KRS 304.37-120: Preacquisition notification -- Review -- Exceptions -- Jurisdiction of

Kentucky courts.

(1) No person other than the issuer shall make a tender offer for, a request or invitation

for tenders of, enter into any agreement to exchange securities, se ek to acquire, or

acquire in the open market or otherwise, any voting security of a domestic insurer if,

after the consummation, the person would, directly or indirectly, or by conversion,

or by exercise of any right to acquire, be in control of the insure r. No person shall

enter into an agreement to merge with or to acquire control of a domestic insurer or

any person controlling a domestic insurer unless, at the time of the offer, request, or

invitation is made, or any agreement is entered into, or prior t o the acquisition of

these securities if no offer or agreement is involved, the person has filed with the

commissioner and has sent to the insurer, a statement containing the information

required by this section and the offer, request, invitation, agreemen t, or acquisition

has been approved by the commissioner in the manner prescribed in this section.

(a) For purposes of this section a domestic insurer shall include any person

controlling a domestic insurer unless the person as determined by the

commissioner is either directly or through its affiliates primarily engaged in

business other than the business of insurance. For the purposes of this section,

"person" shall not include any securities broker holding, in the usual and

customary brokers function, less than twenty percent (20%) of the voting

securities of an insurance company or of any person which controls an

insurance company.

(b) For purposes of this section, any controlling person of a domestic insurer

seeking to divest its controlling interest in t he domestic insurer, in any

manner, shall file with the commissioner, with a copy to the insurer,

confidential notice of its proposed divestiture at least thirty (30) days prior to

the cessation of control. The commissioner shall determine those instances in

which the party seeking to divest or to acquire a controlling interest in an

insurer will be required to file for and obtain approval of the transaction. The

information shall remain confidential until the conclusion of the transaction

unless the commissioner, in his or her discretion, determines that confidential

treatment will interfere with the enforcement of this section. If the statement

referred to in this subsection is otherwise filed, this paragraph shall not apply.

(c) With respect to a transaction subject to this section, the acquiring person shall

also file a preacquisition notification with the commissioner, which shall

contain the information set forth in KRS 304.37 -130. A failure to file the

notification may be subject to penalties specified in KRS 304.37-130.

(2) The statement to be filed with the commissioner under this section shall be made

under oath or affirmation and shall contain the following information:

(a) The name and address of each person by whom or on whose behalf the merger

or other acquisition of control referred to in subsection (1) of this section is to

be effected; and

1. If the person is an individual, his or her principal occupation and all

offices and positions held during the past five (5) years, and any

conviction of c rimes other than minor traffic violations during the past

ten (10) years; or

2. If the person is not an individual, a report of the nature of its business

operations during the past five (5) years or for a lesser period that the

person and any predecessors have been in existence, an informative

description of the business intended to be done by the person and the

person's subsidiaries, and a list of all individuals who are or who have

been selected to become directors or executive officers of the person, or

who perform or will perform functions appropriate to these functions.

The list shall include for each individual the information required by

subparagraph 1. of this paragraph;

(b) The source, nature, and amount of the consideration used or to be used in

effecting the merger or other acquisition of control, a description of any

transaction in which funds were or are to be obtained for merger or other

acquisition of control, including any pledge of the insurer's stock, or the stock

of any of its subsidiaries or controlling affiliates, and the identity of persons

furnishing the consideration; but if a source of the consideration is a loan

made in the lender's ordinary course of business, the identity of the lender

shall remain confidential, if the person filing the statement so requests;

(c) Fully audited financial information as to the earnings and financial condition

of each acquiring party for the preceding five (5) fiscal years of each acquiring

party, or for a lesser period that the acquiring party and any predecessors have

been in existence, and similar unaudited information as of a date not earlier

than ninety (90) days prior to the filing of the statement;

(d) Any plans or proposals which each acquiring party may have to liquidate the

insurer, to sell it s assets, or merge or consolidate it with any person, or to

make any other material change in its business or corporate structure or

management;

(e) The number of shares of any security referred to in subsection (1) of this

section which the acquiring part y proposes to acquire, and the terms of the

offer, request, invitation, agreement, or acquisition referred to in subsection

(1) of this section, and a statement as to the method used to determine the

fairness of the proposal;

(f) The amount of each class of any security referred to in subsection (1) of this

section which is beneficially owned, or concerning any security referred to in

subsection (1) of this section which there is a right to acquire beneficial

ownership of by each acquiring party;

(g) A full description of any contracts, arrangements, or understandings with

respect to any security referred to in subsection (1) of this section in which

any acquiring party is involved, such as transfer of any of the securities, joint

ventures, loan or option arrangements, puts or calls, guarantees of loans,

guarantees against loss or guarantees of profits, division of losses or profits, or

the giving or withholding of proxies. The description shall identify the persons

with whom these c ontracts, arrangements, or understandings have been

entered into;

(h) A description of the purchase of any security referred to in subsection (1) of

this section during the twelve (12) calendar months preceding the filing of the

statement by any acquiring party, including the dates of purchase, names of

the purchasers, and consideration paid or agreed to be paid;

(i) A description of any recommendations to purchase any security referred to in

subsection (1) of this section made during the twelve (12) calend ar months

preceding the filing of the statement, by any acquiring party, or by anyone

based upon interviews or at the suggestion of the acquiring party;

(j) Copies of all tender offers for requests, or invitations for tenders of, exchange

offers for, and a greements to acquire or exchange any securities referred to in

subsection (1) of this section, and of additional soliciting material distributed

which relates;

