Current through Register 2024 Notice Reg. No. 38, September 20, 2024
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 such stock or stock option shall be
exempt from operation of Section 1104.3 if the plan meets the following
conditions:
(a) The plan has been approved,
directly or indirectly,
(1) by the affirmative
votes of the holders of a majority of the securities of such insurer present, or
represented, and entitled to a vote at a meeting duly held in accordance with the
applicable laws of this State, or
(2) by
the written consent of the holders of a majority of the securities of such insurer
entitled to vote: provided, however, that if such vote or written
consent was not solicited substantially in accordance with the proxy rules and
regulations prescribed by Article 1, Subchapter 5, Chapter 5, of Title 10 of the
California Administrative Code commencing at Section
2680.1, in effect at the time of such
vote or written consent, the insurer shall furnish in writing to the holders of
record of the securities entitled to vote for the plan substantially the same
information concerning the plan which would be required by said Article as in effect
at the time such information is furnished, if proxies to be voted with respect to
the approval or disapproval of the plan were then being solicited, on or prior to
the date of the first annual meeting of security holders held subsequent to the
later of (a) the date Sections 1104.2 to 1104.8 first apply to such insurer, or (b)
the acquisition of an equity security for which exemption is claimed. Such written
information may be furnished by mail to the last known address of the security
holders of record within 30 days prior to the date of mailing. Four copies of such
written information shall be filed with, or mailed for filing to, the Insurance
Commissioner not later than the date on which it is first sent or given to security
holders of the insurer. For the purposes of this paragraph, the term "insurer"
includes a predecessor corporation if the plan or obligations to participate
thereunder 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 such director or officer or
which may be covered by qualified, restricted or employee stock purchase plan stock
options granted to any such director or officer, is subject to the discretion of any
person, then such discretion shall be exercised only as follows:
(1) With respect to the participation of
directors--
(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 or more
persons having full authority to act in the matter, all of the members of which
committee are disinterested persons; or
(C) otherwise in accordance with the plan, if the
plan
(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, such
stock 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,
option prices, market value of shares, outstanding shares or percentages thereof
outstanding from time to time, or similar factors.
(2) With respect to the participation of officers
who are not directors--
(a) by the board of
directors of the insurer or a committee of three or more directors; or
(b) by, or only in accordance with the
recommendations of, a committee of three or more persons having full authority to
act in the matter, all of the members of which committee are disinterested persons.
For the purpose of this paragraph, a director or committee
member shall be deemed to be a disinterested person only if such person is not at
the time such discretion is exercised eligible and has not at any time within one
year prior thereto been eligible for selection as a person 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 any other plan of the insurer of any
of its affiliates entitling the participants therein 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 paragraph shall not apply with respect to any option granted, or
other equity security acquired, prior to the date that Sections 1104.2, 1104.3 and
1104.4 first became applicable with respect to any class of equity securities of any
insurer.
(c) As to each
participant or as to all participants the plan effectively limits 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. The limitations may be established on an
annual basis, or for the duration of the plan, whether or not the plan has a fixed
termination date; and may 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 shares or percentages thereof outstanding from
time to time, or similar factors which will result in an effective and determinable
limitation. Such limitations may be subject to any provisions for adjustment of the
plan or of stock allocable or options outstanding thereunder to prevent dilution or
enlargement of rights.
(d) Unless the
context otherwise requires, all terms used in this section shall have the same
meaning as in Sections 1104.2 to 1104.8 or elsewhere in these regulations. In
addition, the following definitions 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 entirely at one
time.
(2) The definition of the terms
"qualified stock option" and "employee stock purchase plan" that are set forth in
Sections 422 and 423 of the Internal Revenue Code of 1954, as amended, are to be
applied to those terms where used in this section. The term "restricted stock
option" as defined in Section 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 deemed to be a "restricted
stock option."
