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NORTH CAROLINA REGISTER Volume 18, Issue 10 Pages 743 - 823 November 17, 2003 This issue contains documents officially filed through October 24, 2003. Office of Administrative Hearings Rules Division 424 North Blount Street (27601) 6714 Mail Service Center Raleigh, NC 27699-6714 (919) 733-2678 FAX (919) 733-3462 Julian Mann III, Director Camille Winston, Deputy Director Molly Masich, Director of APA Services Ruby Creech, Publications Coordinator Linda Dupree, Editorial Assistant Dana Sholes, Editorial Assistant Rhonda Wright, Editorial Assistant IN THIS ISSUE I. IN ADDITION ENR – Notice of Intent to Redevelop a Brownfields Property – Citiline, LLC............................................743 ENR – Notice of Intent to Redevelop a Brownfields Property – Salem Recreational Fields, LLC ..........744 ENR – Application for Innovative Approval of a Wastewater System for On -site Subsurface Use...746 Labor – Order 2002-V-01, Continental General Tire, Inc., Permanent Variance.................................745 Voting Rights Letters ..................................................747 - 749 II. PROPOSED RULES Environment and Natural Resources Wildlife Resources Commission..............................775 - 813 Insurance Admission Requirements ..........................................774 Consumer Services .....................................................750 Financial Evaluation Division..................................750 - 774 Justice Private Protective Services .......................................774 - 775 III. RULES REVIEW COMMISSION..........................814 - 819 IV. CONTESTED CASE DECISIONS Index to ALJ Decisions.................................................820 - 823 For the CUMULATIVE INDEX to the NC Register go to: http://oahnt.oah.state.nc.us/register/CI.pdf North Carolina Register is published semi-monthly for $195 per year by the Office of Administrative Hearings, 424 North Blount Street, Raleigh, NC 27601. North Carolina Register (ISSN 15200604) to mail at Periodicals Rates is paid at Raleigh, NC. POSTMASTER: Send Address changes to the North Carolina Register, 6714 Mail Service Center, Raleigh, NC 27699-6714. NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM The North Carolina Administrative Code (NCAC) has four major classifications of rules. Three of these, titles, chapters, and sections are mandatory. The major classification of the NCAC is the title. Each major department in the North Carolina executive branch of government has been assigned a title number. Titles are further broken down into chapters which shall be numerical in order. Subchapters are optional classifications to be used by agencies when appropriate. NCAC TITLES TITLE 21 LICENSING BOARDS TITLE 24 INDEPENDENT AGENCIES 1 ADMINISTRATION 2 AGRICULTURE & CONSUMER SERVICES 3 AUDITOR 4 COMMERCE 5 CORRECTION 6 COUNCIL OF STATE 7 CULTURAL RESOURCES 8 ELECTIONS 9 GOVERNOR 10A HEALTH AND HUMAN SERVICES 11 INSURANCE 12 JUSTICE 13 LABOR 14A CRIME CONTROL & PUBLIC SAFETY 15A ENVIRONMENT &NATURAL RESOURCES 16 PUBLIC EDUCATION 17 REVENUE 18 SECRETARY OF STATE 19A TRANSPORTATION 20 TREASURER 21* OCCUPATIONAL LICENSING BOARDS 22 ADMINISTRATIVE PROCEDURES (REPEALED) 23 COMMUNITY COLLEGES 24* INDEPENDENT AGENCIES 25 STATE PERSONNEL 26 ADMINISTRATIVE HEARINGS 27 NC STATE BAR 28 JUVENILE JUSTICE AND DELINQUENCY PREVENTION 1 Acupuncture 2 Architecture 3 Athletic Trainer Examiners 4 Auctioneers 6 Barber Examiners 8 Certified Public Accountant Examiners 10 Chiropractic Examiners 11 Employee Assistance Professionals 12 General Contractors 14 Cosmetic Art Examiners 16 Dental Examin ers 17 Dietetics/Nutrition 18 Electrical Contractors 19 Electrolysis 20 Foresters 21 Geologists 22 Hearing Aid Dealers and Fitters 25 Interpreter/Transliterator (Reserved) 26 Landscape Architects 28 Landscape Contractors 29 Locksmith Licensing Board 30 Massage & Bodywork Therapy 31 Marital and Family Therapy 32 Medical Examiners 33 Midwifery Joint Committee 34 Funeral Service, Board of 36 Nursing 37 Nursing Home Administrators 38 Occupational Therapists 40 Opticians 42 Optometry 44 Osteopathic Examination (Repealed) 45 Pastoral Counselors, Fee-Based Practicing 46 Pharmacy 48 Physical Therapy Examiners 50 Plumbing, Heating & Fire Sprinkler Contractors 52 Podiatry Examiners 53 Professional Counselors 54 Psychology Board 56 Professional Engineers & Land Surveyors 57 Real Estate Appraisal Board 58 Real Estate Commission 60 Refrigeration Examiners 61 Respiratory Care Board 62 Sanitarian Examiners 63 Social Work Certification 64 Speech & Language Pathologists & Audiologists 65 Therapeutic Recreation Certification 66 Veterinary Medical Board 68 Substance Abuse Professionals 69 Soil Scientists 1 Housing Finance 2 Agricultural Finance Authority 3 Safety & Health Review Board 4 Reserved 5 State Health Plan Purchasing Alliance Board (Repealed) Note: Title 21 contains the chapters of the various occupational licensing boards and Title 24 contains the chapters of independent agencies. NORTH CAROLINA REGISTER Publication Schedule for July 2003 – December 2003 FILING DEADLINES NOTICE OF TEXT PERMANENT RULE TEMPORARY RULES Volume & issue number Issue date Last day for filing Earliest date for public hearing End of required comment period Deadline to submit to RRC for review at next meeting Earliest Eff. Date of Permanent Rule Delayed Eff. Date of Permanent Rule (first legislative day of the next regular session) 270th day from publication in the Register 17:13 01/02/03 12/06/02 01/17/03 03/03/03 03/20/03 05/01/03 05/10/04 09/29/03 17:14 01/15/03 12/19/02 01/30/03 03/17/03 03/20/03 05/01/03 05/10/04 10/12/03 17:15 02/03/03 01/10/03 02/18/03 04/04/03 04/21/03 06/01/03 05/10/04 10/31/03 17:16 02/17/03 01/27/03 03/04/03 04/21/03 04/21/03 06/01/03 05/10/04 11/14/03 17:17 03/03/03 02/10/03 03/18/03 05/02/03 05/20/03 07/01/03 05/10/04 11/28/03 17:18 03/17/03 02/24/03 04/01/03 05/16/03 05/20/03 07/01/03 05/10/04 12/12/03 17:19 04/01/03 03/11/03 04/16/03 06/02/03 06/20/03 08/01/03 05/10/04 12/27/03 17:20 04/15/03 03/25/03 04/30/03 06/16/03 06/20/03 08/01/03 05/10/04 01/10/04 17:21 05/01/03 04/09/03 05/16/03 06/30/03 07/21/03 09/01/03 05/10/04 01/26/04 17:22 05/15/03 04/24/03 05/30/03 07/14/03 07/21/03 09/01/03 05/10/04 02/09/04 17:23 06/02/03 05/09/03 06/17/03 08/01/03 08/20/03 10/01/03 05/10/04 02/27/04 17:24 06/16/03 05/23/03 07/01/03 08/15/03 08/20/03 10/01/03 05/10/04 03/12/04 18:01 07/01/03 06/10/03 07/16/03 09/02/03 09/22/03 11/01/03 05/10/04 03/27/04 18:02 07/15/03 06/23/03 07/30/03 09/15/03 09/22/03 11/01/03 05/10/04 04/10/04 18:03 08/01/03 07/11/03 08/16/03 09/30/03 10/20/03 12/01/03 05/10/04 04/27/04 18:04 08/15/03 07/25/03 08/30/03 10/14/03 10/20/03 12/01/03 05/10/04 05/11/04 18:05 09/02/03 08/11/03 09/17/03 11/03/03 11/20/03 01/01/04 05/10/04 05/29/04 18:06 09/15/03 08/22/03 09/30/03 11/14/03 11/20/03 01/01/04 05/10/04 06/11/04 18:07 10/01/03 09/10/03 10/16/03 12/01/03 12/22/03 02/01/04 05/10/04 06/27/04 18:08 10/15/03 09/24/03 10/30/03 12/15/03 12/22/03 02/01/04 05/10/04 07/11/04 18:09 11/03/03 10/13/03 11/18/03 01/02/04 01/20/04 03/01/04 05/10/04 07/30/04 18:10 11/17/03 10/24/03 12/02/03 01/16/04 01/20/04 03/01/04 05/10/04 08/13/04 18:11 12/01/03 11/05/03 12/16/03 01/30/04 02/20/04 04/01/04 05/10/04 08/27/04 18:12 12/15/03 11/20/03 12/30/03 02/13/04 02/20/04 04/01/04 05/10/04 09/10/04 EXPLANATION OF THE PUBLICATION SCHEDULE This Publication Schedule is prepared by the Office of Administrative Hearings as a public service and the computation of time periods are not to be deemed binding or controlling. Time is computed according to 26 NCAC 2C .0302 and the Rules of Civil Procedure, Rule 6. GENERAL The North Carolina Register shall be published twice a month and contains the following information submitted for publication by a state agency: (1) temporary rules; (2) notices of rule-making proceedings; (3) text of proposed rules; (4) text of permanent rules approved by the Rules Review Commission; (5) notices of receipt of a petition for municipal incorporation, as required by G.S. 120-165; (6) Executive Orders of the Governor; (7) final decision letters from the U.S. Attorney General concerning changes in laws affecting voting in a jurisdiction subject of Section 5 of the Voting Rights Act of 1965, as required by G.S. 120-30.9H; (8) orders of the Tax Review Board issued under G.S. 105-241.2; and (9) other information the Codifier of Rules determines to be helpful to the public. COMPUTING TIME: In computing time in the schedule, the day of publication of the North Carolina Register is not included. The last day of the period so computed is included, unless it is a Saturday, Sunday, or State holiday, in which event the period runs until the preceding day which is not a Saturday, Sunday, or State holiday. FILING DEADLINES ISSUE DATE: The Register is published on the first and fifteen of each month if the first or fifteenth of the month is not a Saturday, Sunday, or State holiday for employees mandated by the State Personnel Commission. If the first or fifteenth of any month is a Saturday, Sunday, or a holiday for State employees, the North Carolina Register issue for that day will be published on the day of that month after the first or fifteenth that is not a Saturday, Sunday, or holiday for State employees. LAST DAY FOR FILING: The last day for filing for any issue is 15 days before the issue date excluding Saturdays, Sundays, and holidays for State employees. NOTICE OF TEXT EARLIEST DATE FOR PUBLIC HEARING: The hearing date shall be at least 15 days after the date a notice of the hearing is published. END OF REQUIRED COMMENT PERIOD (1) RULE WITH NON-SUBSTANTIAL ECONOMIC IMPACT: An agency shall accept comments on the text of a proposed rule for at least 60 days after the text is published or until the date of any public hearings held on the proposed rule, whichever is longer. (2) RULE WITH SUBSTANTIAL ECONOMIC IMPACT: An agency shall accept comments on the text of a proposed rule published in the Register and that has a substantial economic impact requiring a fiscal note under G.S. 150B-21.4(b1) for at least 60 days after publication or until the date of any public hearing held on the rule, whichever is longer. DEADLINE TO SUBMIT TO THE RULES REVIEW COMMISSION: The Commission shall review a rule submitted to it on or before the twentieth of a month by the last day of the next month. FIRST LEGISLATIVE DAY OF THE NEXT REGULAR SESSION OF THE GENERAL ASSEMBLY: This date is the first legislative day of the next regular session of the General Assembly following approval of the rule by the Rules Review Commission. See G.S. 150B- 21.3, Effective date of rules. IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 743 Note from the Codifier: This Section contains public notices that are required to be published in the Register or have been approved by the Codifier of Rules for publication. SUMMARY OF NOTICE OF INTENT TO REDEVELOP A BROWNFIELDS PROPERTY Citiline, LLC Pursuant to G.S. 130A-310.34, Citiline, LLC has filed with the North Carolina Department of Environment and Natural Resources ("DENR") a Notice of Intent to Redevelop a Brownfields Property ("Property") in the City of Charlotte, Mecklenburg County, North Carolina. The Property consists of 2.88 acres and is located at 2028-2040 South Tryon Street. Environmental contamination exists on the Property in groundwater. Citiline, LLC has committed itself to redevelopment of the Property for no use other than commercial purposes such as office and showroom condominiums. The Notice of Intent to Redevelop a Brownfields Property includes: (1) a proposed Brownfields Agreement between DENR and Citiline, LLC, which in turn includes (a) a legal description of the Property, (b) a map showing the location of the Property, (c) a description of the contaminants involved and their concentrations in the media of the Property, (d) the above-stated description of the intended future use of the Property, and (e) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in accordance with G.S. 130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be reviewed at 600 East Trade Street, Neighborhood Development Key Business, Charlotte, NC, 28217 by contacting Carolyn Minnich at that address, at carolyn.minnich@ncmail.net or at (704) 336-3499; or at 401 Oberlin Rd., Raleigh, NC 27605 by contacting Scott Ross at that address, at scott.ross@ncmail.net, or at (919)733-2801, ext. 328. Written public comments may be submitted to DENR within 60 days after the date this Notice is published in a newspaper of general circulation serving the area in which the Brownfields property is located, or in the North Carolina Register, whichever is later. Written requests for a public meeting may be submitted to DENR within 30 days after the period for written public comments begins. All such comments and requests should be addressed as follows: Mr. Bruce Nicholson Head, Special Remediation Branch Superfund Section Division of Waste Management NC Department of Environment and Natural Resources 401 Oberlin Road, Suite 150 Raleigh, North Carolina 27605 IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 744 SUMMARY OF NOTICE OF INTENT TO REDEVELOP A BROWNFIELDS PROPERTY Salem Recreational Fields, LLC Pursuant to G.S. 130A-310.34, Salem Recreational Fields, LLC has filed with the North Carolina Department of Environment and Natural Resources ("DENR") a Notice of Intent to Redevelop a Brownfields Property ("Property") in Winston-Salem, Forsyth County, North Carolina. The Property, currently a city park that Salem Recreational Fields, LLC has contracted to purchase, consists of 7.23 acres and is located on South Salem Avenue near its intersection with South Main Street. Environmental contamination exis ts on the Property in groundwater beneath the former landfill. Salem Recreational Fields, LLC has committed itself to allow no use of the Property other than for outdoor recreation. When not used by Salem Academy and College, the fields will be available for use by the City of Winston-Salem and its citizens, subject to reasonable restrictions that may be imposed by Salem Recreational Fields, LLC. The Notice of Intent to Redevelop a Brownfields Property includes: (1) a proposed Brownfields Agreement between DENR and Salem Recreational Fields, LLC which in turn includes (a) a map showing the location of the Property, (b) a description of the contaminants involved and their concentrations in the media of the Property, (c) the above-stated description of the intended future use of the Property, and (d) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in accordance with G.S. 130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be reviewed at the North Carolina Room of the Forsyth County Central Library, 660 West Fifth Street, Winston-Salem, NC 27101 by contacting Jerry Carroll, at (336)727-2264, ext. 9; or at 401 Oberlin Rd., Raleigh, NC 27605 by contacting Scott Ross at that address, at scott.ross@ncmail.net, or at (919)733-2801, ext. 328. Written public comments may be submitted to DENR within 60 days after the date this Notice is published in a newspaper of general circulation serving the area in which the Brownfields property is located, or in the North Carolina Register, whichever is later. Written requests for a public meeting may be submitted to DENR within 30 days after the period for written public comments begins. All such comments and requests should be addressed as follows: Mr. Bruce Nicholson Head, Brownfields Program Division of Waste Management NC Department of Environment and Natural Resources 401 Oberlin Road, Suite 150 Raleigh, North Carolina 27605 IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 745 NORTH CAROLINA DEPARTMENT OF LABOR DIVIS ION OF OCCUPATIONAL SAFETY AND HEALTH RALEIGH, NORTH CAROLINA Order 2002-V-01 Continental General Tire, Inc. Permanent Variance Order: In accordance with G.S. 95-132(b) and 13 NCAC 07A .0700, Continental General Tire, Inc. (" Continental") is granted the permission to exceed the maximum storage limit requirements for Liquid Petroleum (" LP") gas storage in a single location as specified in 29 C.F.R. 1910.110(f)(4)(i). The standard prohibits the storage of LP in excess of 300 pounds in a single building. This permission is limited to Continental site located at 1900 Continental Boulevard in Charlotte, North Carolina. Discussion: Continental is located in an extremely large facility, which covers approximately 25 acres, with a total of more than two million square feet. The facility is divided into twelve "sub-buildings" designed for different functions (general office spaces, warehouses, and manufacturing, etc.). There are 85 forklifts located in this huge facility which are powered by LP gas. The LP gas used to power these forklifts is stored in LP gas cylinders containing 33 pounds of gas each, and spare cylinders are also stored at the facility. The combination of the used and unused LP gas cylinders exceed the 300 pound limit set forth in the standard. However, these LP gas cylinders are dispersed among multiple sub-locations of the building, with no sub-location containing more than 300 pounds of gas on a given day. The first LP gas storage area, located in the southwest corner of the building, is at least 300 feet away from the second LP storage area, located in the northeast corner of a different subsection of the building. In addition, a two-hour fire -rated wall separates these two areas. The third storage area for LP gas is located in another sub-building, which is more than one-quarter of a mile from the other two locations. Furthermore, the entire building is protected by sprinkler systems, and is classified as low hazard building. The permission granted by this Order is contingent upon Continental ensuring that no more than 300 pounds of LP gas are stored in any one of the three location clusters established at the time of the variance inspection. This limitation equates to a maximum of nine (9) 33-pound LP gas cylinders in one cluster, including empty cylinders. This arrangement complies with the spirit and intent of the standard, and is as safe and healthful as strict compliance with the standard. In addition, Continental should also comply with the requirements of Chapter 5 of NFPA 58 – Liquified Petroleum Gas Code (2001 Edition), which concerns the storage of LP gas cylinders awaiting use, and which is administered by the NC Department of Agriculture and Consumer Services – Standards Division. Action: This order grants Continental's request for a permanent variance. This permanent variance will remain in effect until modified or revoked pursuant to G.S. 95-132(b) and 13 NCAC 07A.0709. This the 24th day of November, 2003. __________________________________________ Allen M. McNeely Director, North Carolina Department of Labor – Occupational Safety and Health Division 11/17/2003 Signed on Original Effective Date Allen M. McNeely Director, North Carolina Department of Labor – Occupational Safety and Health Division IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 746 TITLE 15A – DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES WASTEWATER SECTION, DIVISION OF ENVIRONMENTAL HEALTH Notice of Application for Innovative Approval of a Wastewater System for On-site Subsurface Use Pursuant to G.S. 130A-343(g), the North Carolina Department of Environment and Natural Resources (DENR) shall publish a Notice in the NC Register that a manufacturer has submitted a request for approval of a wastewater system, component, or device for on-site subsurface use. The following application has been submitted to DENR: Application by: On-Site Wastewater Section Division of Environmental Health 1642 Mail Service Center Raleigh, NC 27699-1642 919-733-2895 Fax 919-715-3227 For: Component Substitution for Four-Inch Corrugated Plastic Tubing in Nitrification Lines DENR Contact: Steven Berkowitz 1-919-715-3271 FAX 919-715-3227 steven.berkowitz@ncmail.net The application may be reviewed by contacting the applicant or at 2728 Capital Blvd., Raleigh, NC, On-Site Wastewater Section, Division of Environmental Health. Draft proposed innovative approvals and proposed final action on the application by DENR can be viewed on the On-Site Wastewater Section web site: www.deh.enr.state.nc/oww/. Written public comments may be submitted to DENR within 30 days of the date of the Notice publication in the North Carolina Register. All written comments should be submitted to Mr. Bill Jeter, Chief, On-site Wastewater Section, 1642 Mail Service Center, Raleigh, NC 27699-1642, or bill.jeter@ncmail.net, or Fax 919.715.3227. Written comments received by DENR in accordance with this Notice will be taken into consideration before a final agency decision is made on the innovative subsurface wastewater system application. IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 747 U.S. Department of Justice Civil Rights Division JDR:TCH:AMS:jdh Voting Section – NWB. DJ 166-012-3 950 Pennsylvania Ave., NW 2003-2769 Washington, D.C. 20530 October 6, 2003 Mr. Gary O. Bartlett Executive Director State Board of Elections P.O. Box 27255 Raleigh, NC 27611-7255 Dear Mr. Bartlett: This refers to Session Law 2003-12, which establishes a state election fund; Session Law 2003-226, which adopts changes to implement the Help America Vote Act of 2002, 42 U.S.C. 15301-15545 ("HAVA"), including: providing that the statewide voter registration list is the official list for all elections; enabling the State Board of Elections to make changes in the statewide list to conform it to HAVA requirements, to interface the list with other databases, to verify voter identification, and to assign each voter a unique identifier; providing for electronic voter registration applications and electronically captured signatures; providing for the posting of certain information at polling places with the State Board of Elections to prescribe the format; providing for modifications to the state voter registration form; enabling the State Board of Elections to adopt rules to ensure that voting systems comply with HAVA, including definitions of what constitutes a vote on each voting system; abolishing lever voting systems; providing for provisional balloting with the State Board of Elections to prescribe certain rules; providing identification procedures for voters who register to vote for the first time by mail; enabling the State Board of Elections to develop a procedure for resolving HAVA complaints; providing new procedures for registration and balloting for voters covered by the Uniformed and Overseas Citizens Absentee Voting Act; and enabling the State Board of Elections to adopt rules and guidelines for implementing HAVA; and State Board of Elections guidelines regarding processing voter registration forms, accessible polling places, and complaint procedures for the State of North Carolina, submitted to the Attorney General pursuant to Section 5 of the Voting Rights Act, 42 U.S.C. 1973c. We received your submission on August 6, 2003; supplemental information was received on September 17, 2003. The Attorney General does not interpose any objection to the specified changes. However, we note that Section 5 expressly provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the changes. See the Procedures for the Administration of Section 5 (28 C.F.R. 51.41). Session Law 2003-226 includes provis ions that are enabling in nature. Therefore, any changes affecting voting that are adopted pursuant to this legislation require Section 5 review (e.g., procedures adopted by the State Board of Elections concerning HAVA minimum requirements, voting systems , definition of what constitutes a vote, statewide voter registration database, and provisional voting). See 28 C.F.R. 51.15. Sincerely, Joseph D. Rich Chief, Voting Section IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 748 U.S. Department of Justice Civil Rights Div ision JDR:CMK:TGL:nj Voting Section – NWB. DJ 166-012-3 950 Pennsylvania Ave., NW 2003-2768 Washington, D.C. 20530 October 6, 2003 Mr. Gary O. Bartlett Executive Director State Board of Elections P.O. Box 27255 Raleigh, NC 27611-7255 Dear Mr. Bartlett: This refers to Session Law 2003-346, which provides for a boundary definition, candidate qualifying procedures, the conduct of the elections by Granville County, absentee voting procedures, concurrent terms, and the at-large method of election, for the Butner Advisory Council Jurisdiction (formerly known as the Camp Butner Reservation) in Durham and Granville Counties, North Carolina, submitted to the Attorney General pursuant to Section 5 of the Voting Rights Act, 42 U.S.C. 1973c. We received your submission on August 5, 2003. We have considered our earlier determination regarding the use of at-large elections based on the adoption of concurrent rather than staggered terms, information and arguments you have advanced, along with other information and comments received from interested persons. Accordingly, pursuant to Section 51.48(b) of the Procedures for the Administration of Section 5 (28 C.F.R.) the objection interposed to the at-large method of election is hereby withdrawn. The Attorney General does not interpose any objection to the remaining specified changes. However, we note that Section 5 expressly provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the changes. See the Procedures for the Administration of Section 5 (28 C.F.R. 51.41). Sincerely, Joseph D. Rich Chief, Voting Section IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 749 U.S. Department of Justice Civil Rights Division JDR:RSB:CMK:TGL:jdh:par Voting Section DJ 166-012-3 950 Pennsylvania Ave., NW 1996-3224 Washington, D.C. 20530 2003-2768 October 16, 2003 Mr. Gary O. Bartlett Executive Director State Board of Elections P.O. Box 27255 Raleigh, NC 27611-7255 Dear Mr. Bartlett: This refers to our October 6, 2003, letter regarding the Butner Advisory Council Jurisdiction. The purpose of that letter was to inform you that no objection would be interposed to Session Law 2003-346. However, the letter mistakenly informed you that the Attorney General was withdrawing the February 3, 1997, objection to Chapter 667 (1996). The State did not ask for reconsideration of that objection, the Attorney General did not give the appropriate public notice that he was reconsidering it, and the State does not require that the objection be withdrawn in order to implement the changes contained in Session Law 2003-346. Session Law 2003-346 is a different piece of legislation from chapter 667 (1996) and implements a different election system than the one to which the 1997 objection was interposed. Accordingly, please accept this letter as notification that the February 3, 1997, objection to Chapter 667 (1996) remains in effect. Please accept our apology for any confusion the October 6, 2003, letter may have caused and do not hesitate to contact us should you have any questions. Sincerely, Joseph D. Rich Chief, Voting Section PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 750 Note from the Codifier: The notices published in this Section of the NC Register include the text of proposed rules. The agency must accept comments on the proposed rule(s) for at least 60 days from the publication date, or until the public hearing, or a later date if specified in the notice by the agency. If the agency adopts a rule that differs substantially from a prior published notice, the agency must publish the text of the proposed different rule and accept comment on the proposed different rule for 60 days. Statutory reference: G.S. 150B-21.2. TITLE 11 – DEPARTMENT OF INSURANCE Notice is hereby given in accordance with G.S. 150B-21.2 that the NC Department of Insurance intends to amend the rule cited as 11 NCAC 04 .0427. Proposed Effective Date: March 1, 2004 Public Hearing: Date: December 2, 2003 Time: 10:00 a.m. Location: Dobbs Building, 3rd floor Hearing Room, Raleigh, NC Reason for Proposed Action: S.L. 2003-395 (HB 986) has incorporated the language in Paragraph (b) of this Rule into G.S. 58-36-95(a). Procedure by which a person can object to the agency on a proposed rule: The Department of Insurance will accept written objections to the amendment of this Rule until the expiration of the comment period (1/16/04). Objections need to be specific and sent to the attention of the APA Coordinator. Written comments may be submitted to: Ellen K. Sprenkel, PO Box 26837, Raleigh, NC 27611, phone (919) 733-4529, fax (919) 733-6495, and email esprenke@ncdoi.net. Comment period ends: January 16, 2004 Procedure for Subjecting a Proposed Rule to Legislative Review: Any person who objects to the adoption of a permanent rule may submit written comments to the agency. A person may also submit written objections to the Rules Review Commission. If the Rules Review Commission receives written and signed objections in accordance with G.S. 150B-21.3(b2) from 10 or more persons clearly requesting review by the legislature and the Rules Review Commission approves the rule, the rule will become effective as provided in G.S. 150B-21.3(b1). The Commission will receive written objections until 5:00 p.m. on the 6th business day preceding the end of the month in which a rule is approved. The Commission will receive those objections by mail, delivery service, hand delivery, or facsimile transmission. If you have any further questions concerning the submission of objections to the Commission, please call a Commission staff attorney at 919-733-2721. Fiscal Impact State Local Substantive (>$3,000,000) None CHAPTER 04 - CONSUMER SERVICES DIVISION SECTION .0400 - PROPERTY AND LIABILITY 11 NCAC 04 .0427 DISCLOSURE REQUIREMENTS (a) Every insurer that writes motor vehicle insurance in this state and that intends to require or specify the use of after market parts must disclose to its policyholders in writing, either in the policy or on a sticker attached thereto, the following information in no smaller print than ten point type: IN THE REPAIR OF YOUR COVERED AUTO UNDER THE PHYSICAL DAMAGE COVERAGE PROVISIONS OF THIS POLICY, WE MAY REQUIRE OR SPECIFY THE USE OF AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL MANUFACTURER. THESE PARTS ARE REQUIRED TO BE AT LEAST EQUAL IN TERMS OF FIT, QUALITY, PERFORMANCE AND WARRANTY TO THE ORIGINAL MANUFACTURER PARTS THEY REPLACE. (b) An insurer must disclose to a claimant in writing, either on the estimate or on a separate document attached to the estimate, the following information in no smaller print than ten point type: THIS ESTIMATE HAS BEEN PREPARED BASED ON THE USE OF AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL MANUFACTURER. PARTS USED IN THE REPAIR OF YOUR VEHICLE BY OTHER THAN THE ORIGINAL MANUFACTURER ARE REQUIRED TO BE AT LEAST EQUAL IN TERMS OF FIT, QUALITY, PERFORMANCE AND WARRANTY TO THE ORIGINAL MANUFACTURER PARTS THEY ARE REPLACING. All after market parts installed on a motor vehicle shall be clearly identified on the estimate and invoice for such repair. Authority G.S. 58-2-40. * * * * * * * * * * * * * * * * * * * * Notice is hereby given in accordance with G.S. 150B-21.2 that the NC Department of Insurance intends to adopt the rules cited as 11 NCAC 11F .0601-.0605 and repeal the rules cited as 11 NCAC 11B .0104, .0106, .0108-.0111, .0113-.0114, .0119, .0122-.0131, .0133-.0137, .0139, .0144-.0147, .0149-.0151; 11C .0110, .0122, .0124-.0126, .0131, .0206, .0309; 11D .0115- .0167. