N.Y. Insurance Law § 7312: Reorganization of a domestic mutual life insurer into a domestic stock life insurer

§ 7312. Reorganization of a domestic mutual life insurer into a

domestic stock life insurer. (a) Definitions. As used in this section,

the following terms shall have the following meanings:

(1) "Mutual life insurer" means a domestic mutual life insurer.

(2) "Policyholder" means a person, as determined by the records of a

mutual life insurer, who is deemed to be the "policyholder" of a policy

or annuity contract which is of a type described in paragraphs one, two

or three of subsection (a) of section one thousand one hundred thirteen

of this chapter for purposes of paragraph three of subsection (a) of

section four thousand two hundred ten of this chapter.

(3) "Policyholders' membership interest" means and includes all

policyholders' rights as members arising under the charter of the mutual

life insurer or this chapter or otherwise by law including, but not

limited to, the rights to vote and to participate in any distribution of

surplus whether or not incident to a liquidation of the mutual life

insurer. The term "policyholders' membership interest" does not include

rights, including without limitation the right to participate in the

distribution of surplus, expressly conferred upon the policyholders by

their policies or contracts other than any right to vote.

(4) "Plan of reorganization" means a plan of conversion or conversion

and merger in accordance with this section.

(5) "Reorganized insurer" means the domestic stock life insurer into

which a mutual life insurer has been reorganized in accordance with this

section.

(6) "Statement date" means the December thirty-first immediately prior

to the date the plan of reorganization was adopted.

(7) "Person" means an individual, partnership, firm, association,

corporation, joint-stock company, trust, any similar entity or any

combination of the foregoing acting in concert.

(b) Demutualization. Any other provision of this chapter to the

contrary notwithstanding, upon compliance with the requirements of and

completion of the proceedings prescribed by this section and with the

written approval of the superintendent, a mutual life insurer may either

(1) reorganize into a domestic stock life insurer or (2) reorganize as

part of a plan of reorganization in which a majority or all of the

common shares of the domestic stock life insurer is acquired by another

institution which may be an institution organized for such purpose. As

part of the reorganization, the mutual life insurer may merge with a

domestic stock insurer, provided that the merging insurers shall comply

with the provisions of this chapter applicable to their participation in

such a merger.

(c) Plan of reorganization. A plan of reorganization must: (1)

demonstrate a purpose and specify reasons for the proposed

reorganization; (2) be in the best interest of the mutual life insurer

and its policyholders; (3) be fair and equitable to policyholders; (4)

provide for the enhancement of the operations of the reorganized

insurer; and (5) not substantially lessen competition in any line of

insurance business.

(d) Reorganization. The proposed reorganization shall be accomplished

by a plan which must be fair and equitable to the policyholders and must

comply with the terms and conditions set forth in paragraph one, two or

four of this subsection provided however, that a mutual life insurer

which has surplus to policyholders, excluding contingently repayable

obligations of the mutual life insurer under section one thousand three

hundred seven of this chapter, of less than fifty million dollars and

which has industrial insurance in force must comply with the terms and

conditions set forth in paragraph one, two, three or four of this

subsection. Nothing herein contained shall be deemed to give any class

of policyholders priority with respect to the assets of any such

reorganized insurer in liquidation, other than as expressly stated in

paragraph two of this subsection.

(1) (A) The mutual life insurer's participating business comprised of

its participating policies and contracts in force on the effective date

of reorganization shall be operated by the reorganized insurer as a

closed block of participating business in accordance with paragraph five

of this subsection except that, at the option of the mutual life

insurer, some or all classes of group policies and contracts may be

excluded from the closed block of participating business and in such

event such group policies and contracts shall continue to be eligible to

receive dividends based on the experience of such class or classes; (B)

subject to the provisions of subparagraph (D) of this paragraph, the

plan of reorganization provides that the policyholders' membership

interest will be exchanged for all of the common shares of the

reorganized insurer or its parent company, if any, or for either, or a

combination of (i) the common shares of the reorganized insurer or its

parent company, if any, and (ii) consideration equal to the proceeds of

the public sale in the market of such common shares by the issuer

thereof or by a trust or other entity existing for the exclusive benefit

of the policyholders and established solely for the purpose of effecting

the reorganization to which such common shares are issued by the issuer

on the effective date of reorganization, such consideration to be

distributed to policyholders during a process of reorganization

specified in the plan and not to last more than ten years after the

effective date of reorganization or until notification of the death of a

policyholder or the death of the insured, whichever occurs first; (C)

the consideration to be given to the policyholders is allocated among

the policyholders in a manner which is fair and equitable to

policyholders and which may take into account the estimated

proportionate contribution of each class of participating policies and

contracts to the aggregate consideration being given to policyholders;

(D) unless such issuance within a shorter or longer period is disclosed

in the plan of reorganization, the issuer of such common shares has not

issued and does not issue within two years of the effective date of the

reorganization (i) any of its common shares, (ii) any securities

convertible, with or without consideration, into such common shares or

carrying any warrant or right to subscribe to or to purchase common

shares, or (iii) any warrants or rights to subscribe to or purchase such

common shares or other securities described in item (ii) of this

subparagraph, except for the issue of common shares to or for the

benefit of the policyholders pursuant to the reorganization and the

issue of stock in anticipation of options for the purchase of common

shares being granted to officers or employees of the reorganized insurer

or its holding company, if any, pursuant to this chapter and a plan

approved by the superintendent; (E) the issuer shall use its best

efforts to encourage and assist in the establishment of a public market

for such common shares within two years of the effective date of the

reorganization (or such longer period as may be disclosed in the plan of

reorganization); (F) within one year after the offering of stock other

than the initial distribution, but no later than six years after the

effective date of the reorganization the insurer, under a plan approved

by the superintendent, which he finds not to be harmful to the

reorganized insurer, shall offer to make available to policyholders who

received and retained shares of stock with minimal values on

reorganization, a procedure to dispose of those shares of stock at

market value without brokerage commissions or similar fees; and (G) the

costs and expenses of the reorganization shall be borne by the insurer

but no costs and expenses incurred in any manner in connection with the

reorganization shall be charged to the closed block.

