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Approval of stock option plan

UNOFFICIAL COPY: 3 NYCRR - Ch. I Part 26 -- Stock Options
(Statutory authority: Banking Law, §§ 140-a, 313)

Sec.

GENERAL PROVISIONS

26.1 Definitions
26.2 Requirement of Superintendent's approval
26.3 Preliminary approval
26.4 Final approval
26.5 Notice to stockholders
26.6 Amendments to plan or options

PROVISIONS OF PLAN

26.10 Granting committee
26.11 Option pricing
26.12 Additional mandatory provisions
26.13 Permissive provisions
26.14 Voidability of plans and options

History: Part (§§ 26.1 - 26.6, 26.10 - 26.14) filed July 18, 1963 eff. July 18, 1963.

GENERAL PROVISIONS

3 NYCRR - § 26.1 -- Definitions.

As used in this Part the term:

(a) bank means a bank, trust company or industrial bank;

(b) option means the right of an individual (optionee) to purchase from a bank shares of the bank's authorized and unissued capital stock by virtue of an offer by the bank continuing for a stated period of time to sell such shares at a stipulated price, such individual being under no obligation to purchase; and

(c) plan means the document setting forth the terms and conditions under which a bank may grant stock options to its directors, officers and employees.

History: Sec. filed July 18, 1963; amd. filed Feb. 8, 1988 eff. Feb. 8, 1988.

3 NYCRR - § 26.2 -- Requirement Of Superintendent's Approval.

No option granted by any bank shall become effective and no shares shall be issued or purchased pursuant to any plan until the Superintendent has given final approval to such plan upon application therefor.

History: Sec. filed July 18, 1963 eff. July 18, 1963.

3 NYCRR - § 26.3 -- Preliminary Approval.

(a) Following adoption of a plan by its board of directors, a bank may submit to the Superintendent an application for preliminary approval of such plan. The application, to be submitted in triplicate, shall consist of:

(1) a copy of the plan;

(2) a certified copy of the resolution of the board of directors adopting the plan;

(3) drafts or printer's proofs of resolutions to be submitted to a stockholder's meeting:

(i) authorizing adoption of the plan; and

(ii) authorizing any appropriate amendments to the bank's organization certificate with regard to any increase in capital stock or other matters;

(4) drafts or printer's proofs of the proposed certificate of amendment;

(5) an opinion of the bank's counsel that the provisions of the plan will permit compliance with the provisions of this Part;

(6) proposed proxy materials; and

(7) such other documents or information as the Superintendent may require.

(b) The Superintendent shall approve or disapprove in writing such application for preliminary approval.

(c) In the event the Superintendent approves such application, the plan may be submitted to the stockholders of the bank.

History: Sec. filed July 18, 1963; amd. filed Jan. 8, 1965 eff. Jan. 8, 1965.

3 NYCRR - § 26.4 -- Final Approval.

(a) Following approval by the holders of a majority of the outstanding shares of capital stock of the bank and following the expiration of a 20-day period from the date notice of the stockholder's meeting was mailed to stockholders, the bank may submit to the Superintendent an application for final approval of the plan. The application, to be submitted in triplicate, shall consist of:

(1) a certified copy of the resolution of the stockholders adopting the plan and approving any appropriate amendments to the bank's organization certificate;

(2) a sworn statement of the bank's president, secretary or cashier setting forth the votes cast for and against the plan, and stating whether any stockholders have demanded payment for their shares and if so, the number of shares for which payment has been demanded; and

(3) such other documents or information as the Superintendent may require.

(b) The Superintendent shall approve or disapprove in writing such application.

History: Sec. filed July 18, 1963; amd. filed Feb. 8, 1988 eff. Feb. 24, 1988.

3 NYCRR - § 26.5 -- Notice To Stockholders.

The following information shall accompany the notice given to stockholders of the stockholders' meeting to be held for the purpose of approving a plan:

(a) a copy of the plan;

(b) comparative earnings statements of the bank, in tabular form, for each of the last five calendar years and for the current year, inclusive of the quarterly period preceding such notice;

(c) comparative balance sheets of the bank, in tabular form, for each of the last five calendar years and for the current year, inclusive of the quarterly period preceding such notice;

(d) the current annual compensation of each of the bank's two highest paid officers and the current annual aggregate compensation of all the bank's officers;

(e) any options previously granted by the bank to its officers or employees;

(f) a statement to the effect that the Superintendent's preliminary review of the plan implies neither approval nor disapproval of the plan's contents;

(g) such other information as may be required by the Superintendent; and

(h) such other information as may be required by applicable law or regulation.

History: Sec. filed July 18, 1963 eff. July 18, 1963.

3 NYCRR - § 26.6 -- Amendments To Plan Or Options.

(a) Except as provided in subdivision (b) of this section, no amendment to a plan shall become effective until such amendment has been adopted by the bank's board of directors, and approved by the holders of a majority of the outstanding shares of the capital stock of the bank and by the Superintendent in accordance with the procedures set forth in sections 26.3 and 26.4 of this Part.