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 751 Proposed Effective Date: March 1, 2004 Public Hearing: Date: December 2, 2003 Time: 10:00 a.m. Location Dobbs Building, 3rd Floor Hearing Room, Raleigh, NC Reason for Proposed Action: 11 NCAC 11B .0104, .0106, .0108-.0111, .0113-.0114, .0119, .0122-.0131, .0133-.0137, .0139, .0144-.0147, .0149-.0151; 11C .0110, .0122, .0124-.0126, .0131, .0206, .0309; 11D .0115-.0167 – These Rules are being repealed because they are outdated. 11 NCAC 11F .0601-.0605 – The adoption of these Rules is needed to be in compliance with NAIC Model Laws. Procedure by which a person can object to the agency on a proposed rule: The Department of Insurance will accept written objections to the adoption or repeal of these Rules until the expiration of the comment period (1/16/04). Objections need to be specific and sent to the attention of the APA Coordinator. Written comments may be submitted to: Ellen K. Sprenkel, PO Box 26837, Raleigh, NC 27611, phone (919) 733-4529, fax (919) 733-6495, and email esprenke@ncdoi.net. Comment period ends: January 16, 2004 Procedure for Subjecting a Proposed Rule to Legislative Review: Any person who objects to the adoption of a permanent rule may submit written comments to the agency. A person may also submit written objections to the Rules Review Commission. If the Rules Review Commission receives written and signed objections in accordance with G.S. 150B-21.3(b2) from 10 or more persons clearly requesting review by the legislature and the Rules Review Commis sion approves the rule, the rule will become effective as provided in G.S. 150B-21.3(b1). The Commission will receive written objections until 5:00 p.m. on the 6th business day preceding the end of the month in which a rule is approved. The Commission will receive those objections by mail, delivery service, hand delivery, or facsimile transmission. If you have any further questions concerning the submission of objections to the Commission, please call a Commission staff attorney at 919-733-2721. Fiscal Impact State Local Substantive (>$3,000,000) None CHAPTER 11 - FINANCIAL EVALUATION DIVISION SUBCHAPTER 11B - SPECIAL PROGRAMS SECTION .0100 – SECURITIES 11 NCAC 11B .0104 REPLACEMENT UPON REDUCTION OF MARKET VALUE SECURITIES When any company licensed in North Carolina is required to have a deposit of securities in this state in accordance with Article 5 of G.S. 58 or pursuant to any rule of the Department of Insurance, the amount of such deposit required shall be at the market value thereof and shall be increased from time to time as necessary to maintain the required amount of deposit. Authority G.S. 58-2-40; 58-5-25. 11 NCAC 11B .0106 DEPOSITS REQUIRED: REVOCATION/LICENSE: FOREIGN COMPANIES The Commissioner may require any insurance company licensed in this state to make and maintain deposits of securities in such amounts as the Commissioner may deem necessary for the sole protection of North Carolina policyholders, upon one or mo re of the following grounds: (1) The insurer is operating with unsatisfactory results as determined by the Commissioner from an annual statement or an interim financial statement, or a report on examination; or (2) The insurer has sustained a substantial loss in surplus as reflected in an annual statement or an interim financial statement, or a report on examination; or (3) The insurer is found by the commissioner to be in such an unsound condition that the company is potentially unable to fulfill policyholder contracts. Authority G.S. 58-2-40(1); 58-3-100; 58-5-40; 58-5-45. 11 NCAC 11B .0108 RIGHT OF COMPANY TO RECEIVE INTEREST The right of a company to receive earned interest from the securities on deposit in this state shall be extended to all deposits made under all rules of the Department and the right of the Department to withhold interest in accordance with G.S. 58-5-60 shall also extend to all such deposits. Interest checks from issuing agents or institutions on bonds, notes, debentures or other securities on deposit shall be forwarded to the master trust bank. The interest shall be transmitted to the insurance company in a manner as detailed by the Department and the Master Trust Bank. Authority G.S. 58-2-40; 58-5-1; 58-5-60. 11 NCAC 11B .0109 RIGHT OF THE COMMISSIONER TO RECEIVE AND HOLD INTERES T The Commissioner may in his discretion receive and retain the interest on deposits of a company licensed in North Carolina which is placed in conservatorship, rehabilitation or receivership by its state of domicile, and where the Commissioner has reason to believe that such company may potentially be unable to meet its claims obligation in North Carolina. Such interest will be placed in an interest-bearing account at the master bank account and will be held in trust by the Commissioner for policyholders of the company. Authority G.S. 58-2-40; 58-5-60; 58-183. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 752 11 NCAC 11B .0110 SALE OF DEPOSIT FOR PAYMENT OF LIABILITIES Any company licensed in this state and refusing to pay a claim of a North Carolina resident, after such claim has been reduced to a final judgment and no appeals are outstanding, shall be subject to this Rule. The parties due the claim shall ask the commissioner to sell such deposit of securities as needed to pay claims plus all expenses involved in settling such claim. It is understood that such sale will be done by our master trust bank as further defined under 11 NCAC 11B .0131. The procedure for this sale is as follows: (1) The claimant must inform the company or its North Carolina agent in writing 20 days in advance of his intentions to petition the Commissioner for sale of bonds. (2) After receiving the petition from the claimant the Commissioner shall advertise in a daily paper in Raleigh at least 30 days before the sale. Such advertising shall include, as a minimum, the following information: (a) securities to be sold, (b) company having the deposit, (c) the law under which these securities are being sold. The Commissioner will notify the company after the deposit has been sold, replace the deposit in an amount deemed to be adequate and reasonable by the Commissioner. The right of the commissioner to sell at public auction such amount of the securities on deposit with him as is necessary to pay an outstanding liability of a company as provided by G.S. 58-5-65 shall extend to all deposits made under all rules of the Department. Authority G.S. 58-2-40; 58-5-1; 58-5-65. 11 NCAC 11B .0111 CONVERSION TO CASH MASTER TRUST (a) As used in this Rule and elsewhere in this Section: (1) "DTC" means the electronic transfer of municipal securities through the Deposit Trust Corporation. (2) "Federal Book Entry" means the electronic transfer of U.S. Treasury obligations and cash through member banks of the Federal Reserve System. (b) The Department shall process and release securities that have matured only upon receipt of a written request from the company and where adequate replacement has been made by the company. Securities eligible for Federal Book Entry or DTC shall be converted to cash at maturity. Certificates of deposit shall be redeemed or rolled over at maturity. Authority G.S. 58-2-40; 58-5-1; 58-5-75. 11 NCAC 11B .0113 DEPOSIT REQUIRED UPON INITIAL LICENSING Any company seeking admission to this state which is required to deposit securities with this state shall deposit such securities within 30 days after its license is granted. Authority G.S. 58-2-40; 58-5-5; 58-5-10; 58-5-50. 11 NCAC 11B .0114 DEPOSITS HELD IN TRUST BY COMMISSIONER OF INSURANCE The establishment and servicing of deposits shall be done by authority of the Commissioner of Insurance only. The deposits shall be in the custody of the Master Trust Bank. The procedure for replacement of the deposit shall be as follows: (1) The company desiring to replace bonds or notes shall make a written request for replacement to the Commissioner of Insurance. This request shall be made in advance of the shipment of any securities. (2) The replacement deposit shall be of an equal value to the bond or note being replaced. (3) The Commissioner shall require additional securities at the time of replacement if the citizens and policyholders of this state will have less protection as a result of the replacement. Authority G.S. 58-2-40; 58-5-1; 58-5-40; 58-5-90; 58-5-95. 11 NCAC 11B .0119 CONTINUATION OF DEPOSITS OF SECURITIES OF MERGING COMPANIES The deposits of securities of a licensed company which is merged into another company may be transferred to the account of the surviving company, thus increasing the original deposit of the surviving company by the amount of the deposit of the merged company. Authority G.S. 58-2-40; 58-5-40; 58-5-55. 11 NCAC 11B .0122 EXCHANGE OF DEPOSIT: PROCEDURAL HANDLING It shall be the responsibility of the insurance company to make arrangements with this department at least five working days before exchange of deposit is required. There are no forms required in making an exchange. This department must have the eligible replacement deposit at the master trust bank before any deposit can be returned. Such replacement deposit must be on a market value basis. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0123 SALE OF SECURITIES B Y THE INSURANCE COMPANY PROHIBITED Insurance companies are prohibited from selling bonds or notes which are on deposit with this department without the express written consent of this department prior to sale, and after arrangements for replacements of equal value have been finalized. Authority G.S. 58-2-40. 11 NCAC 11B .0124 MASTER TRUST CREATION THEREOF In order to allow insurance companies to use Federal Book Entry and DTC Systems, the North Carolina Department of Insurance PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 753 has entered an agreement with a Master Trust Bank. This bank has transferred all securities from the vault at the State Treasurers Office to its safekeeping facility at the Master Trust Bank or its duly appointed fiduciary. Enactment of statute to allow the Department of Insurance to create such an agreement was necessary to insure that insurance companies be allowed to participate in purchase of Non-Physical Government Securities in Federal Book Entry and other electronic wire transfers of assets. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0125 MASTER TRUST USE PROCEDURAL HANDLING STEP 1 Any insurance company making a deposit of securities for the North Carolina Department of Insurance must have written approval from the Department of Insurance as to the amount and type of eligible securities to be used in fulfillment of the deposit requirements. Such request for approval must be forwarded to the appropriate named individual in the N.C. Department of Insurance as soon as is feasible by the insurance company but not later than 90 days after admission to North Carolina (See also Rule 11 NCAC 11B .0113). Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0126 MASTER TRUST USE PROCEDURAL HANDLING STEP 2 After approval has been granted the insurance company is required to contact the appropriate named individual for instructions as to shipment and/or wire transfer of the eligible securities. The Department of Insurance will notify the Master Trust Bank when new or increased securities will be forthcoming. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0127 MASTER TRUST USE PROCEDURAL HANDLING STEP 3 After securities are shipped or wired to the Master Trust Bank, the Master Trust Bank will provide the Department of Insurance with a signed receipt indicating securities in question are at the Master Trust Bank. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0128 MASTER TRUST USE PROCEDURAL HANDLING STEP 4 The Master Trust Bank may place the security in Federal Book Entry or DTC in any form which in fact perfects the security interest of this state so long as it is understood that the securities are held for protection of N.C. policyholders in the cases of foreign insurance companies and for protection of all policyholders wheresoever situated in cases of domestic insurance companies unless otherwise noted. The Master Trust Bank understands and agrees that all securities held under this trust arrangement are to be separated at all times from other assets of the bank and other trust arrangements at the bank. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0129 MASTER TRUST USE PROCEDURAL HANDLING STEP 5 The Master Trust Bank understands and agrees that securities while held by them can be in a street name or any other convenient designation so long as such securities can be determined to be the property of the insurance company and the State of North Carolina and not the property of the bank. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0130 MASTER TRUST SOLVENT COMPANIES All interest from securities on deposit will be forwarded to the insurance company in a manner as detailed by the N.C. Department of Insurance and the Master Trust Bank. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0131 MASTER TRUST INSOLVENT COMPANIES All interest from securities on deposit will be deposited in an interest bearing account at the Master Trust Bank. This action will occur after receipt of a court order declaring the insurance company to be insolvent. Also at this time the principal will be sold by the Master Trust to the best bidder from a field of at least two bids. It is conclusively presumed that the sale of securities to the best bidder from a field of two bids will constitute a public sale. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0133 DEPOSIT/AMOUNT FOREIGN FIRE AND/OR CASUALTY INSURERS All foreign fire and casualty insurance companies being licensed in North Carolina must make and maintain a deposit of securities in accordance with the Department of Insurance Admission Data Guidelines form 11 NCAC 14 .0143. Such deposit must be made in accordance with the Master Trust Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0134 DEPOSIT REQUIRED AMOUNT DOMESTIC LIFE INSURERS All domestic life insurance companies being formed and licensed in North Carolina must make and maintain a deposit of securities in accordance with the general regulatory authority of the Insurance Commission for the State of N. C. Such deposit must be made in accordance with the Master Trust Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0135 DEPOSIT/AMOUNT DOMES TIC FIRE AND/OR CASUALTY INSURERS All domestic fire and/or casualty insurance companies being licensed in North Carolina must make and maintain a deposit of securities in accordance with the general regulatory authority of the Commissioner of Insurance for the State of N. C. Such deposit must be made in accordance with the Master Trust PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 754 Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0136 FOREIGN DEPOSIT REQUIRED AMOUNT FOREIGN MISC INSURERS All miscellaneous insurance companies being licensed in North Carolina must make and maintain a deposit of securities in accordance with the Department of Insurance Admission Data Guidelines from 11 NCAC 14 .0143. Such deposit must be made in accordance with the Master Trust Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0137 DEPOSIT REQUIRED AMOUNT DOMESTIC MISCELLANEOUS INSURERS All domestic miscellaneous fire and/or casualty insurance companies being formed and licensed in North Carolina must make and maintain a deposit of securities in accordance with the general regulatory authority of the Commissioner of Insurance for the State of N. C. Such deposit must be made in accordance with the Master Trust Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0139 DEPOSIT USE OF MASTER TRUST ALL NEW COMPANIES Insurance companies required to deposit securities in fulfillment of the North Carolina Department Admissions Data Guidelines, and admission rules shall make such deposits with the Master Trust Bank selected by the North Carolina Commissioner of Insurance. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0144 MASTER TRUST DK TRANSACTION It shall be the responsibility of the insurance company to notify their custodian bank of items to be wired from the Master Trust Bank. Prompt and consistent attention to this matter will prevent delays in the releasing transactions. DK Transactions are conclusively presumed to mean transactions rejected by the sending or receiving bank due to a lack of advance notice of the receipt. Authority G.S. 58-2-40(1); 58-5-1. 11 NCAC 11B .0145 MASTER TRUST CHARGES The Master Trust Bank will notify the insurance companies as to the charges relative to safekeeping the assets held by the Master Trust Bank. All insurance companies are required to pay these charges in accordance with the fee structure as provided by the N.C. Department of Insurance. Authority G.S. 58-2-40(1); 58-5-1. 11 NCAC 11B .0146 MASTER TRUST BANK ABILITY TO REGISTER SECURITIES From time to time registration of securities shall be changed by the Master Trust Bank to facilitate the redemp tion, sale, or transfer of securities on deposit. Such changes shall be made after a written request for approval has been made by the Master Trust Bank and received and approved by the Commissioner of Insurance. Authority G.S. 58-2-40; 58-5-1; 58-5-30; 58-5-63; 58-5-70; 58-5-90; 58-5-95. 11 NCAC 11B .0147 USE OF FEDERAL BOOK ENTRY/DEPOSITORY TRUST CORP/SHIPPING Where securities are eligible for Federal Book Entry or Depository Trust Corp such securities must be placed in these systems prior to shipment to the Department of Insurance or to its appointed Master Trust Bank. Securities ineligible for the above systems will be delivered to the N.C. Department of Insurance or the Master Trust Bank in accordance with written instructions to the shipping insurance company from the N.C. Department of Insurance. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0149 MASTER TRUST USE OF DTC Where securities are eligible for DTC such securities may be placed in this system unless otherwise directed by the Commissioner of Insurance. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0150 MASTER TRUST-RELEASE OF SECURITIES All requests for releasing securities must be delivered in writing to the Department of Insurance at least five working days prior to the requested release date. All release requests must be signed by an officer of the insurance company. Requests from custodian banks or brokerage firms will not be honored. All requests for release of items in Federal Book Entry must identify the servicing Federal Reserve Bank account name, bank ABA number and other required information. All requests for release of items in DTC must give the bank name, address and DTC number. All requests for release of ineligible items must give sufficient information to make the proper transfer. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0151 MASTER TRUST - PAYMENT OF INTEREST In order to make the Master Trust Bank fully accountable, all interest must be forwarded from the paying agent to the Master Trust Bank. The Master Trust Bank will forward the interest to the insurance company or its designated receiving bank. Unless the insurance company notifies the North Carolina Department of Insurance in writing, all interest will be forwarded to the last known home office address given the Department of Insurance. Authority G.S. 58-2-40; 58-5-1. SUBCHAPTER 11C - ANALYSIS AND EXAMINATIONS SECTION .0100 - GENERAL PROVISIONS PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 755 11 NCAC 11C .0110 INVESTMENT IN GOLD OR GOLD FUTURES BY INSURANCE COMPANIES The investment in gold or gold futures by domestic insurance companies is not permitted by the Department. The investment in gold or gold futures by a foreign insurer admitted to do business or seeking admission to North Carolina will be afforded no value in determining compliance with the statutory requirements for such type companies in this state, even if such investment was authorized under the laws of the state of domicile. Authority G.S. 58-2-40(1); 58-7-85; 58-7-90. 11 NCAC 11C .0122 SALE OF EXCHANGE: TRADED CALL OPTIONS An insurer may sell exchange-traded call options only through an exchange and only with respect to stock which it owns. Insurers may not sell any other options. Any insurer selling an option: (1) shall enter into an escrow agreement which provides that its escrowed stock is kept segregated by the bank from other securities owned by the company, and from securities owned by others, which are deposited with the same bank; and (2) must obtain and retain in its possession a copy of an escrow receipt identifying with particularity the escrowed stock. Authority G.S. 58-2-40; 58-7-85; 58-7-90. 11 NCAC 11C .0124 ACCOUNTING PROCEDURES The price received for selling a call option shall not be included in income at the time of receipt, but shall be carried in a deferred account until: (1) The call option expires through the passage of time. The price for the option shall be treated as investment income. (2) The insurer sells the underlying stock pursuant to an exercise of the call option. The price received for the option shall be treated as increasing the amount realized upon the sale of the stock and shall be included in determining capital gain or loss. (3) The insurer engages in a closing purchase transaction. In this event the difference between the price received from the sale of the call option and the price paid in the closing purchase transaction shall be treated as an addition to or deduction from investment income. Authority G.S. 58-2-40; 58-7-85; 58-7-90. 11 NCAC 11C .0125 VALUATION The stock on which an option has been sold shall be valued, so long as the obligation under the option exists, at the lesser of: (1) the exercise price of the option, or (2) the current market price of the stock. Authority G.S. 58-2-40; 58-7-85; 58-7-90. 11 NCAC 11C .0126 PROHIBITION AGAINST SPECULATING IN OPTIONS The authority granted to insurers herein to engage in option transactions shall be used solely in a manner consistent with the insurer's obligation to exercise prudent judgment in the conservative management of its assets. Each option transaction shall reflect such prudent judgment and shall have a rationale related to such conservative management of assets rather than speculation. Nothing herein shall be construed to authorize an insurer to engage in option transactions to an extent or to a degree which would, under the relevant circumstances, be inordinate or speculative. The insurer shall establish and maintain records as to each transaction, demonstrating compliance with this Section. Authority G.S. 58-2-40; 58-7-85; 58-7-90. 11 NCAC 11C .0131 VALUATION OF DEBT SECURITIES The investments in bonds and other evidences of indebtedness specified in G.S. 58-7-190 shall be valued in accordance with the procedures and instructions contained in the Valuations of Securities Manual of the National Association of Insurance Commissioners: Provided, however, that the Commissioner may apply a more conservative valuation method to any insurer for which any of the standards specified in G.S. 58-30-60(b) are applicable. Authority G.S. 58-2-40; 58-7-190. SECTION .0200 - FIRE AND CASUALTY 11 NCAC 11C .0206 ACCOUNTING FOR PREMIUM OVER 90 DAYS PAST DUE Premiums that are not more than 90 days past due are allowable as admitted assets under G.S. 58-7-162(5). For purposes of this determination, premiums are considered more than 90 days past due under any of the following conditions: (1) Original, deposit, and renewal premiums on policies and bonds effective more than 90 days before the date of determination. (2) Premiums covering endorsements on which the effective dates were more than 90 days before the date of determination. (3) Installment premiums due more than 90 days before the date of determination. If any installments are overdue, all of the unpaid installment premiums on the same policy or bond shall be classified as overdue. (4) Audit and additional earned premiums determined by audits made more than 90 days before the date of determination, or charged upon an assured's payroll statements received more than 90 days before the date of determination. (5) Audits and additional earned premiums determined by audits covering periods expiring more than 180 days before the date of determination. The dates when the periods PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 756 expire are determined by the provisions of the insurance contract. (6) When original, deposit, endorsement, or audit premiums are overdue, all premiums subsequently charged on the same policies or bonds are overdue. (7) When original, deposit, installment endorsement, or audit premiums on a policy or bond are overdue, all premiums charged on policies or bonds issued as renewals are overdue. (8) Premiums resulting from an experience modification are admitted assets, provided that not more than 90 days have elapsed since the modification has been received from a rating organization; or not more than 90 days have elapsed since the modification has been calculated by the insurer. Premiums resulting from an experience modification are not admitted assets if premiums on the same or prior policy are overdue in accordance with this Rule. (9) Additional premiums developed through the application of a retrospective rating formula and billed to the insured in accordance with contractual provisions are admitted assets; provided that not more than 90 days have elapsed since the billing date and not more than 180 days have elapsed since the accounting date set forth in the insurance contract. Additional retrospective premiums are not admitted assets if premiums on the same or prior policy are overdue in accordance with this Rule. Authority G.S. 58-2-40; 58-7-162(5). SECTION .0300 - LIFE: GENERAL NATURE 11 NCAC 11C .0309 ADMITTED ASSETS: HMO For the purpose of determining the working capital or net worth of any HMO seeking admission to do business in this State and of any HMO admitted to do business in this State, admitted assets for an HMO do not include: (1) prepaid expenses; (2) intangible assets; (3) the depreciated cost of furniture and equipment, except furniture and equipment directly used in providing medical services and electronic data processing equipment; (4) amounts receivable from affiliates that are outstanding for over 90 days; (5) amounts receivable from affiliates that do not have immediate resources to repay the debts; nor (6) any other assets determined by the Commissioner to be of an illiquid nature, other than real property. Authority G.S. 58-2-40; 58-2-40(1); 58-67-20; 58-67-110(b). SUBCHAPTER 11D - PROXY: LIQUIDATION AND MERGER SECTION .0100 - GENERAL PROVISIONS 11 NCAC 11D .0115 PROXIES: ETC DOMESTIC INSURERS: APPLICATION OF RULES Pursuant to the provisions of G.S. 58-2-40, rules for proxies, consents and authorizations of domestic stock insurers are designated as 11 NCAC 11D .0115 to 11 NCAC 11D .0124. Relative thereto, 11 NCAC 11D .0125 to 11 NCAC 11D .0139 set forth the information required in proxy statements and 11 NCAC 11D .0140 to 11 NCAC 11D .0144 set forth information to be included in statements filed by or on behalf of a participant (other than the insurer) in a proxy solicitation in an election contest. These rules are applicable to each domestic stock insurer which has any class of equity security held of record by one hundred or more persons; provided, however, that these rules shall not apply to any insurer if 95 percent or more of its equity securities are owned or controlled by a parent or an affiliated insurer and the remaining securities are held of record by less than 500 persons. A domestic stock insurer which files with the Securities and Exchange Commission forms of proxies, consents and authorizations complying with the requirements of the Securities Exchange Act of 1934, as amended, and the applicable regulations promulgated thereunder, shall be exempt from the provisions of this regulation with respect to any class of securities subject to SEC jurisdiction. Authority G.S. 58-2-40. 11 NCAC 11D .0116 PROXIES: CONSENTS AND AUTHORIZATIONS No domestic stock insurer, or any director, officer or employee of such insurer subject to 11 NCAC 11D .0115, or any other person, shall solicit, or permit the use of his name to solicit, by mail or otherwise, any proxy, consent or authorization in respect of any class of equity security of such insurer held of record by 100 persons in contravention of these rules. Authority G.S. 58-2-40(2). 11 NCAC 11D .0117 PROXIES: DISCLOSURE OF EQUIVALENT INFORMATION Unless proxies, consents or authorizations in respect of any class of equity securities of a domestic insurer subject to 11 NCAC 11D .0115 are solicited by or on behalf of the management of such insurer from the holders of record of such security in accordance with these rules prior to any annual or other meeting of such security holders, such insurer shall, in accordance with these rules and such further rules as the Commissioner may adopt, file with the Commissioner and transmit to all security holders of record information substantially equivalent to the information which would be required to be transmitted if a solicitation were made. Such insurer shall transmit a written information statement containing the information specified in 11 NCAC 11D .0119 (d) to every security holder who is entitled to vote in regard to any matter to be acted upon at the meeting and from whom a proxy is not solicited on behalf of the management of the insurer; provided, that in the case of a class of securities in PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 757 unregistered or bearer form such statement need be transmitted only to those security holders whose names and addresses are known to the insurer. Authority G.S. 58-2-40(2). 