44-1997

44-1997. False registration statement;
liability

A. If any part of the registration statement filed under any federal or Arizona
securities laws relating to securities offered or sold within or from this state
contained, at the time the part became effective, an untrue statement of a material fact
or omitted to state a material fact required to be stated or necessary to make the
statement not misleading, any person acquiring the securities may commence in any court
or administrative forum of competent jurisdiction an action against any of the following
persons unless it is proved that at the time of the acquisition the purchaser knew of the
untruth or omission:

1. Every person who signed the registration statement.

2. Every person who was a director or person performing similar functions of the
issuer or partner in the issuer at the time of the filing of the part of the registration
statement.

3. Every person who consents to be and is named in the registration statement as
being or about to become a director, person performing similar functions or partner.

4. Every accountant, engineer or appraiser or any person whose profession gives
authority to a statement made by the person who with the person's consent has been named
as having prepared or certified any part of the registration statement or as having
prepared or certified any report or valuation that is used in connection with the
registration statement, with respect to the statement in the registration statement,
report or valuation, that purports to have been prepared or certified by the person.

5. Every underwriter with respect to the security.

B. If a person acquires the security after the issuer has made generally available
to its security holders an earnings statement covering a period of at least twelve months
beginning after the effective date of the registration statement, the right of recovery
under subsection A is conditioned on proof that the person acquired the security relying
on the untrue statement in the registration statement or relying on the registration
statement and not knowing of the omission. Reliance may be established without proof
that the person read the registration statement.

C. No person other than the issuer is liable under subsections A and B who proves
any of the following:

1. Before the effective date of the part of the registration statement for which
liability is asserted the person both:

(a) Had resigned from or had taken steps permitted by law to resign from, or had
ceased or refused to act in every office, capacity or relationship in which the person
was described in the registration statement as acting or agreeing to act.

(b) Had advised the issuer and either the commission or the SEC in writing that the
person had taken the action and that the person would not be responsible for that part of
the registration statement.

2. If that part of the registration statement became effective without the person's
knowledge, on becoming aware of that fact the person promptly acted and advised either
the commission or the SEC, in accordance with paragraph 1 of this subsection and gave
reasonable public notice that the part of the registration statement had become effective
without the person's knowledge.

3. Regarding any part of the registration statement:

(a) Not purporting to be made on the authority of an expert and not purporting to
be a copy of or extract from a report or valuation of an expert, and not purporting to be
made on the authority of a public official document or statement, the person after
reasonable investigation had reasonable grounds to believe and did believe at the time
that part of the registration statement became effective, that the statements in that
part of the registration statement were true and that there was no omission to state a
material fact required to be stated or necessary to make the statements not misleading.

(b) Purporting to be made on the person's authority as an expert or purporting to
be a copy of or extract from a report or valuation of the person as an expert either of
the following:

(i) The person had after reasonable investigation reasonable grounds to believe and
did believe at the time that part of the registration statement became effective that the
statements contained in that part of the registration statement were true and that there
was no omission to state a material fact required to be stated or necessary to make the
statements not misleading.

(ii) That part of the registration statement did not fairly represent the person's
statement as an expert or was not a fair copy of or extract from the person's report or
valuation as an expert.

(c) Purporting to be made on the authority of another expert or purporting to be a
copy of or extract from a report or valuation of another expert, the person had no
reasonable grounds to believe and did not believe at the time that part of the
registration statement became effective that the statements in that part of the
registration statement were untrue or that there was an omission to state a material fact
required to be stated or necessary to make the statements not misleading, or that part of
the registration statement did not fairly represent the statement of the expert or was
not a fair copy of or extract from the report or valuation of the expert.

(d) Purporting to be a statement made by an official or purporting to be a copy of
or extract from a public official document, the person had no reasonable grounds to
believe and did not believe at the time that part of the registration statement became
effective that the statements were untrue or that there was an omission to state a
material fact required to be stated or necessary to make the statements not misleading,
or that part of the registration statement did not fairly represent the statement made by
the official or was not a fair copy of or extract from the public official document.

D. In determining for the purposes of subsection C, paragraph 3 what constitutes
reasonable investigation and reasonable grounds for belief, the standard of
reasonableness is the standard required of a prudent person in the management of the
person's own property.

E. If any person becomes an underwriter of the security after the part of the
registration statement with respect to which the person's liability is asserted becomes
effective, for the purposes of subsection C, paragraph 3 that part of the registration
statement shall be considered effective with respect to the person as of the date the
person became an underwriter.

F. If the defendant proves that any portion or all of the damages represents an
amount other than the depreciation in value of the security resulting from the statement
described in subsection A, the portion or all of the damages are not recoverable. The
action authorized under subsection A or B may be to recover the damages represented by
the difference between the amount paid for the security, not to exceed the price at which
the security was offered to the public, and any of the following:

1. The value of the security as of the time the action was brought.

2. The price at which the security was disposed of in the market before the action
was brought.

3. The price at which the security was disposed of after the action but before
judgment if the damages are less than they would be if determined under paragraph 1 of
this subsection.

G. Unless the underwriter has knowingly received directly or indirectly from the
issuer for acting as an underwriter some benefit in which all other underwriters
similarly situated did not share in proportion to their respective interests in the
underwriting, the underwriter is not liable in any action or as a consequence of an
action brought under subsection A for damages greater than the total price at which the
securities underwritten by the underwriter and distributed to the public were offered to
the public.

H. In any action under this section the court may require an undertaking for the
payment of the costs of the action, including reasonable attorney fees. If judgment is
rendered against a party on the motion of the other party, the costs may be assessed in
favor of the party whether or not the undertaking has been required if the court believes
the action or the defense to have been without merit, in an amount sufficient to
reimburse the party for the reasonable expenses incurred by the party in connection with
the action. The costs awarded are taxable in the manner usually provided for taxing of
costs in the court in which the action was heard.

I. Any or all of the persons specified in subsection A shall be jointly and
severally liable. Every person who becomes liable for any payment under this section may
recover contribution from any person who, if sued separately, would have been liable for
the same payment, unless the person who has become liable also is guilty of fraudulent
misrepresentation under federal securities laws and the other person is not.

J. The amount recoverable under this section shall not exceed the price at which
the security was offered to the public.