(2) (A) The mutual life insurer's participating business comprised of

its participating policies and contracts in force on the effective date

of the reorganization shall be operated by the reorganized insurer as a

closed block of participating business in accordance with paragraph five

of this subsection except that, at the option of the mutual life insurer

some or all classes of group policies and contracts may be excluded from

the closed block of participating business and in such event such group

policies and contracts shall continue to be eligible to receive

dividends based on the experience of such class or classes; (B) the

reorganized insurer or its parent corporation is to issue and sell

shares of one or more classes of stock having a total offering price

equal to the estimated value in the public market of the mutual life

insurer; (C) the policyholders' equity is equal to the excess of (i) the

amount of the mutual insurer's assets accumulated from the operations of

participating policies and contracts in force on the effective date of

the reorganization, over the sum of (ii) the amount of assets allocated

to the closed block of participating business and (iii) an amount equal

to the statutory reserves and other statutory liabilities attributable

to any group participating policies and contracts in force on the

effective date of reorganization and not included in the closed block of

participating business, provided however, that the policyholders' equity

cannot be less than the amount of the policyholders' preference account.

The amount of the policyholders' equity shall be determined as of the

statement date and adjusted by the estimated percentage change in the

mutual insurer's total assets, as reported in its statutory statements,

between the statement date and the effective date of the reorganization.

Any determination of policyholders' equity shall include adjustments for

any events or matters deemed by the superintendent appropriate, which

have a material effect on policyholders' equity and occurred within

seven years prior to the statement date; (D) the plan of reorganization

provides that the policyholders' membership interest will be exchanged

for consideration equal to (i) the policyholders' equity, (ii)

nontransferable preemptive subscription rights to purchase all of the

shares of such issuer, (iii) ten percent of the proceeds net of

underwriting commissions and fees raised by the insurer upon the sale of

its initial offering of shares, and (iv) the establishment of a

policyholders' preference account for the benefit of policyholders

existing on the effective date of reorganization, and for the benefit of

the future policyholders of the reorganized insurer, in the event of a

subsequent complete liquidation of the reorganized insurer, such

policyholders' preference account having the terms described below in

this paragraph; (E) the consideration to be given to the policyholders

is allocated among the policyholders in a manner which is fair and

equitable to policyholders and which may take into account the estimated

proportionate contribution of each class of participating policies and

contracts to the aggregate consideration being given to policyholders;

(F) at the option of the mutual life insurer, any common shares of the

reorganized insurer or its parent company, if any, included in the

policyholders' consideration, other than those acquired as a result of a

policyholder exercising any preemptive subscription rights, may be

placed in a trust or other entity existing for the exclusive benefit of

the policyholders and established solely for the purpose of effecting

the reorganization to which such common shares are issued by the issuer

on the effective date of reorganization, such consideration or the

proceeds of the sale of such consideration to be distributed to

policyholders during a process specified in the plan and not to last

more than ten years after the effective date of reorganization or until

notification of the death of the policyholder or the death of the

insured, whichever occurs first; (G) the issuer shall use its best

efforts to encourage and assist in the establishment of a public market

for such common shares within two years of the effective date of the

reorganization; (H) within one year after the offering of stock other

than the initial distribution, but no later than six years after the

effective date of the reorganization the insurer, under a plan approved

by the superintendent which he finds not to be harmful to the

reorganized insurer, shall offer to make available to policyholders who

received and retained shares of stock with minimal values on

reorganization, including but not limited to shares acquired by

policyholders exercising their preemptive subscription rights, a

procedure to dispose of those shares of stock at market value without

brokerage commissions or similar fees; (I) the costs and expenses of the

reorganization shall be borne by the insurer, however if the

reorganization is effected, no costs and expenses incurred in any manner

in connection with the reorganization shall be charged to the

participating business in force on the effective date of reorganization.

Costs and expenses shall include but not be limited to legal fees,

appraisal fees, printing and/or mailing costs; (J) notwithstanding

subparagraph (I) of this paragraph, if the plan of reorganization

provides for or permits a person to directly or indirectly acquire in

any manner the beneficial ownership of five percent or more of the

voting securities of such reorganized insurer or of any institution

which owns a majority or all of the voting securities of the reorganized

insurer, or if the superintendent determines that a person will control,

as defined in paragraph sixteen of subsection (a) of section one hundred

seven of this chapter, such reorganized insurer or any institution which

owns a majority or all of the voting securities of the reorganized

insurer then, unless the superintendent determines that it is in the

policyholders' interest to waive all or part of this condition, the

mutual life insurer shall not, directly or indirectly, pay for any of

the costs or expenses of a proposed reorganization whether or not such

reorganization is effected and in no event shall any of the costs and

expenses incurred in any manner in connection with the reorganization be

charged to the participating business in force on the effective date of

reorganization. Costs and expenses shall include but not be limited to

legal fees, appraisal fees, printing and/or mailing costs; (K) the

policyholders' preference account referred to above shall be equal to

the excess of the amount of the mutual insurer's total admitted assets

over the sum of (i) the total amount of assets allocated to the closed

block of participating business and (ii) the policyholders' equity and

(iii) statutory reserves and liabilities attributed to policies and

contracts not included in the closed block of participating business.

