1
Exhibit 6(G)
SHARE PURCHASE AGREEMENT
THIS AGREEMENT effective as of May 22, 1996 (the "Effective Date")
BETWEEN:
XXXXX XXXXXXX
-------------
of the Municipality of Metropolitan Toronto in the Province of Ontario
(hereinafter referred to as the "Vendor")
OF THE FIRST PART
-and -
American Stone Industries, Inc.
-------------------------------
a corporation duly incorporated under the laws of the Province of
Ontario (hereinafter called the "Purchaser")
OF THE SECOND PART
WHEREAS the authorized capital of Xxxxxxx Xxxxx Design Limited (hereinafter
called the "Corporation", a corporation duly incorporated under the laws of the
Province of Ontario, consists of unlimited common shares of which 100 Common
shares (the "Common Shares" are issued and outstanding as fully paid and
non-assessable and the beneficial owners thereof are as follows:
Beneficial Owner Number of shares
---------------- ----------------
Xxxxx Xxxxxxx 100 Common
AND WHEREAS the Vendor wishes to sell and the Purchaser wishes to purchase the
Common Shares on the terms and conditions hereof;
NOW THEREFORE in consideration of the mutual covenants herein contained and
other good and valuable consideration, the receipt and sufficiency whereof each
of the parties hereto hereby acknowledges, the parties hereto covenant and agree
as follows:
ARTICLE ONE
PURCHASE AND SALE OF SHARES
Section 1.01 The Purchaser hereby purchases and the Vendor hereby sells the
Common Shares for the consideration and subject to the terms and conditions
hereinafter set forth, effective on the Closing Date.
Section 1.02 The following shall be the terms of payment for the Common Shares:
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(a) the purchase price (the "Purchase Price") payable for the
Common Shares shall be an amount equal to the fair market
value of 200,000 Class A Common Shares of the Purchaser, on
the Closing Date determined by multiplying the closing share
price of one Class A Common Share as listed on NASDAQ on the
Closing Date by 200,000;
(b) in satisfaction of the Purchase Price payable for the Common
Shares, the Purchaser shall issue to the Vendor 200,000 fully
paid and non-assessable and restricted Class A Common Shares
(the "Issued Shares") in the capital of the Purchaser. The
Purchaser shall issue to the Vendor on the Closing Date a
certificate registered in the name of the Vendor for the
Issued Shares;
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF THE VENDOR
Section 2.01 The Vendor hereby represents and warrants to the Purchaser that:
(a) the authorized capital of the Corporation is described in the
recitals herein and the Common Shares have been issued as
fully paid and non-assessable shares and there are no other
shares, options, or other rights with respect to the equity of
the Corporation outstanding now or at Closing;
(b) the Vendor is the registered and beneficial owner of the
Common Shares set opposite his or her name;
(c) the fulfillment of the Vendor's obligations hereunder will
not, on the Closing Date, be in contravention of any contracts
or instruments to which the Vendor is a party or by which he
is bound;
(d) the Common Shares are free and clear of all liens, claims,
rights, adverse interests, restrictions and encumbrances of
any nature whatsoever,
(e) the Vendor knows of no claim, action, proceeding or
investigation pending or threatened which places in question
the validity or enforceability of this agreement; and
(f) the Vendor is not a non-resident as defined in subsection
248(l) of the Income Tax Act (Canada) (the "Act").
ARTICLE THREE
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 3.01 The Purchaser represents and warrants to the Vendor that:
(a) the Purchaser has been duly incorporated and organized and is
validly subsisting under the laws of the State of Delaware,
USA with full corporate power and authority to enter into and
perform this agreement and this agreement constitutes a legal,
valid and binding obligation of the Purchaser enforceable in
accordance with its terms;
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(b) the Issued Shares will be issued as fully paid and
non-assessable shares in the capital of the Purchaser and the
authorized capital of the Purchaser is as stated in Schedule
"A" hereto;
(c) the fulfillment of the Purchaser's obligations hereunder will
not be in contravention of the Purchaser's constating
documents, articles or by-laws or of any laws, regulations or
similar requirements, and will not contravene any contracts or
instruments to which the Purchaser is a party or by which the
Purchaser is bound;
(d) on Closing the Issued Shares will be free and clear of all
liens, claims, rights, adverse interests, restrictions and
encumbrances of any nature whatsoever, save as expressly set
forth in this Agreement, and
(e) the Purchaser knows of no action, claim, proceeding or
investigation pending or threatened which places in question
the validity or enforceability of this agreement.
ARTICLE FOUR
COVENANTS OF THE VENDOR
Section 4.01 The Vendor covenants as follows:
(a) all necessary steps and proceedings shall be taken to
effectively and validly carry out the transaction herein
contemplated including providing an affidavit confirming the
truth of the Vendor's representations and warranties hereunder
on Closing; and
(b) the Vendor shall cause the share certificates representing the
Common Shares to be delivered to the Purchaser on the Closing
Date, duly endorsed in blank for transfer.
(c) the Vendor shall provide the opinion of its corporate counsel,
in the form attached hereto as Schedule "B-1".
(d) the Vendor shall continue to be the sole director and shall
continue as the sole officer of the Corporation after Closing,
and shall operate the Corporation after the Closing Date in a
prudent and reasonable manner, provided that the Vendor shall
assure that no salaries, dividends, shareholder loans or other
pay outs of any type are made by the Corporation to the Vendor
or to any other party, without the specific instructions of
the Purchaser as shareholder of the Corporation, after the
Closing Date save and except for payments of third party
invoices for supplies, materials and other direct operating
costs of the Corporation made in the usual course of business.
