KRS 304.37-570: Stock offering -- Application -- Conditions for approval -- Hearing --

Filing of registration statement with Securities and Exchange Commission.

(1) No stock offering by a mutual insurance holding company, an insurance company

subsidiary of a mutua l insurance holding company, an intermediate holding

company subsidiary of a mutual insurance holding company, or an insurance

company subsidiary of an intermediate holding company subsidiary to a mutual

insurance holding company shall occur without the pr ior approval of the

commissioner. The commissioner's approval may be obtained only through an

application and hearing process.

(2) Every application for approval of a stock offering shall contain the following

information:

(a) A description of the stock in tended to be offered by the applicant, including a

description of all shareholder rights;

(b) The total number of shares authorized to be issued, the estimated number of

shares the applicant requests permission to offer, and the intended date or

range of dates for the offering;

(c) A justification for a uniform planned offering price or a justification of the

method by which the offering price will be determined;

(d) The name or names of any underwriter, syndicate member, or placement agent

involved and, if known, the name or names of each entity, person, or group of

persons to whom the stock offering is to be made who will control five

percent (5%) or more of the total outstanding class of shares, and the manner

in which the offer is to be tendered. If any entity or person is a corporation or

business organization, the name of each member of its board of directors or

equivalent management team shall be provided along with the name of each

member of the board of directors of the offeror. Copies of any filings with the

Securities and Exchange Commission disclosing intended acquisitions of the

stock shall be included in the application;

(e) A description of stock subscription rights to be afforded members of the

mutual insurance holding company in conjunction with the stock offering;

(f) A detailed description of all expenses to be incurred in conjunction with the

stock offering;

(g) An explanation of how funds raised by the stock offering are to be used; and

(h) Any other information requested by the commissioner.

(3) No application regarding a planned stock offering shall be approved unless the plan

contains provisions:

(a) Requiring a majority of the members of the board of directors of the mutual

insurance holding company to be persons who are not interested p ersons of

the mutual insurance holding company or of any subsidiary or affiliated

person of the company. The commissioner may waive this requirement upon a

showing of good cause based on clear and convincing evidence;

(b) For the mutual insurance holding c ompany to adopt articles of incorporation

prohibiting any waiver of dividends from stock subsidiaries except under

conditions specified in its articles of incorporation and after approval of the

waiver by the board of directors of the mutual insurance holding company and

the commissioner;

(c) Requiring that the board of directors of any insurance company subsidiary of a

mutual insurance holding company, any intermediate holding company

subsidiary of a mutual holding company, or the insurance company subsidi ary

of an intermediate holding company shall include at least three (3) directors

who are not interested persons of the mutual insurance holding company;

(d) Establishing, within the board of directors of the corporation offering stock, a

pricing committee consisting exclusively of directors who are not interested

persons who shall have sole responsibility for evaluating and approving the

price of any stock offering;

(e) Establishing, within the board of directors of the mutual insurance holding

company, any insurance company subsidiary of a mutual insurance holding

company, any intermediate holding company subsidiary, and any insurance

company subsidiary of an intermediate holding company subsidiary to a

mutual insurance holding company, an executive compensation committee

consisting exclusively of directors who are not interested persons, who shall

have sole responsibility for evaluating and approving compensation for

directors, officers, and employees;

(f) Establishing that for any committee of the mutual insurance holding company,

any insurance company subsidiary of a mutual insurance holding company,

any intermediate holding company subsidiary, and any insurance company

subsidiary of an intermediate holding company subsidiary to a mutua l

insurance holding company, at least two -thirds (2/3) of any committee having

responsibility for making decisions affecting capital structure or mergers and

acquisitions shall not be interested persons;

(g) Prohibiting officers, directors, and insiders of the mutual insurance holding

company and its subsidiaries and affiliates from the purchase or beneficial

ownership of any shares of the stock offering, or issuance of stock options to

or for the benefit of the officers, directors, and insiders for a perio d of at least

six (6) months following the first date the offering was publicly and regularly

traded. This paragraph shall not be construed to limit the rights of officers,

directors, and insiders from exercising subscription rights generally accorded

members of the mutual insurance holding company, except that, in accordance

with any subscription rights, the officers, directors, and insiders of the mutual

insurance holding company and its subsidiaries and affiliates may not

purchase or own, in the aggregat e, more than one percent (1%) of the stock

offering for a period of at least six (6) months following the first date the

offering was publicly and regularly traded;