The policyholders' preference account shall be calculated as of the

statement date and adjusted appropriately to reflect any changes in the

components used in determining the amount of the policyholders'

preference account between the statement date and the effective date of

reorganization; (L) a mutual life insurer whose policyholders' equity is

paid in the form of stock may show, as a write-in item labeled

"Reorganization surplus" immediately following "Capital paid up" on the

annual statement of the reorganized insurer, a negative amount equal to

the excess of the policyholders' equity which was paid in the form of

stock over its unassigned surplus on the date of reorganization; and (M)

the policyholders' preference account shall be so designated and shown

as a footnote to the surplus of the reorganized insurer in all of its

published and filed statements. In the event of a subsequent complete

liquidation of the reorganized insurer, and only in such event, the

policyholders' preference account shall be allocated among the then

policyholders in a manner found by the superintendent to be fair and

equitable to policyholders, first to policyholders having participating

policies and contracts in force on the effective date of the

reorganization and then to all other policyholders of the reorganized

insurer. The function of the policyholders' preference account shall be

solely to establish a priority on liquidation and its existence shall

not operate to restrict the use or application of the surplus of the

reorganized insurer except that the reorganized insurer, after complying

with all other requirements of this chapter, cannot declare or pay a

cash dividend on, or repurchase any of, its shares if, after such

declaration or payment, the amount of net preference assets of the

reorganized insurer is less than the amount of the policyholders'

preference account. For this purpose, the net preference assets shall be

equal to the insurer's total admitted assets less the sum of (i) the

assets in the closed block of participating business (ii) the statutory

reserves and liabilities with respect to business not in such closed

block and (iii) the reorganized insurer's capital and paid in surplus.

(3) (A) The mutual life insurer's participating business comprised of

its participating policies and contracts in force on the effective date

of the reorganization shall be operated by the reorganized insurer as a

closed block of participating business, for policyholder dividend

purposes only, to which shall be allocated admitted assets of the mutual

life insurer in an amount equal to the statutory reserves and statutory

liabilities of the mutual life insurer; (B) the consideration to be

given in exchange for the policyholders' membership interest shall be

equal to the statutory surplus of the mutual life insurer; (C) the

amount of statutory reserves and statutory liabilities and statutory

surplus shall be determined as of the statement date and adjusted by the

estimated percentage change in the mutual insurer's total admitted

assets between the statement date and the effective date of

reorganization. Any determination of statutory surplus shall include

adjustments for any events or matters deemed by the superintendent

appropriate, which have a material effect on policyholders'

consideration and occurred within seven years prior to the statement

date; (D) the consideration shall be allocated among the policyholders

in a manner which is fair and equitable to the policyholders and which

may take into account the estimated proportionate contribution of each

class of participating policies and contracts to the aggregate

consideration being given to policyholders; (E) the reorganized insurer

or its parent corporation is to issue and sell shares of one or more

classes of stock having a total offering price equal to the estimated

value in the market of the mutual life insurer; (F) the costs and

expenses of the reorganization shall be borne by the insurer; however,

if the plan of reorganization provides for or permits a person to

directly or indirectly acquire in any manner the beneficial ownership of

five percent or more of any class of a voting security of such

reorganized insurer or of any institution which owns a majority or all

of the voting securities of the reorganized insurer, or if the

superintendent determines that a person will control, as defined in

paragraph sixteen of subsection (a) of section one hundred seven of this

chapter, such reorganized insurer or any institution which owns a

majority or all of the voting securities of the reorganized insurer

then, unless the superintendent determines that it is in the

policyholders' interest to waive all or part of this condition, the

mutual life insurer shall not, directly or indirectly, pay for any of

the costs or expenses of a proposed reorganization whether or not such

reorganization is effected. Costs and expenses shall include but not be

limited to legal fees, appraisal fees, printing and/or mailing costs;

and (G) none of the assets, including the revenue therefrom, allocated

in accordance with subparagraph (A) of this paragraph shall revert to

the benefit of the stockholders of the reorganized insurer.

(4) (A) Any method approved by the superintendent under which the

policyholders' membership interest is converted into or exchanged for

consideration determined by the superintendent to be fair and equitable

to policyholders and meeting the requirements of this section; (B) the

consideration to be given to the policyholders is allocated among the

policyholders in a manner which is fair and equitable; (C) unless the

superintendent determines that it is in the policyholders' interest to

waive all or part of this condition, the mutual life insurer does not,

directly or indirectly, pay for any of the costs or expenses of a

proposed reorganization whether or not such reorganization is effected.

Costs and expenses shall include but not be limited to legal fees,

appraisal fees, printing and/or mailing costs; and (D) in determining

whether any reorganization is fair and equitable, the superintendent

shall be guided by the legitimate economic interests of participating

policyholders as delineated in this section.

(5) (A) When the mutual life insurer's participating business

comprised of its participating policies and contracts in force on the

effective date of the reorganization shall be operated by the

reorganized insurer as a closed block of participating business in

accordance with paragraphs one and two of this subsection, then it shall

be so operated for the exclusive benefit of such policies and contracts

included therein, for policyholder dividend purposes only; (B) to such

closed block shall be allocated assets of the mutual life insurer in an

amount which together with anticipated revenue from such business is

reasonably expected to be sufficient to support such business including,

but not limited to, provisions for payment of claims, expenses and

taxes, and to provide for continuation of current payable dividend

scales, if the experience underlying such scales continues and for

appropriate adjustments in such scales if the experience changes; (C)

the amount of such assets shall be determined as of the statement date

and brought forward to the effective date of the reorganization using

methods which would have been used had the closed block been established

on the statement date with appropriate recognition of new issues; and

(D) none of the assets, including the revenue therefrom, allocated in

accordance with subparagraph (B) of this paragraph shall revert to the

benefit of the stockholders of the reorganized insurer.