The Vendor represents and warrants to the Purchaser, that, to
the best of the knowledge and belief of the Vendor, the
financial records of the Corporation that have been provided
to the Purchaser accurately describe the current state of the
Corporation, and that there are no claims, liabilities,
obligations or other matters which might affect the
Corporation, except as shown in the said statements. The
Purchaser acknowledges that the use of the "Xxxxxxx Xxxxx
Design" business style is limited to the use permitted by law
and the Vendor makes no representation or warranty that he has
any right to the use of the said name, and the Purchaser
agrees that if they choose to use such name that they do so at
their own risk.
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ARTICLE FIVE
COVENANTS OF THE PURCHASER
Section 5.01 The Purchaser covenants as follows:
(a) the Purchaser shall cause all necessary steps and corporate
proceedings to be taken to effectively and validly carry out
the transaction herein contemplated including providing the
share certificates for the Issued Shares.
(b) the Purchaser will provide the opinion of its corporate
counsel in the form attached hereto as Schedule "B-2".
(c) INTENTIONALLY DELETED.
ARTICLE SIX
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE
PURCHASER AND THE VENDOR
Section 6.01 The Purchases and the Vendor's obligations under this agreement are
subject to the fulfillment on or prior to the Closing Date of the following
conditions with each of subparagraphs (a) and (b) being for the sole benefit of
the Vendor and being subject to being waived by the Vendor and with each of
subparagraphs (c) and (d) being for the sole benefit of the Purchaser and being
subject to being waived by the Purchaser, and the condition in subparagraph (e)
being a true condition precedent:
(a) all the representations and warranties herein of the Purchaser
shall be true on and as of the closing Date with the same
effect as though they had been made on and as of the Closing
Date and the Purchaser shall have provided the corporate
opinion described in Article 5 hereof;
(b) the Purchaser shall have complied with all covenants to be
complied with by the Purchaser as set forth herein;
(c) all the representations and warranties herein o the Vendor
shall be true on and as of the Closing Date with the same
effect as though they had been made on and as of the Closing
Date and the Vendor shall have provided the corporate opinion
described in Article 4 hereof;
(d) the Vendor shall have complied with all of the covenants to be
complied with by the Vendor as set forth herein; and
(e) INTENTIONALLY DELETED.
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ARTICLE SEVEN
CLOSING
Section 7.01 The purchase and sale of the Common Shares shall be completed in
the offices of the Purchaser at May 23, 1996 or at such other place, date or
time as may be mutually agreed to in writing by the parties hereto (the "Closing
Date" or the "Date of Closing").
ARTICLE EIGHT
MISCELLANEOUS
Section 8.01 Survival All representations and warranties made by the parties
herein or pursuant hereto shall speak as of the Closing Date and shall survive
the Closing Date.
Section 8.02 Governing Law This agreement shall be construed and interpreted in
accordance with the laws of the Province of Ontario and the laws of Canada in
force therein and the parties agree to submit any dispute arising out of this
agreement to the courts of such Province.
Section 8.03 Further Assurances The parties hereto agree to sign or execute all
such other deeds and documents and do such other things as may be necessary or
desirable for more completely and effectually carrying out the terms and
intention of this agreement.
Section 8.04 Successors and Assigns This agreement shall enure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns, provided that this agreement shall not be assigned by either party
without the express written consent of the other party.
Section 8.05 Time shall be of the essence of this agreement.
IN WITNESS WHEREOF the parties hereto have executed and delivered this agreement
as of the time and date first above written.
---------------------------- -----------------------------------------
Witness Xxxxx Xxxxxxx
American Stone Industries, Inc.
By:
----------------------------------
By:
----------------------------------
I/we have authority to bind the corporation.
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Schedule "A"
------------
List of Authorized Capital of American Stone Industries, Inc.
including
Limitations on Issued Shares
AUTHORIZED CAPITAL of AMERICAN STONE INDUSTRIES INC.:
-----------------------------------------------------
40,000,000 shares of common stock with $.001 par value
20,000,000 shares of preferred stock with $.001 par value
RESTRICTIONS ON ISSUED SHARES
-----------------------------
Shares are subject to a complete prohibition on transfer or sale for a two year
period after issuance.
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SCHEDULE "B-1"
DRAFT
-----
May 23, 1996
American Stone Industries, Inc.
DELIVERED
---------
Re: American Stone Industries Inc. ("ASII") purchase of Shares of Xxxxxxx
Xxxxx Design Limited from Xxxxx Xxxxxxx
We have acted as counsel for Xxxxx Xxxxxxx in connection with the sale of all of
the shares of Xxxxxxx Xxxxx Design Limited (the "Company") pursuant to an
agreement made as of the 22 day of May, 1996 (the "Share Purchase Agreement")
between Xxxxx Xxxxxxx and American Stone Industries, Inc. (the "Purchaser").
In connection with the opinions hereinafter expressed, we have considered such
questions of law but have examined only the corporate records in our possession
for the purposes of the opinions hereinafter expressed. In such examination, we
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity to originals of all
documents submitted to us as certified, photostatic or facsimile copies.
In expressing the opinions in paragraphs 6 and 7 hereof, we have assumed that
the Share Purchase Agreement and all documents thereunder have been duly
authorized, executed and delivered by the Purchaser and constitute valid and
legally binding obligations of the Purchaser enforceable in accordance with
their terms.
Based on the foregoing, and subject to the qualifications and reservations
hereinafter expressed, we are of the opinion that:
1. The Company is a subsisting corporation and has not been dissolved
under the laws of the Province of Ontario.
