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(5) Cash settlements of stock appreciation rights. Any transaction involving the exercise and cancellation of a stock appreciation right issued pursuant to a plan (whether or not the transaction also involves the related surrender and cancellation of a stock option), and the receipt of cash in complete or partial settlement of that right, shall be exempt from the operation of section 16(b) of the Act, as not comprehended within the purpose of that section, if all the following conditions are met:

(i) Information about the bank. (A) The issuer of the stock appreciation right has been subject to the reporting requirements of section 13 of the Act for at least a year prior to the transaction and has filed all reports and statements required to be filed under that section during that year;

(B) The issuer of the stock appreciation right on a regular basis releases for publication quarterly and annual summary statements of operations. This condition shall be deemed satisfied if the specified financial data apprears: (1) On a wire service, (2) in a financial news service, (3) in a newspaper of general circulation, or (4) is otherwise made publicly available.

(ii) Limitation on the right and any related option. Neither the stock appreciation right nor any related stock option shall have been exercised during the first six months of their respective terms, except that this limitation shall not apply in the event death or disability of the grantee occurs prior to the expiration of the sixmonth period.

(iii) Administration of the plan. (A) The plan shall be administered by either the board of directors, a majority of which are disinterested persons and a majority of the directors acting on plan matters are disinterested persons, or by a committee of three or more persons, all of whom are disinterested persons;

(B) The board or committee shall have sole discretion either:

(1) To determine the form in which payment of the right will be made (i.e., cash, securities, or any combination thereof), or

(2) To consent to or disapprove the election of the participant to receive

cash in full or partial settlement of the right. Such consent or disapproval may be given at any time after the election to which it relates;

(C) Any election by the participant to receive cash in full or partial settlement of the stock appreciation right, as well as any exercise by the participant of a stock appreciation right for such cash, shall be made during the period beginning on the third business day following the date of release of the financial data specified in paragraph (c)(5)(i)(B) of this section and ending on the twelfth business day following such date. Paragraph (c)(5)(iii)(C) of this section, however, shall not apply to any exercise by the participant of a stock appreciation right for cash where the date of exercise:

(1) Is automatic or fixed in advance under the plan;

(2) Is at least six months beyond the date of grant of the stock appreciation right; and

(3) Is outside the control of the participant.

(iv) Compliance with other conditions of paragraph (c) of this section. The plan under which the stock appreciation rights and any related options are granted shall meet the conditions specified above in paragraphs (c) (1), (2), (3), and (4) of this section.

(v) Limit of the exemption. Nothing in paragraph (c)(5) of this section provides an exemption from section 16(b) for the acquisition of stock upon the exercise of a stock upon the exercise of a stock appreciation right or a stock option.

(d) Exemption from section 16(b) of the Act of long-term profits incident to sales within six months of the exercise of an option. (1) To the extent specified in paragraph (d)(2) of this section, transactions involving the purchase and sale, or sale and purchase, of any equity security of a bank shall be exempt from the operation of section 16(b) of the Act, as not comprehended within the purpose of that section, if such purchase is pursuant to the exercise of an option, warrant, or right either (i) acquired more than six months before its exercise, or (ii) acquired pursuant to the terms of an employment contract entered into

more than six months before its exercise.

(2) With respect to transactions specified in paragraph (d)(1) of this section, the profits inuring to the bank pursuant to section 1(6)(b) of the Act 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 section shall be deemed to enlarge the amount of profit that would inure to the bank in the absence of this paragraph.

(3) The disposition of any equity security of a bank shall also be exempt from the operation of section 16(b) of the Act, as not comprehended within the purpose of that section, if purchased in a transaction specified in paragraph (d)(1) of this section, under a plan or agreement for merger or consolidation, or reclassification of the bank's securities or for the exchange of its securities for the securities of another person that has acquired its assets, where the terms of such plan or agreement are binding upon all stockholders of the bank except to the extent that dissenting stockholders may be entitled, under statutory provisions or provisions contained in the bank's charter, to receive the appraised or fair value of their holdings.

(4) The exemptions provided by paragraph (d) of this section shall not apply to any transaction made unlawful by section 16(c) of the Act or by any regulations thereunder.

