(a) Under section
203(r) of the
act (
70 P.S. §
1-203(r)), the
Department
finds that it is not in the public interest or necessary for the protection of
investors to require the registration under section 201 of the act
(
70
P.S. §
1-201) for securities to be
offered but not sold to an applicant filing a registration statement for its
securities under section 206 of the
act (
70 P.S. §
1-206) before the effectiveness of the
registration statement if all of the following criteria are met:
(1) The applicant has done all of the
following:
(i) Filed a registration statement
under section 206 of the act to register the securities for which offers will
be made.
(ii) Filed a written
opinion of management which states that all of the following conditions apply
to the applicant:
(A) The business, including
any predecessor, is an existing business which possesses a history of
operations of 4 years or more.
(B)
The business, including any predecessor, maintains and will continue to
maintain a place of business in this Commonwealth which employs at least 25
persons.
(C) The business,
including any predecessor, has averaged annual gross revenues of at least
$500,000 for the past 2 years.
(D)
The business, including any predecessor, possesses at least 4 years of
historical financial information.
(iii) Filed an intention to comply with
paragraph (3) and subsections (b)-(d).
(2) The minimum amount of the proceeds from
the securities to be sold under the registration statement described in
paragraph (1)(i) is $500,000.
(3)
There is a withdrawal procedure as follows:
(i) Nonbinding subscription agreements
received in connection with the offer but not sale of securities made under
this section must contain withdrawal rights which permit the investor to
withdraw moneys tendered under the nonbinding subscription agreements with
accrued interest under one of the following circumstances:
(A) Investors may withdraw moneys tendered
under a nonbinding subscription agreement with accrued interest at any time
before the effectiveness of the registration statement described in paragraph
(1)(i).
(B) Investors may withdraw
moneys tendered under a nonbinding subscription agreement with accrued interest
within 2 business days from the date of receipt of notification of
effectiveness of the registration statement described in paragraph (1)(i), as
set forth in subsection (d).
(ii) Investors are considered automatically
to have withdrawn any moneys tendered under a nonbinding subscription agreement
and the moneys with accrued interest shall be returned to the investors on the
occurrence of any of the following:
(A) The
registration statement described in paragraph (1)(i) does not become effective
within 150 days from the date of filing with the Department, unless extended by
the Department.
(B) The
registration statement described in paragraph (1)(i) is withdrawn by the
applicant.
(C) The Department
denies the registration statement described in paragraph (1)(i), regardless of
whether the denial was a result of a hearing or rehearing requested by the
applicant unless the Department permits, in its Denial Order, that the moneys
remain in escrow pending any request for a rehearing on the Denial
Order.
(b) Moneys tendered under nonbinding
subscription agreements as a result of offers made under this section shall be
placed in interest-bearing escrow accounts in a bank and are subject to the
investor withdrawal rights set forth in subsection (a)(3).
(1) If, before the effectiveness of the
registration statement described in subsection (a)(1)(i), the nonbinding
subscription agreement is withdrawn under subsection (a)(3), the deposit and
accrued interest is payable to the investor.
(2) After the effectiveness of the
registration statement described in subsection (a)(1)(i), the deposit plus
accrued interest is payable to the applicant except if the investor withdraws
under subsection (d), in which event the investor shall receive the deposit
plus accrued interest.
(c) All offers for securities made under this
section must be accompanied by the delivery of a preliminary prospectus which
has been prepared and filed to satisfy the requirements of section 206(b) of
the
act and §
206.010(c)
(relating to registration by qualification).
(d) All persons whose moneys have been placed
in escrow as a result of the making of offers for the securities that are the
subject of the registration statement described in subsection (a)(1)(i) shall:
(1) Be notified of the effectiveness of the
registration statement either by certified mail or by direct delivery of the
information.
(2) Receive a copy of
the final prospectus concurrent with the notification of the effectiveness of
the registration statement unless the Department permits a supplement to the
preliminary prospectus setting forth all changes and modifications to be used
for these purposes.
(e)
The following do not constitute the sale of a security:
(1) Receipt by the applicant of a nonbinding
subscription agreement which is subject to the withdrawal provision of
subsection (a)(3).
(2) Deposit of
moneys under subsection (b).
(f) The exemption contained in this section
may not be available for a transaction entered into primarily to avoid the
provisions of section 201 of the act.