2. The authorized capital of the Company consists of an unlimited number
of common shares of which 100 common shares (the "Shares") are validly
issued and outstanding and are the only outstanding shares of record of
the Company.
3. Immediately prior to Closing, Xxxxx Xxxxxxx was the owner of record of
the Shares.
4. The Share Purchase Agreement and all documents thereunder to which
Xxxxx Xxxxxxx is a party have been duly executed and delivered by Xxxxx
Xxxxxxx and constitute legally binding obligations of Xxxxx Xxxxxxx
enforceable against him in accordance with their respective terms.
5. Neither (a) the execution or delivery of the Share Purchase Agreement
nor (b) the fulfillment or compliance with any of the terms thereof
will conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, the articles and by-laws,
as amended, of the Company, or will require the consent or other action
by any administrative or governmental body.
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The opinions expressed herein are subject to the following qualifications and
reservations:
(a) the enforceability of any agreement or any judgment arising
out of or in connection therewith (and the priority of any
rights arising thereunder) may be limited by any applicable
bankruptcy, reorganization, winding-up, insolvency, moratorium
or other laws of general application affecting the enforcement
of creditors' rights from time to time in effect;
(b) the enforceability of the provisions of the Share Purchase
Agreement and any documents thereunder may be limited by
general principles of equity and the obligation to act in a
reasonable manner and, in particular, no opinion is expressed
as to the availability of equitable remedies (including those
of specific performance and injunction) for the enforcement of
any provision of the Share Purchase Agreement or any document
thereunder;
(c) with respect to the opinion given in paragraph 2 above, we
have assumed that all consideration required to have been paid
or given in connection with the issuance of the outstanding
shares in the capital of the Company has in fact been paid;
(d) the opinions expressed herein are limited to the laws of the
Province of Ontario and laws of Canada applicable therein in
force on the date hereof;
(e) we express no opinion as to the truth or accuracy of any of
the warranties or representations in the Share Purchase
Agreement nor have we made any searches or investigations or
inquiries with respect thereto; the opinions expressed herein
are based solely on a review of the corporate records of the
Company in our possession and are subject to any matter that
would be revealed by any further investigation or inquiry.
The opinions expressed herein are provided solely for the benefit of the
addresses pursuant to the Share Purchase Agreement and may not be relied upon by
or disclosed to anyone else or used for any other purpose, without our prior
written consent.
Yours very truly,
BIRENBAUM, KOFFMAN, XXXXXXXXX
Per:
Xxxxxxx Xxxxxx
SL/rg
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Schedule "B-2"
May 22, 1996
Xx. Xxxxx Xxxxxxx
00 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx X0X 0X0
-and-
Birenbaum, Koffman, Xxxxxxxxx
Barristers and Solicitors
00 Xxxxx Xxxxxx Xxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Dear Sirs:
We act as counsel to American Stone Industries, Inc. ("Issuer") in
certain matters. This opinion is being delivered to you pursuant to an Agreement
by and between the Issuer and Xxxxx Xxxxxxx ("Seller"), dated May 22, 1996 (the
"Agreement").
This opinion is governed by and shall be interpreted in accordance
with, the Legal Opinion Accord of the ABA Section of Business law (1991) (the
"Accord"). As a consequence, it is subject to a number of qualifications,
exceptions, definitions, limitations on coverage and other limitations (only
some of which are referred to in this letter) more particularly described in the
Accord, and this letter should be read in conjunction with the Accord.
We have examined the Agreement together with copies of such records of
meetings written actions in lieu of meetings, or resolutions adopted at
meetings, of the directors of the Company, and such other documents and
instruments as in our judgment as in our judgment are necessary or appropriate
to enable us to render the opinions expressed below. In this regard, we have
also relief upon verbal information provided by the Issuer, including its
officers and directors and others acting on the Issuer's behalf.
In examination of the foregoing documents and verbal representations,
we have assumed, without independent investigation; the genuineness of all
signatures and the authenticity of all documents submitted to us as originals,
the conformity to original documents of all documents submitted to us as
certified or photostatic copies, and the authenticity of the originals of such
latter documents; the truth and accuracy of all verbal representations; and the
truth and accuracy of all representations of Issuer in the Agreement.
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Based upon and subject to the foregoing we are of the opinion that:
1. The Issuer is duly incorporated under the laws of the State of
Delaware, U.S.A. The Issuer has not yet filed its 1995 Annual
Franchise Tax Report, because the Issuer's registered agent
misaddressed the Report. As a result, the Secretary of State
of Delaware will not issue a Good Standing Certificate until
the Report is filed. The Issuer has informed this law firm
that the Report will be filed on or before May 25, 1996, and
as soon as we are informed that the Report has been filed, we
will amend this opinion to state that the Issuer is validly
existing and in good standing. However, we note that the
Issuers charter has not been voided, and the Company can
continue to active operations.
2. The authorized capital stock of the Issuer consists of
40,000,000 shares of common stock, $.001 par value and
20,000,000 shares of preferred stock, $.001 par value.
3. The 200,000 shares of the Issuer's common stock (the "Shares")
to be delivered to the Seller pursuant to the Agreement, when
so delivered, will be validly authorized and issued, fully
paid and non-assessable. The attributes of the Shares will be
as specified in the Agreement and the Shares shall have no
attributes other than as specified in the Agreement.
4. The delivery of the Shares in compliance with the terms of the
Agreement will be effective to legally transfer full
ownership, title, property and interest in said shares to the
Seller.
