Ala. Admin. Code r. 830-X-4-.14

Current through Register Vol. 43, No. 1, October 31, 2024

Section 830-X-4-.14 - Options Or Warrants Granted Underwriters

(1) The Commission will not allow the granting of options or warrants to underwriters unless the following criteria is met:

(a) They are issued to the underwriters under a firm underwriting agreement and are not assignable or transferable for a period of one year from date of issuance except to (1) partners of the underwriters when the underwriter is a partnership, and (2) officers or directors of the underwriters when the underwriter is a corporation.

(b) The number of shares covered by the warrants or options do not exceed ten percent of the shares being offered to the public in the offering under consideration.

(c) The initial exercise price of the options is at least equal to the public offering price with a "step-up" of the exercise price of 7% each year they are outstanding, or in the alternative, an overall 20% step-up. The step-up shall commence 12 months after the grant of the option or warrant. The election as to the step-up rate must be made at the time the option or warrant is issued.

(d) The options or warrants do not exceed five (5) years in duration and are exercisable no sooner than eleven (11) months after issuance.

(e) The options or warrants are issued by a relatively small company in the promotional stage where it appears from all the facts and circumstances that the issuance of such options is necessary to obtain competent investment banking service, provided that the direct commissions to the underwriters are lower than the usual and customary commissions would be in absence of such options.

(2) That in the computation of costs involved in the issue, it is hereby established that 20% of the original public offering price of the option to underwriters shall be used by the Commission in considering the overall cost limitation of the issue as set forth in Rule 830-X-4-.09.

Author:

Ala. Admin. Code r. 830-X-4-.14

Filed September 30, 1982. Readopted: Filed November 9, 1983.

Statutory Authority:Code of Ala. 1975, § 8-6-23.