(k) The term of any agreement, contract, or understanding made with, or proposed

to be made with any broker-dealer, as to solicitation of securities referred to in

subsection (1) of this section for tender, and the amount of any fees,

commissions, or other compensation to be paid to broker -dealers with regard

to subsection (1) of this section;

(l) An agreement by the person required to file the statement referred to in

subsection (1) of this section that it will provide the annual report specified in

KRS 304.37-020 for so long as control exists;

(m) An acknowledgement by the person required to file th e statement referred to

in subsection (1) of this section that the person and all subsidiaries within its

control in the insurance holding company system will provide information to

the commissioner upon request as necessary to evaluate enterprise risk to the

insurer;

(n) Any additional information as the commissioner may by regulation prescribe

as necessary or appropriate for the protection of policyholders of the insurer or

in the public interest;

(o) If the person required to file the statement referred to in subsection (1) of this

section is a partnership, limited partnership, syndicate, or other group, the

commissioner may require that the information called for by paragraphs (a) to

(m) of this subsection shall be given with respect to each partner of t he

partnership or limited partnership, each member of the syndicate or other

group, and each person who controls the partner or member. If any partner,

member, or person is a corporation, or the person required to file the statement

referred to in subsection (1) of this section is a corporation, the commissioner

may require that the information called for by paragraphs (a) to (l) of this

subsection shall be given with respect to the corporation, each officer and

director of the corporation, and each person who is directly or indirectly the

beneficial owner of more than ten percent (10%) of the outstanding voting

securities of the corporation; and

(p) If any material change occurs in the facts in the statement filed with the

commissioner and sent to the insur er pursuant to this section, an amendment

stating the change, with copies of all documents and other materials relevant

to the change, shall be filed with the commissioner and sent to the insurer

within two (2) business days after the person learns of the change.

(3) If any offer, request, invitation, agreement, or acquisition referred to in subsection

(1) of this section is proposed to be made by means of a registration statement under

the Securities Act of 1933, or in circumstances requiring the disclosur e of similar

information under the Securities Exchange Act of 1934, or under a state law

requiring similar registration or disclosure, the person required to file the statement

referred to in subsection (1) of this section may utilize those documents in

furnishing the information required by the statement referred to in subsection (1) of

this section.

(4) (a) The commissioner shall approve any merger or other acquisition of control

referred to in subsection (1) of this section unless, after a public hearing the

commissioner finds that:

1. After the change of control, the domestic insurer referred to in

subsection (1) of this section would not be able to satisfy the

requirements for issuance of a certificate of authority to write the line or

lines of insurance for which it is presently authorized;

2. The effect of the merger or other acquisition of control would be

substantially to lessen competition in insurance in Kentucky or tend to

create a monopoly. In applying the competitive standard in this

paragraph:

a. The informational requirements of KRS 304.37 -130(3)(a) and the

standards of KRS 304.37-130(4)(b) shall apply;

b. The merger or other acquisition shall not be disapproved if the

commissioner finds that any of the situations meeting the criteria

provided by KRS 304.37-130(4)(c) exist; and

c. The commissioner may condition the approval of the merger or

other acquisition on the removal of the basis of disapproval within

a specified period of time;

3. The financial condition of the acquiring party might jeopa rdize the

financial stability of the insurer or prejudice the interest of its

policyholders;

4. The plans or proposals which the acquiring party has to liquidate the

insurer, sell its assets, consolidate or merge it with any person, or to

make any other ma terial change in its business or corporate structure or

management are unfair and unreasonable to policyholders of the insurer

and not in the public interest;

5. The competence, experience, and integrity of persons who would control

the operation of the in surer would not be in the interest of policyholders

of the insurer and of the public to permit the merger or other acquisition

of control; or

6. The acquisition is likely to be hazardous or prejudicial to the insurance

buying public.

(b) The public hearing required by this section shall be conducted as directed in

Subtitle 2 of this chapter.

(c) The commissioner may retain at the acquiring person's expense any attorneys,

actuaries, accountants, and other experts not otherwise a part of the

commissioner's st aff that may be necessary to assist the commissioner in

reviewing the proposed acquisition of control.

(5) The provisions of this section shall not apply to:

(a) Any transaction which is subject to the provisions of KRS 304.24 -390,

dealing with the merger or consolidation of a domestic insurer; or

(b) Any offer, request, invitation, agreement, or acquisition which the

commissioner, by order, shall exempt from the s ection as not having been

made or entered into for the purpose of and not having the effect of changing

or influencing the control of, a domestic insurer, or not comprehended within

the purposes of this section; or

(c) Any acquisition of stock of a former mutual by an affiliate company that

occurs in connection with the conversion of a mutual insurer to a stock insurer

under KRS 304.24 -600 to 304.24 -625, provided that no person acquires

control of the parent company. For purposes of this paragraph, "former

mutual" has the meaning provided in KRS 304.24-601.

(6) The following shall be violations of this section:

(a) The failure to file any statement, amendment, or other material required to be

filed pursuant to subsection (1) or (2) of this section; or

(b) The effectuation or any attempt to effectuate an acquisition of control of, or

merger with, a domestic insurer unless the commissioner has given his or her

approval.

(7) The courts of this state shall have jurisdiction over every person not resident,

domiciled, or authorized to do business in this state who files a statement with the

commissioner under this section, and overall actions involving such person arising

out of violations of this section. Each person shall be deemed to have performed

acts equivalent to and constituting an appointment by the person of the Secretary of

State to be his or her true and lawful attorney upon whom may be served all lawful

process in any action, suit, or proceeding arising out of the violations of this section.

Copies of al l lawful process shall be served on the Secretary of State and

transmitted to the person at his or her last known address by the Secretary of State

in the same manner as service of process on foreign insurers.