Current through Register Vol. 48, 12, December 27, 2024
A. An offer or
sale of securities may be disallowed by the Securities Commissioner if the
underwriting expenses to be incurred exceed seventeen (17%) percent of the
gross proceeds from the public offering.
B. Underwriting expenses may include but are
not limited to:
(1) Commissions to
underwriters or broker-dealers;
(2)
Non-accountable fees or expenses to be paid to the underwriter or
broker-dealer;
(3) Underwriter
warrants, which shall be valued using the following formula:
{[(165% x Aggregate Offering Price) - (Exercise Price x the
number of shares offered to public)] / 2} x [(the number of shares underlying
warrants) / (the number of shares offered to public)]
The value may be reduced by twenty percent (20%) if the
exercise period of the warrants is extended from one (1) year after the public
offering to two (2) years after the public offering and by forty percent (40%)
if the exercise period of the warrants is extended from one (1) year after the
public offering to three (3) years after the public offering. Warrants may be
granted to underwriters only under the following conditions and subject to the
following restrictions:
(a) The
underwriter is a managing underwriter;
(b) The public offering is either a firmly
underwritten offering or a "minimum-maximum" offering. Options or warrants may
be issued in a "minimum-maximum" public offering only if:
(i) The options or warrants are issued on a
pro rata basis; and
(ii) The
"minimum" amount of securities has been sold;
(c) The exercise price of the warrants must
be at least equal to the public offering price;
(d) The number of shares covered by
underwriter options or warrants may not exceed ten percent (10%) of the shares
of common stock actually sold in the public offering;
(e) The life of the options or warrants may
not exceed a period of five (5) years from the completion date of the public
offering;
(f) The options or
warrants are not exercisable for the first year after the completion date of
the public offering;
(g) Options or
warrants may not be transferred, except:
(i)
To partners of the underwriter, if the underwriter is a partnership;
(ii) To officers and employees of the
underwriter, who are also shareholders of the underwriter, if the underwriter
is a corporation;
(iii) By will,
pursuant to the laws of descent and distribution; or
(iv) By the operation of law. (H) THE WARRANT
AGREEMENT MAY NOT ALLOW FOR A REDUCTION IN THE EXERCISE PRICE OF THE OPTIONS OR
WARRANTS RESULTING FROM THE SUBSEQUENT ISSUANCE OF SHARES BY THE ISSUER EXCEPT
WHERE SUCH ISSUANCES ARE PURSUANT TO A:
(h) The warrant agreement may not allow for a
reduction in the exercise price of the options or warrants resulting from the
subsequent issuance of shares by the issuer except where such issuances are
pursuant to a:
(i) Stock dividend or stock
split; or
(ii) merger,
consolidation, reclassification, reorganization, recapitalization, or sale of
assets.
(4)
Rights of first refusal, which shall be valued at one percent (1%) of the
public offering or the amount payable to the underwriter if the issuer
terminates the right of first refusal;
(5) Solicitation fees payable to the
underwriter, which shall be valued at the lesser of actual cost or one percent
(1%) of the public offering if the fees are payable within one (1) year of the
offering;
(6) Financial consulting
or financial advisory agreements with an underwriter or any other similar type
of agreement or fees, however designated, which shall be valued at actual
cost;
(7) Underwriter due diligence
expenses;
(8) Payments made either
six (6) months prior to or required to be made six (6) months following the
public offering to investor relations firms designated by the underwriter;
and
(9) Other underwriting expenses
incurred in connection with the public offering of securities as determined by
the Securities Commissioner.
C. Underwriting expenses shall not include
financial consulting or financial advisory agreements with the underwriter
payable at the time the services are rendered provided that such agreement was
entered into at least twelve (12) months prior to the registration being filed
with the Securities and Exchange Commission.
D. An offer or sale of securities may be
disallowed by the Securities Commissioner if the direct and indirect selling
expenses of the offering exceed twenty percent (20%) of the gross proceeds from
the public offering.
E. Selling
expenses may include but are not limited to:
(1) Commissions to underwriters or
broker-dealers;
(2) Non-accountable
fees or expenses to be paid to the underwriters or broker-dealers;
(3) Auditor's and accountant's
fees;
(4) Legal fees;
(5) The cost of printing prospectuses,
circulars and other documents required to comply with securities laws and
regulations;
(6) Charges of
transfer agents, registrars, indenture trustees, escrow holders, depositories,
engineers, appraisers, and other experts;
(7) The cost of authorizing and preparing the
securities, including issue taxes and stamps;
(8) Financial consulting or financial
advisory agreements with an underwriter or any similar type agreement or fees,
however designated, which shall be valued at actual cost, excluding financial
and consulting agreements which are entered into at least twelve (12) months
before the registration is filed with the Securities and Exchange
Commission;
(9) Payments made
either six (6) months prior to or required to be made six (6) months following
the public offering to investor relations firms designated by the underwriter;
and
(10) Other cash expenses
incurred in connection with the public offering of securities as determined by
the Securities Commissioner.
F. A public offering or sale of securities
that includes selling security holders offering more than ten percent (10%) of
the securities to be sold in the public offering may be disallowed by the
Securities Commissioner unless:
(1) Selling
security holders offering or selling more than ten percent (10%) but less than
fifty percent (50%) of the securities to be sold in the public offering pay a
pro-rata share of all selling expenses of the public offering, excluding the
legal and accounting expenses of the public offering;
(2) Selling security holders offering more
than fifty percent (50%) of the securities to be sold in the offering pay a
pro-rata share of all selling expenses of the public offering; and
(3) The prospectus or offering document
discloses the amount of selling expenses which the selling security holders
will pay.
G. With the
exception of underwriter or broker-dealer compensation, Subsections F (1), (2),
and (3) above shall not apply if the selling security holders have a written
agreement with the issuer, that was entered into in an arm's length
transaction, whereby the issuer has agreed to pay all of the selling security
holder's selling expenses.
