Texas Administrative Code
Title 7 - BANKING AND SECURITIES
Part 7 - STATE SECURITIES BOARD
Chapter 139 - EXEMPTIONS BY RULE OR ORDER
Section 139.3 - Blue Chip Exemption

(1) If the issuer is not organized under the laws of the United States or a state, it has appointed a duly authorized agent in the United States for service of process, and has set forth the name and address of such agent in its prospectus, offering memorandum or similar disclosure document.

(2) The security is senior to or on a parity with a class of the issuer's securities registered under section 12 of the Securities Exchange Act of 1934, and the class of securities has been so registered for the three years immediately preceding the offering date.

(3) Neither the issuer nor a subsidiary, which accounts for more than 15% of assets or revenues on a consolidated basis, has had a default that exceeded 5.0% of total assets on a consolidated basis during the last seven years (or the issuer's existence if less than seven years) in the payment of:

(4) The issuer has had consolidated net income after taxes (but before extraordinary items and the cumulative effect of accounting changes) of at least $1 million in each of four of its last five fiscal years including its last fiscal year. In addition, if the offering is of interest-bearing securities, the issuer must have had net income for its last fiscal year (but before deduction for income taxes and depreciation) of at least 1-1/2 times the issuer's annual interest expense, giving effect to the proposed offering and the intended use of the proceeds. "Last fiscal year" means the most recent year for which audited financial statements are available, provided that such statements cover a fiscal period ended not more than 12 months from the commencement of the offering.

(5) If the offering is of stock or shares, other than preferred stock or shares, such securities have voting rights and such rights include:

(6) If the offering is of stock or shares, other than preferred stock or shares, such securities are owned beneficially or of record, on any date within six months prior to the commencement of the offering, by at least 1,200 persons, and on such date there are at least 750,000 such shares outstanding with an aggregate market value, based on the average bid price for that day, of at least $3,750,000. In connection with the determination of the number of persons who are beneficial owners of the stock or shares of an issuer, the issuer or broker dealer may rely in good faith for the purposes of this section upon written information furnished by the record owners.

(7) Any security issued or guaranteed as to both principal and interest by an international bank of which the United States is a member is exempted without regard to the conditions in this section.

(8) If the offering is of interest-bearing securities of a finance company with liquid assets of at least 105% of its liabilities (other than deferred income taxes, deferred investment tax credits, capital stock, and retained earnings) at the end of each of its last five fiscal years, the applicable net income requirements of paragraph (4) of this section, but before deduction for interest expense, shall be 1-1/4 times the issuer's annual interest expense. "Finance company" means a company engaged primarily in the business of wholesale, retail, installment, mortgage, commercial, industrial, and consumer financing, banking, or factoring. "Liquid assets" means cash, receivables payable on demand or not more than 12 years following the close of the company's last fiscal year, and readily marketable securities; in each case, less applicable reserves and unearned income.

(9) The issuer is not in bankruptcy.