3 AAC 08.150 - Options and warrants

(a) An issuer may issue options or warrants to underwriters as compensation with a public offering if the options or warrants comply with the requirements of 3 AAC 08.130.

(b) An issuer may grant options or warrants to unaffiliated institutional investors in connection with loans if

(1) the options or warrants are issued contemporaneously with the issuance of the loan;

(2) the options or warrants are granted as the result of bona fide negotiations between the issuer and unaffiliated institutional investor;

(3) the exercise price of the options or warrants is not less than the fair market value of the issuer's shares of common stock underlying the options or warrants on the date that the loan was approved; and

(4) the number of shares issuable upon exercise of the options or warrants multiplied by the exercise price of the options or warrants does not exceed the face amount of the loan.

(c) An issuer may grant options or warrants in connection with acquisitions, reorganizations, consolidations, or mergers if the

(1) options or warrants are granted to persons who are unaffiliated with the issuer; and

(2) earnings of the issuer at the time of the grant and after giving effect to the acquisition, reorganization, consolidation, or merger would not be materially diluted by the exercise of the options or warrants.

(d) An issuer may not grant options and warrants at an exercise price of less than 85 percent of the fair market value of the issuer's underlying shares of common stock on the date of the grant. If the administrator and the issuer dispute the fair market value of the stock, the administrator will consider whether the issuer and its officers and directors have obtained a concurrent appraisal, by a qualified independent appraiser, of the value of the shares of common stock at the time of the grant as evidence of the fair market value.

(e) The total number of options and warrants issued or reserved for issuance at the date of the public offering may not, for one year following the effective date of the registration, exceed 15 percent of the issuer's shares of common stock outstanding at the date of the public offering plus the number of shares of common stock being offered that are firmly underwritten, or in the case of offerings not firmly underwritten, the number of shares of common stock required to be sold in order to meet the minimum offering amount. In calculating the number of options and warrants, the following are excluded:

(1) options and warrants that were issued or reserved for issuance under (a), (b), or (c) of this section;

(2) options and warrants that were issued or reserved for issuance to employees or consultants who are not promoters, in connection with an incentive stock option plan qualified under 26 U.S.C. 422 (Internal Revenue Code); and

(3) options and warrants that are exercisable at or above the public offering price.

(f) An option or warrant issued and outstanding at the date of the public offering, except for an option or warrant issued under an incentive stock option plan qualified under 26 U.S.C. 422 (Internal Revenue Code), may not be exercisable more than five years from the date of the public offering.

(g) If the number of options and warrants that are issued and outstanding or that are reserved for issuance is material, the final offering circular must disclose the potential dilutive effects of those options and warrants.

(h) If the number of options and warrants issued exceeds the 15 percent limit established in (e) of this section, the administrator will, in the administrator's discretion, require the cancellation of the excess options or, in the alternative, subject the excess options to an escrow or lock-in agreement consistent with 3 AAC 08.180 - 3 AAC 08.186.

Notes

3 AAC 08.150

Eff. 2/20/72, Register 41; am 4/19/2000, Register 154

Authority:AS 45.55.120

AS 45.55.950