(5) The burden of establishing market price of a security for the purpose of this subsection shall rest upon the person claiming the exemption.

(e) Exemptions from section 16(b) of the Act of dispositions of equity securities pursuant to certain mergers or consolidations incident to formation of a bank holding company. (1) There shall be exempt from the provisions of section 16(b) of the Act, as not comprehended within the purpose of that section, the disposition of any equity security, pursuant to a merger or consolidation, of a bank which, prior to said merger or consolidation, held over 85 percent of the combined assets of all the companies undergoing merger or consolidation, as determined by ref

erence to their most recent available financial statements for a 12-month period prior to the merger or consolidation, if, in such merger or consolidation, there are issued, in exchange for such equity securities of such bank, equity securities of a bank holding company as defined in the Bank Holding Company Act of 1956, as amended.

(2) Notwithstanding the foregoing, if an officer, director, or stockholder shall make any purchase (other than a purchase exempted by this rule or any other rule under section 16(b) of the Act) of an equity security of any company involved in the merger or consolidation and any sale (other than a sale exempted by this rule or any other rule under section 16(b) of the Act) of an equity 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 rule shall be unavailable to such officer, director, or stockholder to the extent of such purchase and sale.

(f) Exemption from section 16(b) of the Act of transactions involving the deposit or withdrawal of equity securities under a voting trust or deposit agreement. Any acquisition or disposition of an equity security involved in the deposit of such security under, or the withdrawal of such security from, a voting trust or deposit agreement, and the acquisition or disposition in connection therewith of the certificate representing such security, shall be exempt from the operation of section 16(b) of the Act if substantially all of the assets held under the voting trust or deposit agreement, immediately after the deposit or immediately prior to the withdrawal as the case may be, consisted of equity securities of the same class as the security deposited or withdrawn; Provided, however, That this paragraph shall not apply to the extent that there shall have been either: (1) A purchase of an equity security of the class deposited and a sale of any certificate representing an equity security of such class, or (2) a sale of an equity security of the class deposited and a purchase of any certificate representing an equity security of such class (otherwise than in a

transaction involved in such deposit or withdrawal or in a transaction exempted by any other provision under section 16(b) of the Act within a period of less than six months which includes the date of the deposit or withdrawal.

(g) Exemption from section 16(b) of the Act of transactions involving the conversion of equity securities. (1) Any acquisition or disposition of an equity security involved in the conversion of an equity security which, by its terms or pursuant to the terms of the corporate charter or other governing instruments, is convertible immediately or after a stated period of time into another equity security of the same bank shall be exempt from the operation of section 16(b) of the Act; Provided, however, That this paragraph shall not apply to the extent that there shall have been either: (i) A purchase of any equity security of the class convertible (including any acquisition of or change in a conversion privilege) and a sale of any equity security of the class issuable upon conversion, or (ii) a sale of any equity security of the class convertible and any purchase of any equity security issuable upon conversion (otherwise than in a transaction involved in such conversion or in a transaction exempted by any other provision under section 16(b) of the Act) within a period of less than six months which includes the date of conversion.

(2) For the purpose of this subsection, an equity security shall not be deemed to be acquired or disposed of upon conversion of an equity security in the terms of the equity security converted require the payment or entail the receipt, in connection with such conversion, of cash or other property (other than equity securities involved in the conversion) equal in value at the time of conversion to more than 15 percent of the value of the equity security issued upon conversion.

(3) For the purpose of this subsection, an equity security shall be deemed convertible if it is convertible at the option of the holder or of some other person or by operation of the terms of the security or the governing instruments.

(h) Exemption from section 16(b) of the Act of certain transactions involving the sale of subscription rights. (1) Any sale of a subscription right to acquire any subject security of the same bank shall be exempt from the provisions of section 16(b) of the Act to the extent prescribed in this section, as not comprehended within the purpose of said section of the Act, if:

(i) Such subscription right is acquired, directly or indirectly, from the bank without the payment of consideration;

(ii) Such subscription right by its terms expires within 45 days after the issuance thereof; and

(iii) Such subscription right by its terms is issued on a pro rata basis to all holders of the beneficiary security of the bank.