5. The warranties and representations contained in Article III of
the Agreement are true and accurate in all respects, although
our opinion is to the best of our knowledge with respect to
Articles 3.01(c), (d) and (e).
6. There are no restrictions on the sale or disposition of the
Shares other than as specified in the Agreement, and other
than restrictions on resale pursuant to Rule 144 under the
Securities Act of 1933; a copy of Rule 144 is attached hereto.
7. The Agreement has been duly authorized and approved by the
Board of Directors of Issuer and no other corporate acts or
proceedings are necessary to authorize the Agreement or the
transactions contemplated thereby.
The various statutory provisions and the interpretations thereunder by
administrative authorities in courts having jurisdiction over such matters, upon
which the foregoing opinions are based, are necessarily subject to change from
time to time. The opinions and conclusions expressed herein are based upon the
facts as previously stated which have been provided to us by the Issuer. This
opinion is premised on the accuracy of the facts and representations of the
Issuer. In the event such facts and representations are determined not to be
true, this opinion shall be null and void.
Moreover, as members of the Bar of the State of New York, we do not
purport to be experts in or express an opinion upon the laws of any other
jurisdiction.
The Issuer and Seller are authorized to rely on this opinion in
connection with the Agreement. No other use of this opinion is authorized
without the written consent of the undersigned. This opinion is valid only as of
the date issued and we hereby expressly disclaim any duty to provide updates.
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This authorization is provided solely for your benefit in connection
with the transaction contemplated by the Agreement and may not be relied upon by
you for any other purpose, nor may it be furnished to, used, circulated, quoted
or relied upon by any other person for any purpose whatsoever, without prior
written consent of the undersigned.
Very truly yours,
Xxxx X. Xxxx, P.C.
JBL:ah
ASLA0011.056
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Reg. section 230.144. (a) Definitions. The following definitions shall
apply for the purposes of this rule.
(1) An "affiliate" of an issuer is a person that directly, or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, such issuer.
(2) The term "person" when used with reference to a person for whose
account securities are to be sold in reliance upon this rule includes, in
addition to such person, all of the following persons:
(i) Any relative or spouse of such person, or any relative of
such spouse, any one of whom has the same home as such person;
(ii) Any trust or estate in which such person or any of the
persons specified in paragraph (a)(2)(1) of this section, collectively
own ten percent or more of the total beneficial interest or of which
any of such persons serve as trustee, executor or in any similar
capacity; and
(iii) Any corporation or other organization (other than the
issuer) in which such person or any of the persons specified in
paragraph (a)(2)(i) of this section are the beneficial owners
collectively of ten percent or more of any class of equity securities
or ten percent or more of the equity interest.
(3) The term "restricted securities" means:
(i) securities that are acquired directly or indirectly from
the issuer, or from an affiliate of the issuer, in a transaction or
chain of transactions not involving any public offering; or
(ii) securities acquired from the issuer that are subject to
the resale limitations of Regulation D (section 230.501 through
section 230.506 of this chapter) or Rule 701(c) 230.701(c) of this
chapter) under the Act; or
(iii) securities that are subject to the resale limitations of
Regulation D and acquired in a transaction or chair of transactions not
involving any public offering; or
(iv) securities that are acquired in a transaction or chain of
transactions meeting the requirements of Rule 144A (section 230.144A
of this chapter). [Amended in 'Release No. 33-6862 (paragraph 84,523)
effective April 30, 1990, 55 F.R. 17933]
PROPOSED AMENDMENTS_____________________________________________________________
-> Reproduced below is the text of paragraphs (a)(3)(iv), as
proposed to be amended, and (a)(3)(v), as proposed to be added, in
Release No. 33-7185 (P. 85,636), June 27, 1995.
(iv) securities that are acquired in a transaction or chain of
transactions meeting the requirements of Rule 144A (section 230.144A
of this chapter); or
(v) Securities acquired from the issuer that are subject to
the resale limitations of Regulation CA (section 230.1001).
END OF PROPOSED AMENDMENTS______________________________________________________
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.10 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (A) OF RULE 144 --See
paragraphs 2706.222; 2706.223; 2706.2235; 2706.3039; 2706.307; 2706.308;
2706.3081; 2706.38; 2706.382; 2706.385 2706.412; 2706.4153; 2706.5012;
2706-5013; 2706.5061; 2706.735 and 2706.83.
(b) Conditions to be Met. Any affiliate or other person who sells
restricted securities of an issuer for his own account, or person who sells
restricted, or any other securities for the account of an affiliate of the
issuer of such securities, shall be deemed not to be engaged in a distribution
of such securities and therefore not to be an underwriter thereof within the
meaning of Section 2(11) of the Act if all of the conditions of this rule are
met.
(c) Current Public Information. There shall be available adequate
current public information with respect to the issuer of the securities. Such
information shall be deemed to be available only if either of the following
conditions is met:
(1) Filing of Reports. The issuer has securities registered
pursuant to Section 12 of the Securities Exchange Act of 1934, has been
subject to the reporting requirements of Section 13 of that Act for a
period of at least 90 days immediately preceding the sale of the
securities and has filed all the reports required to be filed
thereunder during the 12 months preceding such sale (or for such
shorter period that the issuer was required to file such reports); or
has securities registered pursuant to the Securities Act of 1933, has
been subject to the reporting requirements of Section 15(d) of the
Securities Exchange Act of 1934 for a period of at least 90 days
immediately preceding the sale of the securities and has filed all the
reports required to be filed thereunder during the 12 months preceding
such sale (or for such shorter period that the issuer was required to
file such reports. The person for whose account the securities are to
be sold shall be entitled to rely upon a statement in whichever is the
most recent, quarterly or annual, required to be filed and filed by the
issuer that such issuer has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the issuer was
required to file such reports) and has been subject to such filings
requirements for the past 90 days, unless he knows or has reason to
believe that the issuer has not complied with such requirements. Such
person shall also be entitled to rely upon a written statement from the
issuer that it has complied with such reporting requirements unless he
knows or has reason to believe that the issuer has not complied with
such requirements. [As amended in Release No. 34-5452 (paragraph
9928), effective March 15, 1974.]