(6) If any amount of the policyholders' consideration for certain

classes of policies or contracts is to be paid in the form of increased

annual dividends to the policyholders in those classes, that amount is

to be added to the assets previously allocated in accordance with

paragraph three or five of this subsection and is to be paid out to

those classes in a fair and equitable manner.

(e) Adoption of plan of reorganization. (1) A mutual life insurer

seeking to reorganize under this section shall, by action of

three-fourths of its entire board of directors, adopt a plan consistent

with the provisions of this section and that it finds is fair and

equitable to the policyholders. The board of directors of the mutual

life insurer, in selecting one of the methods described in subsection

(d) of this section, shall set forth the basis for their selection. The

plan of reorganization shall set forth (A) a demonstration of the

purpose for the proposed reorganization; (B) the form of the

reorganization; (C) the proposed charter of the reorganized insurer set

out in accordance with section one thousand two hundred one of this

chapter and its proposed by-laws which shall provide for the removal of

the word "mutual" from the name of the company; (D) the manner and basis

by which the reorganization shall take place; (E) the consideration to

be given to the policyholders in exchange for their policyholders'

membership interest or the manner of converting the policyholders'

membership interest into securities or other consideration; (F) the

method of allocating the consideration among policyholders; (G) the

method of operation of the mutual life insurer's participating business

comprised of its participating policies and contracts in force on the

effective date of the reorganization; and (H) a plan of operation for

the reorganized insurer including actuarial projections for a ten-year

period and a statement indicating its intentions with regard to issuing

any nonparticipating business. If the reorganized insurer proposes to

continue to issue for delivery in this state participating policies or

contracts, the plan of reorganization shall so specify. In such event,

upon the superintendent's approval of the plan of reorganization

pursuant to this section, the superintendent shall, in accordance with

section four thousand two hundred thirty-one of this chapter, issue a

revocable permit to the reorganized insurer authorizing it to issue

participating policies and contracts in this state. The plan of

reorganization may contain any other conditions and provisions which the

board of directors of the mutual life insurer may deem necessary or

advisable in connection with the proposed reorganization.

(2) The consideration to be given in exchange for the policyholders'

membership interest or into which such membership interest is to be

converted may consist of cash, securities of the reorganized insurer or

securities of another institution or institutions, a certificate of

contribution, additional life insurance or annuity benefits, increased

dividends or other consideration or any combination of such forms of

consideration. The consideration, if any, given to any class or category

of policyholder need not be the same as the consideration given to any

other class or category of policyholder. The certificate of contribution

referred to above shall be repayable in five years and bear annual

interest at the published monthly average, as defined in section three

thousand two hundred six of this chapter, for the calendar month ending

two months before the effective date of reorganization.

(3) The policyholders who shall be entitled to notice of and to vote

upon the proposal to approve the plan of reorganization and to notice of

the public hearing required by this section shall be the policyholders

whose policies or contracts are in force on the date of adoption of the

plan of reorganization. Each such policyholder whose policy has been in

force on such date shall be entitled to the consideration, if any,

provided for such policyholder in the plan based on such policyholder's

membership interest determined pursuant to this section but only to the

extent that such policyholder's membership interest arose from policies

or contracts that shall be in force on the date of adoption of the plan.

(4) Upon adoption of the plan of reorganization, it shall be duly

executed by the chairman of the board, the president or a vice president

and attested by the secretary or an assistant secretary of the mutual

life insurer under such insurer's corporate seal and shall be submitted

to the superintendent with a copy of the resolutions adopting such plan

and finding that it is fair and equitable to the policyholders,

accompanied by a certificate of adoption of such resolutions subscribed

by such officers and affirmed by them as true under penalties of perjury

and under the seal of the mutual life insurer.

(f) Amendment or withdrawal of plan. The mutual life insurer may, by

action of a majority of the entire board of directors, at any time

before the plan of reorganization becomes effective as provided by this

section (1) amend the plan of reorganization; or (2) withdraw the plan

of reorganization. On adoption of an amendment it shall be duly executed

by the chairman of the board, the president or a vice president and

attested by the secretary or an assistant secretary of the mutual life

insurer under such insurer's corporate seal and shall be submitted to

the superintendent with a copy of the resolutions adopting such

amendments subscribed by such officers and affirmed by them as true

under penalties of perjury and under the seal of the mutual life

insurer. In case of an amendment, all references in this section to the

plan of reorganization shall be deemed to refer to the plan as amended.

No amendment made after any public hearing required by this section or

after approval by the policyholders as provided in this section shall

change the plan in a manner which the superintendent determines is

materially disadvantageous to any of the policyholders unless a further

public hearing is held on the plan as amended if the amendment is made

after the public hearing, or the plan as amended is submitted for

reconsideration by the policyholders if the amendment is made after the

plan has been approved by the policyholders, under the conditions and

procedures determined by the superintendent in accordance with this

section.

(g) Additional information. Upon submission to him of the plan of

reorganization, the superintendent may request any additional documents

or information and may examine the mutual life insurer or any of its

affiliates, to the extent he may determine to be necessary to enable him

to make the findings required by this section for the approval by him of

the plan of reorganization. If the reorganized insurer proposes to

continue to issue for delivery in this state participating policies or

contracts, the superintendent may also request such information or

agreements relative thereto as he may require pursuant to section four

thousand two hundred thirty-one of this chapter.

(h) Consultants and certifications. (1) The superintendent may appoint

one or more qualified disinterested persons or institutions as

consultants to advise him on any matters related to the reorganization.

The appointment of a consultant shall be in writing and shall set forth

the duties and responsibilities of the consultant. Copies of such

appointment shall be given to the consultant and concurrently to the

mutual life insurer.

