OAR 441-085-0020: Options to Underwriters

(1) The North American Securities Administrators Association, Inc., has adopted a Statement of Policy regarding Options and Warrants. This rule is designed to parallel, with modifications, the Statement of Policy regarding Options and Warrants adopted by the North American Securities Administrators Association, Inc. The provisions of this rule shall apply to offerings of securities registered pursuant to ORS 59.065 and OAR 441, division 065. (2) Options granted by the issuer to underwriters or other persons as compensation, in whole or in part, for the sale of securities must be reasonable in amount and in terms and conditions under the circumstances of the particular issue. Options which meet all of the following requirements are presumptively reasonable: (a) The number of shares or units called for by such options does not exceed ten percent of the number of shares or units underwritten for the issuer in the offering; (b) The options do not exceed five years in total duration; (c) The options are exercisable at an exercise price which is initially not less than the public offering price of the securities underwritten and the options provide for an increase of the exercise price by seven percent of the initial exercise price for each full year such options are outstanding; or the options are exercisable at a price which is not less than 120 percent of the public offering price of the securities underwritten; (d) The options are not deliverable to the underwriters until the entire issue has been sold, whether it is underwritten on a firm commitment or a best-efforts basis; (e) The options are nontransferable other than by will or pursuant to the laws of descent and distribution, except to a partner of the underwriter when the underwriter is a partnership or to a stockholder, officer or director of the underwriter or beneficiary of a trust which is a stockholder of such underwriter when the underwriter is a corporation; however, after one year such a transfer may occur providing the option is exercised immediately upon transfer. If not exercised immediately upon transfer, the option shall lapse; and (f) Either the exercise of the options, or the resale, transfer and assignment of the shares underlying the options, is prohibited for a period of at least one year from the date of the offering.