Current through Register Vol. 48, No. 12, March 22, 2024
a) Exemption from subsection (b) of certain
transactions effected in connection with a distribution
1) Any transaction of purchase and sale, or
sale and purchase, of a security which is effected in connection with the
distribution of a substantial block of securities shall the exempt from the
provisions of subsection (b) of the Act, to the extent specified in this
Section
204.30 as not
comprehended within the purpose of said subsection (b) of the Act, upon the
following conditions:
A) The person effecting
the transaction is engaged in the business of distributing securities and is
participating in good faith, in the ordinary course of such business, in the
distribution of such block of securities;
B) The security involved in the transaction
is
i) a part of such block of securities and
is acquired by the person effecting the transaction, with a view to the
distribution thereof, from the company or other person on whose behalf such
securities are being distributed or from a person who is participating in good
faith in the distribution of such block of securities, or
ii) a security purchased in good faith by or
for the account of the person effecting the transaction for the purpose of
stabilizing the market price of securities of the class being distributed or to
cover an over-allotment or other short position created in connection with such
distribution; and
C)
Other persons not within the purview of subsection (b) of the Act are
participating in the distribution of such block of securities on terms at least
as favorable as those on which such person is participating and to an extent at
least equal to the aggregate participation of all persons exempted from the
provisions of subsection (b) of the Act by this section. However, the
performance of the functions of manager of a distributing group and the receipt
of a bona fide payment for performing such functions shall not preclude an
exemption which would otherwise be available under this section.
2) The exemption of a transaction
pursuant to this Section
204.30 with
respect to the participation therein of one party thereto shall not render such
transaction exempt with respect to participation of any other party therein
unless such other party also meets the conditions of this section.
b) Exemption from subsection (b)
of acquisitions of shares of stocks and stock options under certain stock
bonus, stock option or similar plans
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 a company issuing such stock
or stock option shall be exempt from the operation of subsection (b) of the Act
if the plan meets the following conditions:
1) The plan has been approved, directly or
indirectly, either by the affirmative votes of the holders of a majority of the
securities of such company present, or represented, and entitled to vote at a
meeting duly held in accordance with the applicable laws of the State of
Illinois, or by the written consent of the holders of a majority of the
securities of such company entitled to vote: provided, however, that if such
vote or written consent was not solicited substantially in accordance with 50
Ill. Adm. Code 203, Proxies, Consents and Authorizations of Domestic Stock
Companies as prescribed by the Director of Insurance of the Illinois Department
of Insurance, in effect at the time of such vote or written consent, the
company 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 any such rules and regulations so prescribed
and in effect at the time such information is furnished, if proxies to be 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 the Act first applies to such company, 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 Director not later than the date on which it is
first sent or given to security holders of the company. For the purposes of
this paragraph, the term "company" includes a predecessor corporation if the
plan or obligations to participate thereunder were assumed by the company in
connection with the succession.
2) If the selection of any director or
officer of the company 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 of 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:
A) With respect to the participation of
directors -
i) by board of directors of the
company, a majority of which board and a majority of the directors acting in
the matter are disinterested persons;
ii) 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
iii) otherwise in
accordance with the plan, if the plan either 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 or such option may be acquired and
exercised; or sets forth, by formula or otherwise, effective and determinable
limitations with respect to the foregoing based upon earning of the company,
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.
B) With respect to the participation of
officers who are not directors, either by the board of directors of the company
or a committee of three or more directors; or 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 company or any of its affiliates entitling the participants therein
to acquire stock or qualified, restricted or employee stock purchase plan stock
options of the company or any of its affiliates.
C) The provisions of this paragraph shall not
apply with respect to any option granted, or other equity security acquired,
prior to the date that subsections (a), (b), and (c) of the Act first become
applicable with respect to any class of equity securities of any
company.
3) 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 company, 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.
4) Unless the context
otherwise requires, all terms used in this Section
204.30 shall
have the same meaning as in the Act or elsewhere in these regulations. In
addition, the following definitions apply:
A)
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.
B) 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
204.10 provided,
however, that for the purposes of this Section
204.30 an
option which meets all of the conditions of said Section 424(b), other than the
date of issuance shall be deemed to be a "restricted stock option."
c) Exemption from
subsection (b) of certain transactions in which securities are received by
redeeming other securities
Any acquisition of an equity security (other than a convertible
security or right to purchase a security) by a director or officer of the
company issuing such security shall be exempt from the operation of subsection
(b) of the Act upon condition that
1)
the equity security is acquired by way of redemption of another security of a
company substantially all of whose assets other than cash (or Government bonds)
consists of securities of the company issuing the equity security so acquired,
and which:
A) represented substantially and
in practical effect a stated or readily ascertainable amount of such equity
security,
B) had a value which was
substantially determined by the value of such equity security, and
C) conferred upon the holder the right to
receive such equity security without the payment of any consideration other
than the security redeemed;
2) no security of the same class as the
security redeemed was acquired by the director or officer within six months
prior to such redemption or is acquired within six months after such
redemption;
3) the company issuing
the equity security acquired has recognized the applicability of paragraph (1)
of this subsection by appropriate corporate action.
d) Exemption of long term profits incident to
sales within six months of the exercise of an option
1) To the extent specified in paragraph
(c)(2) of this Section, the Director hereby exempts as not comprehended within
the purposes of subsection (b) of the Act any transaction or transactions
involving the purchase and sale, or sale and purchase, of any equity security
where such purchase is pursuant to the exercise of an option or similar right
either
A) acquired more than six months
before its exercise, or
B) acquired
pursuant to the terms of an employment contract entered into more than six
months before its exercise.