(2) If the plan of reorganization satisfies the conditions set forth

in paragraph one or two of subsection (d) of this section, the

superintendent shall appoint one or more qualified and disinterested

actuaries for the purpose specified in paragraph three of this

subsection. Such actuary shall be a member of the American Academy of

Actuaries, and shall be knowledgeable and experienced as to the matters

to be certified.

(3) Such actuary shall certify in writing as to (A) in the case of a

plan of reorganization pursuant to paragraph two of subsection (d) of

this section, the amount of the mutual insurer's assets accumulated from

the operations of participating policies and contracts in force on the

effective date of the reorganization and (B) in the case of a plan of

reorganization pursuant to paragraphs one or two of subsection (d) of

this section, the reasonableness and sufficiency of the asset allocation

referred to in subparagraph (B) of paragraph five of subsection (d) of

this section. Such certification shall be in form satisfactory to the

superintendent and shall be made in accordance with professional

standards and practices generally accepted by the actuarial profession

and such other factors as such actuary in his professional judgment

believes are reasonable and appropriate at the time such certification

is made. Any such certification shall be accompanied by a memorandum of

the actuary, in form satisfactory to the superintendent, describing the

calculations made in support of such certification and the assumptions

used in such calculations.

(4) The consultant and the actuary may request of the mutual life

insurer access to its books and records and the furnishing by it of any

other information in its possession, to the extent it may reasonably be

deemed necessary to make the valuations and certifications contemplated

by this subsection, or to advise the superintendent on any matters

related to the reorganization. The consultant and the actuary shall

report to the superintendent any instance in which the mutual life

insurer fails to provide any information requested by them. The

consultant and the actuary shall not, under judicial process or

otherwise, be obligated or permitted to divulge to any one except the

superintendent any information not otherwise publicly available which is

so obtained by them. The consultant and the actuary shall receive

reasonable compensation and shall be reimbursed for reasonable expenses

incurred in performing their duties.

(5) The report of the consultant and the certification of the actuary

shall be made to the superintendent. In making the determinations

contemplated by this section, the superintendent shall not be bound by

any findings, conclusions, certifications or recommendations made by the

consultant or the actuary. All information obtained by the

superintendent pursuant to this section, including without limitation

information obtained through examinations by him, the report of the

consultant, the certification of the actuary, the memorandum of the

actuary and other information secured by the consultant or the actuary

and turned over to the superintendent, are hereby specifically exempted,

as contemplated by paragraph (a) of subdivision two of section

eighty-seven of the public officers law, from disclosure by the

superintendent under said section eighty-seven of such law. Such

exemption shall not preclude or exempt the superintendent from

disclosure of such information pursuant to judicial process under

provisions of law other than said section eighty-seven of the public

officers law, nor prohibit any disclosure which in the opinion of the

superintendent, and after an opportunity for the insurer to be heard,

the superintendent deems should be made public for the benefit of the

insurer, its policyholders or the public. If the department intends to

make any report or certification public, then such report or

certification shall be made available to the company at least fifteen

days prior to such public disclosure.

(6) Nothing contained in this section shall be construed to exclude

any person or employee or member of an institution from the category of

"disinterested person" solely because such individual is a policyholder

of the insurer or that such person or institution is to be one of the

underwriters of any shares to be sold pursuant to the plan of

reorganization.

(i) Public hearing. The superintendent shall hold a public hearing

upon the fairness of the terms and conditions of the plan of

reorganization, the reasons and purposes for the mutual life insurer to

demutualize, and whether the reorganization is in the interest of the

mutual life insurer and its policyholders, and not detrimental to the

public. Notice stating the time, place and purpose of the hearing shall

be mailed by the mutual life insurer to each policyholder entitled to

notice of the hearing in accordance with paragraph three of subsection

(e) of this section, at his last known address as shown on the records

of the mutual life insurer; such notice shall be mailed at least thirty

days before the date of the hearing. Such notice shall be preceded or

accompanied by a true and complete copy of the plan, or by a summary

thereof approved by the superintendent, and such other explanatory

information as the superintendent shall approve or require. In addition,

the mutual life insurer shall give notice of the time, place and purpose

of the hearing by publication in three newspapers of general

circulation, one in the county in which the insurer has its principal

office and two in other cities within or without this state approved by

the superintendent. Such newspaper publications shall be made not less

than fifteen days nor more than sixty days before the hearing, and shall

be in a form approved by the superintendent.

(j) Approval of plan by superintendent. The superintendent shall after

the public hearing required by subsection (i) of this section approve

the plan of reorganization if he finds that the proposed reorganization,

in whole and in part, does not violate this chapter, is fair and

equitable to the policyholders and is not detrimental to the public and

that, after giving effect to the reorganization, the reorganized insurer

will have an amount of capital and surplus the superintendent deems to

be reasonably necessary for its future solvency. If approval is denied,

the denial shall be in writing setting forth a statement of the reasons

therefor and the mutual life insurer shall have the right to a hearing

before the superintendent within thirty days of the date of such denial.

The superintendent shall not disapprove of a plan of reorganization for

the reason that the mutual life insurer selected one of the methods

provided for in subsection (d) of this section rather than another. The

superintendent shall approve or disapprove the plan in writing on or

before sixty days after the conclusion of the public hearing required by

subsection (i) of this section.

(k) Approval by policyholders. (1) A proposal to approve the plan of

reorganization shall be submitted to policyholders. Notice stating the

date, time and place for voting on such proposal shall be mailed by the

mutual life insurer to each policyholder entitled to notice of and to

vote on the proposal in accordance with paragraph three of subsection

(e) of this section, at his last known address as shown on the records

of the mutual life insurer; such notice shall be mailed at least thirty

days before the date of the action. Such notice may be combined with

notice of the public hearing required by this section. Such notice shall

be preceded or accompanied by a true and complete copy of the plan, or

by a summary thereof approved by the superintendent, and such other

explanatory information as the superintendent shall approve or require.