11 NCAC 11D .0118 PROXIES: DEFINITIONS AND INSTRUCTIONS (a) The definitions and instructions set out in Schedule SIS, as promulgated by the NAIC shall be applicable for purposes of this Section. (b) The terms "solicit" and "solicitation" for purposes of this Section includes: (1) any request for a proxy, whether or not accompanied by or included in a form of proxy; or (2) any request to execute or not to execute, or to revoke, a proxy; or (3) the furnishing of a proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy. (c) The terms "solicit" and "solicitation" shall not include: (1) any solicitation by a person in respect of equity security of which he is the beneficial owner; (2) action by a broker or other person in respect to equity security carried in his name or in the name of his nominee in forwarding to the beneficial owner of such equity security soliciting material received from the company, or impartially instructing such beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy, or impartially requesting instructions from the beneficial owner with respect to the authority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date; (3) the furnishing of a form of proxy to a security holder upon the unsolicited request of such security holder, or the performance by any person of ministerial acts on behalf of a person soliciting a proxy. Authority G.S. 58-2-40. 11 NCAC 11D .0119 PROXIES: INFORMATION TO BE FURNISHED TO SECURITY HOLDERS (a) No solicitation subject to these rules shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information specified in 11 NCAC 11D .0125 to 11 NCAC 11D .0139. (b) If the solicitation is made on behalf of the management of the insurer and relates to an annual meeting of security holders at which directors are to be elected, each proxy statement furnished pursuant to Paragraph (a) of this Rule shall be accompanied or preceded by an annual report (in preliminary or final form) to such security holders containing such financial statements for the last fiscal year as are referred to in Schedule SIS under the heading "Financial Reporting to Security Holders." Subject to the foregoing requirements with respect to financial statements the annual report to security holders may be in any form deemed suitable by the management. (c) Two copies of each report sent to the security holders pursuant to this Rule shall be mailed to the Commissioner not later than the date on which such report is first sent or given to security holders or the date on which preliminary copies of solicitation material are filed with the Commissioner pursuant to 11 NCAC 11D .0121(a) whichever date is later. (d) If no solicitation is being made by management of the insurer with respect to any annual or other meeting, such insurer shall mail to every security holder of record at least 20 days prior to the meeting date, an information statement as required by 11 NCAC 11D .0117, containing the information called for by 11 NCAC 11D .0125 to 11 NCAC 11D .0139 except 11 NCAC 11D .0125, .0127, and .0128, which would be applicable to any matter to be acted upon at the meeting if proxies were to be solicited in connection with the meeting. If such information statement relates to an annual meeting at which directors are to be elected, it shall be accompanied by an annual report to such security holders in the form provided in Paragraph (b) of this Rule. Authority G.S. 58-2-40(2). 11 NCAC 11D .0120 PROXIES: REQUIREMENTS AS TO PROXY (a) The form of proxy shall indicate in bold-face type whether or not the proxy is solicited on behalf of the management, shall provide a specifically designated blank space for dating the proxy and shall identify clearly and impartially each matter or group of related matters intended to be acted upon, whether proposed by the management, or security holders. No reference need be made to proposals as to which discretionary authority is conferred pursuant to Paragraph (c) of this Rule. (b) Means shall be provided in the proxy for the person solicited to specify by ballot a choice between approval or disapproval of each matter or group of related matters referred to therein, other than elections to office. A proxy may confer discretionary authority with respect to matters as to which a choice is not so specified if the form of proxy states in bold-face type how it is intended to vote the shares or authorization represented by the proxy in each such case. A form of proxy which provides both for elections to office and for action on other specified matters shall be prepared so as to clearly provide, by a box or otherwise, means by which the security holder may withhold authority to vote for elections to office. Any such form of proxy which is executed by the security holder in such manner as not to withhold authority, to vote for elections to office shall be deemed to grant such authority, provided the form of proxy so states in bold-face type. (c) A proxy may confer discretionary authority with respect to other matters which may come before the meeting, provided the persons on whose behalf the solicitation is made are not aware a reasonable time prior to the time the solicitation is made that any other matters are to be presented for action at the meeting and provided further that a specific statement to that effect is made in the proxy statement or in the form of proxy. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 758 (d) No proxy shall confer authority to vote for the election of any person to any office for which a bona fide nominee is not named in the proxy statement, or to vote at any annual meeting other than the next annual meeting (or any adjournment thereof) to be held after the date on which the proxy statement and form of proxy are first sent or given to security holders. (e) The proxy statement or form of proxy shall provide, subject to reasonable specified conditions, that the proxy will be voted and that where the person solicited specified by means of ballot provided pursuant to Paragraph (b) of this Rule a choice with respect to any matter to be acted upon, the vote will be in accordance with the specifications so made. The information included in the proxy statement or information statement shall be clearly presented and the statements made shall be divided into groups according to subject matter, with appropriate headings. All printed proxy statements or information statements shall be clearly and legibly presented. Authority G.S. 58-2-40(2). 11 NCAC 11D .0121 PROXIES: MATERIAL REQUIRED TO BE FILED (a) Two preliminary copies of the information statement or the proxy statement and form of proxy and any other soliciting material to be furnished to security holders concurrently therewith shall be filed with the Commissioner at least 10 days prior to the date definitive copies of such material are first sent or given to security holders, or such shorter period prior to that date as the Commissioner may authorize upon a showing of good cause therefor. (b) Two preliminary copies of any additional soliciting material relating to the same meeting or subject matter to be furnished to security holders subsequent to the proxy statements shall be filed with the Commissioner at least two days (exclusive of Saturdays, Sundays or holidays) prior to the date copies of this material are first sent or given to security holders or a shorter period prior to such date as the Commissioner may authorize upon a showing of good cause therefor. (c) Two definitive copies of the information statement or the proxy statement, form of proxy and all other soliciting material, in the form in which this material is furnished to security holders, shall be filed with, or mailed for filing to, the Commissioner not later than the date such material is first sent or given to the security holder. (d) Where any information statement or proxy statement, form of proxy or other material filed pursuant to these rules is amended or revised, two of the copies shall be marked to clearly show such changes. Copies of replies to inquiries from security holders requesting further information and copies of communications which do no more than request that forms of proxy theretofore solicited be signed and returned need not be filed pursuant to this Rule. (e) Notwithstanding the provisions of Paragraphs (a) and (b) of this Rule and 11 NCAC 11D .0124(e), copies of soliciting material in form of speeches, press releases and radio or television scripts may, but need not, be filed with the Commissioner prior to use or publication. Definitive copies, however, shall be filed with or mailed for filing to the Commissioner as required by Paragraph (c) of this Rule not later than the date such material is used or published. The provisions of Paragraphs (a) and (b) of this Rule and 11 NCAC 11D .0124(e) shall apply, however, to any reprints or reproductions of all or any part of such material. Authority G.S. 58-2-40(2). 11 NCAC 11D .0122 PROXIES: FALSE OR MISLEADING STATEMENTS No proxy statement, form of proxy, notice of meeting, information statement, or other communication, written or oral, subject to these rules, shall contain any statement which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the same meeting or subject matter which has become false or misleading. Authority G.S. 58-2-40(2). 11 NCAC 11D .0123 PROXIES: PROHIBITION OF CERTAIN SOLICITATIONS No person making a solicitation which is subject to these rules shall solicit any undated or postdated proxy or any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the security holder. Authority G.S. 58-2-40(2). 11 NCAC 11D .0124 PROXIES: SPECIAL PROVISIONS APPLICABLE TO ELECTION CONTES T (a) Applicability. This Rule shall apply to any solicitation subject to these rules by any person or group for the purpose of opposing a solicitation subject to these rules by any other person or group with respect to the election or removal of directors at any annual or special meeting of security holders. (b) Participant or Participant in a Solicitation (1) For purposes of this Rule the terms "participant" and "participant in a solicitation" include: (A) insurer; (B) any director of the insurer and any nominee for whose election as a director proxies are solicited; (C) any other person, acting alone or with one or more other persons, committees or groups, in organizing, directing or financing the solicitation. (2) For the purposes of this Rule the terms "participant" and "participant in a solicitation" do not include: (A) a bank, broker or dealer who, in the ordinary course of business, lends money or executes orders for the purchase or sale of equity security and who is not otherwise a participant; (B) any person or organization retained or employed by a participant to solicit security holders or any person who PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 759 merely transmits proxy soliciting material or performs minis terial or clerical duties; (C) any person employed in the capacity of attorney, accountant, or advertising, public relations or financial adviser, and whose activities are limited to the performance of his duties in the course of such employment; (D) any person regularly employed as an officer or employee of the insurer or any of its subsidiaries or affiliates who is not otherwise a participant; or (E) any officer or director of, or any person regularly employed by any other participant, if such officer, director, or employee is not otherwise a participant. (c) Filing of Information Required by 11 NCAC 11D .0140 (1) No solicitation subject to this Rule shall be made by any person other than the management of an insurer unless at least five business days prior thereto, or such shorter period as the Commissioner may authorize upon a showing of good cause therefor, there has been filed, with the Commissioner by or on behalf of each participant in such solicitation, a statement in duplicate containing the information specified by 11 NCAC 11D .0140 through 11 NCAC 11D .0144 and a copy of any material proposed to be distributed to security holders in furtherance of such solicitation. Where preliminary copies of any materials are filed, distribution to security holders should be deferred until the Commissioner's comments have been received and complied with. (2) Within five business days after a solicitation subject to this Rule is made by the management of an insurer, or such longer period as the Commissioner may authorize upon a showing of good cause therefor, there shall be filed with the Commissioner by or on behalf of each participant in such solicitation, other than the insurer, and by or on behalf of each management nominee for director, a statement in duplicate containing the information specified by 11 NCAC 11D .0140 to 11 NCAC 11D .0144. (3) If any solicitation on behalf of management or any other person has been made, or if proxy material is ready for distribution, prior to a solicitation subject to this Rule in opposition thereto, a statement in duplicate containing the information specified in 11 NCAC 11D .0140 to 11 NCAC 11D .0144 shall be filed with the Commissioner by or on behalf of each participant in such prior solicitation, other than the insurer, as soon as reasonably practicable after the commencement of the solicitation in opposition thereto. (4) If, subsequent to the filing of the statements required by Subparagraphs (1), (2) and (3) or Paragraph (c) of this Rule, additional persons become partic ipants in a solicitation subject to this Rule, there shall be filed with the Commissioner by or on behalf of each such person, a statement in duplicate containing the information specified by 11 NCAC 11D .0140 to 11 NCAC 11D .0144 within three business days after such person becomes a participant, or such longer period as the Department may authorize upon a showing of good cause therefor. (5) If any material change occurs in the facts reported in any statement filed by or on behalf of any participant, an appropriate amendment to such statement shall be filed promptly with the Commissioner. Each statement and amendment thereto filed pursuant to this Paragraph shall be part of the public files of the Commissioner. (d) Solicitations Prior to Furnishing Required Written Proxy Statement. Notwithstanding the provisions of 11 NCAC 11D .0119 (a), a solicitation subject to this Section may be made prior to furnishing security holders a written proxy statement containing the information specified in 11 NCAC 11D .0125 to 11 NCAC 11D .0139 with respect to such solicitation, provided that: (1) The statements required by Paragraph (c) of this Rule are filed by or on behalf of each participant in such solicitation. (2) No form of proxy is furnished to security holders prior to the time the written proxy statement required by 11 NCAC 11D .0119(a) is furnished to such persons: Provided, however, that this Subparagraph (2) shall not apply where a proxy statement then meeting the requirements of 11 NCAC 11D .0125 to 11 NCAC 11D .0139 has been furnished to security holders. (3) At least the information specified in Subparagraphs (2) and (3) of the statements required by Paragraph (c) of this Rule to be filed by each participant, or an appropriate summary thereof, are included in each communication sent or given to security holders in connection with the solicitation. (4) A written proxy statement containing the information specified in 11 NCAC 11D .0125 to 11 NCAC 11D .0139 with respect to a solicitation is sent or given security holders at the earliest practicable date. (e) Solicitations Prior to Furnishing Required Written Proxy Statement-Filing Requirements. Two copies of any soliciting material proposed to be sent or given to security holders prior to the furnishing of the written proxy statement required by 11 NCAC 11D .0119(a) shall be filed with the Commissioner in preliminary form at least five business days prior to the date definitive copies of such material are first sent or given to such PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 760 persons, or shorter period as the Commissioner may authorize upon a showing of good cause therefor. (f) Application of this Section to Report. Notwithstanding the provisions of Paragraphs (b) and (c) in 11 NCAC 11D .0119, two copies of any portion of the report referred to in Paragraph (b) of 11 NCAC 11D .0119 which comments upon or refers to any solicitation subject to this Rule, or to any participant in such solicitation, other than the solicitation by the management, shall be filed with the Commissioner as proxy material subject to these rules. Such portion of the report shall be filed with the Commissioner in preliminary form at least five business days prior to the date copies of the report are first sent or given to security holders. Authority G.S. 58-2-40(2). 11 NCAC 11D .0125 PROXY INFORMATION REQUIRED: REVOCABILITY OF PROXY Every proxy statement must state whether or not the person giving the proxy has the power to revoke it. If the right of revocation before the proxy is exercised is limited or is subject to compliance with any formal procedure, the statement must briefly describe such limitation or procedure. Authority G.S. 58-2-40(2). 11 NCAC 11D .0126 PROXY INFORMATION REQUIRED: DISSENTERS' RIGHT OF APPRAISAL Every proxy statement must outline briefly the rights of appraisal or similar rights of dissenting security holders with respect to any matter to be acted upon and indicate any statutory procedure required to be followed by such security holders in order to perfect their rights. Where such rights may be exercised only within a limited time after the date of the adoption of a proposal, the filing of a charter amendment, or other similar act, the statement must state whether the person solicited will be notified of such date. Authority G.S. 58-2-40(2). 11 NCAC 11D .0127 PROXY INFORMATION REQUIRED: SUBJECT TO 11 NCAC 11D .0124 Every proxy statement must: (1) if the solicitation is made by the management of the insurer, so state; Give the name of any director of the insurer who has informed the management in writing that he intends to oppose any action intended to be taken by the management and indicate the action which he intends to oppose; (2) if the solicitation is made otherwise than by the management of the insurer, state the names and addresses of the persons by whom and on whose behalf it is made and the names and addresses of the persons by whom the cost of solicitation has been or will be borne, directly or indirectly; (3) if the solicitation is to be made by specially engaged employees or paid solicitors, state the material features of any contract or arrangement for such solicitation and identify the parties and the cost or anticipated cost thereof. Authority G.S. 58-2-40(2). 11 NCAC 11D .0128 PROXY INFO REQUIRED: INTEREST IN MATTERS TO BE ACTED UPON Every proxy statement must describe briefly any substantial interest, direct or indirect, by security holders or otherwise, of any director, nominee for election for director, officer and, if the solicitation is made otherwise than on behalf of management, each person on whose behalf the solicitation is made, in any matter to be acted upon other than election to office. Authority G.S. 58-2-40(2). 11 NCAC 11D .0129 PROXY INFORMATION REQUIRED: VOTING SECURITIES Every proxy statement must: (1) state, as to each class of voting equity security of the insurer entitled to be voted at the meeting, the number of shares outstanding and the number of votes to which each class is entitled; (2) give the date as of which the record list of security holders entitled to vote at the meeting will be determined. If the right to vote is not limited to security holders of record on that date, indicate the conditions under which other security holders may be entitled to vote; (3) if action is to be taken with respect to the election of directors and if the persons solicited have cumulative voting rights, make a statement that they have such rights and state briefly and conditions precedent to the exercise thereof. Authority G.S. 58-2-40(2). 11 NCAC 11D .0130 PROXY INFORMATION REQUIRED: NOMINEE AND DIRECTORS Every proxy statement must, if action is to be taken with respect to the election of directors, furnish the following information, in tabular form to the extent practicable with respect to each person nominated for election as a director and each other person whose term of office as a director will continue after the meeting: (1) name each such person, state when his term of office or the term of office for which he is a nominee will expire, and all other positions and offices with the insurer presently held by him, and indicate which persons are nominees for election as directors at the meeting; (2) state his present principal occupation or employment and give the name and principal business of any corporation or other organization in which such employment is carried on; furnish similar information as to all of his principal occupations or employments during the last five years, unless he is now a director and was elected to his present term of office by a vote of security holders at a PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 761 meeting for which proxies were solicited under this Regulation; (3) if he is or has previously been a director of the insurer, state the period or periods during which he has served as such; (4) state, as of the most recent practicable date, the approximate amount of each class of stock of the insurer or any of its parents, subsidiaries or affiliates other than directors qualifying shares, beneficially owned directly or indirectly by him; if he is not the beneficial owner of any such equity securities make a statement to that effect. Authority G.S. 58-2-40(2). 11 NCAC 11D .0131 PROXY INFORMATION REQUIRED: TRANSACTIONS WITH MANAGEMENT Every proxy statement must furnish the information reported or required in Item 1 of Schedule SIS under the heading "Information Regarding Management and Directors" if action is to be taken with respect to: (1) the election of directors; (2) any remuneration plan, contract or arrangement in which any director, nominee for election as a director, or officer of the insurer will participate; (3) any person or retirement plan in which any such person will participate; or (4) the granting extension to any such person of any options, warrants or rights issued to security holders, as such, on a pro rata basis. If the solicitation is made on behalf of persons other than the management, information shall be furnished only as to Item 1A of the aforesaid heading of Schedule SIS. Authority G.S. 58-2-40(2). 11 NCAC 11D .0132 PROXY INFO REQUIRED: BONUS: PROFIT SHARING: REMUNERATION Every proxy statement must, if action is to be taken with respect to any bonus, profit sharing, or other remuneration plan, of the insurer, furnish the following information: (1) A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation; (2) The amount which would have been distributable under the plan during the last year to: (a) each person named in 11 NCAC 11D .0131; (b) directors and officers as a group; and (c) to all other employees as a group, if the plan had been in effect. (3) If the plan to be acted upon may be amended (other than by a vote of security holders) in a manner which would materially increase the cost thereof to the insurer or materially alter the allocation of the benefits as between the groups specified in Paragraph (2) of this Rule, the nature of such amendments should be specified. Authority G.S. 58-2-40(2). 11 NCAC 11D .0133 PROXY INFORMATION REQUIRED: PENSION AND RETIREMENT PLANS Every proxy statement must, if action is to be taken with respect to any pension or retirement plan of the insurer, furnish the following information: (1) A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation; (2) State: (a) the approximate total amount necessary to fund the plan with respect to past services, the period over which such amount is to be paid, and the estimated annual payments necessary to pay the total amount over such period; (b) the estimated annual payment to be made with respect to current services; and (c) the amount of such annual payments to be made for the benefit of: (i) each person named in 11 NCAC 11D .0131, (ii) directors and officers as a group, and (iii) employees as a group. (3) If the plan to be acted upon may be amended (other than by a vote of security holders) in a manner which would materially increase the cost thereof to the insurer or materially alter the allocation of the benefits as between the groups specified in Subparagraph (2)(c) of this Rule, the nature of such amendment should be specified. Authority G.S. 58-2-40(2). 11 NCAC 11D .0134 PROXY INFORMATION REQUIRED: OPTIONS: WARRANTS OR RIGHTS Every proxy statement must, if action is to be taken with respect to the granting or extension of any options, warrants or rights (all referred to herein as "warrant") to purchase stock of the insurer or any subsidiary or affiliate, other than warrants issued to all security holders on a pro rata basis, furnish the following information: (1) the title and amount of equity security called for or to be called for, the prices, expiration dates and other material conditions upon which the warrants may be exercised, the consideration received or to be received by the insurer, subsidiary or affiliate for the granting or extension of the warrants and the market value of the equity security called for or to be PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 762 called for by the warrants, as of the latest practicable date; (2) if known, state separately the amount of equity security called for or to be called for by warrants received or to be received by the following persons, naming each such person: (a) named in 11 NCAC 11D .0131, and (b) who will be entitled to acquire five percent or more of the equity security called for or to be called for by such warrants; (3) if known, state also the total amount of equity security called for or to be called for by such warrants, received or to be received by all directors and officers of the company as a group and all employees, without naming them. Authority G.S. 58-2-40(2). 11 NCAC 11D .0135 PROXY INFO REQUIRED: AUTHORIZATION OR ISSUANCE OF STOCK Every proxy statement must: (1) If action is to be taken with respect to the authorization of issuance of any equity security of the insurer, furnish the title, amount and description of the equity security to be authorized or issued; (2) If the shares of equity security are other than additional shares or common equity security of a class outstanding, furnish a brief summary of the following, if applicable: dividend, voting, liquidation, preemptive and conversion rights, redemption and sinking fund provisions, interest rate and date of maturity; (3) If the shares of equity security to be authorized or issued are other than additional shares of common equity security of a class outstanding, the Commissioner may require financial statements comparable to those contained in the annual report. Authority G.S. 58-2-40(2). 11 NCAC 11D .0136 PROXY INFO REQUIRED: MERGER: CONSOLIDATION: ACQUISITION Every proxy statement must: (1) if action is to be taken with respect to merger, consolidation, acquisition, or similar matter, furnish in brief outline the following information: (a) the rights of appraisal or similar rights of dissenters with respect to any matters to be acted upon; indicate any procedure required to be followed by dissenting security holders in order to perfect such rights; (b) the material features of the plan or agreement; (c) the business done by the company to be acquired or whose assets are being acquired; (d) if available, the high and low sales prices for each quarterly period within two years; (e) the percentage of outstanding shares which must approve the transaction before it is consummated. (2) for each company involved in a merger, consolidation or acquisition, furnish the following financial statements: (a) a comparative balance sheet as of the close of the last two fiscal years; (b) a comparative statement of operating income and expenses for each of the last two fiscal years and, as a continuation of each statement, a statement of earnings per share after related taxes and cash dividends paid per share; (c) a pro forma combined balance sheet and income and expenses statement for the last fiscal year giving effect to the necessary adjustments with respect to the resulting company. Authority G.S. 58-2-40(2). 11 NCAC 11D .0137 PROXY INFORMATION REQUIRED: RESTATEMENT OF ACCOUNTS Every proxy statement must, if action is to be taken with respect to the restatement of any asset, capital, or surplus of the insurer, furnish the following information: (1) state the nature of the restatement and the date as of which it is to be effective, (2) outline briefly the reasons for the restatement and for the selection of the particular effective date, (3) state the name and amount of each account affected by the restatement and the effect of the restatement thereon. Authority G.S. 58-2-40(2). 11 NCAC 11D .0138 PROXY INFO REQUIRED: MATTERS NOT REQUIRED TO BE SUBMITTED Every proxy statement must, if action is to be taken with respect to any matter which is not required to be submitted to a vote of security holders, state the nature of such matter, the reason for submitting it to a vote of security holders and what action is intended to be taken by the management in the event of a negative vote on the matter by the security holders. Authority G.S. 58-2-40(2). 11 NCAC 11D .0139 PROXY INFORMATION REQUIRED: AMENDMENT OF CHARTER: BY-LAWS Every proxy statement must, if action is to be taken with respect to any amendment of the insurer's charter, by-laws or other documents as to which information is not required above, state PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 763 briefly the reasons for and general effect of such amendment and the vote needed for its approval. Authority G.S. 58-2-40(2). 