1. (a) No sponsor or any affiliates shall make or cause to be made any offer to a participant to exchange his units for a security of any company, unless:

   1. (1) such offer is made after the expiration of two years after such program commenced operations;
   2. (2) such offer is made to all participants;
   3. (3) such offer, if made by a third party to the sponsor or principal underwriter, or any affiliate of such sponsor or principal underwriter, is on a basis not more advantageous to such sponsor, principal underwriter or affiliate than to participants.
   4. (4) the value of the security or other consideration offered is at least equivalent to the value of the units;
   5. (5) the value of any reserves used in computing the exchange ratio is supported by an appraisal prepared by an independent petroleum engineer within 120 days of the date such exchange is to be made; the value of any undeveloped acreage used in computing the exchange ratio is at cost unless fair market value, as evidenced by supporting data, is higher; and the value of other assets used in computing the exchange ratio is based upon audited financial statements prepared in accordance with generally accepted accounting principles consistently applied; and

   6. (6) the offer is made pursuant to a qualification first obtained and, unless exempt, by means of a Registration Statement meeting the requirements of the Securities Act of 1933, as amended.

      For purposes of this Section, an “offer of exchange” includes any security of an oil program which is convertible into a security issued by the sponsor or another issuer.

Note: Authority cited: Section 25610, Corporations Code. Reference: Section 25140, Corporations Code.

History

1. Editorial correction adding Note filed 11-8-82 (Register 82, No. 46).