2) In respect of transactions specified in
paragraph (1) the profits inuring to the company shall not exceed the
difference between the proceeds of sale and the lowest market price of any
security of the same class within six months before or after the date of sale.
Nothing in this subsection (d) shall be deemed to enlarge the amount of profit
which would inure to such company in the absence of this subsection
(d).
3) The Director also hereby
exempts, as not comprehended within the purposes of subsection (b) of the Act,
the disposition of a security, purchased in a transaction specified in
paragraph (1) of this subsection (d), pursuant to a plan or agreement for
merger or consolidation, or reclassification of the company's securities, or
for the exchange of its securities for the securities of another person which
has acquired its assets, or which is in control, as defined in Section 368(c)
of the Internal Revenue Code of 1954, of a person which has acquired its
assets, where the terms of such plan or agreement are binding upon all
stockholders of the company except to the extent that dissenting stockholders
may be entitled, under statutory provisions or provisions contained in the
certificate of incorporation, to receive the appraised or fair value of their
holdings.
4) The exemptions proved
by this subsection (d) shall not apply to any transaction made unlawful by
subsection (c) of the Act or by any rules and regulations thereunder.
5) The burden of establishing market price of
a security for the purpose of this subsection (d) shall rest upon the person
claiming the exemption.
e) Exemption from subsection (b) of certain
acquisitions and dispositions of securities pursuant to merger or
consolidations
1) The following transactions
shall be exempt from the provisions of subsection (b) of the Act as not
comprehended within the purpose of said subsection:
A) The acquisition of a security of a
company, pursuant to a merger or consolidation, in exchange for a security of a
company which, prior to said merger or consolidation, owned 85 percent or more
of the equity securities of all other companies involved in the merger or
consolidation except, in the case of consolidation, the resulting
company.
B) The disposition of a
security, pursuant to a merger or consolidation of a company which, prior to
said merger or consolidation, owned 85 percent or more of the equity securities
of all other companies involved in the merger or consolidation except, in the
case of consolidation, the resulting company.
C) The acquisition of a security of a
company, pursuant to a merger or consolidation, in exchange for a security of a
company which, prior to said merger or consolidation, held over 85 per cent of
the combined assets of all the companies undergoing merger or consolidation,
computed according to their book values prior to the merger or consolidation as
determined by reference to their most recent available financial statements for
a 12-month period prior to the merger or consolidation.
D) The disposition of a security, pursuant to
a merger or consolidation, of a company which, prior to said merger or
consolidation, held over 85 per cent of the combined assets of all the
companies undergoing merger or consolidation, computed according to their book
values prior to merger or consolidation, as determined by reference to their
most recent available financial statement for a 12-month period prior to the
merger or consolidation.
2) A merger within the meaning of this
subsection (e) shall include the sale or purchase of substantially all the
assets of one company by another in exchange for stock which is then
distributed to the security holders of the company which sold its
assets.
3) Notwithstanding the
foregoing, if an officer, director or stockholder shall make any purchase
(other than a purchase exempted by this subsection) of a security in any
company involved in the merger or consolidation and any sale (other than a sale
exempted by this subsection) of a security in any other company involved in the
merger or consolidation within any period of less than six months during which
the merger or consolidation took place, the exemption provided by this
subsection (e) shall be unavailable to such officer, director or
stockholder.
f)
Exemption from subsection (b) of certain transaction involving an exchange of
similar securities
Any acquisition or disposition of securities made in an
exchange of shares of a class (or series thereof) of stock of a company for an
equivalent number of shares of another class (or series thereof) of stock of
the same company, pursuant to a right of conversion under the terms of the
company's charter or other governing instruments shall be exempt from the
operation of subsection (b) of the Act if -
1) The shares surrendered and those acquired
in exchange therefor evidence substantially the same rights and privileges
except that, pursuant to the provisions of the company's charter or other
governing instruments, the board of directors may declare and pay a lesser
dividend per share on shares of the class surrendered than on shares of the
class acquired in exchange therefor, or may declare and pay no dividend on
shares of the class surrendered; and
2) The transaction was effected in
contemplation of a public sale of the shares acquired in the exchange;
provided, that this subsection (f) shall not be construed to exempt from the
operation of subsection (b) of the Act any purchase or sale of shares of the
class surrendered and any sale or purchase of shares of the class acquired in
the exchange (otherwise than in the transaction of exchange exempted by this
subsection) within a period of less than six months.