(2) Each policyholder entitled to vote on the proposal shall be

entitled to cast one vote, unless otherwise provided in the charter or

by-laws of the mutual life insurer, on the proposal, either in person or

by mail or by proxy, irrespective of the number or amount of the

policies or contracts he holds. Any proxy shall be revocable at any time

except to the extent that, at the time of exercise, the power conferred

thereby has been exercised. All votes shall be by written ballot cast in

person or by mail by policyholders entitled to vote or by proxy agents

duly appointed by policyholders entitled to vote. The voting on the

proposal shall be held at the home office of the mutual life insurer.

The polls shall be opened at ten o'clock in the forenoon and remain open

until four o'clock in the afternoon of the day fixed for such voting, at

which time they shall be closed. The proposal to approve the plan of

reorganization may be adopted by the affirmative vote of two-thirds of

all votes cast by policyholders entitled to vote.

(3) The superintendent shall have power to supervise and direct and

prescribe rules governing the procedure for the conduct of the voting on

the proposal to such extent, consistent with the provisions of this

section, as he deems necessary to insure a fair and accurate vote. Such

powers shall include, but not be limited to, power to supervise and

regulate (A) the determination of policyholders entitled to notice of

and to vote on the proposal; (B) the giving of notice of the proposal;

(C) the receipt, custody, safeguarding, verification and tabulation of

proxy forms and ballots; and (D) the resolution of disputes.

(4) The superintendent shall appoint as inspectors an adequate number

of personnel of the department of financial services or other competent

and disinterested persons and may appoint, if necessary, expert

accountants and other assistants and may authorize the procurement of

stationery and supplies necessary for conducting the voting on the

proposal and canvassing the votes. The inspectors shall have power to

determine all questions concerning the verification of the ballots and

proxies, the ascertainment of the validity thereof, the qualifications

of the voters and the canvass of the vote, and with respect thereto

shall act under such rules as shall be prescribed by the superintendent.

Any disagreement among the inspectors shall be reported to and shall be

resolved by the superintendent. Any determinations by the inspectors or

the superintendent shall be subject to judicial review.

(5) Representatives of the policyholders, including representatives of

policyholders favoring or opposing the approval of the plan, shall be

entitled to be present during the casting, verification and canvassing

of the proxies and ballots and shall be entitled to examine and object

to any such proxy or ballot. The superintendent or the inspectors may

limit the number of persons representing any interested person or group

and may specify fair and reasonable procedures for the examination of

and presentation of objections to the proxies and ballots. Costs and

expenses incurred in providing such representation shall not be a charge

upon or paid from the funds of the mutual life insurer or the person

responsible for the costs and expenses of the reorganization.

(6) Neither the mutual life insurer nor any officer, agent or employee

thereof shall knowingly omit, from any list of policyholders entitled to

notice of and to vote on the proposal, the name of any policyholder

required to be included therein, or shall, in connection with any such

list, knowingly omit to give the name and address, as last shown on the

records of the mutual life insurer, of any policyholder. No person shall

conceal or withhold or aid or abet any other person in concealing or

withholding any proxy or ballot from the authorized custodians thereof

or from the inspectors. No policyholder shall sell or offer to sell any

vote or proxy for any sum of money or anything of value other than the

consideration provided for in the plan or reorganization if such plan

becomes effective.

(7) All ballots and proxies received by the inspectors shall

immediately upon the completion of the canvass be placed in sealed

packages and shall be preserved by the inspectors for a period of four

years, subject to the order of any court having jurisdiction of any

proceedings relating thereto, and then shall be turned over to the

mutual life insurer, or the reorganized insurer if the reorganization

has become effective.

(8) The conduct of the voting on the proposal shall at all times, on

petition of the superintendent or of any person or persons whose rights

may be affected, be subject to the supervision and control of the

supreme court in the judicial district in which the mutual life insurer

has its home office.

(9) The inclusion by the mutual life insurer of the name of any person

in any list of policyholders required by this section shall not be

construed as an admission by such insurer of the validity of any policy

or contract and no such list shall be competent evidence against such

insurer in any action or proceeding in which the question of the

validity of any policy or contract or of any claim under it is involved.

(10) The provisions of section four thousand two hundred ten of this

chapter shall not apply to the action by policyholders pursuant to this

section.

(11) Upon the conclusion of the vote, the mutual life insurer shall

submit to the superintendent (A) a certified copy of the plan of

reorganization, subscribed by the chairman of the board, the president

or any vice president and attested by the secretary or an assistant

secretary of the mutual life insurer; (B) a certificate, subscribed by

the chairman of the board, the president or any vice president and

attested by the secretary or assistant secretary of the mutual life

insurer, or subscribed by the person or persons, if any, designated by

the superintendent to supervise the giving of notice of the date for

action on the proposal, to the effect that such notice was given in

accordance with this section to all policyholders entitled to such

notice; and (C) a certificate subscribed by the inspectors of the

results of the vote, as evidenced by valid ballots received before the

polls were closed. Each such certificate shall be affirmed as true under

the penalties of perjury by the person or persons subscribing the same

and, in the case of a certificate signed by officers of the mutual life

insurer, shall be affirmed under the corporate seal of the mutual life

insurer.