(b) Stockholder approval of the proposed amendment shall not be required if the plan contains a provision similar to that permitted under section 26.13(a)(8) of this Part, the proposed amendment is not one of those specified in subparagraphs (i) through (v) thereof and the proposed amendment does not require an amendment of the bank's organization certificate. In such event, following adoption of the amendment by its board of directors, a bank shall submit to the Superintendent an application for approval of the amendment, and no such amendment shall become effective until the Superintendent's approval is granted. The application, to be submitted in triplicate, shall consist of:

(1) a copy of the amendment;

(2) a certified copy of the resolution of the board of directors adopting the amendment;

(3) an opinion of the bank's counsel that the provisions of the plan, as amended, will permit compliance with the provisions of this Part; and

(4) such other documents or information as the Superintendent may require. The Superintendent shall approve or disapprove in writing such application.

(c) Options may be amended only in accordance with the plan pursuant to which they are granted.

History: Sec. filed July 18, 1963; amds. filed: Jan. 1, 1965; Feb. 8, 1988 eff. Feb. 24, 1988.

PROVISIONS OF PLAN

3 NYCRR - § 26.10 -- Granting Committee.

The plan shall provide that options shall be granted only by (or upon recommendation of) a committee elected by the bank's board of directors. However, with respect to participation by directors, the plan shall provide that options shall be granted by (or only in accordance with the recommendation of) a committee elected by the bank's board of directors, none of the members of which committee shall be under consideration for a grant of options at the time such committee acts, or in accordance with the plan if the plan specifies the number of options which will be granted to directors.

History

Sec. filed July 18, 1963; amds. filed: Feb. 8, 1988; March 14, 1989 eff. March 29, 1989.

3 NYCRR - § 26.11 -- Option Pricing.

The plan shall provide that options may be granted at not less than 100 percent of the fair market value of the shares covered by such option on the date the option is granted. If a realistic and fair market value of such shares is not readily determinable, an estimate of the fair market value shall be made and options may be granted at not less than this figure and in such case the plan shall set forth in detail the method to be employed in estimating fair market value. Among the factors which should be considered in such estimates are:

(a) the market value of the shares of comparable banks; and

(b) the trend of the bank's earnings.

History: Sec. filed July 18, 1963; amd. filed Feb. 8, 1988 eff. Feb. 24, 1988.

3 NYCRR - § 26.12 -- Additional Mandatory Provisions.

The plan shall provide:

(a) a general statement of the purposes of the plan;

(b) that the plan is subject to the provisions of the Banking Law, section 140-a or 313, the regulations of the Banking Board and any other applicable law or regulation;

(c) the total number of shares as to which options may be granted, which number may, however, be subject to adjustment as provided in section 26.13(a)(7) of this Part;

(d) the period of time for which the plan shall be in effect;

(e) that options granted thereunder shall not extend beyond a period of 10 years or such shorter period as the plan may provide;

(f) that an optionee may not sell within a specified period shares which he has purchased pursuant to option (unless the Superintendent shall waive, in writing, the requirement for such a provision);

(g) that no options shall be assignable or transferable except by will or by the laws of descent and distribution; and

(h) that the terms and conditions of options shall be set forth or incorporated by reference in the instruments evidencing such options.

History: Sec. filed July 18, 1963; amds. filed: Jan. 8, 1965; Feb. 8, 1988 eff. Feb. 24, 1988.

3 NYCRR - § 26.13 -- Permissive Provisions.

(a) The plan may include:

(1) a limitation upon the number of shares which may be optioned to any single individual;

(2) a limitation to the effect that an optionee may exercise an option only while in the employ of the bank or within three months after leaving such employment;

(3) a limitation to the effect that an option may not be exercised more than two years after the death of the optionee;

(4) a limitation upon the times during a year when options may be exercised;

(5) a limitation upon the portion of an optionee's options which may be exercised in any one year;

(6) an age limitation upon the persons who may be granted options;

(7) a provision which would permit a bank's board of directors, subject only to the Superintendent's approval, to make appropriate adjustments in the total number of shares as to which options may be granted, the number of shares which may be optioned to any single individual, the number of shares optioned under any option, and the option price under any option, to reflect any stock dividend, stock split or share combination duly effectuated by the bank; and

(8) a provision which would permit a bank's board of directors to amend the plan, subject only to the Superintendent's approval; provided, however, that the approval of the holders of a majority of the bank's outstanding capital stock shall be required for any amendment (other than an adjustment made pursuant to paragraph [7] of this subdivision) which would:

(i) increase the number of shares as to which options may be granted;

(ii) change the number of shares which may be optioned to any single individual;

(iii) decrease an option price;

(iv) extend the term of the plan or of an option; or

(v) change the persons or category of persons eligible to be granted options.

(b) The foregoing provisions are not intended to be inclusive of all provisions which may be appropriate or desirable for inclusion in a plan.

History: Sec. filed July 18, 1963; amd. filed Feb. 8, 1988 eff. Feb. 24, 1988.

3 NYCRR - § 26.14 -- Voidability Of Plans And Options.

If the Superintendent shall find at any time that there has been, with respect to any plan approved by him, any violation of any of the provisions of the Banking Law, section 140-a or 313, of this Part, or of the plan, he may declare such plan or any option granted thereunder null and void, and in such event shall so advise the bank and, if appropriate, the optionee, by official communications stating the grounds for such declaration, and specifying the action, if any, to be taken by such bank or optionee to effectuate or carry out such declaration. The Superintendent may advise the bank and, if appropriate, the optionee, of the action, if any, to be taken by such bank or optionee to cure the defect.

History: Sec. filed July 18, 1963 eff. July 18, 1963.