11 NCAC 11D .0140 PROXY INFORMATION REQUIRED: IN ELECTION CONTEST The rules set forth herein and designated as 11 NCAC 11D .0140 to 11 NCAC 11D .0144 reflect the information required to be included in proxy statements filed by or on behalf of a participant (other than the insurer) in a proxy solicitation in an election contest and as more specifically required by 11 NCAC 11D .0124. Authority G.S. 58-2-40(2). 11 NCAC 11D .0141 PROXY STATEMENT IN ELEC: INSURER: IDENTITY AND BACKGROUND (a) Every proxy statement must contain the name and business address of the insurer. (b) Every proxy statement must contain the following information about the identity and background of the participant: (1) name and business address; (2) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on; (3) residence address; (4) information as to all material occupations, positions, offices or employments during the last 10 years, giving starting and ending dates of each and the name, principal business and address of any business corporation or other business organization in which each such occupation, position, office or employment was carried on; (5) state whether or not you are or have been a participant in any other proxy contest involving this company or other companies within the past 10 years; if so, identify the principals, the subject matter and your relationship to the parties and the outcome; (6) state whether or not, during the past 10 years, you have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and, if so, give date, nature of conviction, name and location of court, and penalty imposed or other disposition of the case; A negative answer to this Sub-item need not be included in the proxy statement or other proxy soliciting material. Authority G.S. 58-2-40(2). 11 NCAC 11D .0142 PROXY STATEMENT IN ELECTION: INTEREST IN EQUITY SECURITY Every proxy statement must contain the following information: (1) The amount of each class of equity security of the insurer which you own beneficially, directly or indirectly; state the amount of each class of equity security of the insurer which you own of record but not beneficially; and state with respect to the equity security specified herein, the amount acquired within the past two years, the dates of acquisition and the amounts acquired on each date; (2) If any part of the purchase price or market value of any of the equity security specified in Paragraph (1) is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such equity security, so state and indicate the amount of the indebtedness as of the latest practicable date. If such funds were borrowed or obtained otherwise than pursuant to a margin account or bank loan in the regular course of business of a bank, broker or dealer, briefly describe the transaction and state the names of the parties; (3) Whether or not you are a party to any contracts, arrangements or understandings with any person with respect to any equity security of the insurer, including but not limited to joint ventures, loan or option arrangements, puts or calls guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. If so name the persons with whom such contracts, arrangements, or understanding exist and give the details thereof; (4) The amount of equity security of the insurer owned beneficially, directly or indirectly, by each of your associates and the name and address of each such associate; (5) The amount of each class of equity security of any parent, subsidiary or affiliate of the insurer which you own beneficially, directly, or indirectly. Authority G.S. 58-2-40(2). 11 NCAC 11D .0143 PROXY STATEMENT IN ELECTION CONTEST: FURTHER MATTERS Every proxy statement shall: (1) describe the time and circumstances under which you became a participant in the solicitation and state the nature and extent of your activities or proposed activities as a participant; (2) describe briefly, and where practicable state the approximate amount of, any material interest, direct or indirect, of yourself and of each of your associates in any material transactions since the beginning of the company's last fiscal year, or in any material proposed transactions, to which the company of any of its subsidiaries or affiliates was or is to be a party; (3) state whether or not you or any of your associates have any arrangement or understanding with any person: PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 764 (a) with respect to any future employment by the insurer or its subsidiaries or affiliates, or (b) with respect to any future transactions to which the insurer or any of its subsidiaries or affiliates will or may be a party. If so, describe such arrangement or understanding and state the names of the parties thereto. Authority G.S. 58-2-40(2). 11 NCAC 11D .0144 PROXY STATEMENT IN ELECTION CONTEST: SIGNATURE The statement shall be dated and signed in the following manner: I certify that the statements made in this statement are true, complete, and correct, to the best of my knowledge and belief. This certification shall be dated and signed by the participant or authorized representative. Authority G.S. 58-2-40(2). 11 NCAC 11D .0145 INSIDER TRADING OF STOCK: DEFINITIONS (a) The following definitions contained in this Rule are applicable to insider trading of equity securities of a domestic stock insurance company as contained in 11 NCAC 11D .0145 to 11 NCAC 11D .0167. (b) Insurer. "Insurer" means any domestic stock insurance company with an equity security subject to the provisions of G.S. 58-7-145 and not exempt thereunder. (c) Act. "Act" means G.S. 58-7-145. (d) Officer. "Officer" means a president, vice president, treasurer, actuary, secretary, controller and any other person who performs for the insurer functions corresponding to those performed by the foregoing officer. (e) Equity Security. "Equity Security" means any stock or similar security; or any voting trust certificate or certificate of deposit for such a security; or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right. (f) Securities Held of Record. "Securities held of record" shall mean: (1) For the purpose of determining whether the equity securities of an insurer are held of record by 100 or more persons, securities shall be deemed to be held of record by each person who is identified as the owner of such securities on records of security holders maintained by or on behalf of the insurer, subject to the following: (A) In any case where the records of security holders have not been maintained in accordance with accepted practice, any additional person who would be identified as such an owner on such records if they had been maintained in accordance with accepted practice shall be included as a holder of record. (B) Securities identified as held of record by a corporation, a partnership, a trust whether or not the trustees are named, or other organization shall be included as so held by one person. (C) Securities identified as held of record by one or more persons as trustees, executors, guardians, custodians or in other fiduciary capacities with respect to a single trust, estate or account shall be included as held of record by one person. (D) Securities held by two or more persons as co-owners shall be included as held by one person. (E) Each outstanding unregistered or bearer certificate shall be included as held of record by a separate person, except to the extent that the insurer can establish that, if such securities were registered, they would be held of record, under the provisions of this Rule, by a lesser number of persons. (F) Securities registered in substantially similar names where the insurer has reason to believe because of the address or other indications that such names represent the same person, may be included as held of record by one person. (2) Notwithstanding the provisions of Paragraph (f) (1) of this Rule: (A) Securities held, to the knowledge of the insurer, subject to a voting trust, deposit agreement or similar arrangement shall be included as held of record by the record holders of the voting trust certificates, certificates of deposit, receipts or similar evidences of interest in such securities; provided however, that the insurer may rely in good faith on such information as is received in response to its request from a nonaffiliated insurer of the certificates or evidences of interest. (B) If the insurer knows or have reason to know that the form of holding securities of record is used primarily to circumvent the provisions of the act, the beneficial owners of such securities shall be deemed to be the record owners thereof. (g) Class. "Class" means all securities of an insurer which are of substantially similar character and the holders of which enjoy substantially similar rights and privileges. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0146 WHO MUST FILE UNDER PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 765 INSIDER TRADING OF STOCK Every person who is directly or indirectly the beneficial owner of more than 10 percent of any class of any equity security of a domestic stock insurance company or who is a director or an officer of such company, shall file in the office of the Commissioner within 10 days after he becomes such beneficial owner, director or officer, a statement in such form as prescribed by the Commissioner. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0147 WHAT MUST BE FILED UNDER INSIDER TRADING OF STOCK (a) The initial statements of beneficial ownership of equity securities required by 11 NCAC 11D .0147 shall be filed on a form as prescribed by the Commissioner. Statements of changes in such beneficial ownership as required by G.S. 58-7-145 shall be filed on a form as prescribed by the Commissioner. All such statements shall be prepared and filed in accordance with the requirements of the applicable form. (b) Any director or officer who is required to file a statement with respect to any change in his beneficial ownership of equity securities which occurs within six months after he became a director or officer of the issuer of such securities, or within six months after equity securities of such issuer first became subject to the provisions of the act, shall include in the first such statement the information called for with respect to all changes in his beneficial ownership of equity securities of such issuer which occurred within six months prior to the date of the changes which requires the filing of such statement. (c) Any person who has ceased to be a director or officer of an issuer which has equity securities subject to the provisions of the act, shall file a statement with respect to any change in his beneficial ownership of equity securities of such issuer which shall occur on or after the date on which he ceased to be such director or officer, or the date on which the issuer ceased to have any equity securities subject to the provisions of the act, as the case may be, if such change shall occur within six months after any change in his beneficial ownership of such securities prior to such date. The statement shall be filed within 10 days after the end of the month in which the reported change in beneficial ownership occurs. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0148 DETERMINING BENEFICIAL OWNERSHIP: INSIDER TRADING OF STOCK (a) In determining, for the purpose of the act, whether a person is the beneficial owner, directly or indirectly, of more than 10 percent of any class of any equity security, such class shall be deemed to consist of the total amount of such class outstanding, exclusive of any securities of such class held by or for the account of the insurer or a subsidiary of the insurer; except that for the purpose of determining percentage ownership of voting trust certificates or certificates of deposit for equity securities, the class of voting trust certificates or certificates of deposit shall be deemed to consist of the amount of voting trust certificates or certificates of deposit issuable with respect to the total amount of outstanding equity securities of the class which may be deposited under the voting trust agreement or deposit agreement in question, whether or not all of such outstanding securities have been so deposited. For the purpose of this Rule a person acting in good faith may rely on the information contained in the latest convention form statement filed with the Commissioner with respect to the amount of securities of a class outstanding or in the case of voting trust certificates or certificates of deposit the amount thereof issuable. (b) In determin ing for the purpose of the act whether a person is the beneficial owner, directly or indirectly, of more than 10 percent of any class of equity securities, such person shall be deemed to be the beneficial owner of securities of such class which such person has the right to acquire through the exercise of presently exercisable options, warrants or rights or through the conversion of presently convertible securities. The securities subject to such options, warrants, rights or conversion privileges held by a person shall be deemed to be outstanding for the purpose of computing, in accordance with the first paragraph of this Rule, the percentage of outstanding securities of the class owned by such person but shall not be deemed outstanding for the purpose of computing the percentage of the class owned by any other person. The first paragraph of this Rule shall not be construed to relieve any person of any duty to comply with the act with respect to any equity securities consisting of options, warrants, rights or convertible securities which are otherwise subject as a class to the act. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0149 DISCLAIMER OF BENEFICIAL OWNERSHIP: INSIDER TRADING Any person filing a statement may expressly declare therein that the filing of such statement shall not be construed as an admission that such person is, for the purpose of the act, the beneficial owner of any equity securities covered by the statement. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0150 EXEMPTIONS FROM SUBSECTIONS (A) AND (B) OF THE ACT (a) During the period of 12 months following their appointment and qualification, securities held by the following persons shall be exempt from subsections (a) and (b) of the act: (1) executors or administrators of the estate of a decedent; (2) guardians or committees for an incompetent; and (3) receivers, trustees in bankruptcy, assigners for the benefit of creditors, conservators, liquidating agents, and other similar persons duly authorized by law to administer the estate or assets of other persons. (b) After the 12 month period following their appointment or qualification the foregoing persons shall be required to file reports with respect to the securities held by the estates which they administer under subsection (a) of the act and shall be liable for profits realized from trading in such securities pursuant to subsection (b) of the act only when the estate being administered is a beneficial owner of more than 10 percent of any class of equity security of an insurer subject to the act. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 766 (c) Securities reacquired by or for the account of an insurer and held by it for its account shall be exempt from subsections (a) and (b) during the time they are held by the insurer. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0151 SECURITIES BOUGHT OR SOLD BY ODD-LOT DEALERS: EXEMPTION Securities purchased or sold by an odd-lot dealer: (1) in odd lots so far as reasonably necessary to carry on odd-lot transactions or (2) in round lots to offset odd-lot transactions previously or simultaneously executed or reasonably anticipated in the usual course of business, shall be exempt from the provisions of the act with respect to participation by such odd-lot dealer in such transactions. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0152 CERTAIN TRANSACTIONS SUBJECT TO SUBSECTIO N (A) OF THE ACT The acquisition or disposition of any transferable option, put, call, spread or straddle shall be deemed such a change in the beneficial ownership of the security to which such privilege relates as to require the filing of a statement reflecting the acquisition or disposition of such privilege. Nothing in this Rule, however, shall exempt any person from filing the statements required upon the exercise of such option, put, call, spread or straddle. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0153 OWNERSHIP OF SECURITIES HELD IN TRUST: INSIDER TRADING (a) Beneficial ownership of a security for the purposes of this Rule shall include: (1) the ownership of securities as a trustee where either the trustee or members of his immediate family have a vested interest in the income or corpus of the trust, (2) the ownership of a vested beneficial interest in a trust, and (3) the ownership of securities as a settlor of a trust in which the settlor has the power to revoke the trust without obtaining the consent of all the beneficiaries. (b) Except as provided in the next Paragraph (c) of this Rule, beneficial ownership of securities solely as a settlor or beneficiary of a trust shall be exempt from the provisions of Subsection (a) of G.S. 58-7-145 where less than 20 percent in market value of the securities having a readily ascertainable market value held by such trust, determined as of the end of the preceding fiscal year of the trust, consists of equity securities with respect to which reports would otherwise be required. Exemption is likewise accorded from Subsection (a) of G.S. 58-7-145 with respect to any obligation which would otherwise be imposed solely by reason of ownership as settlor or beneficiary of securities held in trust, where the ownership, acquisition, or disposition of such securities by the trust is made without prior approval by the settlor or beneficiary. No exemption pursuant to this Subsection shall, however, be acquired or lost solely as a result of changes in the value of the trust assets during any fiscal year or during any time when there is no transaction by the trust in the securities otherwise subject to the reporting requirements of Subsection (a) of G.S. 58-7-145. (c) In the event that 10 percent of any class of any equity security of an insurer is held in trust, that trust and the trustees thereof as such shall be deemed a person required to file the reports specified in subsection (a) of the act. (d) Not more than one report need to filed to report any holdings or with respect to any transaction in securities held by a trust, regardless of the number of officers, directors or 10 percent stockholders who are either trustees, settlors, or beneficiaries of a trust, provided that the report filed shall disclose the names of all trustees, settlors, and beneficiaries who are officers, directors or 10 percent stockholders. A person having an interest only as a beneficiary of a trust shall not be required to file any such report so long as he relies in good faith upon an understanding that the trustee of such trust will file whatever reports might otherwise be required of such beneficiary. As used in this Rule the "immediate family" of a trustee means: (1) a son or daughter of the trustee, or a descendant of either; (2) a stepson or stepdaughter of the trustee; (3) the father or mother of the trustee, or an ancestor of either; (4) a stepfather or stepmother of the trustee; or (5) a spouse of the trustee. For the purpose of determining whether any of the foregoing relations exists, a legally adopted child of a person shall be considered a child of such person by blood. (e) In determining, for the purposes of subsection (a) of the act, whether a person is the beneficial owner, directly or indirectly, of more than 10 percent of any class of any equity security, the interest of such person in the remainder of a trust shall be excluded from the computation. No report shall be required by any person, whether or not otherwise subject to the requirement of filing reports under subsection (a) with respect to his indirect interest in portfolio securities held by: (1) a pension or retirement plan holding securities of an insurer whose employees generally are the beneficiary of the plan, (2) a business trust with over 25 beneficiaries. Nothing in this Rule shall be deemed to impose any duties or liabilities with respect to reporting any transaction or holding prior to its effective date. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0154 EXEMPTION FOR SMALL TRANSACTIONS: INSIDER TRADING OF STOCK (a) Any acquisition of securities shall be exempt from subsection (a) of the act where: (1) The person effecting the acquisition does not within six months thereafter effect any disposition, other than by way of gift of securities of the same class; and (2) The person effecting such acquisition does not participate in acquisitions or in dispositions of securities of the same class having a total market value in excess of three thousand PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 767 dollars ($3,000) for any six month period during which the acquisition occurs. (b) Any acquisition or disposition of securities by way of gift, where the total amount of such gifts does not exceed three thousand dollars ($3,000) in market value for any six month period, shall be exempt from subsection (a) of the act and may be excluded from the computations prescribed in Paragraph (a) (2) of this Rule. (c) Any person exempted by Paragraph (a) or (b) of this Rule shall include in the first report filed by him after a transaction within the exemption a statement showing his acquisitions and dispositions for each six month period or portion thereof which has elapsed since his last filing. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0155 EXEMPTIONS IN GENERAL: INSIDER TRADING OF STOCK If an exemption is granted from subsection (b) of the act then such an exemption need not be reported under subsection (a) of the act. Any transaction which has been or shall be exempted from the requirements of subsection (a) of the act shall, insofar as it is otherwise subject to the provisions of subsection (b), be likewise exempted from subsection (b) of the act. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0156 EXEMPTION EFFECTED IN CONNECTION WITH A DISTRIBUTION (a) Any transaction of purchase and sale, or sale and purchase, of a security which is effected in connection with the distribution of a substantial block of securities shall be exempt from the provisions of subsection (b) of the act, to the extent specified in this section as not comprehended within the purpose of said subsection of the act, upon the following conditions: (1) The person effecting the transaction is engaged in the business of distributing securities and is participating in good faith, in the ordinary course of such business, in the distribution of such block of securities; (2) The security involved in the transaction is: (A) a part of such block of securities and is acquired by the person effecting the transaction, with a view to the distribution thereof, from the insurer or other person on whose behalf such securities are being distributed or from a person who is participating in good faith in the distribution of such block of securities or (B) a security purchase in good faith by or for the account of the person effecting the transaction for the purpose of stabilizing the market price of securities of the class being distributed or to cover an over-allotment or other short position created in connection with such distribution; and (3) Other persons not within the purview of subsection (b) of the act are participating in the distribution of such block of securities on terms at least as favorable as those on which such person is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of subsection (b) of the act by this Rule. However, 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 preclude an exemption which would otherwise be available under this Rule. (b) The exemption of a transaction pursuant to this Rule with respect to the participation therein of one party thereto shall not render such transaction exempt with respect to participation of any other party therein unless such other party also meets the conditions of this Rule. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0157 EXEMPTION STOCK OPTIONS: STOCK BONUS OR SIMILAR PLANS Any acquisition of shares of stock (other than stock acquired upon the exercise of an option, warrant or right) pursuant to a stock bonus profit sharing, retirement, incentive, thrift, savings or similar plan, or any acquisition of a qualified or a restricted stock option pursuant to a qualified or a restricted stock option plan, or a stock option pursuant to an employee stock purchase plan, by a director or officer of an insurer issuing such stock or stock option shall be exempt from the operation of subsection (b) of the act if the plan meets the following conditions: (1) The plan has been approved, directly or indirectly: (a) by the affirmative votes of the holders of a majority of the securities of such insurer present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of North Carolina; or (b) the written consent of the holders of a majority of the securities of such insurer entitled to vote: provided, however, that if such vote of written consent was not solicited substantially in accordance with the proxy rules and regulations prescribed by the National Association of Insurance Commissioners, if any, in effect at the time of such vote or written consent, 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 which would be required by any such rules and regulations so prescribed and in effect at the time such information is furnished, if proxies to be voted with respect to the approval or disapproval PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 768 of the plan were then being solicited, on or prior to the date of the first annual meeting of security holders held subsequent to the later of: (i) the date the act first applies to such insurer, or (ii) the acquisition of such equity security for which exemption is claimed. Such written information 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 such written information shall be filed with, or mailed for filing to, the Commissioner not later than the date on which it is first sent or given to security holders of the insurer. For the purposes of this Paragraph the term "insurer" includes a predecessor corporation if the plan or obligations to participate thereunder were assumed by the insurer in connection with the succession. (2) If 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 the determination of the number or maximum number of shares of stock which may be allocated to any such director or officer or which may be covered by qualified, restricted or employee stock purchase plan stock options granted to any such director or officer, is subject to the discretion of any person, then such discretion shall be exercised only as follows: (a) With respect to the participation of directors: (i) by the board of directors of the insurer, a majority of which board and majority of the directors acting in the matter are disinterested persons; (ii) by, or only in accordance with the recommendations of, a committee of three or more persons having full authority to act in the matter, all of the members of which committee are disinterested persons; or (iii) otherwise in accordance with the plan, if the plan: (A) specifies the number or maximum number of shares of stock which directors may acquire or which may be subject to qualified, restricted or employee stock purchas e plan stock options granted to directors and the terms upon which, and the times at which, or the periods within which, such stock may be acquired or such options may be acquired and exercised; or (B) sets forth, by formula or otherwise, effective and determinable limitations with respect to the foregoing based upon earnings 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. (b) With respect to the participation of officers who are not directors: (i) by the board of directors of the insurer or a committee of three or more directors; or (ii) by, or only in accordance with the recommendations of, a committee of three or more persons having full authority to act in the matter, all of the members of which committee are disinterested persons. For the purpose of this Paragraph, a director or committee member shall be deemed to be a disinterested person only if such person is not at the time such discretion is exercised eligible and has not at any time within one year prior thereto been eligible for selection as a person 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 any other plan of the insurer or any of its affiliates entitling the participants therein to acquire stock or qualified, restricted or employee stock purchase plan stock options of the insurer or any of its affiliates. (c) The provisions of this Paragraph shall not apply with respect to any option granted, or other equity security acquired, prior to the date that subsections (a), (b), and (c) of the act first become applicable with respect to any class of equity securities of any insurer. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 769 (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 which may be allocated, or which 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 earnings 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 which will result in an effective and determinable limitation. Such limitations may be subject to any provisions for adjustment of the plan or of stock allocable or options outstanding thereunder to prevent dilution or enlargement of rights. (4) Unless the context otherwise requires, all terms used in this Rule shall have the same meaning as in the act and in these rules. In addition, the following definitions apply: (a) The
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Title | North Carolina register |
Date | 2003-11-17 |
Description | Volume 18, Number 10, (November 17, 2003) |
Digital Characteristics-A | 441 KB; 85 p. |
Digital Format |
application/pdf |
Pres Local File Path-M | \Preservation_content\StatePubs\pubs_borndigital\images_master\ |