(l) Effective date of reorganization. When the superintendent has

given his approval of the plan of reorganization as provided in

subsection (j) of this section and certification of approval of the plan

has been made to the superintendent as provided in subsection (k) of

this section, a copy of the plan of reorganization, with the

superintendent's approval endorsed thereon, shall be filed in the office

of the superintendent. A copy of such plan certified by the

superintendent shall also be filed by the mutual life insurer in the

office of the clerk of the county where the principal office of the

mutual life insurer is located. The plan of reorganization shall take

effect in accordance with its terms on the date when the filings

required by this subsection have been made or on such later date, if

any, as may have been specified in or determined in accordance with said

plan or pursuant thereto. The superintendent shall issue an amended

certificate of authority to the reorganized insurer and such license, if

any, as may be required under section one thousand two hundred four of

this chapter for the sale of its securities as specified in its plan of

reorganization.

(m) Corporate existence. Upon the reorganization of the mutual life

insurer in the manner herein provided, the reorganized insurer shall be

deemed a continuation of the corporate existence of the mutual life

insurer or, in the case of a merger, of the company specified in the

plan of reorganization as the continuing company, which may be either

the mutual life insurer or the domestic stock life insurer with which it

is merged. All the rights, franchises and interests of the mutual life

insurer and, in the case of a merger, of the domestic stock insurer, in

and to every species of property, real, personal and mixed, and things

in action thereunto belonging, shall be deemed transferred to and vested

in the continuing company, without any other deed or transfer; and

simultaneously therewith such continuing company shall be deemed to have

assumed all of the obligations and liabilities of the mutual life

insurer and, in the case of a merger, of the domestic stock insurer,

other than obligations and liabilities with respect to the

policyholders' membership interest eliminated by the plan of

reorganization.

(n) Actions and proceedings. No action or proceeding pending at the

time of the reorganization to which the mutual life insurer may be a

party shall be abated or discontinued by reason of such reorganization,

but the same may be prosecuted to final judgment in the same manner as

if the reorganization had not taken place, or the reorganized insurer

may be substituted in place of such mutual life insurer by order of the

court in which the action or proceeding may be pending.

(o) Directors and officers. The directors and officers of the mutual

life insurer, unless otherwise specified in the plan of reorganization,

shall serve as directors and officers of the reorganized insurer until

new directors and officers have been duly elected and qualified pursuant

to the charter and by-laws of the reorganized insurer.

(p) Costs and expenses. (1) The mutual life insurer shall deliver to

the superintendent at the time of submission of the plan of

reorganization a written undertaking in form and substance satisfactory

to the superintendent and signed by the mutual life insurer, and by such

other persons as the superintendent may require, specifying the manner

in which all costs and expenses incurred in any manner in connection

with the plan of reorganization shall be paid or reimbursed. Such

undertaking shall provide for the payment or reimbursement of all

expenses incurred by the superintendent or the department in connection

with the plan of reorganization, other than normal operating expenses of

the department.

(2) Such undertaking, other than a reorganization pursuant to

paragraph one of subsection (d) of this section, shall also provide that

no payment of costs and expenses by the mutual life insurer or the

reorganized insurer shall, after giving effect to any reimbursement or

contribution received by such insurer with respect thereto, have the

effect of reducing the consideration, other than the policyholders'

preference account referred to in paragraph two of subsection (d) of

this section, to be paid to the policyholders pursuant to the plan of

reorganization. The requirements of this paragraph may be waived in a

reorganization pursuant to paragraphs three and four of subsection (d)

of this section if the superintendent determines that it is in the

policyholders' interest to do so.

(3) The said undertaking shall apply to costs and expenses incurred

prior to the submission of the plan of reorganization as well as those

incurred thereafter and shall be binding whether or not the plan of

reorganization takes effect. The consideration to be given to

policyholders pursuant to the plan shall not be deemed a cost or expense

of the reorganization subject to this subsection nor to such

undertaking.

(q) Notice of proposed reorganization. Notice of the pendency of the

proposed reorganization and of the effect thereof shall be given by the

mutual life insurer in a manner satisfactory to the superintendent to

all persons to whom the mutual life insurer delivers policies or

contracts which are issued after the date on which the plan of

reorganization is adopted by the mutual life insurer and before the plan

takes effect or is withdrawn. Such persons shall have the right, unless

the laws of their domiciliary state gives other rights, to rescind such

policies or contracts, and to be refunded any amounts paid with respect

thereto, by written notice to such insurer or its agent given within ten

days of their receipt of the aforesaid notice given by such insurer.

(r) Effect of reorganization. If the plan of reorganization takes

effect, the rights of all policyholders thereafter shall be as specified

in their policies or contracts, in the charter of the reorganized

insurer and in the plan of reorganization, except for the elimination of

the right to vote, if any, and they shall have no rights under the

charter of the mutual life insurer. The reorganized insurer shall

thereafter be subject to all laws, rules and regulations applicable to

domestic stock life insurers and shall not be subject to any laws, rules

or regulations of this state applicable to domestic mutual insurers and

not to domestic stock life insurers.

(s) Failure to give notice. If the mutual life insurer complies

substantially and in good faith with the requirements of this section

with respect to the giving of any required notice to policyholders, its

failure in any case to give such notice to any person or persons

entitled thereto shall not impair the validity of the actions and

proceedings taken under this section or entitle such person to any

injunctive or other equitable relief with respect thereto, but this

subsection shall not impair any claim for damage such person or persons

would otherwise have due to such failure.

(t) Limitation of actions; security. (1) Any action challenging the

validity of or arising out of acts taken or proposed to be taken under

this section must be commenced within one year after a copy of the plan

of reorganization, with the superintendent's approval endorsed thereon,

shall be filed in the office of the superintendent or six months from

the effective date of the reorganization, whichever is later, or if the

plan of reorganization is withdrawn, within six months of such

withdrawal.

