California Code of Regulations › Title 10 - Investment › Chapter 5 - Insurance Commissioner › Subchapter 4 - Insurer Securities Permits › Article 8 - Stock Purchase and Stock Option Plans › Section 2608.01 - Officers, Directors and Employee Stock Option Plans

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
Stock options of this nature are generally looked upon with
					 favor where they conform to the following specifications:
A. They are provided for by a fair and
				  reasonable plan to be fairly administered which has been submitted to and
				  approved by the directors and stockholders. The Commissioner will insist on
				  proof that a full and fair disclosure of outstanding options, the details of
				  the plan and its intended operation has been made to applicant's stockholders,
				  and that adoption thereof was in accordance with any applicable
				  statutes.
B. The granting thereof
				  bears a reasonable incentive relationship to the continued employment of the
				  optionee.
C. They are for a stated
				  number of shares, to be paid for in cash.
D. They are for 100% of the fair market value
				  of the shares optioned as of the time they are granted, if issued pursuant to a
				  plan which is by law subject to such requirement. If the stock is not widely
				  traded, they are for a lawful price fixed by company's board of directors and
				  concurred in by the Commissioner. If issued pursuant to an employees' stock
				  purchase plan available to all of applicant's employees, they are for a price
				  of not less than 85% of fair market value of the shares optioned as of the time
				  they are granted. (Cf. Cal. Rev. & T.C. Sections
				  17534 and
				  17632)
E. They fully set forth employment
				  qualifications, conditions for complete exercise of the option, conditions
				  under which cessation of employment will terminate the option, the effect of
				  death, resignation, etc.
F. They
				  contain an anti-dilution or pro-ration clause in substance to the effect that
				  the number of shares allocated to the Plan and the number of shares covered by
				  each individual option, and the price per share, all shall be proportionately
				  adjusted automatically for any increase or decrease in the number of issued and
				  outstanding shares of the corporation accomplished without a corresponding
				  increase or decrease in the corporation's paid-in capital.
G. Only the optionee (or a court appointed
				  guardian) can exercise the option during the optionee's lifetime, and only the
				  optionee's heirs, administrator or executor for a limited time after the
				  optionee's death.
H. They provide
				  in substance that the company will diligently endeavor to comply with all
				  applicable securities laws before any such options are issued and before any
				  shares will be issued pursuant to such options.
I. The term thereof is for not longer than
				  five years.
J. The total number of
				  shares set aside at any one time for such purpose or expected to be optioned
				  for such purpose within the foreseeable future is not inequitably disparate to
				  the number of shares issued and outstanding. Refer to Section
				  2608.04, infra. (Sects. 839,
				  843)
1. Change
					 without regulatory effect amending paragraph G. filed 7-14-2021 pursuant to
					 section 100, title 1, California Code of
					 Regulations (Register 2021, No. 29). Filing deadline specified in Government
					 Code section
					 11349.3(a)
					 extended 60 calendar days pursuant to Executive Order
					 N-40-20.