(2) Other Public Information. If the issuer is not subject to
Section 13 or 15(d) of the Securities Exchange Act of 1934, there is
publicly available the information concerning the issuer specified in
paragraph (a)(5)(i) to (xiv), inclusive, and paragraph (a)(5)(xvi) of
Rule 15c2-11 (section 240.15c2-11 of this chapter) under that Act or,
if the issuer is an insurance company the information specified in
Section 12(g)(2)(G)(i) of that Act. [Amended in Release No. 33-6862
(paragraph 84,523), effective April 30, 1990, 55 F.R. 17933.]
.30 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (C) OF RULE 144. --See
12706.141; 2706.2237; 2706.2241; 2706.328; 2706.49; 2706-4901; 2706.4902;
2706.4903; 2706.491; 2706.4911; 2706.4912; 2706.4915; 2706.4916; 2706-4917;
2706.492; 2706.4921; 2706.494; 2706.495, 2706.496; 2706.497; 2706.5151; 2706.58;
2706.581; 2706.70; 2706.86; 2706.88 and 2706.92.
(d) Holding Period for Restricted Securites. If the securities sold are
restricted securities, the following provisions apply:
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(1) General rule. A minimum of two years must elapse between
the later of the date of the acquisition of the securities from the
issuer or from an affiliate of the issuer, and any resale of such
securities in reliance on this section for the account of either the
acquisition or any subsequent holder of those securities, and if the
acquisition takes the securities by purchase, the two-year period shall
not begin until the full purchase price or other consideration is paid
or given by the person acquiring the securities from the issuer or from
an affiliate of the issuer.
PROPOSED AMENDMENT ___________________________________________________________
-> Reproduced below is the text of paragraph (d)(1) as proposed
to be amended in Release No. 33-7187 (paragraph 85,638), June 27, 1995.
(1) General rule. A minimum of one year must elapse between
the later of the date of the acquisition of the securities from the
issuer or from an affiliate of the issuer, and any resale of such
securities in reliance on this section for the account of either the
acquisition or any subsequent holder of those securities, and if the
acquisition takes the securities by purchase, the one-year period shall
not begin until the full purchase price or other consideration is paid
or given by the person acquiring the securities from the issuer or from
an affiliate of the issuer.
END OF PROPOSED AMENDMENT_____________________________________________________
(2) Promissory Notes, Other Obligations or Installment Contracts.
Giving the issuer or affiliate of the issuer from whom the securities were
purchased a promissory note or other obligation to pay the purchase price, or
entering into an installment purchase contract with such seller, shall not be
deemed full payment of the purchase price unless the promissory note, obligation
or contract:
(i) provides for full recourse against the purchaser of the
securities;
(ii) is secured by collateral, other than the securities
purchased, having a fair market value at least equal to the purchase
price of the securities purchased; and
(iii) shall have been discharged by payment in full prior to
the sale of the securities.
(3) Determination of Holding Period. The following provisions shall
apply for the purpose of determining the period securities have been held:
(i) Stock Dividends, Splits and Recapitalizations. Securities
acquired from the issuer as a dividend or pursuant to a stock split,
reverse split or recapitalization shall be deemed to have been acquired
at the same time as the securities on which the dividend or, if more
than one, the initial dividend was paid, the securities involved in the
split or reverse split, or the securities surrendered in connection
with the recapitalization;
(ii) Conversions. If the securities sold were acquired from
the issuer for a consideration consisting solely of other securities of
the same issuer surrendered for conversion, the securities so acquired
shall be deemed to have been acquired at the same time as the
securities surrendered for conversion;
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(iii) Contingent Issuance of Securities. Securities acquired
as a contingent payment of the purchase price of an equity interest in
a business, or the assets of a business, sold to the issuer or an
affiliate of the issuer shall be deemed to have been acquired at the
time of such sale if the issuer or affiliate was then committed to
issue the securities subject only to conditions other than the payment
of further consideration for such securities. An agreement entered into
in connection with any such purchase to remain in the employment of, or
not to compete with, the issuer or affiliate or the rendering of
services pursuant to such agreement shall not be deemed to be the
payment of further consideration for such securities.
(iv) Pledged Securities. Securities which are bona fide
pledged by an affiliate of the issuer when sold by the pledgee, or by a
purchaser, after a default in the obligation secured by the pledge,
shall be deemed to have been acquired when they were acquired by the
pledgor, except that if the securities were pledged without recourse
they shall be deemed to have been acquired by the pledgee at the time
of the pledge or by the purchaser at the time of purchase.
(v) Gifts of Securities. Securities acquired from an affiliate
of the issuer by gift shall be deemed to have been acquired by the
donee when they were acquired by the donor.
(vi) Trusts. Where a trust settlor is an affiliate of the
issuer, securities acquired from the settlor by the trust, or acquired
from the trust by the beneficiaries thereof, shall be deemed to have
been acquired when such securities were acquired by the settlor.