(2) In any action arising out of acts taken or proposed to be taken

under this section, the mutual life insurer of the reorganized insurer

shall be entitled at any stage of the proceedings before final judgment

to petition the court to require plaintiff or plaintiffs to give

security for the reasonable expenses, including attorneys' fees, which

may be incurred by it in connection with such action and by any other

parties defendant in connection therewith or for which the mutual life

insurer or the reorganized insurer may become liable under this chapter,

under any contract or otherwise by law, to which security the mutual

life insurer or the reorganized insurer shall have recourse in such

amount as the court having jurisdiction of such action shall determine

upon the termination of such action. The amount of security may

thereafter from time to time be increased or decreased in the discretion

of the court having jurisdiction of such action upon showing that the

security provided has or may become inadequate or excessive.

(u) Modification or exchange of existing policies. Nothing in this

section shall preclude either the mutual life insurer or the reorganized

insurer, on compliance with all applicable requirements of this chapter,

from offering at any time or from time to time to any class or category

of policyholders to modify their policies or contracts or to exchange

their policies or contracts for other policies or contracts in the

manner set forth in the offer.

(v) Prohibitions on certain offers to acquire and acquisitions of

shares. Prior to, and for a period of five years following the date when

the distribution of consideration to the policyholders in exchange for

their membership interests is completed pursuant to such plan of

reorganization, no person, other than the reorganized insurer or an

institution referred to in subsection (b) of this section that is a part

of the plan of reorganization as provided by said subsection (b) or an

institution that is formed, with the approval of the superintendent,

subsequent to the effective date of the reorganization in order to

acquire all of the common shares of the reorganized insurer in a

transaction where holders of common shares of the reorganized insurer

receive all of the common shares of such institution on a basis that is

proportionate to the number of common shares of the reorganized insurer

held by each such holder, shall directly or indirectly offer to acquire

or acquire in any manner the beneficial ownership of five percent or

more of any class of a voting security of such reorganized insurer or of

any institution which owns a majority or all of the voting securities of

the reorganized insurer, without the prior approval of the

superintendent. In the event of any violation of this subsection, or of

any action which, if consummated, might constitute such a violation, (1)

all voting securities of the reorganized insurer or of such institution

acquired by any person in excess of the maximum amount permitted to be

acquired by such person pursuant to this subsection shall be deemed to

be non-voting securities of the reorganized insurer or of such

institution, as the case may be, and (2) such violation or action may be

enforced or enjoined, as the case may be, by appropriate proceeding

commenced by the reorganized insurer, such institution or the

superintendent, the attorney general or any policyholder or stockholder

of the reorganized insurer or such institution on behalf of the

reorganized insurer or such institution in the supreme court in the

judicial district in which the reorganized insurer has its home office

or in any other court having jurisdiction, and such court may issue any

order, injunctive or otherwise, it finds necessary to cure such

violation or to prevent such action. For the purposes of this

subsection, the term "beneficial ownership", with respect to any

security, means the sole or shared power to vote, or direct the voting

of, such security and/or the sole or shared power to dispose, or direct

the disposition, of such security; the term "voting security" includes

voting securities as defined in paragraph forty-five of subsection (a)

of section one hundred seven of this chapter, any preorganization

certificate or subscription (including subscription rights issued

pursuant to a plan of reorganization), or any security convertible (with

or without consideration) into any such security, or carrying any

warrant or right to subscribe for or purchase any such security, or any

such warrant or right; the term "offer" includes every offer to buy or

acquire, solicitation of an offer to sell, tender offer for, or request

or invitation for tenders of, a security or interest in a security for

value; and the term "person" means an individual, group, firm,

corporation, partnership, association, joint stock company, trust, any

similar entity or any combination of the foregoing acting in concert.

(w) Prohibited transactions by officers, directors or employees. (1)

Prior to, and for a period of five years following the date when the

distribution of consideration to the policyholders in exchange for their

membership interests is completed pursuant to such plan of

reorganization, no officer, director or employee of the mutual insurer

or of the reorganized insurer, including family members and their

spouses, shall directly or indirectly offer to acquire or shall acquire

in any manner the beneficial ownership of any securities of the

reorganized insurer or of the institution referred to in subsection (b)

of this section unless the acquisition is (A) made pursuant to a stock

option plan approved by the superintendent; (B) made pursuant to the

plan of reorganization; (C) made by employees, including their family

members and their spouses, from a broker or dealer registered with the

Securities and Exchange Commission at the then quoted prices on the date

of purchase; or (D) made by officers or directors, including their

family members and their spouses, at least two years after the initial

public offering from a broker or dealer registered with the Securities

and Exchange Commission at the then quoted prices on the date of

purchase.

(2) For purposes of this subsection, the term "beneficial ownership",

with respect to any security, means the sole or shared power to vote, or

direct the voting of, such security and/or the sole or shared power to

dispose, or direct the disposition, of such security.

(3) For purposes of this subsection, the term "securities", includes

voting securities as defined in section one hundred seven of this

chapter, any preorganization certificate or subscription (including

subscription rights issued pursuant to a plan of reorganization), or any

security convertible (with or without consideration), into any such

security, or carrying any warrant or right to subscribe for or purchase

any such security, or any such warrant or right.

(4) For purposes of this subsection, the term "family member",

includes a brother, sister, spouse, ancestor or descendant of the

officer, director or employee of the mutual insurer or of the

reorganized insurer.

(5) No officer, director or employee shall receive any fee or other

consideration, other than regular salary, director fees, or

consideration as a policyholder in connection with any proposed

reorganization. This paragraph, however, shall not prohibit the mutual

life insurer from compensating in cash any firm with which one of its

directors is associated for services rendered in connection with any

proposed reorganization.

(x) Effect on department personnel. Notwithstanding subsection (a) of

section five hundred one of the financial services law, the

superintendent, any deputy or other employee of the department shall be

permitted to receive and exercise any rights received as a policyholder

in connection with a reorganization.