Full Text | NORTH CAROLINA REGISTER Volume 18, Issue 10 Pages 743 - 823 November 17, 2003 This issue contains documents officially filed through October 24, 2003. Office of Administrative Hearings Rules Division 424 North Blount Street (27601) 6714 Mail Service Center Raleigh, NC 27699-6714 (919) 733-2678 FAX (919) 733-3462 Julian Mann III, Director Camille Winston, Deputy Director Molly Masich, Director of APA Services Ruby Creech, Publications Coordinator Linda Dupree, Editorial Assistant Dana Sholes, Editorial Assistant Rhonda Wright, Editorial Assistant IN THIS ISSUE I. IN ADDITION ENR – Notice of Intent to Redevelop a Brownfields Property – Citiline, LLC............................................743 ENR – Notice of Intent to Redevelop a Brownfields Property – Salem Recreational Fields, LLC ..........744 ENR – Application for Innovative Approval of a Wastewater System for On -site Subsurface Use...746 Labor – Order 2002-V-01, Continental General Tire, Inc., Permanent Variance.................................745 Voting Rights Letters ..................................................747 - 749 II. PROPOSED RULES Environment and Natural Resources Wildlife Resources Commission..............................775 - 813 Insurance Admission Requirements ..........................................774 Consumer Services .....................................................750 Financial Evaluation Division..................................750 - 774 Justice Private Protective Services .......................................774 - 775 III. RULES REVIEW COMMISSION..........................814 - 819 IV. CONTESTED CASE DECISIONS Index to ALJ Decisions.................................................820 - 823 For the CUMULATIVE INDEX to the NC Register go to: http://oahnt.oah.state.nc.us/register/CI.pdf North Carolina Register is published semi-monthly for $195 per year by the Office of Administrative Hearings, 424 North Blount Street, Raleigh, NC 27601. North Carolina Register (ISSN 15200604) to mail at Periodicals Rates is paid at Raleigh, NC. POSTMASTER: Send Address changes to the North Carolina Register, 6714 Mail Service Center, Raleigh, NC 27699-6714. NORTH CAROLINA ADMINISTRATIVE CODE CLASSIFICATION SYSTEM The North Carolina Administrative Code (NCAC) has four major classifications of rules. Three of these, titles, chapters, and sections are mandatory. The major classification of the NCAC is the title. Each major department in the North Carolina executive branch of government has been assigned a title number. Titles are further broken down into chapters which shall be numerical in order. Subchapters are optional classifications to be used by agencies when appropriate. NCAC TITLES TITLE 21 LICENSING BOARDS TITLE 24 INDEPENDENT AGENCIES 1 ADMINISTRATION 2 AGRICULTURE & CONSUMER SERVICES 3 AUDITOR 4 COMMERCE 5 CORRECTION 6 COUNCIL OF STATE 7 CULTURAL RESOURCES 8 ELECTIONS 9 GOVERNOR 10A HEALTH AND HUMAN SERVICES 11 INSURANCE 12 JUSTICE 13 LABOR 14A CRIME CONTROL & PUBLIC SAFETY 15A ENVIRONMENT &NATURAL RESOURCES 16 PUBLIC EDUCATION 17 REVENUE 18 SECRETARY OF STATE 19A TRANSPORTATION 20 TREASURER 21* OCCUPATIONAL LICENSING BOARDS 22 ADMINISTRATIVE PROCEDURES (REPEALED) 23 COMMUNITY COLLEGES 24* INDEPENDENT AGENCIES 25 STATE PERSONNEL 26 ADMINISTRATIVE HEARINGS 27 NC STATE BAR 28 JUVENILE JUSTICE AND DELINQUENCY PREVENTION 1 Acupuncture 2 Architecture 3 Athletic Trainer Examiners 4 Auctioneers 6 Barber Examiners 8 Certified Public Accountant Examiners 10 Chiropractic Examiners 11 Employee Assistance Professionals 12 General Contractors 14 Cosmetic Art Examiners 16 Dental Examin ers 17 Dietetics/Nutrition 18 Electrical Contractors 19 Electrolysis 20 Foresters 21 Geologists 22 Hearing Aid Dealers and Fitters 25 Interpreter/Transliterator (Reserved) 26 Landscape Architects 28 Landscape Contractors 29 Locksmith Licensing Board 30 Massage & Bodywork Therapy 31 Marital and Family Therapy 32 Medical Examiners 33 Midwifery Joint Committee 34 Funeral Service, Board of 36 Nursing 37 Nursing Home Administrators 38 Occupational Therapists 40 Opticians 42 Optometry 44 Osteopathic Examination (Repealed) 45 Pastoral Counselors, Fee-Based Practicing 46 Pharmacy 48 Physical Therapy Examiners 50 Plumbing, Heating & Fire Sprinkler Contractors 52 Podiatry Examiners 53 Professional Counselors 54 Psychology Board 56 Professional Engineers & Land Surveyors 57 Real Estate Appraisal Board 58 Real Estate Commission 60 Refrigeration Examiners 61 Respiratory Care Board 62 Sanitarian Examiners 63 Social Work Certification 64 Speech & Language Pathologists & Audiologists 65 Therapeutic Recreation Certification 66 Veterinary Medical Board 68 Substance Abuse Professionals 69 Soil Scientists 1 Housing Finance 2 Agricultural Finance Authority 3 Safety & Health Review Board 4 Reserved 5 State Health Plan Purchasing Alliance Board (Repealed) Note: Title 21 contains the chapters of the various occupational licensing boards and Title 24 contains the chapters of independent agencies. NORTH CAROLINA REGISTER Publication Schedule for July 2003 – December 2003 FILING DEADLINES NOTICE OF TEXT PERMANENT RULE TEMPORARY RULES Volume & issue number Issue date Last day for filing Earliest date for public hearing End of required comment period Deadline to submit to RRC for review at next meeting Earliest Eff. Date of Permanent Rule Delayed Eff. Date of Permanent Rule (first legislative day of the next regular session) 270th day from publication in the Register 17:13 01/02/03 12/06/02 01/17/03 03/03/03 03/20/03 05/01/03 05/10/04 09/29/03 17:14 01/15/03 12/19/02 01/30/03 03/17/03 03/20/03 05/01/03 05/10/04 10/12/03 17:15 02/03/03 01/10/03 02/18/03 04/04/03 04/21/03 06/01/03 05/10/04 10/31/03 17:16 02/17/03 01/27/03 03/04/03 04/21/03 04/21/03 06/01/03 05/10/04 11/14/03 17:17 03/03/03 02/10/03 03/18/03 05/02/03 05/20/03 07/01/03 05/10/04 11/28/03 17:18 03/17/03 02/24/03 04/01/03 05/16/03 05/20/03 07/01/03 05/10/04 12/12/03 17:19 04/01/03 03/11/03 04/16/03 06/02/03 06/20/03 08/01/03 05/10/04 12/27/03 17:20 04/15/03 03/25/03 04/30/03 06/16/03 06/20/03 08/01/03 05/10/04 01/10/04 17:21 05/01/03 04/09/03 05/16/03 06/30/03 07/21/03 09/01/03 05/10/04 01/26/04 17:22 05/15/03 04/24/03 05/30/03 07/14/03 07/21/03 09/01/03 05/10/04 02/09/04 17:23 06/02/03 05/09/03 06/17/03 08/01/03 08/20/03 10/01/03 05/10/04 02/27/04 17:24 06/16/03 05/23/03 07/01/03 08/15/03 08/20/03 10/01/03 05/10/04 03/12/04 18:01 07/01/03 06/10/03 07/16/03 09/02/03 09/22/03 11/01/03 05/10/04 03/27/04 18:02 07/15/03 06/23/03 07/30/03 09/15/03 09/22/03 11/01/03 05/10/04 04/10/04 18:03 08/01/03 07/11/03 08/16/03 09/30/03 10/20/03 12/01/03 05/10/04 04/27/04 18:04 08/15/03 07/25/03 08/30/03 10/14/03 10/20/03 12/01/03 05/10/04 05/11/04 18:05 09/02/03 08/11/03 09/17/03 11/03/03 11/20/03 01/01/04 05/10/04 05/29/04 18:06 09/15/03 08/22/03 09/30/03 11/14/03 11/20/03 01/01/04 05/10/04 06/11/04 18:07 10/01/03 09/10/03 10/16/03 12/01/03 12/22/03 02/01/04 05/10/04 06/27/04 18:08 10/15/03 09/24/03 10/30/03 12/15/03 12/22/03 02/01/04 05/10/04 07/11/04 18:09 11/03/03 10/13/03 11/18/03 01/02/04 01/20/04 03/01/04 05/10/04 07/30/04 18:10 11/17/03 10/24/03 12/02/03 01/16/04 01/20/04 03/01/04 05/10/04 08/13/04 18:11 12/01/03 11/05/03 12/16/03 01/30/04 02/20/04 04/01/04 05/10/04 08/27/04 18:12 12/15/03 11/20/03 12/30/03 02/13/04 02/20/04 04/01/04 05/10/04 09/10/04 EXPLANATION OF THE PUBLICATION SCHEDULE This Publication Schedule is prepared by the Office of Administrative Hearings as a public service and the computation of time periods are not to be deemed binding or controlling. Time is computed according to 26 NCAC 2C .0302 and the Rules of Civil Procedure, Rule 6. GENERAL The North Carolina Register shall be published twice a month and contains the following information submitted for publication by a state agency: (1) temporary rules; (2) notices of rule-making proceedings; (3) text of proposed rules; (4) text of permanent rules approved by the Rules Review Commission; (5) notices of receipt of a petition for municipal incorporation, as required by G.S. 120-165; (6) Executive Orders of the Governor; (7) final decision letters from the U.S. Attorney General concerning changes in laws affecting voting in a jurisdiction subject of Section 5 of the Voting Rights Act of 1965, as required by G.S. 120-30.9H; (8) orders of the Tax Review Board issued under G.S. 105-241.2; and (9) other information the Codifier of Rules determines to be helpful to the public. COMPUTING TIME: In computing time in the schedule, the day of publication of the North Carolina Register is not included. The last day of the period so computed is included, unless it is a Saturday, Sunday, or State holiday, in which event the period runs until the preceding day which is not a Saturday, Sunday, or State holiday. FILING DEADLINES ISSUE DATE: The Register is published on the first and fifteen of each month if the first or fifteenth of the month is not a Saturday, Sunday, or State holiday for employees mandated by the State Personnel Commission. If the first or fifteenth of any month is a Saturday, Sunday, or a holiday for State employees, the North Carolina Register issue for that day will be published on the day of that month after the first or fifteenth that is not a Saturday, Sunday, or holiday for State employees. LAST DAY FOR FILING: The last day for filing for any issue is 15 days before the issue date excluding Saturdays, Sundays, and holidays for State employees. NOTICE OF TEXT EARLIEST DATE FOR PUBLIC HEARING: The hearing date shall be at least 15 days after the date a notice of the hearing is published. END OF REQUIRED COMMENT PERIOD (1) RULE WITH NON-SUBSTANTIAL ECONOMIC IMPACT: An agency shall accept comments on the text of a proposed rule for at least 60 days after the text is published or until the date of any public hearings held on the proposed rule, whichever is longer. (2) RULE WITH SUBSTANTIAL ECONOMIC IMPACT: An agency shall accept comments on the text of a proposed rule published in the Register and that has a substantial economic impact requiring a fiscal note under G.S. 150B-21.4(b1) for at least 60 days after publication or until the date of any public hearing held on the rule, whichever is longer. DEADLINE TO SUBMIT TO THE RULES REVIEW COMMISSION: The Commission shall review a rule submitted to it on or before the twentieth of a month by the last day of the next month. FIRST LEGISLATIVE DAY OF THE NEXT REGULAR SESSION OF THE GENERAL ASSEMBLY: This date is the first legislative day of the next regular session of the General Assembly following approval of the rule by the Rules Review Commission. See G.S. 150B- 21.3, Effective date of rules. IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 743 Note from the Codifier: This Section contains public notices that are required to be published in the Register or have been approved by the Codifier of Rules for publication. SUMMARY OF NOTICE OF INTENT TO REDEVELOP A BROWNFIELDS PROPERTY Citiline, LLC Pursuant to G.S. 130A-310.34, Citiline, LLC has filed with the North Carolina Department of Environment and Natural Resources ("DENR") a Notice of Intent to Redevelop a Brownfields Property ("Property") in the City of Charlotte, Mecklenburg County, North Carolina. The Property consists of 2.88 acres and is located at 2028-2040 South Tryon Street. Environmental contamination exists on the Property in groundwater. Citiline, LLC has committed itself to redevelopment of the Property for no use other than commercial purposes such as office and showroom condominiums. The Notice of Intent to Redevelop a Brownfields Property includes: (1) a proposed Brownfields Agreement between DENR and Citiline, LLC, which in turn includes (a) a legal description of the Property, (b) a map showing the location of the Property, (c) a description of the contaminants involved and their concentrations in the media of the Property, (d) the above-stated description of the intended future use of the Property, and (e) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in accordance with G.S. 130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be reviewed at 600 East Trade Street, Neighborhood Development Key Business, Charlotte, NC, 28217 by contacting Carolyn Minnich at that address, at carolyn.minnich@ncmail.net or at (704) 336-3499; or at 401 Oberlin Rd., Raleigh, NC 27605 by contacting Scott Ross at that address, at scott.ross@ncmail.net, or at (919)733-2801, ext. 328. Written public comments may be submitted to DENR within 60 days after the date this Notice is published in a newspaper of general circulation serving the area in which the Brownfields property is located, or in the North Carolina Register, whichever is later. Written requests for a public meeting may be submitted to DENR within 30 days after the period for written public comments begins. All such comments and requests should be addressed as follows: Mr. Bruce Nicholson Head, Special Remediation Branch Superfund Section Division of Waste Management NC Department of Environment and Natural Resources 401 Oberlin Road, Suite 150 Raleigh, North Carolina 27605 IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 744 SUMMARY OF NOTICE OF INTENT TO REDEVELOP A BROWNFIELDS PROPERTY Salem Recreational Fields, LLC Pursuant to G.S. 130A-310.34, Salem Recreational Fields, LLC has filed with the North Carolina Department of Environment and Natural Resources ("DENR") a Notice of Intent to Redevelop a Brownfields Property ("Property") in Winston-Salem, Forsyth County, North Carolina. The Property, currently a city park that Salem Recreational Fields, LLC has contracted to purchase, consists of 7.23 acres and is located on South Salem Avenue near its intersection with South Main Street. Environmental contamination exis ts on the Property in groundwater beneath the former landfill. Salem Recreational Fields, LLC has committed itself to allow no use of the Property other than for outdoor recreation. When not used by Salem Academy and College, the fields will be available for use by the City of Winston-Salem and its citizens, subject to reasonable restrictions that may be imposed by Salem Recreational Fields, LLC. The Notice of Intent to Redevelop a Brownfields Property includes: (1) a proposed Brownfields Agreement between DENR and Salem Recreational Fields, LLC which in turn includes (a) a map showing the location of the Property, (b) a description of the contaminants involved and their concentrations in the media of the Property, (c) the above-stated description of the intended future use of the Property, and (d) proposed investigation and remediation; and (2) a proposed Notice of Brownfields Property prepared in accordance with G.S. 130A-310.35. The full Notice of Intent to Redevelop a Brownfields Property may be reviewed at the North Carolina Room of the Forsyth County Central Library, 660 West Fifth Street, Winston-Salem, NC 27101 by contacting Jerry Carroll, at (336)727-2264, ext. 9; or at 401 Oberlin Rd., Raleigh, NC 27605 by contacting Scott Ross at that address, at scott.ross@ncmail.net, or at (919)733-2801, ext. 328. Written public comments may be submitted to DENR within 60 days after the date this Notice is published in a newspaper of general circulation serving the area in which the Brownfields property is located, or in the North Carolina Register, whichever is later. Written requests for a public meeting may be submitted to DENR within 30 days after the period for written public comments begins. All such comments and requests should be addressed as follows: Mr. Bruce Nicholson Head, Brownfields Program Division of Waste Management NC Department of Environment and Natural Resources 401 Oberlin Road, Suite 150 Raleigh, North Carolina 27605 IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 745 NORTH CAROLINA DEPARTMENT OF LABOR DIVIS ION OF OCCUPATIONAL SAFETY AND HEALTH RALEIGH, NORTH CAROLINA Order 2002-V-01 Continental General Tire, Inc. Permanent Variance Order: In accordance with G.S. 95-132(b) and 13 NCAC 07A .0700, Continental General Tire, Inc. (" Continental") is granted the permission to exceed the maximum storage limit requirements for Liquid Petroleum (" LP") gas storage in a single location as specified in 29 C.F.R. 1910.110(f)(4)(i). The standard prohibits the storage of LP in excess of 300 pounds in a single building. This permission is limited to Continental site located at 1900 Continental Boulevard in Charlotte, North Carolina. Discussion: Continental is located in an extremely large facility, which covers approximately 25 acres, with a total of more than two million square feet. The facility is divided into twelve "sub-buildings" designed for different functions (general office spaces, warehouses, and manufacturing, etc.). There are 85 forklifts located in this huge facility which are powered by LP gas. The LP gas used to power these forklifts is stored in LP gas cylinders containing 33 pounds of gas each, and spare cylinders are also stored at the facility. The combination of the used and unused LP gas cylinders exceed the 300 pound limit set forth in the standard. However, these LP gas cylinders are dispersed among multiple sub-locations of the building, with no sub-location containing more than 300 pounds of gas on a given day. The first LP gas storage area, located in the southwest corner of the building, is at least 300 feet away from the second LP storage area, located in the northeast corner of a different subsection of the building. In addition, a two-hour fire -rated wall separates these two areas. The third storage area for LP gas is located in another sub-building, which is more than one-quarter of a mile from the other two locations. Furthermore, the entire building is protected by sprinkler systems, and is classified as low hazard building. The permission granted by this Order is contingent upon Continental ensuring that no more than 300 pounds of LP gas are stored in any one of the three location clusters established at the time of the variance inspection. This limitation equates to a maximum of nine (9) 33-pound LP gas cylinders in one cluster, including empty cylinders. This arrangement complies with the spirit and intent of the standard, and is as safe and healthful as strict compliance with the standard. In addition, Continental should also comply with the requirements of Chapter 5 of NFPA 58 – Liquified Petroleum Gas Code (2001 Edition), which concerns the storage of LP gas cylinders awaiting use, and which is administered by the NC Department of Agriculture and Consumer Services – Standards Division. Action: This order grants Continental's request for a permanent variance. This permanent variance will remain in effect until modified or revoked pursuant to G.S. 95-132(b) and 13 NCAC 07A.0709. This the 24th day of November, 2003. __________________________________________ Allen M. McNeely Director, North Carolina Department of Labor – Occupational Safety and Health Division 11/17/2003 Signed on Original Effective Date Allen M. McNeely Director, North Carolina Department of Labor – Occupational Safety and Health Division IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 746 TITLE 15A – DEPARTMENT OF ENVIRONMENT AND NATURAL RESOURCES WASTEWATER SECTION, DIVISION OF ENVIRONMENTAL HEALTH Notice of Application for Innovative Approval of a Wastewater System for On-site Subsurface Use Pursuant to G.S. 130A-343(g), the North Carolina Department of Environment and Natural Resources (DENR) shall publish a Notice in the NC Register that a manufacturer has submitted a request for approval of a wastewater system, component, or device for on-site subsurface use. The following application has been submitted to DENR: Application by: On-Site Wastewater Section Division of Environmental Health 1642 Mail Service Center Raleigh, NC 27699-1642 919-733-2895 Fax 919-715-3227 For: Component Substitution for Four-Inch Corrugated Plastic Tubing in Nitrification Lines DENR Contact: Steven Berkowitz 1-919-715-3271 FAX 919-715-3227 steven.berkowitz@ncmail.net The application may be reviewed by contacting the applicant or at 2728 Capital Blvd., Raleigh, NC, On-Site Wastewater Section, Division of Environmental Health. Draft proposed innovative approvals and proposed final action on the application by DENR can be viewed on the On-Site Wastewater Section web site: www.deh.enr.state.nc/oww/. Written public comments may be submitted to DENR within 30 days of the date of the Notice publication in the North Carolina Register. All written comments should be submitted to Mr. Bill Jeter, Chief, On-site Wastewater Section, 1642 Mail Service Center, Raleigh, NC 27699-1642, or bill.jeter@ncmail.net, or Fax 919.715.3227. Written comments received by DENR in accordance with this Notice will be taken into consideration before a final agency decision is made on the innovative subsurface wastewater system application. IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 747 U.S. Department of Justice Civil Rights Division JDR:TCH:AMS:jdh Voting Section – NWB. DJ 166-012-3 950 Pennsylvania Ave., NW 2003-2769 Washington, D.C. 20530 October 6, 2003 Mr. Gary O. Bartlett Executive Director State Board of Elections P.O. Box 27255 Raleigh, NC 27611-7255 Dear Mr. Bartlett: This refers to Session Law 2003-12, which establishes a state election fund; Session Law 2003-226, which adopts changes to implement the Help America Vote Act of 2002, 42 U.S.C. 15301-15545 ("HAVA"), including: providing that the statewide voter registration list is the official list for all elections; enabling the State Board of Elections to make changes in the statewide list to conform it to HAVA requirements, to interface the list with other databases, to verify voter identification, and to assign each voter a unique identifier; providing for electronic voter registration applications and electronically captured signatures; providing for the posting of certain information at polling places with the State Board of Elections to prescribe the format; providing for modifications to the state voter registration form; enabling the State Board of Elections to adopt rules to ensure that voting systems comply with HAVA, including definitions of what constitutes a vote on each voting system; abolishing lever voting systems; providing for provisional balloting with the State Board of Elections to prescribe certain rules; providing identification procedures for voters who register to vote for the first time by mail; enabling the State Board of Elections to develop a procedure for resolving HAVA complaints; providing new procedures for registration and balloting for voters covered by the Uniformed and Overseas Citizens Absentee Voting Act; and enabling the State Board of Elections to adopt rules and guidelines for implementing HAVA; and State Board of Elections guidelines regarding processing voter registration forms, accessible polling places, and complaint procedures for the State of North Carolina, submitted to the Attorney General pursuant to Section 5 of the Voting Rights Act, 42 U.S.C. 1973c. We received your submission on August 6, 2003; supplemental information was received on September 17, 2003. The Attorney General does not interpose any objection to the specified changes. However, we note that Section 5 expressly provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the changes. See the Procedures for the Administration of Section 5 (28 C.F.R. 51.41). Session Law 2003-226 includes provis ions that are enabling in nature. Therefore, any changes affecting voting that are adopted pursuant to this legislation require Section 5 review (e.g., procedures adopted by the State Board of Elections concerning HAVA minimum requirements, voting systems , definition of what constitutes a vote, statewide voter registration database, and provisional voting). See 28 C.F.R. 51.15. Sincerely, Joseph D. Rich Chief, Voting Section IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 748 U.S. Department of Justice Civil Rights Div ision JDR:CMK:TGL:nj Voting Section – NWB. DJ 166-012-3 950 Pennsylvania Ave., NW 2003-2768 Washington, D.C. 20530 October 6, 2003 Mr. Gary O. Bartlett Executive Director State Board of Elections P.O. Box 27255 Raleigh, NC 27611-7255 Dear Mr. Bartlett: This refers to Session Law 2003-346, which provides for a boundary definition, candidate qualifying procedures, the conduct of the elections by Granville County, absentee voting procedures, concurrent terms, and the at-large method of election, for the Butner Advisory Council Jurisdiction (formerly known as the Camp Butner Reservation) in Durham and Granville Counties, North Carolina, submitted to the Attorney General pursuant to Section 5 of the Voting Rights Act, 42 U.S.C. 1973c. We received your submission on August 5, 2003. We have considered our earlier determination regarding the use of at-large elections based on the adoption of concurrent rather than staggered terms, information and arguments you have advanced, along with other information and comments received from interested persons. Accordingly, pursuant to Section 51.48(b) of the Procedures for the Administration of Section 5 (28 C.F.R.) the objection interposed to the at-large method of election is hereby withdrawn. The Attorney General does not interpose any objection to the remaining specified changes. However, we note that Section 5 expressly provides that the failure of the Attorney General to object does not bar subsequent litigation to enjoin the enforcement of the changes. See the Procedures for the Administration of Section 5 (28 C.F.R. 51.41). Sincerely, Joseph D. Rich Chief, Voting Section IN ADDITION 18:10 NORTH CAROLINA REGISTER November 17, 2003 749 U.S. Department of Justice Civil Rights Division JDR:RSB:CMK:TGL:jdh:par Voting Section DJ 166-012-3 950 Pennsylvania Ave., NW 1996-3224 Washington, D.C. 20530 2003-2768 October 16, 2003 Mr. Gary O. Bartlett Executive Director State Board of Elections P.O. Box 27255 Raleigh, NC 27611-7255 Dear Mr. Bartlett: This refers to our October 6, 2003, letter regarding the Butner Advisory Council Jurisdiction. The purpose of that letter was to inform you that no objection would be interposed to Session Law 2003-346. However, the letter mistakenly informed you that the Attorney General was withdrawing the February 3, 1997, objection to Chapter 667 (1996). The State did not ask for reconsideration of that objection, the Attorney General did not give the appropriate public notice that he was reconsidering it, and the State does not require that the objection be withdrawn in order to implement the changes contained in Session Law 2003-346. Session Law 2003-346 is a different piece of legislation from chapter 667 (1996) and implements a different election system than the one to which the 1997 objection was interposed. Accordingly, please accept this letter as notification that the February 3, 1997, objection to Chapter 667 (1996) remains in effect. Please accept our apology for any confusion the October 6, 2003, letter may have caused and do not hesitate to contact us should you have any questions. Sincerely, Joseph D. Rich Chief, Voting Section PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 750 Note from the Codifier: The notices published in this Section of the NC Register include the text of proposed rules. The agency must accept comments on the proposed rule(s) for at least 60 days from the publication date, or until the public hearing, or a later date if specified in the notice by the agency. If the agency adopts a rule that differs substantially from a prior published notice, the agency must publish the text of the proposed different rule and accept comment on the proposed different rule for 60 days. Statutory reference: G.S. 150B-21.2. TITLE 11 – DEPARTMENT OF INSURANCE Notice is hereby given in accordance with G.S. 150B-21.2 that the NC Department of Insurance intends to amend the rule cited as 11 NCAC 04 .0427. Proposed Effective Date: March 1, 2004 Public Hearing: Date: December 2, 2003 Time: 10:00 a.m. Location: Dobbs Building, 3rd floor Hearing Room, Raleigh, NC Reason for Proposed Action: S.L. 2003-395 (HB 986) has incorporated the language in Paragraph (b) of this Rule into G.S. 58-36-95(a). Procedure by which a person can object to the agency on a proposed rule: The Department of Insurance will accept written objections to the amendment of this Rule until the expiration of the comment period (1/16/04). Objections need to be specific and sent to the attention of the APA Coordinator. Written comments may be submitted to: Ellen K. Sprenkel, PO Box 26837, Raleigh, NC 27611, phone (919) 733-4529, fax (919) 733-6495, and email esprenke@ncdoi.net. Comment period ends: January 16, 2004 Procedure for Subjecting a Proposed Rule to Legislative Review: Any person who objects to the adoption of a permanent rule may submit written comments to the agency. A person may also submit written objections to the Rules Review Commission. If the Rules Review Commission receives written and signed objections in accordance with G.S. 150B-21.3(b2) from 10 or more persons clearly requesting review by the legislature and the Rules Review Commission approves the rule, the rule will become effective as provided in G.S. 150B-21.3(b1). The Commission will receive written objections until 5:00 p.m. on the 6th business day preceding the end of the month in which a rule is approved. The Commission will receive those objections by mail, delivery service, hand delivery, or facsimile transmission. If you have any further questions concerning the submission of objections to the Commission, please call a Commission staff attorney at 919-733-2721. Fiscal Impact State Local Substantive (>$3,000,000) None CHAPTER 04 - CONSUMER SERVICES DIVISION SECTION .0400 - PROPERTY AND LIABILITY 11 NCAC 04 .0427 DISCLOSURE REQUIREMENTS (a) Every insurer that writes motor vehicle insurance in this state and that intends to require or specify the use of after market parts must disclose to its policyholders in writing, either in the policy or on a sticker attached thereto, the following information in no smaller print than ten point type: IN THE REPAIR OF YOUR COVERED AUTO UNDER THE PHYSICAL DAMAGE COVERAGE PROVISIONS OF THIS POLICY, WE MAY REQUIRE OR SPECIFY THE USE OF AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL MANUFACTURER. THESE PARTS ARE REQUIRED TO BE AT LEAST EQUAL IN TERMS OF FIT, QUALITY, PERFORMANCE AND WARRANTY TO THE ORIGINAL MANUFACTURER PARTS THEY REPLACE. (b) An insurer must disclose to a claimant in writing, either on the estimate or on a separate document attached to the estimate, the following information in no smaller print than ten point type: THIS ESTIMATE HAS BEEN PREPARED BASED ON THE USE OF AUTOMOBILE PARTS NOT MADE BY THE ORIGINAL MANUFACTURER. PARTS USED IN THE REPAIR OF YOUR VEHICLE BY OTHER THAN THE ORIGINAL MANUFACTURER ARE REQUIRED TO BE AT LEAST EQUAL IN TERMS OF FIT, QUALITY, PERFORMANCE AND WARRANTY TO THE ORIGINAL MANUFACTURER PARTS THEY ARE REPLACING. All after market parts installed on a motor vehicle shall be clearly identified on the estimate and invoice for such repair. Authority G.S. 58-2-40. * * * * * * * * * * * * * * * * * * * * Notice is hereby given in accordance with G.S. 150B-21.2 that the NC Department of Insurance intends to adopt the rules cited as 11 NCAC 11F .0601-.0605 and repeal the rules cited as 11 NCAC 11B .0104, .0106, .0108-.0111, .0113-.0114, .0119, .0122-.0131, .0133-.0137, .0139, .0144-.0147, .0149-.0151; 11C .0110, .0122, .0124-.0126, .0131, .0206, .0309; 11D .0115- .0167. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 751 Proposed Effective Date: March 1, 2004 Public Hearing: Date: December 2, 2003 Time: 10:00 a.m. Location Dobbs Building, 3rd Floor Hearing Room, Raleigh, NC Reason for Proposed Action: 11 NCAC 11B .0104, .0106, .0108-.0111, .0113-.0114, .0119, .0122-.0131, .0133-.0137, .0139, .0144-.0147, .0149-.0151; 11C .0110, .0122, .0124-.0126, .0131, .0206, .0309; 11D .0115-.0167 – These Rules are being repealed because they are outdated. 11 NCAC 11F .0601-.0605 – The adoption of these Rules is needed to be in compliance with NAIC Model Laws. Procedure by which a person can object to the agency on a proposed rule: The Department of Insurance will accept written objections to the adoption or repeal of these Rules until the expiration of the comment period (1/16/04). Objections need to be specific and sent to the attention of the APA Coordinator. Written comments may be submitted to: Ellen K. Sprenkel, PO Box 26837, Raleigh, NC 27611, phone (919) 733-4529, fax (919) 733-6495, and email esprenke@ncdoi.net. Comment period ends: January 16, 2004 Procedure for Subjecting a Proposed Rule to Legislative Review: Any person who objects to the adoption of a permanent rule may submit written comments to the agency. A person may also submit written objections to the Rules Review Commission. If the Rules Review Commission receives written and signed objections in accordance with G.S. 150B-21.3(b2) from 10 or more persons clearly requesting review by the legislature and the Rules Review Commis sion approves the rule, the rule will become effective as provided in G.S. 150B-21.3(b1). The Commission will receive written objections until 5:00 p.m. on the 6th business day preceding the end of the month in which a rule is approved. The Commission will receive those objections by mail, delivery service, hand delivery, or facsimile transmission. If you have any further questions concerning the submission of objections to the Commission, please call a Commission staff attorney at 919-733-2721. Fiscal Impact State Local Substantive (>$3,000,000) None CHAPTER 11 - FINANCIAL EVALUATION DIVISION SUBCHAPTER 11B - SPECIAL PROGRAMS SECTION .0100 – SECURITIES 11 NCAC 11B .0104 REPLACEMENT UPON REDUCTION OF MARKET VALUE SECURITIES When any company licensed in North Carolina is required to have a deposit of securities in this state in accordance with Article 5 of G.S. 58 or pursuant to any rule of the Department of Insurance, the amount of such deposit required shall be at the market value thereof and shall be increased from time to time as necessary to maintain the required amount of deposit. Authority G.S. 58-2-40; 58-5-25. 11 NCAC 11B .0106 DEPOSITS REQUIRED: REVOCATION/LICENSE: FOREIGN COMPANIES The Commissioner may require any insurance company licensed in this state to make and maintain deposits of securities in such amounts as the Commissioner may deem necessary for the sole protection of North Carolina policyholders, upon one or mo re of the following grounds: (1) The insurer is operating with unsatisfactory results as determined by the Commissioner from an annual statement or an interim financial statement, or a report on examination; or (2) The insurer has sustained a substantial loss in surplus as reflected in an annual statement or an interim financial statement, or a report on examination; or (3) The insurer is found by the commissioner to be in such an unsound condition that the company is potentially unable to fulfill policyholder contracts. Authority G.S. 58-2-40(1); 58-3-100; 58-5-40; 58-5-45. 11 NCAC 11B .0108 RIGHT OF COMPANY TO RECEIVE INTEREST The right of a company to receive earned interest from the securities on deposit in this state shall be extended to all deposits made under all rules of the Department and the right of the Department to withhold interest in accordance with G.S. 58-5-60 shall also extend to all such deposits. Interest checks from issuing agents or institutions on bonds, notes, debentures or other securities on deposit shall be forwarded to the master trust bank. The interest shall be transmitted to the insurance company in a manner as detailed by the Department and the Master Trust Bank. Authority G.S. 58-2-40; 58-5-1; 58-5-60. 11 NCAC 11B .0109 RIGHT OF THE COMMISSIONER TO RECEIVE AND HOLD INTERES T The Commissioner may in his discretion receive and retain the interest on deposits of a company licensed in North Carolina which is placed in conservatorship, rehabilitation or receivership by its state of domicile, and where the Commissioner has reason to believe that such company may potentially be unable to meet its claims obligation in North Carolina. Such interest will be placed in an interest-bearing account at the master bank account and will be held in trust by the Commissioner for policyholders of the company. Authority G.S. 58-2-40; 58-5-60; 58-183. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 752 11 NCAC 11B .0110 SALE OF DEPOSIT FOR PAYMENT OF LIABILITIES Any company licensed in this state and refusing to pay a claim of a North Carolina resident, after such claim has been reduced to a final judgment and no appeals are outstanding, shall be subject to this Rule. The parties due the claim shall ask the commissioner to sell such deposit of securities as needed to pay claims plus all expenses involved in settling such claim. It is understood that such sale will be done by our master trust bank as further defined under 11 NCAC 11B .0131. The procedure for this sale is as follows: (1) The claimant must inform the company or its North Carolina agent in writing 20 days in advance of his intentions to petition the Commissioner for sale of bonds. (2) After receiving the petition from the claimant the Commissioner shall advertise in a daily paper in Raleigh at least 30 days before the sale. Such advertising shall include, as a minimum, the following information: (a) securities to be sold, (b) company having the deposit, (c) the law under which these securities are being sold. The Commissioner will notify the company after the deposit has been sold, replace the deposit in an amount deemed to be adequate and reasonable by the Commissioner. The right of the commissioner to sell at public auction such amount of the securities on deposit with him as is necessary to pay an outstanding liability of a company as provided by G.S. 58-5-65 shall extend to all deposits made under all rules of the Department. Authority G.S. 58-2-40; 58-5-1; 58-5-65. 11 NCAC 11B .0111 CONVERSION TO CASH MASTER TRUST (a) As used in this Rule and elsewhere in this Section: (1) "DTC" means the electronic transfer of municipal securities through the Deposit Trust Corporation. (2) "Federal Book Entry" means the electronic transfer of U.S. Treasury obligations and cash through member banks of the Federal Reserve System. (b) The Department shall process and release securities that have matured only upon receipt of a written request from the company and where adequate replacement has been made by the company. Securities eligible for Federal Book Entry or DTC shall be converted to cash at maturity. Certificates of deposit shall be redeemed or rolled over at maturity. Authority G.S. 58-2-40; 58-5-1; 58-5-75. 11 NCAC 11B .0113 DEPOSIT REQUIRED UPON INITIAL LICENSING Any company seeking admission to this state which is required to deposit securities with this state shall deposit such securities within 30 days after its license is granted. Authority G.S. 58-2-40; 58-5-5; 58-5-10; 58-5-50. 11 NCAC 11B .0114 DEPOSITS HELD IN TRUST BY COMMISSIONER OF INSURANCE The establishment and servicing of deposits shall be done by authority of the Commissioner of Insurance only. The deposits shall be in the custody of the Master Trust Bank. The procedure for replacement of the deposit shall be as follows: (1) The company desiring to replace bonds or notes shall make a written request for replacement to the Commissioner of Insurance. This request shall be made in advance of the shipment of any securities. (2) The replacement deposit shall be of an equal value to the bond or note being replaced. (3) The Commissioner shall require additional securities at the time of replacement if the citizens and policyholders of this state will have less protection as a result of the replacement. Authority G.S. 58-2-40; 58-5-1; 58-5-40; 58-5-90; 58-5-95. 11 NCAC 11B .0119 CONTINUATION OF DEPOSITS OF SECURITIES OF MERGING COMPANIES The deposits of securities of a licensed company which is merged into another company may be transferred to the account of the surviving company, thus increasing the original deposit of the surviving company by the amount of the deposit of the merged company. Authority G.S. 58-2-40; 58-5-40; 58-5-55. 11 NCAC 11B .0122 EXCHANGE OF DEPOSIT: PROCEDURAL HANDLING It shall be the responsibility of the insurance company to make arrangements with this department at least five working days before exchange of deposit is required. There are no forms required in making an exchange. This department must have the eligible replacement deposit at the master trust bank before any deposit can be returned. Such replacement deposit must be on a market value basis. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0123 SALE OF SECURITIES B Y THE INSURANCE COMPANY PROHIBITED Insurance companies are prohibited from selling bonds or notes which are on deposit with this department without the express written consent of this department prior to sale, and after arrangements for replacements of equal value have been finalized. Authority G.S. 58-2-40. 11 NCAC 11B .0124 MASTER TRUST CREATION THEREOF In order to allow insurance companies to use Federal Book Entry and DTC Systems, the North Carolina Department of Insurance PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 753 has entered an agreement with a Master Trust Bank. This bank has transferred all securities from the vault at the State Treasurers Office to its safekeeping facility at the Master Trust Bank or its duly appointed fiduciary. Enactment of statute to allow the Department of Insurance to create such an agreement was necessary to insure that insurance companies be allowed to participate in purchase of Non-Physical Government Securities in Federal Book Entry and other electronic wire transfers of assets. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0125 MASTER TRUST USE PROCEDURAL HANDLING STEP 1 Any insurance company making a deposit of securities for the North Carolina Department of Insurance must have written approval from the Department of Insurance as to the amount and type of eligible securities to be used in fulfillment of the deposit requirements. Such request for approval must be forwarded to the appropriate named individual in the N.C. Department of Insurance as soon as is feasible by the insurance company but not later than 90 days after admission to North Carolina (See also Rule 11 NCAC 11B .0113). Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0126 MASTER TRUST USE PROCEDURAL HANDLING STEP 2 After approval has been granted the insurance company is required to contact the appropriate named individual for instructions as to shipment and/or wire transfer of the eligible securities. The Department of Insurance will notify the Master Trust Bank when new or increased securities will be forthcoming. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0127 MASTER TRUST USE PROCEDURAL HANDLING STEP 3 After securities are shipped or wired to the Master Trust Bank, the Master Trust Bank will provide the Department of Insurance with a signed receipt indicating securities in question are at the Master Trust Bank. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0128 MASTER TRUST USE PROCEDURAL HANDLING STEP 4 The Master Trust Bank may place the security in Federal Book Entry or DTC in any form which in fact perfects the security interest of this state so long as it is understood that the securities are held for protection of N.C. policyholders in the cases of foreign insurance companies and for protection of all policyholders wheresoever situated in cases of domestic insurance companies unless otherwise noted. The Master Trust Bank understands and agrees that all securities held under this trust arrangement are to be separated at all times from other assets of the bank and other trust arrangements at the bank. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0129 MASTER TRUST USE PROCEDURAL HANDLING STEP 5 The Master Trust Bank understands and agrees that securities while held by them can be in a street name or any other convenient designation so long as such securities can be determined to be the property of the insurance company and the State of North Carolina and not the property of the bank. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0130 MASTER TRUST SOLVENT COMPANIES All interest from securities on deposit will be forwarded to the insurance company in a manner as detailed by the N.C. Department of Insurance and the Master Trust Bank. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0131 MASTER TRUST INSOLVENT COMPANIES All interest from securities on deposit will be deposited in an interest bearing account at the Master Trust Bank. This action will occur after receipt of a court order declaring the insurance company to be insolvent. Also at this time the principal will be sold by the Master Trust to the best bidder from a field of at least two bids. It is conclusively presumed that the sale of securities to the best bidder from a field of two bids will constitute a public sale. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0133 DEPOSIT/AMOUNT FOREIGN FIRE AND/OR CASUALTY INSURERS All foreign fire and casualty insurance companies being licensed in North Carolina must make and maintain a deposit of securities in accordance with the Department of Insurance Admission Data Guidelines form 11 NCAC 14 .0143. Such deposit must be made in accordance with the Master Trust Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0134 DEPOSIT REQUIRED AMOUNT DOMESTIC LIFE INSURERS All domestic life insurance companies being formed and licensed in North Carolina must make and maintain a deposit of securities in accordance with the general regulatory authority of the Insurance Commission for the State of N. C. Such deposit must be made in accordance with the Master Trust Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0135 DEPOSIT/AMOUNT DOMES TIC FIRE AND/OR CASUALTY INSURERS All domestic fire and/or casualty insurance companies being licensed in North Carolina must make and maintain a deposit of securities in accordance with the general regulatory authority of the Commissioner of Insurance for the State of N. C. Such deposit must be made in accordance with the Master Trust PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 754 Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0136 FOREIGN DEPOSIT REQUIRED AMOUNT FOREIGN MISC INSURERS All miscellaneous insurance companies being licensed in North Carolina must make and maintain a deposit of securities in accordance with the Department of Insurance Admission Data Guidelines from 11 NCAC 14 .0143. Such deposit must be made in accordance with the Master Trust Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0137 DEPOSIT REQUIRED AMOUNT DOMESTIC MISCELLANEOUS INSURERS All domestic miscellaneous fire and/or casualty insurance companies being formed and licensed in North Carolina must make and maintain a deposit of securities in accordance with the general regulatory authority of the Commissioner of Insurance for the State of N. C. Such deposit must be made in accordance with the Master Trust Agreement between the Department of Insurance and a bank in North Carolina. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0139 DEPOSIT USE OF MASTER TRUST ALL NEW COMPANIES Insurance companies required to deposit securities in fulfillment of the North Carolina Department Admissions Data Guidelines, and admission rules shall make such deposits with the Master Trust Bank selected by the North Carolina Commissioner of Insurance. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0144 MASTER TRUST DK TRANSACTION It shall be the responsibility of the insurance company to notify their custodian bank of items to be wired from the Master Trust Bank. Prompt and consistent attention to this matter will prevent delays in the releasing transactions. DK Transactions are conclusively presumed to mean transactions rejected by the sending or receiving bank due to a lack of advance notice of the receipt. Authority G.S. 58-2-40(1); 58-5-1. 11 NCAC 11B .0145 MASTER TRUST CHARGES The Master Trust Bank will notify the insurance companies as to the charges relative to safekeeping the assets held by the Master Trust Bank. All insurance companies are required to pay these charges in accordance with the fee structure as provided by the N.C. Department of Insurance. Authority G.S. 58-2-40(1); 58-5-1. 11 NCAC 11B .0146 MASTER TRUST BANK ABILITY TO REGISTER SECURITIES From time to time registration of securities shall be changed by the Master Trust Bank to facilitate the redemp tion, sale, or transfer of securities on deposit. Such changes shall be made after a written request for approval has been made by the Master Trust Bank and received and approved by the Commissioner of Insurance. Authority G.S. 58-2-40; 58-5-1; 58-5-30; 58-5-63; 58-5-70; 58-5-90; 58-5-95. 11 NCAC 11B .0147 USE OF FEDERAL BOOK ENTRY/DEPOSITORY TRUST CORP/SHIPPING Where securities are eligible for Federal Book Entry or Depository Trust Corp such securities must be placed in these systems prior to shipment to the Department of Insurance or to its appointed Master Trust Bank. Securities ineligible for the above systems will be delivered to the N.C. Department of Insurance or the Master Trust Bank in accordance with written instructions to the shipping insurance company from the N.C. Department of Insurance. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0149 MASTER TRUST USE OF DTC Where securities are eligible for DTC such securities may be placed in this system unless otherwise directed by the Commissioner of Insurance. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0150 MASTER TRUST-RELEASE OF SECURITIES All requests for releasing securities must be delivered in writing to the Department of Insurance at least five working days prior to the requested release date. All release requests must be signed by an officer of the insurance company. Requests from custodian banks or brokerage firms will not be honored. All requests for release of items in Federal Book Entry must identify the servicing Federal Reserve Bank account name, bank ABA number and other required information. All requests for release of items in DTC must give the bank name, address and DTC number. All requests for release of ineligible items must give sufficient information to make the proper transfer. Authority G.S. 58-2-40; 58-5-1. 11 NCAC 11B .0151 MASTER TRUST - PAYMENT OF INTEREST In order to make the Master Trust Bank fully accountable, all interest must be forwarded from the paying agent to the Master Trust Bank. The Master Trust Bank will forward the interest to the insurance company or its designated receiving bank. Unless the insurance company notifies the North Carolina Department of Insurance in writing, all interest will be forwarded to the last known home office address given the Department of Insurance. Authority G.S. 58-2-40; 58-5-1. SUBCHAPTER 11C - ANALYSIS AND EXAMINATIONS SECTION .0100 - GENERAL PROVISIONS PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 755 11 NCAC 11C .0110 INVESTMENT IN GOLD OR GOLD FUTURES BY INSURANCE COMPANIES The investment in gold or gold futures by domestic insurance companies is not permitted by the Department. The investment in gold or gold futures by a foreign insurer admitted to do business or seeking admission to North Carolina will be afforded no value in determining compliance with the statutory requirements for such type companies in this state, even if such investment was authorized under the laws of the state of domicile. Authority G.S. 58-2-40(1); 58-7-85; 58-7-90. 11 NCAC 11C .0122 SALE OF EXCHANGE: TRADED CALL OPTIONS An insurer may sell exchange-traded call options only through an exchange and only with respect to stock which it owns. Insurers may not sell any other options. Any insurer selling an option: (1) shall enter into an escrow agreement which provides that its escrowed stock is kept segregated by the bank from other securities owned by the company, and from securities owned by others, which are deposited with the same bank; and (2) must obtain and retain in its possession a copy of an escrow receipt identifying with particularity the escrowed stock. Authority G.S. 58-2-40; 58-7-85; 58-7-90. 11 NCAC 11C .0124 ACCOUNTING PROCEDURES The price received for selling a call option shall not be included in income at the time of receipt, but shall be carried in a deferred account until: (1) The call option expires through the passage of time. The price for the option shall be treated as investment income. (2) The insurer sells the underlying stock pursuant to an exercise of the call option. The price received for the option shall be treated as increasing the amount realized upon the sale of the stock and shall be included in determining capital gain or loss. (3) The insurer engages in a closing purchase transaction. In this event the difference between the price received from the sale of the call option and the price paid in the closing purchase transaction shall be treated as an addition to or deduction from investment income. Authority G.S. 58-2-40; 58-7-85; 58-7-90. 11 NCAC 11C .0125 VALUATION The stock on which an option has been sold shall be valued, so long as the obligation under the option exists, at the lesser of: (1) the exercise price of the option, or (2) the current market price of the stock. Authority G.S. 58-2-40; 58-7-85; 58-7-90. 11 NCAC 11C .0126 PROHIBITION AGAINST SPECULATING IN OPTIONS The authority granted to insurers herein to engage in option transactions shall be used solely in a manner consistent with the insurer's obligation to exercise prudent judgment in the conservative management of its assets. Each option transaction shall reflect such prudent judgment and shall have a rationale related to such conservative management of assets rather than speculation. Nothing herein shall be construed to authorize an insurer to engage in option transactions to an extent or to a degree which would, under the relevant circumstances, be inordinate or speculative. The insurer shall establish and maintain records as to each transaction, demonstrating compliance with this Section. Authority G.S. 58-2-40; 58-7-85; 58-7-90. 11 NCAC 11C .0131 VALUATION OF DEBT SECURITIES The investments in bonds and other evidences of indebtedness specified in G.S. 58-7-190 shall be valued in accordance with the procedures and instructions contained in the Valuations of Securities Manual of the National Association of Insurance Commissioners: Provided, however, that the Commissioner may apply a more conservative valuation method to any insurer for which any of the standards specified in G.S. 58-30-60(b) are applicable. Authority G.S. 58-2-40; 58-7-190. SECTION .0200 - FIRE AND CASUALTY 11 NCAC 11C .0206 ACCOUNTING FOR PREMIUM OVER 90 DAYS PAST DUE Premiums that are not more than 90 days past due are allowable as admitted assets under G.S. 58-7-162(5). For purposes of this determination, premiums are considered more than 90 days past due under any of the following conditions: (1) Original, deposit, and renewal premiums on policies and bonds effective more than 90 days before the date of determination. (2) Premiums covering endorsements on which the effective dates were more than 90 days before the date of determination. (3) Installment premiums due more than 90 days before the date of determination. If any installments are overdue, all of the unpaid installment premiums on the same policy or bond shall be classified as overdue. (4) Audit and additional earned premiums determined by audits made more than 90 days before the date of determination, or charged upon an assured's payroll statements received more than 90 days before the date of determination. (5) Audits and additional earned premiums determined by audits covering periods expiring more than 180 days before the date of determination. The dates when the periods PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 756 expire are determined by the provisions of the insurance contract. (6) When original, deposit, endorsement, or audit premiums are overdue, all premiums subsequently charged on the same policies or bonds are overdue. (7) When original, deposit, installment endorsement, or audit premiums on a policy or bond are overdue, all premiums charged on policies or bonds issued as renewals are overdue. (8) Premiums resulting from an experience modification are admitted assets, provided that not more than 90 days have elapsed since the modification has been received from a rating organization; or not more than 90 days have elapsed since the modification has been calculated by the insurer. Premiums resulting from an experience modification are not admitted assets if premiums on the same or prior policy are overdue in accordance with this Rule. (9) Additional premiums developed through the application of a retrospective rating formula and billed to the insured in accordance with contractual provisions are admitted assets; provided that not more than 90 days have elapsed since the billing date and not more than 180 days have elapsed since the accounting date set forth in the insurance contract. Additional retrospective premiums are not admitted assets if premiums on the same or prior policy are overdue in accordance with this Rule. Authority G.S. 58-2-40; 58-7-162(5). SECTION .0300 - LIFE: GENERAL NATURE 11 NCAC 11C .0309 ADMITTED ASSETS: HMO For the purpose of determining the working capital or net worth of any HMO seeking admission to do business in this State and of any HMO admitted to do business in this State, admitted assets for an HMO do not include: (1) prepaid expenses; (2) intangible assets; (3) the depreciated cost of furniture and equipment, except furniture and equipment directly used in providing medical services and electronic data processing equipment; (4) amounts receivable from affiliates that are outstanding for over 90 days; (5) amounts receivable from affiliates that do not have immediate resources to repay the debts; nor (6) any other assets determined by the Commissioner to be of an illiquid nature, other than real property. Authority G.S. 58-2-40; 58-2-40(1); 58-67-20; 58-67-110(b). SUBCHAPTER 11D - PROXY: LIQUIDATION AND MERGER SECTION .0100 - GENERAL PROVISIONS 11 NCAC 11D .0115 PROXIES: ETC DOMESTIC INSURERS: APPLICATION OF RULES Pursuant to the provisions of G.S. 58-2-40, rules for proxies, consents and authorizations of domestic stock insurers are designated as 11 NCAC 11D .0115 to 11 NCAC 11D .0124. Relative thereto, 11 NCAC 11D .0125 to 11 NCAC 11D .0139 set forth the information required in proxy statements and 11 NCAC 11D .0140 to 11 NCAC 11D .0144 set forth information to be included in statements filed by or on behalf of a participant (other than the insurer) in a proxy solicitation in an election contest. These rules are applicable to each domestic stock insurer which has any class of equity security held of record by one hundred or more persons; provided, however, that these rules shall not apply to any insurer if 95 percent or more of its equity securities are owned or controlled by a parent or an affiliated insurer and the remaining securities are held of record by less than 500 persons. A domestic stock insurer which files with the Securities and Exchange Commission forms of proxies, consents and authorizations complying with the requirements of the Securities Exchange Act of 1934, as amended, and the applicable regulations promulgated thereunder, shall be exempt from the provisions of this regulation with respect to any class of securities subject to SEC jurisdiction. Authority G.S. 58-2-40. 11 NCAC 11D .0116 PROXIES: CONSENTS AND AUTHORIZATIONS No domestic stock insurer, or any director, officer or employee of such insurer subject to 11 NCAC 11D .0115, or any other person, shall solicit, or permit the use of his name to solicit, by mail or otherwise, any proxy, consent or authorization in respect of any class of equity security of such insurer held of record by 100 persons in contravention of these rules. Authority G.S. 58-2-40(2). 11 NCAC 11D .0117 PROXIES: DISCLOSURE OF EQUIVALENT INFORMATION Unless proxies, consents or authorizations in respect of any class of equity securities of a domestic insurer subject to 11 NCAC 11D .0115 are solicited by or on behalf of the management of such insurer from the holders of record of such security in accordance with these rules prior to any annual or other meeting of such security holders, such insurer shall, in accordance with these rules and such further rules as the Commissioner may adopt, file with the Commissioner and transmit to all security holders of record information substantially equivalent to the information which would be required to be transmitted if a solicitation were made. Such insurer shall transmit a written information statement containing the information specified in 11 NCAC 11D .0119 (d) to every security holder who is entitled to vote in regard to any matter to be acted upon at the meeting and from whom a proxy is not solicited on behalf of the management of the insurer; provided, that in the case of a class of securities in PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 757 unregistered or bearer form such statement need be transmitted only to those security holders whose names and addresses are known to the insurer. Authority G.S. 58-2-40(2). 