(vii) Estates. Where a deceased person was an affiliate of the
issuer, securities held by the estate of such person or acquired from
such estate by the beneficiaries thereof shall be deemed to have been
acquired when they were acquired by the deceased person, except that no
holding period is required if the estate is not an affiliate of the
issuer or if the securities are sold by a beneficiary of the estate who
is not such an affiliate.
NOTE: While there is no holding period or amount limitation for estates
and beneficiaries thereof which are not affiliates of the issuer, paragraphs
(c), (h) and (i) of the rule apply to securities sold by such persons in
reliance upon the rule.
(viii) Rule 145(a) transactions. The holding period for
securities acquired in a transaction specified in Rule 145(a) shall be
deemed to commence on the date the securities were acquired by the
purchaser in such transaction. This provision shall not apply, however,
to a transaction effected solely for the purpose of forming a holding
company.
[Amended in Release No. 33-6862 (paragraph 84,523), effective April
30, 1990, 55 F.R. 17933.]
.40 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (D) OF RULE 144. --See
2706-153; 2706.185; 2706.2236; 2706.3001; 2706.3042; 2706.3051; 2706-308;
2706.3510; 2706.391; 2706.41 thru 2706.421; 2706.429, 2706.4410; 2706.625;
2706.641; 2706.642; 2706.732; 2706.810; 2706.93.
(e) Limitation on amount of securities sold. Except as hereinafter
provided, the amount of securities which may be sold in reliance upon this rule
shall be determined as follows:
(1) Sales by affiliates. If restricted or other securities are sold for
the account of an affiliate of the issuer, the amount of securities sold,
together with all sales of restricted and other securities of the same class for
the account of such person within the preceding three months, shall not exceed
the greater of (i)
Page 159
16
one percent of the shares or other units of the class outstanding as shown by
the most recent report or statement published by the issuer, or (ii) the
average weekly reported volume of trading in such securities on all national
securities exchanges and/or reported through the automated quotation system of
a registered securities association during the four calendar weeks preceding
the filing of notice required by paragraph (h), or if no such notice is
required the date of receipt of the order to execute the transaction by the
broker or the date of execution of the transaction directly with a market
maker, or (iii) the average weekly volume of trading in such securities
reported through the consolidated transaction reporting system contemplated by
Rule 11Aa3-1 under the Securities Exchange Act of 1934 (section 240-11Aa3-1)
during the four-week period specified in subdivision (ii) of this paragraph.
[Amended in Release No. 33-5717 (paragraph 80,601), June 8, 1976,
41 F. R. 24702; Release No. 33-5979 (paragraph 81,731), effective September 25,
1978, 43 F. R. 43711; Release No. 33-5995 (paragraph 81,759), effective
November 15, 1978, 43 F. R. 54230; Release No. 34-16589 (paragraph 82,455),
effective April 5, 1980, 45 F. R. 12377.]
(2) Sales by persons other than affiliates. The amount of restricted
securities sold for the account of any person other than an affiliate of the
issuer, together with all other sales of restricted securities of the same class
for the account of such person within the preceding three months, shall not
exceed the amount specified in paragraphs (1)(ii) or (1)(iii) of this section,
whichever is applicable, unless the conditions in paragraph (k) of this rule are
satisfied. [Amended in Release No. 33-5979 (paragraph 81,731), effective
September 25, 1978, 43 F. R. 43711; Release No. 33-5995 (paragraph 81,759),
effective November 15, 1978, 43 F. R. 54230; Release No. 33-6032 (paragraph
81,992), effective Xxxxx 00, 0000, 00 X X. 00000; Release No. 33-6286
(paragraph 82,821), February 6, 1981, effective March 16,1981, 46 F. R. 12195.]
(3) Determination of Amount. For the purpose of determining the amount
of securities specified in paragraphs (e)(l) and (2) of this rule, the following
provisions shall apply:
(i) Where both convertible securities and securities of the
class into which they are convertible are sold, the amount of
convertible securities sold shall be deemed to be the amount of
securities of the class into which they are convertible for the purpose
of determining the aggregate amount of securities of both classes sold;
(ii) The amount of securities sold for the account of a
pledgee thereof, or for the account of a purchaser of the pledged
securities, during any period of three months within two years after a
default in the obligation secured by the pledge, and the amount of
securities sold during the same three-month period for the account of
the pledgor shall not exceed, in the aggregate, the amount specified in
subparagraph (1) or (2) of this paragraph, whichever is applicable.
[Amended in Release No. 33-5995 (paragraph 81,759), effective November
15, 1978, 43 F. R. 54230.]
(iii) The amount of securities sold for the amount of a donee
thereof during any period of three months within two years after the
donation, and the amount of securities sold during the same three-month
period for the account of the donor, shall not exceed, in the
aggregate, the amount specified in subparagraph (1) or (2) of this
paragraph, whichever is applicable; [Amended in Release No. 33-5995
(paragraph 81,759), effective November 15, 1978, 43 F. R. 54230.]
(v) Where securities were acquired by a trust from the settlor
of the trust, the amount of such securities sold for the account of the
trust during any period of three months within two years after the
acquisition of the securities by the trust, and the amount of
securities sold during the same three-month period for the account of
the settlor, shall not exceed, in the aggregate, the amount
Page 160
17
specified in subparagraph (1) or (2) of this paragraph, whichever is
applicable; [Amended in Release No. 33-5995 (paragraph 81,759),
effective November 15, 1978, 43 F. R. 54230.]
