Arizona Administrative Code › Title 14 - PUBLIC SERVICE CORPORATIONS; CORPORATIONS AND ASSOCIATIONS; SECURITIES REGULATION › Chapter 4 - Corporation Commission - Securities › Article 1 - IN GENERAL RELATING TO THE ARIZONA SECURITIES ACT › Section R14-4-105 - Promotional Securities; Definitions

Current through Register Vol. 30, No. 28, July 12, 2024
A. Promotional securities, held by promoters
				of a promotional stage corporation that proposes to make a public offering of
				its securities pursuant to A.R.S. Title 44, Chapter 12, Article 7, except
				pursuant to A.R.S. §
									44-1901,
				shall be subject to a restrictive sales agreement in accordance with the
				provisions of this Section.
B. As
				used in this Section, the following terms have the meaning indicated.
1. "Consideration" includes cash, services
				rendered, and tangible or intangible property.
2. "Earnings per share" means fully diluted
				earnings computed in accordance with generally accepted accounting
				principles.
3. "Promoters" means
				any person who meets any one of the following conditions. Promoter does not
				include an unaffiliated institutional investor or a person who receives either
				securities or proceeds solely as underwriting compensation and who is not a
				promoter under subsection (B)(3)(a), (c), (d), or (e).
a. Alone or in conjunction with one or more
				persons, directly or indirectly, founded, organized, or controls the
				issuer;
b. Directly or indirectly
				receives, as consideration for service and property rendered, 5% or more of any
				class of the issuer's equity securities or 5% or more of the proceeds from the
				sale of any class of the issuer's equity securities;
c. Is an officer, or director of the
				issuer;
d. Directly or indirectly,
				legally or beneficially owns 10% or more of the issuer's outstanding shares
				before or immediately following the public offering;
e. Directly or indirectly, through one or
				more intermediaries, controls or is controlled by, or is under common control
				with, a promoter as defined in subsections (B)(3)(a) through (d).
4. "Promotional stage corporation"
				means a corporation that has no public market for its shares and has no
				significant earnings.
5.
				"Promotional securities" means securities issued to a promoter, at any time
				during the three-year period prior to the proposed public offering date, that
				meet the conditions of subsection (C). Promotional securities shall be limited
				to common stock unless securities other than common stock were issued for the
				primary purpose of evading this Section.
6. "Public market" means a public place of
				exchange where securities are bought and sold, directly or through
				intermediaries. Public market excludes "thin markets" that do not result in
				reliable prices. To determine if the securities trade in a public market, the
				Commission may consider the market history, the public trading volume, the
				spread between the bid and asked prices, the number of market makers, the
				public float, the pricing formula, the marketplace in which the securities
				trade, the length of time the securities have been traded in that marketplace,
				and other relevant factors.
7.
				"Restrictive sales agreement" means an agreement between a promotional stage
				corporation and a promoter, for the benefit of the shareholders of the
				corporation, entered into prior to the proposed public offering of the
				promotional stage corporation's securities, subjecting the promotional
				securities to a sales restriction for up to three years following the proposed
				public offering and including the terms contained in subsection (H). As a
				condition of registration, the issuer shall submit the agreement to the
				Commission for review.
8.
				"Significant earnings" means earnings per share, based upon the issuer's shares
				outstanding immediately before the proposed public offering, of at least one of
				the following. Such test shall not be deemed the exclusive test for the
				determination of "significant earnings."
a.
				5% of the public offering price per common share for the prior fiscal year, or
				the period of the issuer's existence if less than one fiscal year;
b. 4% of the public offering price per common
				share for each of the prior two fiscal years; or
c. 3% of the public offering price per common
				share for each of the prior three fiscal years.
9. "Unaffiliated institutional investor"
				means any unaffiliated bank; investment company registered under the Investment
				Company Act of 1940,
				15 U.S.C.
				80a-1 to 80a -
				64(1994),
				as amended; business development company as defined in Section 2(a)(48) of the
				Investment Company Act of 1940, 15 U.S.C. 80a -
				2(a)(48)
				(1994 & Supp. II 1996), incorporated by reference; small business
				investment company licensed by the U.S. Small Business Administration under
				Section 301 of the Small Business Investment Act of 1958,
				15
				U.S.C. 681(1994), as
				amended; employee benefit plan within the meaning of Title I of the Employee
				Retirement Income Security Act of 1974,
				29
				U.S.C. 1002(3) (1994),
				incorporated by reference; insurance company; private business development
				company as defined in Section 202(a)(22) of the Investment Advisers Act of
				1940, 15 U.S.C. 80b -
				2(a)(22)
				(1994), incorporated by reference; or
				comparable business entity engaged as a substantial part of its business in the
				purchase and sale of securities and that owns less than 20% of the securities
				to be outstanding at the completion of the proposed public offering. Copies of
				documents incorporated by reference do not contain any later amendments or
				editions, are on file in the Office of the Secretary of State, and are
				available from the Securities Division of the Corporation Commission and from
				the Superintendent of Documents, Government Printing Office, Washington, D.C.
				20402.