11 NCAC 11D .0118 PROXIES: DEFINITIONS AND INSTRUCTIONS (a) The definitions and instructions set out in Schedule SIS, as promulgated by the NAIC shall be applicable for purposes of this Section. (b) The terms "solicit" and "solicitation" for purposes of this Section includes: (1) any request for a proxy, whether or not accompanied by or included in a form of proxy; or (2) any request to execute or not to execute, or to revoke, a proxy; or (3) the furnishing of a proxy or other communication to security holders under circumstances reasonably calculated to result in the procurement, withholding or revocation of a proxy. (c) The terms "solicit" and "solicitation" shall not include: (1) any solicitation by a person in respect of equity security of which he is the beneficial owner; (2) action by a broker or other person in respect to equity security carried in his name or in the name of his nominee in forwarding to the beneficial owner of such equity security soliciting material received from the company, or impartially instructing such beneficial owner to forward a proxy to the person, if any, to whom the beneficial owner desires to give a proxy, or impartially requesting instructions from the beneficial owner with respect to the authority to be conferred by the proxy and stating that a proxy will be given if the instructions are received by a certain date; (3) the furnishing of a form of proxy to a security holder upon the unsolicited request of such security holder, or the performance by any person of ministerial acts on behalf of a person soliciting a proxy. Authority G.S. 58-2-40. 11 NCAC 11D .0119 PROXIES: INFORMATION TO BE FURNISHED TO SECURITY HOLDERS (a) No solicitation subject to these rules shall be made unless each person solicited is concurrently furnished or has previously been furnished with a written proxy statement containing the information specified in 11 NCAC 11D .0125 to 11 NCAC 11D .0139. (b) If the solicitation is made on behalf of the management of the insurer and relates to an annual meeting of security holders at which directors are to be elected, each proxy statement furnished pursuant to Paragraph (a) of this Rule shall be accompanied or preceded by an annual report (in preliminary or final form) to such security holders containing such financial statements for the last fiscal year as are referred to in Schedule SIS under the heading "Financial Reporting to Security Holders." Subject to the foregoing requirements with respect to financial statements the annual report to security holders may be in any form deemed suitable by the management. (c) Two copies of each report sent to the security holders pursuant to this Rule shall be mailed to the Commissioner not later than the date on which such report is first sent or given to security holders or the date on which preliminary copies of solicitation material are filed with the Commissioner pursuant to 11 NCAC 11D .0121(a) whichever date is later. (d) If no solicitation is being made by management of the insurer with respect to any annual or other meeting, such insurer shall mail to every security holder of record at least 20 days prior to the meeting date, an information statement as required by 11 NCAC 11D .0117, containing the information called for by 11 NCAC 11D .0125 to 11 NCAC 11D .0139 except 11 NCAC 11D .0125, .0127, and .0128, which would be applicable to any matter to be acted upon at the meeting if proxies were to be solicited in connection with the meeting. If such information statement relates to an annual meeting at which directors are to be elected, it shall be accompanied by an annual report to such security holders in the form provided in Paragraph (b) of this Rule. Authority G.S. 58-2-40(2). 11 NCAC 11D .0120 PROXIES: REQUIREMENTS AS TO PROXY (a) The form of proxy shall indicate in bold-face type whether or not the proxy is solicited on behalf of the management, shall provide a specifically designated blank space for dating the proxy and shall identify clearly and impartially each matter or group of related matters intended to be acted upon, whether proposed by the management, or security holders. No reference need be made to proposals as to which discretionary authority is conferred pursuant to Paragraph (c) of this Rule. (b) Means shall be provided in the proxy for the person solicited to specify by ballot a choice between approval or disapproval of each matter or group of related matters referred to therein, other than elections to office. A proxy may confer discretionary authority with respect to matters as to which a choice is not so specified if the form of proxy states in bold-face type how it is intended to vote the shares or authorization represented by the proxy in each such case. A form of proxy which provides both for elections to office and for action on other specified matters shall be prepared so as to clearly provide, by a box or otherwise, means by which the security holder may withhold authority to vote for elections to office. Any such form of proxy which is executed by the security holder in such manner as not to withhold authority, to vote for elections to office shall be deemed to grant such authority, provided the form of proxy so states in bold-face type. (c) A proxy may confer discretionary authority with respect to other matters which may come before the meeting, provided the persons on whose behalf the solicitation is made are not aware a reasonable time prior to the time the solicitation is made that any other matters are to be presented for action at the meeting and provided further that a specific statement to that effect is made in the proxy statement or in the form of proxy. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 758 (d) No proxy shall confer authority to vote for the election of any person to any office for which a bona fide nominee is not named in the proxy statement, or to vote at any annual meeting other than the next annual meeting (or any adjournment thereof) to be held after the date on which the proxy statement and form of proxy are first sent or given to security holders. (e) The proxy statement or form of proxy shall provide, subject to reasonable specified conditions, that the proxy will be voted and that where the person solicited specified by means of ballot provided pursuant to Paragraph (b) of this Rule a choice with respect to any matter to be acted upon, the vote will be in accordance with the specifications so made. The information included in the proxy statement or information statement shall be clearly presented and the statements made shall be divided into groups according to subject matter, with appropriate headings. All printed proxy statements or information statements shall be clearly and legibly presented. Authority G.S. 58-2-40(2). 11 NCAC 11D .0121 PROXIES: MATERIAL REQUIRED TO BE FILED (a) Two preliminary copies of the information statement or the proxy statement and form of proxy and any other soliciting material to be furnished to security holders concurrently therewith shall be filed with the Commissioner at least 10 days prior to the date definitive copies of such material are first sent or given to security holders, or such shorter period prior to that date as the Commissioner may authorize upon a showing of good cause therefor. (b) Two preliminary copies of any additional soliciting material relating to the same meeting or subject matter to be furnished to security holders subsequent to the proxy statements shall be filed with the Commissioner at least two days (exclusive of Saturdays, Sundays or holidays) prior to the date copies of this material are first sent or given to security holders or a shorter period prior to such date as the Commissioner may authorize upon a showing of good cause therefor. (c) Two definitive copies of the information statement or the proxy statement, form of proxy and all other soliciting material, in the form in which this material is furnished to security holders, shall be filed with, or mailed for filing to, the Commissioner not later than the date such material is first sent or given to the security holder. (d) Where any information statement or proxy statement, form of proxy or other material filed pursuant to these rules is amended or revised, two of the copies shall be marked to clearly show such changes. Copies of replies to inquiries from security holders requesting further information and copies of communications which do no more than request that forms of proxy theretofore solicited be signed and returned need not be filed pursuant to this Rule. (e) Notwithstanding the provisions of Paragraphs (a) and (b) of this Rule and 11 NCAC 11D .0124(e), copies of soliciting material in form of speeches, press releases and radio or television scripts may, but need not, be filed with the Commissioner prior to use or publication. Definitive copies, however, shall be filed with or mailed for filing to the Commissioner as required by Paragraph (c) of this Rule not later than the date such material is used or published. The provisions of Paragraphs (a) and (b) of this Rule and 11 NCAC 11D .0124(e) shall apply, however, to any reprints or reproductions of all or any part of such material. Authority G.S. 58-2-40(2). 11 NCAC 11D .0122 PROXIES: FALSE OR MISLEADING STATEMENTS No proxy statement, form of proxy, notice of meeting, information statement, or other communication, written or oral, subject to these rules, shall contain any statement which at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the same meeting or subject matter which has become false or misleading. Authority G.S. 58-2-40(2). 11 NCAC 11D .0123 PROXIES: PROHIBITION OF CERTAIN SOLICITATIONS No person making a solicitation which is subject to these rules shall solicit any undated or postdated proxy or any proxy which provides that it shall be deemed to be dated as of any date subsequent to the date on which it is signed by the security holder. Authority G.S. 58-2-40(2). 11 NCAC 11D .0124 PROXIES: SPECIAL PROVISIONS APPLICABLE TO ELECTION CONTES T (a) Applicability. This Rule shall apply to any solicitation subject to these rules by any person or group for the purpose of opposing a solicitation subject to these rules by any other person or group with respect to the election or removal of directors at any annual or special meeting of security holders. (b) Participant or Participant in a Solicitation (1) For purposes of this Rule the terms "participant" and "participant in a solicitation" include: (A) insurer; (B) any director of the insurer and any nominee for whose election as a director proxies are solicited; (C) any other person, acting alone or with one or more other persons, committees or groups, in organizing, directing or financing the solicitation. (2) For the purposes of this Rule the terms "participant" and "participant in a solicitation" do not include: (A) a bank, broker or dealer who, in the ordinary course of business, lends money or executes orders for the purchase or sale of equity security and who is not otherwise a participant; (B) any person or organization retained or employed by a participant to solicit security holders or any person who PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 759 merely transmits proxy soliciting material or performs minis terial or clerical duties; (C) any person employed in the capacity of attorney, accountant, or advertising, public relations or financial adviser, and whose activities are limited to the performance of his duties in the course of such employment; (D) any person regularly employed as an officer or employee of the insurer or any of its subsidiaries or affiliates who is not otherwise a participant; or (E) any officer or director of, or any person regularly employed by any other participant, if such officer, director, or employee is not otherwise a participant. (c) Filing of Information Required by 11 NCAC 11D .0140 (1) No solicitation subject to this Rule shall be made by any person other than the management of an insurer unless at least five business days prior thereto, or such shorter period as the Commissioner may authorize upon a showing of good cause therefor, there has been filed, with the Commissioner by or on behalf of each participant in such solicitation, a statement in duplicate containing the information specified by 11 NCAC 11D .0140 through 11 NCAC 11D .0144 and a copy of any material proposed to be distributed to security holders in furtherance of such solicitation. Where preliminary copies of any materials are filed, distribution to security holders should be deferred until the Commissioner's comments have been received and complied with. (2) Within five business days after a solicitation subject to this Rule is made by the management of an insurer, or such longer period as the Commissioner may authorize upon a showing of good cause therefor, there shall be filed with the Commissioner by or on behalf of each participant in such solicitation, other than the insurer, and by or on behalf of each management nominee for director, a statement in duplicate containing the information specified by 11 NCAC 11D .0140 to 11 NCAC 11D .0144. (3) If any solicitation on behalf of management or any other person has been made, or if proxy material is ready for distribution, prior to a solicitation subject to this Rule in opposition thereto, a statement in duplicate containing the information specified in 11 NCAC 11D .0140 to 11 NCAC 11D .0144 shall be filed with the Commissioner by or on behalf of each participant in such prior solicitation, other than the insurer, as soon as reasonably practicable after the commencement of the solicitation in opposition thereto. (4) If, subsequent to the filing of the statements required by Subparagraphs (1), (2) and (3) or Paragraph (c) of this Rule, additional persons become partic ipants in a solicitation subject to this Rule, there shall be filed with the Commissioner by or on behalf of each such person, a statement in duplicate containing the information specified by 11 NCAC 11D .0140 to 11 NCAC 11D .0144 within three business days after such person becomes a participant, or such longer period as the Department may authorize upon a showing of good cause therefor. (5) If any material change occurs in the facts reported in any statement filed by or on behalf of any participant, an appropriate amendment to such statement shall be filed promptly with the Commissioner. Each statement and amendment thereto filed pursuant to this Paragraph shall be part of the public files of the Commissioner. (d) Solicitations Prior to Furnishing Required Written Proxy Statement. Notwithstanding the provisions of 11 NCAC 11D .0119 (a), a solicitation subject to this Section may be made prior to furnishing security holders a written proxy statement containing the information specified in 11 NCAC 11D .0125 to 11 NCAC 11D .0139 with respect to such solicitation, provided that: (1) The statements required by Paragraph (c) of this Rule are filed by or on behalf of each participant in such solicitation. (2) No form of proxy is furnished to security holders prior to the time the written proxy statement required by 11 NCAC 11D .0119(a) is furnished to such persons: Provided, however, that this Subparagraph (2) shall not apply where a proxy statement then meeting the requirements of 11 NCAC 11D .0125 to 11 NCAC 11D .0139 has been furnished to security holders. (3) At least the information specified in Subparagraphs (2) and (3) of the statements required by Paragraph (c) of this Rule to be filed by each participant, or an appropriate summary thereof, are included in each communication sent or given to security holders in connection with the solicitation. (4) A written proxy statement containing the information specified in 11 NCAC 11D .0125 to 11 NCAC 11D .0139 with respect to a solicitation is sent or given security holders at the earliest practicable date. (e) Solicitations Prior to Furnishing Required Written Proxy Statement-Filing Requirements. Two copies of any soliciting material proposed to be sent or given to security holders prior to the furnishing of the written proxy statement required by 11 NCAC 11D .0119(a) shall be filed with the Commissioner in preliminary form at least five business days prior to the date definitive copies of such material are first sent or given to such PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 760 persons, or shorter period as the Commissioner may authorize upon a showing of good cause therefor. (f) Application of this Section to Report. Notwithstanding the provisions of Paragraphs (b) and (c) in 11 NCAC 11D .0119, two copies of any portion of the report referred to in Paragraph (b) of 11 NCAC 11D .0119 which comments upon or refers to any solicitation subject to this Rule, or to any participant in such solicitation, other than the solicitation by the management, shall be filed with the Commissioner as proxy material subject to these rules. Such portion of the report shall be filed with the Commissioner in preliminary form at least five business days prior to the date copies of the report are first sent or given to security holders. Authority G.S. 58-2-40(2). 11 NCAC 11D .0125 PROXY INFORMATION REQUIRED: REVOCABILITY OF PROXY Every proxy statement must state whether or not the person giving the proxy has the power to revoke it. If the right of revocation before the proxy is exercised is limited or is subject to compliance with any formal procedure, the statement must briefly describe such limitation or procedure. Authority G.S. 58-2-40(2). 11 NCAC 11D .0126 PROXY INFORMATION REQUIRED: DISSENTERS' RIGHT OF APPRAISAL Every proxy statement must outline briefly the rights of appraisal or similar rights of dissenting security holders with respect to any matter to be acted upon and indicate any statutory procedure required to be followed by such security holders in order to perfect their rights. Where such rights may be exercised only within a limited time after the date of the adoption of a proposal, the filing of a charter amendment, or other similar act, the statement must state whether the person solicited will be notified of such date. Authority G.S. 58-2-40(2). 11 NCAC 11D .0127 PROXY INFORMATION REQUIRED: SUBJECT TO 11 NCAC 11D .0124 Every proxy statement must: (1) if the solicitation is made by the management of the insurer, so state; Give the name of any director of the insurer who has informed the management in writing that he intends to oppose any action intended to be taken by the management and indicate the action which he intends to oppose; (2) if the solicitation is made otherwise than by the management of the insurer, state the names and addresses of the persons by whom and on whose behalf it is made and the names and addresses of the persons by whom the cost of solicitation has been or will be borne, directly or indirectly; (3) if the solicitation is to be made by specially engaged employees or paid solicitors, state the material features of any contract or arrangement for such solicitation and identify the parties and the cost or anticipated cost thereof. Authority G.S. 58-2-40(2). 11 NCAC 11D .0128 PROXY INFO REQUIRED: INTEREST IN MATTERS TO BE ACTED UPON Every proxy statement must describe briefly any substantial interest, direct or indirect, by security holders or otherwise, of any director, nominee for election for director, officer and, if the solicitation is made otherwise than on behalf of management, each person on whose behalf the solicitation is made, in any matter to be acted upon other than election to office. Authority G.S. 58-2-40(2). 11 NCAC 11D .0129 PROXY INFORMATION REQUIRED: VOTING SECURITIES Every proxy statement must: (1) state, as to each class of voting equity security of the insurer entitled to be voted at the meeting, the number of shares outstanding and the number of votes to which each class is entitled; (2) give the date as of which the record list of security holders entitled to vote at the meeting will be determined. If the right to vote is not limited to security holders of record on that date, indicate the conditions under which other security holders may be entitled to vote; (3) if action is to be taken with respect to the election of directors and if the persons solicited have cumulative voting rights, make a statement that they have such rights and state briefly and conditions precedent to the exercise thereof. Authority G.S. 58-2-40(2). 11 NCAC 11D .0130 PROXY INFORMATION REQUIRED: NOMINEE AND DIRECTORS Every proxy statement must, if action is to be taken with respect to the election of directors, furnish the following information, in tabular form to the extent practicable with respect to each person nominated for election as a director and each other person whose term of office as a director will continue after the meeting: (1) name each such person, state when his term of office or the term of office for which he is a nominee will expire, and all other positions and offices with the insurer presently held by him, and indicate which persons are nominees for election as directors at the meeting; (2) state his present principal occupation or employment and give the name and principal business of any corporation or other organization in which such employment is carried on; furnish similar information as to all of his principal occupations or employments during the last five years, unless he is now a director and was elected to his present term of office by a vote of security holders at a PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 761 meeting for which proxies were solicited under this Regulation; (3) if he is or has previously been a director of the insurer, state the period or periods during which he has served as such; (4) state, as of the most recent practicable date, the approximate amount of each class of stock of the insurer or any of its parents, subsidiaries or affiliates other than directors qualifying shares, beneficially owned directly or indirectly by him; if he is not the beneficial owner of any such equity securities make a statement to that effect. Authority G.S. 58-2-40(2). 11 NCAC 11D .0131 PROXY INFORMATION REQUIRED: TRANSACTIONS WITH MANAGEMENT Every proxy statement must furnish the information reported or required in Item 1 of Schedule SIS under the heading "Information Regarding Management and Directors" if action is to be taken with respect to: (1) the election of directors; (2) any remuneration plan, contract or arrangement in which any director, nominee for election as a director, or officer of the insurer will participate; (3) any person or retirement plan in which any such person will participate; or (4) the granting extension to any such person of any options, warrants or rights issued to security holders, as such, on a pro rata basis. If the solicitation is made on behalf of persons other than the management, information shall be furnished only as to Item 1A of the aforesaid heading of Schedule SIS. Authority G.S. 58-2-40(2). 11 NCAC 11D .0132 PROXY INFO REQUIRED: BONUS: PROFIT SHARING: REMUNERATION Every proxy statement must, if action is to be taken with respect to any bonus, profit sharing, or other remuneration plan, of the insurer, furnish the following information: (1) A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation; (2) The amount which would have been distributable under the plan during the last year to: (a) each person named in 11 NCAC 11D .0131; (b) directors and officers as a group; and (c) to all other employees as a group, if the plan had been in effect. (3) If the plan to be acted upon may be amended (other than by a vote of security holders) in a manner which would materially increase the cost thereof to the insurer or materially alter the allocation of the benefits as between the groups specified in Paragraph (2) of this Rule, the nature of such amendments should be specified. Authority G.S. 58-2-40(2). 11 NCAC 11D .0133 PROXY INFORMATION REQUIRED: PENSION AND RETIREMENT PLANS Every proxy statement must, if action is to be taken with respect to any pension or retirement plan of the insurer, furnish the following information: (1) A brief description of the material features of the plan, each class of persons who will participate therein, the approximate number of persons in each such class, and the basis of such participation; (2) State: (a) the approximate total amount necessary to fund the plan with respect to past services, the period over which such amount is to be paid, and the estimated annual payments necessary to pay the total amount over such period; (b) the estimated annual payment to be made with respect to current services; and (c) the amount of such annual payments to be made for the benefit of: (i) each person named in 11 NCAC 11D .0131, (ii) directors and officers as a group, and (iii) employees as a group. (3) If the plan to be acted upon may be amended (other than by a vote of security holders) in a manner which would materially increase the cost thereof to the insurer or materially alter the allocation of the benefits as between the groups specified in Subparagraph (2)(c) of this Rule, the nature of such amendment should be specified. Authority G.S. 58-2-40(2). 11 NCAC 11D .0134 PROXY INFORMATION REQUIRED: OPTIONS: WARRANTS OR RIGHTS Every proxy statement must, if action is to be taken with respect to the granting or extension of any options, warrants or rights (all referred to herein as "warrant") to purchase stock of the insurer or any subsidiary or affiliate, other than warrants issued to all security holders on a pro rata basis, furnish the following information: (1) the title and amount of equity security called for or to be called for, the prices, expiration dates and other material conditions upon which the warrants may be exercised, the consideration received or to be received by the insurer, subsidiary or affiliate for the granting or extension of the warrants and the market value of the equity security called for or to be PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 762 called for by the warrants, as of the latest practicable date; (2) if known, state separately the amount of equity security called for or to be called for by warrants received or to be received by the following persons, naming each such person: (a) named in 11 NCAC 11D .0131, and (b) who will be entitled to acquire five percent or more of the equity security called for or to be called for by such warrants; (3) if known, state also the total amount of equity security called for or to be called for by such warrants, received or to be received by all directors and officers of the company as a group and all employees, without naming them. Authority G.S. 58-2-40(2). 11 NCAC 11D .0135 PROXY INFO REQUIRED: AUTHORIZATION OR ISSUANCE OF STOCK Every proxy statement must: (1) If action is to be taken with respect to the authorization of issuance of any equity security of the insurer, furnish the title, amount and description of the equity security to be authorized or issued; (2) If the shares of equity security are other than additional shares or common equity security of a class outstanding, furnish a brief summary of the following, if applicable: dividend, voting, liquidation, preemptive and conversion rights, redemption and sinking fund provisions, interest rate and date of maturity; (3) If the shares of equity security to be authorized or issued are other than additional shares of common equity security of a class outstanding, the Commissioner may require financial statements comparable to those contained in the annual report. Authority G.S. 58-2-40(2). 11 NCAC 11D .0136 PROXY INFO REQUIRED: MERGER: CONSOLIDATION: ACQUISITION Every proxy statement must: (1) if action is to be taken with respect to merger, consolidation, acquisition, or similar matter, furnish in brief outline the following information: (a) the rights of appraisal or similar rights of dissenters with respect to any matters to be acted upon; indicate any procedure required to be followed by dissenting security holders in order to perfect such rights; (b) the material features of the plan or agreement; (c) the business done by the company to be acquired or whose assets are being acquired; (d) if available, the high and low sales prices for each quarterly period within two years; (e) the percentage of outstanding shares which must approve the transaction before it is consummated. (2) for each company involved in a merger, consolidation or acquisition, furnish the following financial statements: (a) a comparative balance sheet as of the close of the last two fiscal years; (b) a comparative statement of operating income and expenses for each of the last two fiscal years and, as a continuation of each statement, a statement of earnings per share after related taxes and cash dividends paid per share; (c) a pro forma combined balance sheet and income and expenses statement for the last fiscal year giving effect to the necessary adjustments with respect to the resulting company. Authority G.S. 58-2-40(2). 11 NCAC 11D .0137 PROXY INFORMATION REQUIRED: RESTATEMENT OF ACCOUNTS Every proxy statement must, if action is to be taken with respect to the restatement of any asset, capital, or surplus of the insurer, furnish the following information: (1) state the nature of the restatement and the date as of which it is to be effective, (2) outline briefly the reasons for the restatement and for the selection of the particular effective date, (3) state the name and amount of each account affected by the restatement and the effect of the restatement thereon. Authority G.S. 58-2-40(2). 11 NCAC 11D .0138 PROXY INFO REQUIRED: MATTERS NOT REQUIRED TO BE SUBMITTED Every proxy statement must, if action is to be taken with respect to any matter which is not required to be submitted to a vote of security holders, state the nature of such matter, the reason for submitting it to a vote of security holders and what action is intended to be taken by the management in the event of a negative vote on the matter by the security holders. Authority G.S. 58-2-40(2). 11 NCAC 11D .0139 PROXY INFORMATION REQUIRED: AMENDMENT OF CHARTER: BY-LAWS Every proxy statement must, if action is to be taken with respect to any amendment of the insurer's charter, by-laws or other documents as to which information is not required above, state PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 763 briefly the reasons for and general effect of such amendment and the vote needed for its approval. Authority G.S. 58-2-40(2). 