PROPOSED AMENDMENTS_____________________________________________________________
-> Reproduced below is the text of paragraphs (e)(3)(ii), (iii) and (iv)
as proposed to be amend in Release No. 33-7187 (paragraph 85,638), June 27,
1995.
(ii) The amount of securities sold for the account of a
pledgee thereof, or for the account of a purchaser of the pledged
securities, during any period of three months within one year after a
default in the obligation secured by the pledge, and the amount of
securities sold during the same three-month period for the account of
the pledgor shall not exceed, in the aggregate, the amount specified in
paragraph (e)(1) or (2) of this section, whichever is applicable;
(iii) The amount of securities sold for the account of a donee
thereof during any period of three months within one year after the
donation, and the amount of securities sold during the same three-month
period for the account of the donor, shall not exceed, in the
aggregate, the amount specified in paragraph (e)(1) or (2) of this
section, whichever is applicable;
(iv) Where securities were acquired by a trust from the
settlor of the trust, the amount of such securities sold for the
account of the trust during any period of three months within one year
after the acquisition of the securities by the trust, and the amount of
securities sold during the same three-month period for the account of
the settlor, shall not exceed, in the aggregate, the amount specified
in paragraph (e)(1) or (2) of this section, whichever is applicable;
END OF PROPOSED AMENDMENTS____________________________________________________
(v) The amount of securities sold for the account of the
estate of a deceased person, or for the account of a beneficiary of
such estate, during any period of three months and the amount of
securities sold during the same period for the account of the deceased
person prior to his death shall not exceed, in the aggregate, the
amount specified in subparagraph (1) or (2) of this paragraph,
whichever is applicable; Provided, That no limitation on amount shall
apply if the estate or beneficiary thereof is not an affiliate of the
issuer; [Amended in Release No. 33-5995 (paragraph 81,759), effective
November 15, 1978, 43 F. R. 54230.]
(vi) When two or more affiliates or other persons agree to act
in concert for the purpose of selling securities of an issuer, all
securities of the same class sold for the account of all such persons
during any period of three months shall be aggregated for the purpose
of determining the limitation on the amount of securities sold;
[Amended in Release No. 33-5995 (paragraph 81,759), effective November
15, 1978, 43 F R 54230.]
(vii) Securities sold pursuant to an effective registration
statement under the Act or pursuant to an exemption provided Regulation
A under the Act or in a transaction exempt pursuant to Section 4 of the
Act and not involving any public offering need not be included in
determining the amount of securities sold in reliance upon this rule.
[As amended in Release No. 33-5432 (paragraph 79,633), effective
March 15, 1974, 39 F. R. 6069.]
.50 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (E) OF RULE 144.--See
2706.2201; 2706.2231; 2706.2241; 2706.3025; 2706.303; 2706.3031; 2706.3033;
2706.30341; 2706.3035; 2706.3036; 2706.3047;
Page 161
18
2706.305; 2706.3051; 2706.3052; 2706.3053; 2706.3054; 2706.3055; 2706.3056;
2706.306; 2706.328; 2706.3853; 2706-412; 2706.481; 2706.50' 2706.501; 2706 5011;
2706.5012; 2706.514; 2706.562; 2706.503; 2706.504; 2706.505; 2706.506;
2706.5060; 2706.3037; 2706.304; 2706.3042; 2706.3043; 2706.5061; 2706.64;
2706-642; 2706.652; 2706-723; 2706.732; 2706.86; 2706.88; 2706.92; 2706-93.
(f) Manner of sale. The securities shall be sold in "brokers'
transactions" within the meaning of section 4(4) of the Act or in transactions
directly with a "market maker," as that term is defined in section 3(a)(38) of
the Securities Exchange Act of 1934, and the person selling the securities shall
not (1) solicit or arrange for the solicitation of orders to buy the securities
in anticipation of or in connection with such transaction, or (2) make any
payment in connection with the offer or sale of the securities to any person
other than the broker who executes the order to sell the securities. The
requirements of this paragraph, however, shall not apply to securities sold for
the account of the estate of a deceased person or for the account of a
beneficiary of such estate provided the estate or beneficiary thereof is not
an affiliate of the issuer, nor shall they apply to securities sold for the
account of any person other than an affiliate of the issuer, provided the
conditions of paragraph (k) of this rule are satisfied. [Amended in Release
No. 33-5979 (paragraph 8l,731), effective September 25, 1978, 43 F. R. 43711;
Release No. 33-6286 (paragraph 82,821), February 6, 1981, effective March 16,
1981, 46 F. R. 12195.]
.60 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (F) OF RULE 144. --See
2706.2241; 2706.2262; 2706.2237; 2706.328; 2706423; 2706.656; 2706.6561;
2706.86; 2706.90; and 2706-92.
(g) Brokers' Transactions. The term "brokers' transactions" in Section
4(4) of the Act shall for the purposes of this rule be deemed to include
transactions by a broker in which such broker-
(1) does no more than execute the order or orders to sell the
securities as agent for the person for whose account the securities are
sold; and receives no more than the usual and customary broker's
commission;
(2) neither solicits nor arranges for the solicitation of
customers' orders to buy the securities in anticipation of or in
connection with the transaction; provided, that the foregoing shall not
preclude (i) inquiries by the broker of other brokers or dealers who
have indicated an interest in the securities within the preceding 60
days, (ii) inquiries by the broker of his customers who have indicated
an unsolicited bona fide interest in the securities within the
preceding 10 business days; or (iii) the publication by the broker of
bid and ask quotations for the security in an inter-dealer quotation
system provided that such quotations are incident to the maintenance of
a bona fide inter-dealer market for the security for the broker's own
account and that the broker has published bona fide bid and ask
quotations for the security in an inter-dealer quotation system on each
of at least twelve days within the preceding thirty calendar days with
no more than four business days in succession without such two-way
quotations;
Note to Subparagraph g(2)(ii): The broker should obtain and
retain in his files written evidence of indications of bona fide
unsolicited interest by his customers in the securities at the time
such indications are received. [As amended in Release No. 33-5452
(paragraph 79,633), effective March 15, 1974.]
