836-024-0165 Exemption from ORS 732.435 of Acquisitions of Shares of Stock and Stock Options under Certain Stock Bonus, Stock Option or Similar plans When a director or officer of an insurer issuing stock or a stock option acquires shares of the insurer’s stock pursuant to a stock bonus, profit sharing, retirement, incentive, thrift, savings or similar plan, other than stock acquired upon the exercise of an option, warrant or right, or acquires a qualified or restricted stock option through an employee stock purchase plan, the acquisition is exempt from ORS 732.435 if the plan meets the following conditions: (1) The plan has been approved, directly or indirectly, by the affirmative votes of the holders of a majority of the securities of the insurer present, or represented, and entitled to vote at a meeting held according to Oregon law or by the written consent of the holders of a majority of the securities of the insurer entitled to vote. For the purpose of this section, “insurer” includes a predecessor corporation if the plan or obligations to participate in the plan were assumed by the insurer in connection with the succession. If, however, the vote or written consent was not solicited substantially in accordance with OAR 836-024-0003 to 836-024-0055 at the time of the vote or written consent, the following shall apply: (a) 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 that would be required by OAR 836-024-0003 to 836-024-0055 at the time the information is furnished, if proxies to be voted with respect to the approval or disapproval of the plan were being solicited, on or prior to the date of the first annual meeting of security holders held subsequent to the later of the date on which ORS 732.420 to 732.455 first applies to the insurer, or the date of the acquisition of an equity security for which an exemption is claimed. (b) The written information required in subsection (a) of this section 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 the written information must be filed with or mailed for filing to the Director of the Department of Consumer and Business Services not later than the date on which it is first sent or given to security holders of the insurer. (2) If a person is authorized to exercise discretion in 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 in the determination of the number or maximum number of shares of stock that may be allocated to a director or officer or that may be covered by qualified, restricted or employee stock purchase plan stock options granted to the director or officer, the discretion may be exercised only as follows: (a) With respect to the participation of directors: (A) By the board of directors of the insurer, but a majority of the members of the board and a majority of the directors acting in the matter must be disinterested persons; (B) By, or only in accordance with the recommendations of, a committee of three or more persons who have full authority to act in the matter, but only if all of the members of the 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 that directors may acquire or that 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 acquisition or purchase based upon earnings of the insurer, dividends paid, compensation received by participants, option prices, market value of shares, outstanding shares or percentages of shares outstanding from time to time, or similar factors. (b) 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, but only if all of the members of the committee are disinterested persons. (c) For the purpose of this section, a director or committee member is a disinterested person only if the person, at the time discretion is exercised, is not eligible and has not at any time within one year prior to the exercise of discretion been eligible for selection as a person: (A) To whom stock may be allocated; or (B) 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 participants to acquire stock or qualified, restricted or employee stock purchase plan stock options of the insurer or any of its affiliates. (d) This section does not apply with respect to any option granted, or other equity security acquired, prior to the date that ORS 732.430, 732.435 and 732.440 first become applicable with respect to any class of equity securities of any insurer. (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 that may be allocated, or that 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 earning 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 that will result in an effective and determinable limitation. The limitations may be subject to any provision for adjustment of the plan or of stock allocable or options outstanding thereunder to prevent dilution or enlargement of rights. (4) All terms used in this rule have the same meaning as the terms have in ORS 732.420 to 732.455 and in OAR 836-024-0105. In addition, the following definitions apply to this rule: (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 definitions 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, apply to those terms as they are used in this rule. For the purpose of this rule, however, an option that meets all of the conditions of sections 422 and 423 of the Internal Revenue Code of 1954, as amended, other than the date of issuance, shall be considered to be a “restricted stock option.” (c) The term “exercise of an option, warrant or right” does not include: (A) The making of any election to receive under any plan an award of compensation in the forma of stock or credits for stock, except that an election must be made prior to the making of the award and the election must be irrevocable until at least six months after termination of employment; (B) The subsequent crediting of the stock; (C) The making of any election as to a time for delivery of the stock after termination of employment, but only if the election is made at least six months prior to delivery. (D) The fulfillment of any condition to the absolute right to receive stock; or (E) The acceptance of certificates for shares of stock. Statutory/Other Authority: ORS 731.244, 732.420, 732.430, 732.435, 732.445, 732.450 & 732.455 Statutes/Other Implemented: ORS 732.420 - 732.455 History: ID 16-2006, f. & cert. ef. 8-7-06