11 NCAC 11D .0140 PROXY INFORMATION REQUIRED: IN ELECTION CONTEST The rules set forth herein and designated as 11 NCAC 11D .0140 to 11 NCAC 11D .0144 reflect the information required to be included in proxy statements filed by or on behalf of a participant (other than the insurer) in a proxy solicitation in an election contest and as more specifically required by 11 NCAC 11D .0124. Authority G.S. 58-2-40(2). 11 NCAC 11D .0141 PROXY STATEMENT IN ELEC: INSURER: IDENTITY AND BACKGROUND (a) Every proxy statement must contain the name and business address of the insurer. (b) Every proxy statement must contain the following information about the identity and background of the participant: (1) name and business address; (2) present principal occupation or employment and the name, principal business and address of any corporation or other organization in which such employment is carried on; (3) residence address; (4) information as to all material occupations, positions, offices or employments during the last 10 years, giving starting and ending dates of each and the name, principal business and address of any business corporation or other business organization in which each such occupation, position, office or employment was carried on; (5) state whether or not you are or have been a participant in any other proxy contest involving this company or other companies within the past 10 years; if so, identify the principals, the subject matter and your relationship to the parties and the outcome; (6) state whether or not, during the past 10 years, you have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) and, if so, give date, nature of conviction, name and location of court, and penalty imposed or other disposition of the case; A negative answer to this Sub-item need not be included in the proxy statement or other proxy soliciting material. Authority G.S. 58-2-40(2). 11 NCAC 11D .0142 PROXY STATEMENT IN ELECTION: INTEREST IN EQUITY SECURITY Every proxy statement must contain the following information: (1) The amount of each class of equity security of the insurer which you own beneficially, directly or indirectly; state the amount of each class of equity security of the insurer which you own of record but not beneficially; and state with respect to the equity security specified herein, the amount acquired within the past two years, the dates of acquisition and the amounts acquired on each date; (2) If any part of the purchase price or market value of any of the equity security specified in Paragraph (1) is represented by funds borrowed or otherwise obtained for the purpose of acquiring or holding such equity security, so state and indicate the amount of the indebtedness as of the latest practicable date. If such funds were borrowed or obtained otherwise than pursuant to a margin account or bank loan in the regular course of business of a bank, broker or dealer, briefly describe the transaction and state the names of the parties; (3) Whether or not you are a party to any contracts, arrangements or understandings with any person with respect to any equity security of the insurer, including but not limited to joint ventures, loan or option arrangements, puts or calls guarantees against loss or guarantees of profits, division of losses or profits, or the giving or withholding of proxies. If so name the persons with whom such contracts, arrangements, or understanding exist and give the details thereof; (4) The amount of equity security of the insurer owned beneficially, directly or indirectly, by each of your associates and the name and address of each such associate; (5) The amount of each class of equity security of any parent, subsidiary or affiliate of the insurer which you own beneficially, directly, or indirectly. Authority G.S. 58-2-40(2). 11 NCAC 11D .0143 PROXY STATEMENT IN ELECTION CONTEST: FURTHER MATTERS Every proxy statement shall: (1) describe the time and circumstances under which you became a participant in the solicitation and state the nature and extent of your activities or proposed activities as a participant; (2) describe briefly, and where practicable state the approximate amount of, any material interest, direct or indirect, of yourself and of each of your associates in any material transactions since the beginning of the company's last fiscal year, or in any material proposed transactions, to which the company of any of its subsidiaries or affiliates was or is to be a party; (3) state whether or not you or any of your associates have any arrangement or understanding with any person: PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 764 (a) with respect to any future employment by the insurer or its subsidiaries or affiliates, or (b) with respect to any future transactions to which the insurer or any of its subsidiaries or affiliates will or may be a party. If so, describe such arrangement or understanding and state the names of the parties thereto. Authority G.S. 58-2-40(2). 11 NCAC 11D .0144 PROXY STATEMENT IN ELECTION CONTEST: SIGNATURE The statement shall be dated and signed in the following manner: I certify that the statements made in this statement are true, complete, and correct, to the best of my knowledge and belief. This certification shall be dated and signed by the participant or authorized representative. Authority G.S. 58-2-40(2). 11 NCAC 11D .0145 INSIDER TRADING OF STOCK: DEFINITIONS (a) The following definitions contained in this Rule are applicable to insider trading of equity securities of a domestic stock insurance company as contained in 11 NCAC 11D .0145 to 11 NCAC 11D .0167. (b) Insurer. "Insurer" means any domestic stock insurance company with an equity security subject to the provisions of G.S. 58-7-145 and not exempt thereunder. (c) Act. "Act" means G.S. 58-7-145. (d) Officer. "Officer" means a president, vice president, treasurer, actuary, secretary, controller and any other person who performs for the insurer functions corresponding to those performed by the foregoing officer. (e) Equity Security. "Equity Security" means any stock or similar security; or any voting trust certificate or certificate of deposit for such a security; or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security; or any such warrant or right. (f) Securities Held of Record. "Securities held of record" shall mean: (1) For the purpose of determining whether the equity securities of an insurer are held of record by 100 or more persons, securities shall be deemed to be held of record by each person who is identified as the owner of such securities on records of security holders maintained by or on behalf of the insurer, subject to the following: (A) In any case where the records of security holders have not been maintained in accordance with accepted practice, any additional person who would be identified as such an owner on such records if they had been maintained in accordance with accepted practice shall be included as a holder of record. (B) Securities identified as held of record by a corporation, a partnership, a trust whether or not the trustees are named, or other organization shall be included as so held by one person. (C) Securities identified as held of record by one or more persons as trustees, executors, guardians, custodians or in other fiduciary capacities with respect to a single trust, estate or account shall be included as held of record by one person. (D) Securities held by two or more persons as co-owners shall be included as held by one person. (E) Each outstanding unregistered or bearer certificate shall be included as held of record by a separate person, except to the extent that the insurer can establish that, if such securities were registered, they would be held of record, under the provisions of this Rule, by a lesser number of persons. (F) Securities registered in substantially similar names where the insurer has reason to believe because of the address or other indications that such names represent the same person, may be included as held of record by one person. (2) Notwithstanding the provisions of Paragraph (f) (1) of this Rule: (A) Securities held, to the knowledge of the insurer, subject to a voting trust, deposit agreement or similar arrangement shall be included as held of record by the record holders of the voting trust certificates, certificates of deposit, receipts or similar evidences of interest in such securities; provided however, that the insurer may rely in good faith on such information as is received in response to its request from a nonaffiliated insurer of the certificates or evidences of interest. (B) If the insurer knows or have reason to know that the form of holding securities of record is used primarily to circumvent the provisions of the act, the beneficial owners of such securities shall be deemed to be the record owners thereof. (g) Class. "Class" means all securities of an insurer which are of substantially similar character and the holders of which enjoy substantially similar rights and privileges. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0146 WHO MUST FILE UNDER PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 765 INSIDER TRADING OF STOCK Every person who is directly or indirectly the beneficial owner of more than 10 percent of any class of any equity security of a domestic stock insurance company or who is a director or an officer of such company, shall file in the office of the Commissioner within 10 days after he becomes such beneficial owner, director or officer, a statement in such form as prescribed by the Commissioner. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0147 WHAT MUST BE FILED UNDER INSIDER TRADING OF STOCK (a) The initial statements of beneficial ownership of equity securities required by 11 NCAC 11D .0147 shall be filed on a form as prescribed by the Commissioner. Statements of changes in such beneficial ownership as required by G.S. 58-7-145 shall be filed on a form as prescribed by the Commissioner. All such statements shall be prepared and filed in accordance with the requirements of the applicable form. (b) Any director or officer who is required to file a statement with respect to any change in his beneficial ownership of equity securities which occurs within six months after he became a director or officer of the issuer of such securities, or within six months after equity securities of such issuer first became subject to the provisions of the act, shall include in the first such statement the information called for with respect to all changes in his beneficial ownership of equity securities of such issuer which occurred within six months prior to the date of the changes which requires the filing of such statement. (c) Any person who has ceased to be a director or officer of an issuer which has equity securities subject to the provisions of the act, shall file a statement with respect to any change in his beneficial ownership of equity securities of such issuer which shall occur on or after the date on which he ceased to be such director or officer, or the date on which the issuer ceased to have any equity securities subject to the provisions of the act, as the case may be, if such change shall occur within six months after any change in his beneficial ownership of such securities prior to such date. The statement shall be filed within 10 days after the end of the month in which the reported change in beneficial ownership occurs. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0148 DETERMINING BENEFICIAL OWNERSHIP: INSIDER TRADING OF STOCK (a) In determining, for the purpose of the act, whether a person is the beneficial owner, directly or indirectly, of more than 10 percent of any class of any equity security, such class shall be deemed to consist of the total amount of such class outstanding, exclusive of any securities of such class held by or for the account of the insurer or a subsidiary of the insurer; except that for the purpose of determining percentage ownership of voting trust certificates or certificates of deposit for equity securities, the class of voting trust certificates or certificates of deposit shall be deemed to consist of the amount of voting trust certificates or certificates of deposit issuable with respect to the total amount of outstanding equity securities of the class which may be deposited under the voting trust agreement or deposit agreement in question, whether or not all of such outstanding securities have been so deposited. For the purpose of this Rule a person acting in good faith may rely on the information contained in the latest convention form statement filed with the Commissioner with respect to the amount of securities of a class outstanding or in the case of voting trust certificates or certificates of deposit the amount thereof issuable. (b) In determin ing for the purpose of the act whether a person is the beneficial owner, directly or indirectly, of more than 10 percent of any class of equity securities, such person shall be deemed to be the beneficial owner of securities of such class which such person has the right to acquire through the exercise of presently exercisable options, warrants or rights or through the conversion of presently convertible securities. The securities subject to such options, warrants, rights or conversion privileges held by a person shall be deemed to be outstanding for the purpose of computing, in accordance with the first paragraph of this Rule, the percentage of outstanding securities of the class owned by such person but shall not be deemed outstanding for the purpose of computing the percentage of the class owned by any other person. The first paragraph of this Rule shall not be construed to relieve any person of any duty to comply with the act with respect to any equity securities consisting of options, warrants, rights or convertible securities which are otherwise subject as a class to the act. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0149 DISCLAIMER OF BENEFICIAL OWNERSHIP: INSIDER TRADING Any person filing a statement may expressly declare therein that the filing of such statement shall not be construed as an admission that such person is, for the purpose of the act, the beneficial owner of any equity securities covered by the statement. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0150 EXEMPTIONS FROM SUBSECTIONS (A) AND (B) OF THE ACT (a) During the period of 12 months following their appointment and qualification, securities held by the following persons shall be exempt from subsections (a) and (b) of the act: (1) executors or administrators of the estate of a decedent; (2) guardians or committees for an incompetent; and (3) receivers, trustees in bankruptcy, assigners for the benefit of creditors, conservators, liquidating agents, and other similar persons duly authorized by law to administer the estate or assets of other persons. (b) After the 12 month period following their appointment or qualification the foregoing persons shall be required to file reports with respect to the securities held by the estates which they administer under subsection (a) of the act and shall be liable for profits realized from trading in such securities pursuant to subsection (b) of the act only when the estate being administered is a beneficial owner of more than 10 percent of any class of equity security of an insurer subject to the act. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 766 (c) Securities reacquired by or for the account of an insurer and held by it for its account shall be exempt from subsections (a) and (b) during the time they are held by the insurer. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0151 SECURITIES BOUGHT OR SOLD BY ODD-LOT DEALERS: EXEMPTION Securities purchased or sold by an odd-lot dealer: (1) in odd lots so far as reasonably necessary to carry on odd-lot transactions or (2) in round lots to offset odd-lot transactions previously or simultaneously executed or reasonably anticipated in the usual course of business, shall be exempt from the provisions of the act with respect to participation by such odd-lot dealer in such transactions. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0152 CERTAIN TRANSACTIONS SUBJECT TO SUBSECTIO N (A) OF THE ACT The acquisition or disposition of any transferable option, put, call, spread or straddle shall be deemed such a change in the beneficial ownership of the security to which such privilege relates as to require the filing of a statement reflecting the acquisition or disposition of such privilege. Nothing in this Rule, however, shall exempt any person from filing the statements required upon the exercise of such option, put, call, spread or straddle. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0153 OWNERSHIP OF SECURITIES HELD IN TRUST: INSIDER TRADING (a) Beneficial ownership of a security for the purposes of this Rule shall include: (1) the ownership of securities as a trustee where either the trustee or members of his immediate family have a vested interest in the income or corpus of the trust, (2) the ownership of a vested beneficial interest in a trust, and (3) the ownership of securities as a settlor of a trust in which the settlor has the power to revoke the trust without obtaining the consent of all the beneficiaries. (b) Except as provided in the next Paragraph (c) of this Rule, beneficial ownership of securities solely as a settlor or beneficiary of a trust shall be exempt from the provisions of Subsection (a) of G.S. 58-7-145 where less than 20 percent in market value of the securities having a readily ascertainable market value held by such trust, determined as of the end of the preceding fiscal year of the trust, consists of equity securities with respect to which reports would otherwise be required. Exemption is likewise accorded from Subsection (a) of G.S. 58-7-145 with respect to any obligation which would otherwise be imposed solely by reason of ownership as settlor or beneficiary of securities held in trust, where the ownership, acquisition, or disposition of such securities by the trust is made without prior approval by the settlor or beneficiary. No exemption pursuant to this Subsection shall, however, be acquired or lost solely as a result of changes in the value of the trust assets during any fiscal year or during any time when there is no transaction by the trust in the securities otherwise subject to the reporting requirements of Subsection (a) of G.S. 58-7-145. (c) In the event that 10 percent of any class of any equity security of an insurer is held in trust, that trust and the trustees thereof as such shall be deemed a person required to file the reports specified in subsection (a) of the act. (d) Not more than one report need to filed to report any holdings or with respect to any transaction in securities held by a trust, regardless of the number of officers, directors or 10 percent stockholders who are either trustees, settlors, or beneficiaries of a trust, provided that the report filed shall disclose the names of all trustees, settlors, and beneficiaries who are officers, directors or 10 percent stockholders. A person having an interest only as a beneficiary of a trust shall not be required to file any such report so long as he relies in good faith upon an understanding that the trustee of such trust will file whatever reports might otherwise be required of such beneficiary. As used in this Rule the "immediate family" of a trustee means: (1) a son or daughter of the trustee, or a descendant of either; (2) a stepson or stepdaughter of the trustee; (3) the father or mother of the trustee, or an ancestor of either; (4) a stepfather or stepmother of the trustee; or (5) a spouse of the trustee. For the purpose of determining whether any of the foregoing relations exists, a legally adopted child of a person shall be considered a child of such person by blood. (e) In determining, for the purposes of subsection (a) of the act, whether a person is the beneficial owner, directly or indirectly, of more than 10 percent of any class of any equity security, the interest of such person in the remainder of a trust shall be excluded from the computation. No report shall be required by any person, whether or not otherwise subject to the requirement of filing reports under subsection (a) with respect to his indirect interest in portfolio securities held by: (1) a pension or retirement plan holding securities of an insurer whose employees generally are the beneficiary of the plan, (2) a business trust with over 25 beneficiaries. Nothing in this Rule shall be deemed to impose any duties or liabilities with respect to reporting any transaction or holding prior to its effective date. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0154 EXEMPTION FOR SMALL TRANSACTIONS: INSIDER TRADING OF STOCK (a) Any acquisition of securities shall be exempt from subsection (a) of the act where: (1) The person effecting the acquisition does not within six months thereafter effect any disposition, other than by way of gift of securities of the same class; and (2) The person effecting such acquisition does not participate in acquisitions or in dispositions of securities of the same class having a total market value in excess of three thousand PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 767 dollars ($3,000) for any six month period during which the acquisition occurs. (b) Any acquisition or disposition of securities by way of gift, where the total amount of such gifts does not exceed three thousand dollars ($3,000) in market value for any six month period, shall be exempt from subsection (a) of the act and may be excluded from the computations prescribed in Paragraph (a) (2) of this Rule. (c) Any person exempted by Paragraph (a) or (b) of this Rule shall include in the first report filed by him after a transaction within the exemption a statement showing his acquisitions and dispositions for each six month period or portion thereof which has elapsed since his last filing. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0155 EXEMPTIONS IN GENERAL: INSIDER TRADING OF STOCK If an exemption is granted from subsection (b) of the act then such an exemption need not be reported under subsection (a) of the act. Any transaction which has been or shall be exempted from the requirements of subsection (a) of the act shall, insofar as it is otherwise subject to the provisions of subsection (b), be likewise exempted from subsection (b) of the act. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0156 EXEMPTION EFFECTED IN CONNECTION WITH A DISTRIBUTION (a) Any transaction of purchase and sale, or sale and purchase, of a security which is effected in connection with the distribution of a substantial block of securities shall be exempt from the provisions of subsection (b) of the act, to the extent specified in this section as not comprehended within the purpose of said subsection of the act, upon the following conditions: (1) The person effecting the transaction is engaged in the business of distributing securities and is participating in good faith, in the ordinary course of such business, in the distribution of such block of securities; (2) The security involved in the transaction is: (A) a part of such block of securities and is acquired by the person effecting the transaction, with a view to the distribution thereof, from the insurer or other person on whose behalf such securities are being distributed or from a person who is participating in good faith in the distribution of such block of securities or (B) a security purchase in good faith by or for the account of the person effecting the transaction for the purpose of stabilizing the market price of securities of the class being distributed or to cover an over-allotment or other short position created in connection with such distribution; and (3) Other persons not within the purview of subsection (b) of the act are participating in the distribution of such block of securities on terms at least as favorable as those on which such person is participating and to an extent at least equal to the aggregate participation of all persons exempted from the provisions of subsection (b) of the act by this Rule. However, 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 preclude an exemption which would otherwise be available under this Rule. (b) The exemption of a transaction pursuant to this Rule with respect to the participation therein of one party thereto shall not render such transaction exempt with respect to participation of any other party therein unless such other party also meets the conditions of this Rule. Authority G.S. 58-2-40; 58-7-145. 11 NCAC 11D .0157 EXEMPTION STOCK OPTIONS: STOCK BONUS OR SIMILAR PLANS Any acquisition of shares of stock (other than stock acquired upon the exercise of an option, warrant or right) pursuant to a stock bonus profit sharing, retirement, incentive, thrift, savings or similar plan, or any acquisition of a qualified or a restricted stock option pursuant to a qualified or a restricted stock option plan, or a stock option pursuant to an employee stock purchase plan, by a director or officer of an insurer issuing such stock or stock option shall be exempt from the operation of subsection (b) of the act if the plan meets the following conditions: (1) The plan has been approved, directly or indirectly: (a) by the affirmative votes of the holders of a majority of the securities of such insurer present, or represented, and entitled to vote at a meeting duly held in accordance with the applicable laws of the State of North Carolina; or (b) the written consent of the holders of a majority of the securities of such insurer entitled to vote: provided, however, that if such vote of written consent was not solicited substantially in accordance with the proxy rules and regulations prescribed by the National Association of Insurance Commissioners, if any, in effect at the time of such vote or written consent, 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 which would be required by any such rules and regulations so prescribed and in effect at the time such information is furnished, if proxies to be voted with respect to the approval or disapproval PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 768 of the plan were then being solicited, on or prior to the date of the first annual meeting of security holders held subsequent to the later of: (i) the date the act first applies to such insurer, or (ii) the acquisition of such equity security for which exemption is claimed. Such written information 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 such written information shall be filed with, or mailed for filing to, the Commissioner not later than the date on which it is first sent or given to security holders of the insurer. For the purposes of this Paragraph the term "insurer" includes a predecessor corporation if the plan or obligations to participate thereunder were assumed by the insurer in connection with the succession. (2) If 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 the determination of the number or maximum number of shares of stock which may be allocated to any such director or officer or which may be covered by qualified, restricted or employee stock purchase plan stock options granted to any such director or officer, is subject to the discretion of any person, then such discretion shall be exercised only as follows: (a) With respect to the participation of directors: (i) by the board of directors of the insurer, a majority of which board and majority of the directors acting in the matter are disinterested persons; (ii) by, or only in accordance with the recommendations of, a committee of three or more persons having full authority to act in the matter, all of the members of which committee are disinterested persons; or (iii) otherwise in accordance with the plan, if the plan: (A) specifies the number or maximum number of shares of stock which directors may acquire or which may be subject to qualified, restricted or employee stock purchas e plan stock options granted to directors and the terms upon which, and the times at which, or the periods within which, such stock may be acquired or such options may be acquired and exercised; or (B) sets forth, by formula or otherwise, effective and determinable limitations with respect to the foregoing based upon earnings 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. (b) With respect to the participation of officers who are not directors: (i) by the board of directors of the insurer or a committee of three or more directors; or (ii) by, or only in accordance with the recommendations of, a committee of three or more persons having full authority to act in the matter, all of the members of which committee are disinterested persons. For the purpose of this Paragraph, a director or committee member shall be deemed to be a disinterested person only if such person is not at the time such discretion is exercised eligible and has not at any time within one year prior thereto been eligible for selection as a person 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 any other plan of the insurer or any of its affiliates entitling the participants therein to acquire stock or qualified, restricted or employee stock purchase plan stock options of the insurer or any of its affiliates. (c) The provisions of this Paragraph shall not apply with respect to any option granted, or other equity security acquired, prior to the date that subsections (a), (b), and (c) of the act first become applicable with respect to any class of equity securities of any insurer. PROPOSED RULES 18:10 NORTH CAROLINA REGISTER November 17, 2003 769 (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 which may be allocated, or which 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 earnings 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 which will result in an effective and determinable limitation. Such limitations may be subject to any provisions for adjustment of the plan or of stock allocable or options outstanding thereunder to prevent dilution or enlargement of rights. (4) Unless the context otherwise requires, all terms used in this Rule shall have the same meaning as in the act and in these rules. In addition, the following definitions apply: (a) The |
OCLC number | 13686205 |