Administrative Rules of Montana › Department 6 - STATE AUDITOR › Chapter 6.10 - SECURITIES DEPARTMENT › Subchapter 6.10.2 - Offerings › Rule 6.10.207 - WARRANTS AND OPTIONS

Current through Register Vol. 13, July 5, 2024
(1) The
				commissioner will consider the granting of warrants or options, to persons
				other than purchasers of securities, as grounds for denial of an application
				for registration, with the exception of:
(a)
				options to management in the nature of restricted options for incentive
				purposes, if reasonable in number and method of exercise;
(b) options to employees or their nominees
				pursuant to stock purchase plans or profit sharing plans, if reasonable in
				number and method of exercise; and
(c) options or warrants issued to
				underwriters or other persons as compensation, in whole or in part, for the
				sale of securities if:
(i) the issuer does
				not have:
(A) a public market for its
				securities; or
(B) previously
				issued options or warrants to an underwriter in connection with more than one
				public offering of its securities;
(ii) the options or warrants are issued only
				to a managing underwriter and no options or warrants are issued in connection
				with a best efforts underwriting unless the entire issue is sold, except that
				options or warrants may be issued in connection with a minimum-maximum offering
				if the amount to be issued is prorated depending on the amount of the
				underwriting which is sold;
(iii)
				the options or warrants may not be exercised for a period of one year from the
				completion of the public offering;
(iv) the options or warrants are
				nontransferable except by will, by intestate succession, or by operation of
				law, except that the options or warrants may be transferred without payment
				thereto to:
(A) partners of the underwriter
				if the underwriter is a partnership;
(B) persons who are both officers and
				shareholders of the underwriter if the underwriter is a corporation;
				or
(C) employees of the
				underwriter;
(v) the
				initial exercise price of the options or warrants is at least equal to the
				public offering price plus either:
(A) 7%
				each year they are outstanding, commencing one year after issuance, so that the
				exercise price throughout the second year is 107%, throughout the third year is
				114%, throughout the fourth year is 121%, and throughout the fifth year is
				128%; or
(B) 20% at any time after
				one year from the date of issuance;
(vi) the term of an option or warrant is not
				longer than five years; and
(vii)
				units of securities underlying the options or warrants acquired by an
				underwriter and related persons, whether acquired prior to, at the time of, or
				after the offering (but which is determined to be in connection with, or
				related to, the offering) are not, in the aggregate, more than 10% of the total
				number of shares that are outstanding at the conclusion of the offering. For
				purposes of this limitation, over-allotment units and units underlying options,
				warrants, or convertible securities that are a part of the proposed public
				offering are not to be counted as part of the aggregate number of shares being
				offered against which the 10% limitation is to be applied.