(h) For a period of two (2) years after the six (6) month period referred to in

paragraph (g) of this section, the officers, directors, and insiders of the mutual

insurance holding company and its subsidiaries and affiliates may not

purchase or beneficially own, in the aggregate, more than five percent (5%) of

the stock of the insurance company subsidiary of a mutual insurance holding

company, an intermediate holding company subsidiary of a mutual insurance

company, or an insurance company subsidiary of an intermediate holding

company subsidiary to a mutual insurance holding company; and

(i) Requiring that all members of the mutual insurance holding company are

granted stock subscription rights in any initial stock offering. This requirement

may be waived by the commissioner upon a showing of good cause at public

hearing. For purposes of this para graph, good cause may only be found where

the members of the mutual insurance holding company are given rights to

participate in the appreciation of the stock offered that are comparable to stock

subscription rights.

(4) An insurance company subsidiary of a mutual insurance holding company, an

intermediate holding company subsidiary of a mutual insurance company, or an

insurance company subsidiary of an intermediate holding company subsidiary to a

mutual insurance holding company may issue more than one (1) class of stock if:

(a) At all times a majority of the voting stock is held by the mutual insurance

holding company or its subsidiary; and

(b) No class of common stock possesses greater dividend or other rights than the

class held by the mutual insurance holding company or its subsidiary.

(5) The commissioner shall hire, at the applicant's expense, attorneys, actuaries,

accountants, investment bankers, and other experts as may reasonably be necessary

to assist the commissioner in reviewing the application.

(6) The commissioner shall, in the commissioner's discretion, hold a public hearing in

accordance with KRS Chapter 13B regarding any application for approval of a stock

offering. Upon receipt of an application for approval of a stock offering which

includes an initial offering of stock, the commissioner shall hold a public hearing at

which all interested parties may appear and present evidence and argument

regarding the applicant's planned offering. The commissioner shall provide the

applicant adequate noti ce of the hearing so that the applicant can provide notice of

the hearing to members of the mutual insurance holding company, in a manner

approved by the commissioner, not less than twenty (20) days prior to the hearing.

Following the hearing, the commissi oner may approve, conditionally approve, or

deny the application. The commissioner may approve the plan if:

(a) The offering complies with these rules and other provisions of law;

(b) The method for establishing the price of a stock offering is consistent with

generally accepted market or industry practices for establishing stock offering

prices in similar transactions; and

(c) The plan and offering will not unfairly impact the interests of members of the

mutual insurance holding company.

(7) Nothing in thi s section shall be deemed to prohibit the filing of a registration

statement with the Securities and Exchange Commissioner prior to or concurrently

with the giving of notice to members.

(a) Notwithstanding subsections (1) to (6) of this section, a stock of fering which

is not an initial stock offering and which offers stock regularly traded on the

New York Stock Exchange, the American Stock Exchange, or another

exchange approved by the commissioner, or designated on the national

association of securities dea lers automated quotations-national market system

may be sold if a mutual insurance holding company, an insurance company

subsidiary of a mutual insurance holding company, an intermediate holding

company, or an insurance company subsidiary of an intermediat e holding

company intends to make a stock offering which would be governed by the

provisions of KRS 304.37 -500 to 304.37 -580. The entity shall deliver to the

commissioner not less than thirty (30) days prior to the offering a notice of the

planned stock offering and information regarding the following:

1. The total number of shares intended to be offered;

2. The intended date of sale;

3. Evidence that the stock is regularly traded on one (1) of the public

exchanges noted in subsection (a) of this section; and

4. A record of the trading pace and trading volume of the stock during the

prior fifty-two (52) weeks.

(b) The commissioner shall be deemed to have approved the sale unless, within

thirty (30) days following receipt of the notice, the commissioner issue s an

objection to the sale. If the commissioner issues an objection to the sale, the

procedures set forth in subsection (2) of this section shall be followed to

determine whether the commissioner approves the proposed sale;

(c) Approval of a stock offering obtained under either subsection (6) or (7) of this

section shall expire ninety (90) days following the date of the approval or

deemed approval, except as otherwise provided by the order of the

commissioner; and

(d) No prospectus, information, sales mater ial, or sales presentation by the

applicant, or by any representative, agent, or affiliate of the applicant shall

contain a representation that the commissioner's approval of a stock offering

constitutes an endorsement of the price, price range, or any oth er information

relating to the stock.