securities,"
as those terms are used in the Limited Offering Exemptions do not
include holders of any options granted pursuant to a plan that falls
within the exemption for compensatory or benefit plans provided by
§4005.013 of the Act.
(d) Total number of security holders. The phrase "the
total number of security holders of the issuer" in the Limited Offering
Exemption (a)(1) includes all security holders of the issuer without
regard to their places of residence (within or without the State of
Texas) and without regard to where they acquired the securities. In
determining the number of persons for purposes of the Limited Offering
Exemption (a)(2), prior sales to persons residing outside the State
of Texas and prior sales to Texas residents consummated outside the
State of Texas shall be included unless such sales were made in compliance
with §139.7 of this title (relating to Sale of Securities to
Nonresidents).
(e) Other exemptions. The phrase "exempt under another
provision of this subchapter" in §4005.012(b)(1) means exempt
under any provisions of the Act, other than the Limited Offering Exemption
(a)(1), and subsections (k) and (l) of this section.
(f) Compensation plans and contracts exemption found
in §4005.013 of the Act.
Cont'd... |