(2) When used within paragraph (q) of this section, the following terms shall have the meaning indicated.

(i) The term "subscription right" means any warrant or certificate evidencing a right to subscribe to or otherwise acquire an equity security.

(ii) The term "beneficiary security" means a security registered under section 12 of the Act to the holders of which a subscription right is granted.

(iii) The term "subject security" means a security which is the subject of a subscription right.

(3) Notwithstanding anything contained herein to the contrary, if a person purchases subscription rights for cash or other consideration, then a sale by such person of subscription rights otherwise exempted by this rule will not be so exempted to the extent of such purchases within the 6-month period preceding or following such sale.

[46 FR 25208, May 5, 1981, as amended at 48 FR 55564, Dec. 14, 1983]

§ 335.412 Exemption of certain securities from section 16(c) of the Act.

(a) Exemption of certain securities from section 16(c) of the Act. Any equity security of a bank shall be exempt from the operation of section 16(c) of the Act to the extent necessary to render lawful under such section the execution by a broker of an

order for an account in which he has no direct or indirect interest.

(b) Exemption from section 16(c) of the Act of certain tranactions affected in connection with a distribution. Any equity security of a bank shall be exempt from the operation of section 16(c) of the Act to the extent necessary to render lawful under such section any sale made by or on behalf of a dealer in connection with a distribution of a substantial block of the bank's securities, upon the following conditions:

(1) The sale is made with respect to an overallotment in which the dealer is participating as a member of an underwriting group, or the dealer or a person acting on his behalf intends in good faith to offset such sale with a security to be acquired by or on behalf of the dealer as a participant in an underwriting, selling or soliciting-dealer group of which the dealer is a member at the time of the sale, whether or not the security to be so acquired is subject to a prior offering to existing security holders or some other class of persons; and

(2) Other persons not within the purview of section 16(c) of the Act are participating in the distribution of such block of securities on terms at least as favorable as those on which such dealer is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of section 16(c) of the Act by this paragraph. 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, however, preclude an exemption that would otherwise be available under this paragraph.

(c) Exemption of sales of securities to be acquired. (1) Whenever any person is entitled, as an incident to his ownership of an issued equity security of a bank and without the payment of

consideration, to receive another security of the bank "when issued" or “when distributed”, the security to be acquired shall be exempt from the operation of section 16(c) of the Act if: (i) The sale is made subject to the same conditions as those attaching to the right of acquisition, (ii) such person exercises reasonable diligence to deliver such security to the purchaser promptly after his right of acquisition matures, and (iii) such person reports the sale on the appropriate form for reporting transactions by persons subject to section 16(a) of the Act.

(2) Paragraph (c) of this section shall not be construed as exempting transactions involving both a sale of a security "when issued" or "when distributed" and a sale of the security by virtue of which the seller expects to receive the "when issued" or "when distributed” security, if the two transactions combined result in a sale of more units than the aggregate of those owned by the seller plus those to be received by him pursuant to his right of acquisition.

(d) Arbitrage transactions under section 16 of the Act. It shall be unlawful for any director or officer of a bank to effect any foreign or domestic arbitrage transaction in any equity security of the bank unless he shall include such transaction in the statements required by section 16(a) of the Act and paragraph (a) of § 335.410 and shall account to such bank for the profits arising from such transaction, as provided in section 16(b) of the Act. The provisions of section 16(c) of the Act shall not apply to such arbitrage transactions. The provisions of paragraph (a) of § 335.410 and of section 16 of the Act shall not apply to any bona fide foreign or domestic arbitrage transaction insofar as it is effected by any person other than such director or officer of the bank issuing such security.

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Initial statement of beneficial ownership of equity securities (Form F-7).

FEDERAL DEPOSIT INSURANCE CORPORATION

INITIAL STATEMENT OF BENEFICIAL OWNERSHIP OF EQUITY SECURITIES (FORM F-7)

Filed pursuant to Section 16(a) of the Securities Exchange Act of 1934

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FDIC 6112 01 (176)

SIGNATURE OF REPORTING PERSON

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