D.C. Mun. Regs. tit. 26, r. 26-A1412

Current through Register 71, No. 45, November 7, 2024

Rule 26-A1412 - EXEMPTION FROM SECTION 3(B) OF ACQUISITIONS OF SHARES OF STOCK AND STOCK OPTIONS UNDER CERTAIN STOCK BONUS, STOCK OPTION OR SIMILAR PLANS

1412.1

Any acquisition of shares of stock (other than stock acquired upon the exercise of an option, warrant or right) pursuant to a stock bonus, profit sharing, retirement, incentive, thrift, savings or similar plan, or any acquisition of a qualified or a restricted stock option pursuant to a qualified or a restricted stock option plan, or a stock option pursuant to an employee stock purchase plan, by a director or officer of an insurer issuing the stock or stock option shall be exempt from the operation of Section 3(b) of the Act if the plan meets the following conditions:

(a) The plan has been duly approved, directly or indirectly as follows:

(1) By the holders of a majority of the securities of the insurer present, or represented, and entitled to vote at a meeting for which proxies were solicited substantially in accordance with the rules and regulations issued under Section 2(a) of the Act;

(2) By the written consent of the holders of a majority of the securities of the insurer entitled to vote solicited substantially in accordance with the rules and regulations, whether or not the rules and regulations were applicable to the solicitations; or

(3) By the holders of a majority of the securities of a predecessor corporation entitled to vote, in the manner specified in §§ 1412(a)(1) and 1412(a)(2), if the plan or obligations to participate were assumed by the insurer in connection with the succession.

(b) If the selection of any director or officer of the insurer to whom stock may be allocated or to whom qualified, restricted or employee stock purchase plan stock options may be granted pursuant to the plan, or the determination of the number or maximum number of shares of stock which may be allocated to any director or officer or which may be covered by qualified, restricted or employee stock purchase plan stock options granted to any director or officer, shall be subject to the discretion of any person. The discretion shall be exercised only as follows:

(1) With respect to the participation of directors the following apply:

(A) By the board of directors of the insurer, a majority of which board and a majority of the directors acting in the matter are disinterested persons;

(B) By, or only in accordance with the recommendations of a committee of three (3) or more persons having full authority to act in the matter, all of the members of which committee are of disinterested persons; or

(C) Otherwise in accordance with the plan, if the plan states the following:

(i) Specifies the number or maximum number of shares of stock which directors may acquire or which may be subject to qualified, restricted or employee stock purchase plan stock options granted to directors and the terms upon which, and the times at which, or the periods within which, the stock may be acquired or the options may be acquired and exercised; or

(ii) Sets forth, by formula or otherwise, effective and determinable limitations with respect to the foregoing based upon earnings of the insurer, dividends paid, compensation received by participants, options prices, market value of shares, outstanding shares or percentages outstanding from time to time or similar factors;

(2) With respect to the participation of officers who are not directors the following apply:

(A) By the board of directors of the insurer or a committee of three (3) or more directors; or

(B) By, or only in accordance with the recommendations of, a committee of three (3) or more persons having full authority to act in the matter, all of the members of which committee are disinterested persons; and

(C) For the purposes of this section, a director or committee member shall be considered as follows:

(i) To be a disinterested person only if the person is not at the time such discretion is exercised eligible and has not at any time within one (1) year prior thereto been eligible for selection as a person to whom stock may be allocated; or

(ii) To whom qualified, restricted or employee stock purchase plan stock options may be granted pursuant to the plan or any other plan of the insurer or any of its affiliates entitling the participation to acquire stock or qualified, restricted or employee stock purchase plan stock options of the insurer or any of its affiliates;

(3) The provisions of this section shall not apply with respect to any option granted, or other equity security acquired, prior to the date that the Act became applicable with respect to any class of equity security of any insurer;

(c) The plan shall, for each participant, limit the aggregate dollar amount or the aggregate number of shares of stock which may be allocated, or which may be subject to qualified, restricted, or employee stock purchase plan stock options granted, pursuant to the plan;

(d) The limitations shall be established on an annual basis, or for the duration of the plan, whether or not the plan has fixed termination date; and shall be determined either by fixed or maximum dollar amounts or fixed or maximum numbers of shares or by formulas based upon earnings of the insurer, dividends paid, compensation received by participants, option prices, market value of shares, outstanding or similar factors which will result in an effect and determinable limitation;

(e) The limitations shall be subject to any provisions for adjustment of the plan or of stock allocable or options outstanding to prevent dilution or enlargement or rights; and

(f) For the purposes of this section, the following terms shall apply:

(1) The term "plan" includes any plan, whether or not set forth in any formal written document or documents and whether or not approved in its entirety at one time;

(2) The term "qualified stock option" and "employee stock purchase plan" that are set for forth in §§ 422 and 423 of the Internal Revenue Code of 1954, as amended, are to be applied to those terms where used in this section; and

(3) The term "restricted stock option" as defined in § 424(b) of the Internal Revenue Code of 1954, as amended, shall be applied to that term as used in this section, provided however, that for the purposes of this section an option which meets all of the conditions of that Section, other than the date of issuance shall be considered to be a "restricted stock option."

D.C. Mun. Regs. tit. 26, r. 26-A1412