Warrants . . .

are a form of stock option that entitles an investor to purchase shares of company stock in the future at a price fixed by the warrant. Warrants are commonly given in connection with a loan or equity investment in a company. They are also commonly included in teh compensation paid to a broker or investment banker for successfully completing a company funding. The holder is given the warrant as an inducement. He can "exercise the warrant" by paying cash for the share price on the warrant or, if given with a loan, by canceling a portion of the debt equal to the warrant exercise price. When they are issued in connection with a loan, they are often called equity kickers to refer to their ability to give debt investors an opportunity to share in the company’s capital appreciation. See: Brokers, Equity Kickers, Options.