69W-700.007. Options or Warrants Granted Underwriters

The Office of Financial Regulation will permit the registration of securities where options or warrants are granted to underwriters only on the condition that such options or warrants meet the criteria set forth in subsections (1) through (6), hereafter:

(1)(a) They are issued to the underwriters under a firm underwriting agreement; or

(b) They are issued in connection with a best efforts underwriting only when the entire issue is sold, provided however, that options or warrants may be issued in connection with a minimum-maximum offering only if the amount of options or warrants to be issued to the underwriters is pro-rated in accordance with the amount of the underwriting which is sold; and,

(c) Option or warrants may not be transferred, except:

1. To partners of the underwriter, if the underwriter is a partnership;

2. To officers and employees of the underwriter, who are also shareholders of the underwriter, if the underwriter is a corporation;

3. To managers and managing members of the underwriter, if the underwriter is a limited liability corporation; or

4. By will, under the laws of descent and distribution, or by operation of law.

(2) The number of shares covered by the underwriter’s options or warrants must not exceed ten percent (10%) of the shares of common stock actually sold in the public offering.

(3) The initial exercise price of the options or warrants 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 twelve (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.

(4) The options or warrants do not exceed five (5) years in duration and are exercisable no sooner than twelve (12) months after issuance.

(5) The prospectus used in connection with the offering fully discloses the terms and the reason for the issuance of such options or warrants; provided that if such reason relates to future advisory services to be performed by the underwriter without compensation in consideration for the issuance of such options or warrants, a statement to that effect is placed in the prospectus.

(6) It is hereby established that 20% of the original public offering price per security of the issue multiplied by the number or securities the underwriters have the right to purchase under the options or warrants shall be included by the Office of Financial Regulation in considering the overall cost limitation of the issue.

Rulemaking Authority 517.03 FS. Law Implemented 517.081(7) FS. History–New 9-20-82, Formerly 3E-20.06, 3E-700.07, 3E-700.007, Amended 9-22-14, 3-21-24.