.70 Annotations of rulings under paragraph (g) of Rule 144. -- See
paragraphs 2706.215; 2706.2237; 2706.285; 2706.387; 2706.388; 2706.172;
2706.444; 2706.6561; 2706.6563; 2706.6565; 2706.6567; 2706.86; and 2706.92.
Page 162
19
(3) after reasonable inquiry is not aware of circumstances
indicating that the person for whose account the securities are sold is
an underwriter with respect to the securities or that the transaction
is a part of a distribution of securities of the issuer. Without
limiting the foregoing, the broker shall be deemed to be aware of any
facts or statements contained in the notice required by paragraph (h)
below.
Notes. (1) The broker, for his own protection, should obtain
and retain in his files a copy of the notice required by paragraph (h).
(ii) The reasonable inquiry required by paragraph (g)(3) of
this section should include, but not necessarily be limited to, inquiry
as to the following matters:
a. The length of time the securities have been held
by the person for whose account they are to be sold. If
practicable, the inquiry should include physical inspection of
the securities;
b. The nature of the transaction in which the
securities were acquired by such person;
c. The amount of securities of the same class sold
during the past three months by all persons whose sales are
required to be taken into consideration pursuant to paragraph
(e) of this section,
d. Whether such person intends to sell additional
securities of the same class through any other means;
e. Whether such person has solicited or made any
arrangement for the solicitation of buy orders in connection
with the proposed sale of securities;
f. Whether such person has made any payment to any
other person in connection with the proposed sale of the
securities, and
g. The number of shares or other units of the class
outstanding, or the relevant trading volume.
(h) Notice of proposed sale. If the amount of
securities to be sold in reliance upon the rule during any
period of three months exceeds 500 shares or other units or
has an aggregate sale price in excess of $10,000, three copies
of a notice on Form 144 shall be filed with the Commission at
its principal office in Washington, D.C.; and if such
securities are admitted to trading on any national securities
exchange, one copy of such notice shall also be transmitted to
the principal exchange on which such securities are so
admitted. The Form 144 shall be signed by the person for whose
account the securities are to be sold and shall be transmitted
for filing concurrently with either the placing with a broker
of an order to execute a sale of securities in reliance upon
this rule or the execution directly with a market maker of
such a sale. Neither the filing of such notice nor the failure
of the Commission to comment thereon shall be deemed to
preclude the Commission from taking any action it deems
necessary or appropriate with respect to the sale of the
securities referred to in such notice. The requirements of
this paragraph, however, shall not apply to securities sold
for the account of any person other than an affiliate of the
issuer, provided the conditions of paragraph (k)
Page 163
20
of this rule are satisfied. [Amended in Release No.
33-5307 (paragraph 79,001), effective November 1, 1972, 37 F.
R. 20577; Release No. 33-5452 (paragraph 79,633), effective
March 15, 1974, 39 F. R. 6069; Release No. 33-5452A, effective
March 15, 1974, 39 F. R. 8914; Release No. 33-5560 (paragraph
80,066), effective March 15, 1975, 40 F. R. 6487; Release No.
33-5995 (paragraph 81,759), effective November 15, 1978, 43 F.
R. 54230; Release No. 33-6286 (paragraph 82,821), February 6,
1981, effective March 16, 1981, 46 F. R. 12195.]
.80 ANNOTATIONS OF RULINGS UNDER PARAGRAPH (H) OF RULE 144. -- See
paragraphs 2706.2237; 2706-301; 2706- 3011; 2706.30121; 2706.3015; 2706-417;
2706.419; 2706.500; 2706.59; 2706.611; 2706.635; and 2706.636.
(i) Bona Fide Intention to Sell. The person the notice related
by paragraph, (h) shall have a bona fide intention to sell the
securities referred to therein within a reasonable time after the
filing of such notice.
(j) Non-exclusive rule. Although this rule provides a means
for reselling restricted securities and securities held by affiliates
without registration, it is not the exclusive means for reselling such
securities in that manner. Therefore, it does not eliminate or
otherwise affect the availability of any exemption for resales under
the Securities Act that a person or entity may be able to rely upon.
[Added in Release No. 33-6032 (paragraph 81,992), effective March 12,
1979, 44 F. R. 15612.]
(k) Termination of certain restrictions on sales of restricted
securities by persons other than affiliates. The requirements of
paragraphs (c), (e), (f) and (h) of this rule shall not apply to
restricted securities sold for the account of a person who is not an
affiliate of the issuer at the time of the sale and has not been an
affiliate during the preceding three months, provided a period of at
least three years has elapsed since the later of the date the
securities were acquired from the issuer or from an affiliate of the
issuer. In computing the three-year period for purposes of this
provision, reference should be made to paragraph (d) of this section.
[Amended in Release No. 33-6286 (paragraph 82,821), effective March
16, 1981, 46 F.R. 12195; Release No. 33-6488 (paragraph 83,429),
effective October 31, 1983, 48 F.R. 44770; and Release No. 33-6862
(paragraph 84,523), effective April 30, 1990, 55 F.R. 17933.]
Page 164
