HAR §16-38-11.4. Options and warrants

Options and warrants and other acquisitions or conversion rights granted to or reserved for officers, directors, promoters, or insiders shall be fully justified, reasonable in number and method of exercise, and meet the following requirements: (1) A complete explanation for the basis and reason for the issuance shall be provided; (2) The total number of underlying shares subject to options does not exceed ten per cent of the shares to be outstanding if all shares being offered are sold; §16-38-11.5 38-33 (3) The rights are not exercisable during the effectiveness of the public offering nor for a period of eleven months from date issued, and the exercise price thereafter of not less than the percentage amounts provided in the following schedule: Per cent of public offering Period at which exercise price at which rights may be privilege may take place exercised After 1 year from issuance 107% 2 years from issuance 114% 3 years from issuance 121% 4 years from issuance 128% (4) The rights are not exercisable after the expiration of five years from the date of issue; and (5) Options or warrants to dealers or underwriters do not exceed the limitations imposed by section 16-38-11.2 relating to maximum commissions allowable as compensation in whole or in part for the sale of securities and shall be nontransferable. Options or warrants issued to all shareholders pro rata, or in connection with qualified stock options to employees which meet the requirements of the United States Internal Revenue Code, or other employees' options pursuant to a stock purchase or profit-sharing plan, shall not be subject to the restrictions provided in this section if they are justified and reasonable in number and method of exercise. [Eff 6/4/70; am 8/8/71; am and ren §16-38-11, 7/30/81; am, ren §16-38-11.4 and comp 10/12/85; am and comp 4/14/03] (Auth: HRS §485-2) (Imp: HRS §§485-2, 485-10)