Sec. 31.04.10.06. Exemption from Insurance Article, §3-119(e), Annotated Code of Maryland, of Long-Term Profits Incident to Sales within 6 Months of the Exercise of an Option

A. To the extent specified in §B of this regulation, the Insurance Commissioner hereby exempts as not comprehended within the purposes of Insurance Article, §3-119(e), Annotated Code of Maryland, any transaction or transactions involving the purchase and sale, or sale and purchase, of any equity security if the purchase is pursuant to the exercise of an option or similar right either acquired:

(1) More than 6 months before its exercise; or

(2) Pursuant to the terms of an employment contract entered into more than 6 months before its exercise.

B. In respect of transactions specified in §A of this regulation, the profits inuring to the issuer may not exceed the difference between the process of the sale and the lowest market price of any security of the same class within 6 months before or after the date of sale. Nothing in this section shall be deemed to enlarge the amount of profit which would inure to the issuer in the absence of this regulation.

C. The Insurance Commissioner also hereby exempts, as not comprehended within the purposes of Insurance Article, §3-119(e), Annotated Code of Maryland, the disposition of a security, purchased in a transaction specified in §A of this regulation pursuant to a plan or agreement for merger or consolidation, or reclassification of the issuer'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 §368(c) of the Internal Revenue Code of 1954, of a person which has acquired its assets, when the terms of the plan or agreement are binding upon all stockholders of the issuer 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.

D. The exemptions provided by this regulation may not apply to any transaction made unlawful by Insurance Article, §3-119(f), Annotated Code of Maryland, or by any regulations thereunder.

E. The burden of establishing the market price of a security for the purpose of this regulation shall rest upon the person claiming the exemption.

F. The exemption granted pursuant to this regulation shall apply to any liability under Insurance Article, §3-119(e), Annotated Code of Maryland, existing at or after the effective date of this regulation, but may not be deemed to affect judgments rendered before that date.