Section 830-X-4-.15 - Options And Warrants To Officer, Employees And Others (Alabama Administrative Code)

§ 830-X-4-.15. Options And Warrants To Officer, Employees And Others

(1) The number of options issued or reserved for issuance shall be reasonable in number and the exercise price of such options and warrants shall not be less than fair market value at the date of granting. In the event such warrants and options exceed 10% of the shares to be outstanding upon completion of the offering, the issuer shall submit a written analysis supporting the reasonableness of the issuer's warrant and option policy.

(2) Options or warrants issued in connection with private placement financing arrangements made by the issuer may be excluded from the ten percent computation of the ruling if the exercise price of the warrant or option is not less than fair market value at time of issuance and the following conditions are met:

(a) The options or warrants are issued contemporaneously with the issuance of the evidence of indebtedness of the loan and expire no later than the final maturity date of the loan;

(b) The options or warrants are issued as a result of a bona fide negotiation between the issuer and parties not affiliated with the issuer;

(c) The options or warrants are issued to obtain favorable financing arrangements in a private placement financing with persons not affiliated with the issuer; and

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

(3) Options and warrants issued in connection with acquisitions, reorganizations, consolidations or mergers may be excluded in determining the reasonableness of the number of shares covered by warrants and options if they are issued to parties not affiliated with the issuer. In the event the earnings per share of the issuer would be diluted in excess of 10% by the issuance of shares upon exercise of such options and warrants, the issuer shall submit an analysis upholding the reasonableness of the issuance of such options or warrants.

(4) The requirements of this ruling shall apply to applications for registration of equity securities or securities convertible into equity securities. In the event that a written analysis supporting the reasonableness of a warrant and option policy is unacceptable, the Commission may disregard the number of shares reserved for issuance covered by options and warrants if it is stated in the prospectus that the issuer will not grant options or warrants to purchase shares which would result in there being outstanding options or warrants covering a total of shares in excess of 10% of the then outstanding shares.

Author:

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

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

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