N.Y. ISC Law § 7312 — New York Code / Act ISC / Article 73 / Section 7312
Reorganization of a domestic mutual life insurer into a domestic stock life insurer
Status: in_force

§ 7312. Reorganization of a domestic mutual life insurer into a\ndomestic stock life insurer. (a) Definitions. As used in this section,\nthe following terms shall have the following meanings:\n  (1) "Mutual life insurer" means a domestic mutual life insurer.\n  (2) "Policyholder" means a person, as determined by the records of a\nmutual life insurer, who is deemed to be the "policyholder" of a policy\nor annuity contract which is of a type described in paragraphs one, two\nor three of subsection (a) of section one thousand one hundred thirteen\nof this chapter for purposes of paragraph three of subsection (a) of\nsection four thousand two hundred ten of this chapter.\n  (3) "Policyholders' membership interest" means and includes all\npolicyholders' rights as members arising under the charter of the mutual\nlife insurer or this chapter or otherwise by law including, but not\nlimited to, the rights to vote and to participate in any distribution of\nsurplus whether or not incident to a liquidation of the mutual life\ninsurer. The term "policyholders' membership interest" does not include\nrights, including without limitation the right to participate in the\ndistribution of surplus, expressly conferred upon the policyholders by\ntheir policies or contracts other than any right to vote.\n  (4) "Plan of reorganization" means a plan of conversion or conversion\nand merger in accordance with this section.\n  (5) "Reorganized insurer" means the domestic stock life insurer into\nwhich a mutual life insurer has been reorganized in accordance with this\nsection.\n  (6) "Statement date" means the December thirty-first immediately prior\nto the date the plan of reorganization was adopted.\n  (7) "Person" means an individual, partnership, firm, association,\ncorporation, joint-stock company, trust, any similar entity or any\ncombination of the foregoing acting in concert.\n  (b) Demutualization. Any other provision of this chapter to the\ncontrary notwithstanding, upon compliance with the requirements of and\ncompletion of the proceedings prescribed by this section and with the\nwritten approval of the superintendent, a mutual life insurer may either\n(1) reorganize into a domestic stock life insurer or (2) reorganize as\npart of a plan of reorganization in which a majority or all of the\ncommon shares of the domestic stock life insurer is acquired by another\ninstitution which may be an institution organized for such purpose. As\npart of the reorganization, the mutual life insurer may merge with a\ndomestic stock insurer, provided that the merging insurers shall comply\nwith the provisions of this chapter applicable to their participation in\nsuch a merger.\n  (c) Plan of reorganization. A plan of reorganization must: (1)\ndemonstrate a purpose and specify reasons for the proposed\nreorganization; (2) be in the best interest of the mutual life insurer\nand its policyholders; (3) be fair and equitable to policyholders; (4)\nprovide for the enhancement of the operations of the reorganized\ninsurer; and (5) not substantially lessen competition in any line of\ninsurance business.\n  (d) Reorganization. The proposed reorganization shall be accomplished\nby a plan which must be fair and equitable to the policyholders and must\ncomply with the terms and conditions set forth in paragraph one, two or\nfour of this subsection provided however, that a mutual life insurer\nwhich has surplus to policyholders, excluding contingently repayable\nobligations of the mutual life insurer under section one thousand three\nhundred seven of this chapter, of less than fifty million dollars and\nwhich has industrial insurance in force must comply with the terms and\nconditions set forth in paragraph one, two, three or four of this\nsubsection. Nothing herein contained shall be deemed to give any class\nof policyholders priority with respect to the assets of any such\nreorganized insurer in liquidation, other than as expressly stated in\nparagraph two of this subsection.\n  (1) (A) The mutual life insurer's participating business comprised of\nits participating policies and contracts in force on the effective date\nof reorganization shall be operated by the reorganized insurer as a\nclosed block of participating business in accordance with paragraph five\nof this subsection except that, at the option of the mutual life\ninsurer, some or all classes of group policies and contracts may be\nexcluded from the closed block of participating business and in such\nevent such group policies and contracts shall continue to be eligible to\nreceive dividends based on the experience of such class or classes; (B)\nsubject to the provisions of subparagraph (D) of this paragraph, the\nplan of reorganization provides that the policyholders' membership\ninterest will be exchanged for all of the common shares of the\nreorganized insurer or its parent company, if any, or for either, or a\ncombination of (i) the common shares of the reorganized insurer or its\nparent company, if any, and (ii) consideration equal to the proceeds of\nthe public sale in the market of such common shares by the issuer\nthereof or by a trust or other entity existing for the exclusive benefit\nof the policyholders and established solely for the purpose of effecting\nthe reorganization to which such common shares are issued by the issuer\non the effective date of reorganization, such consideration to be\ndistributed to policyholders during a process of reorganization\nspecified in the plan and not to last more than ten years after the\neffective date of reorganization or until notification of the death of a\npolicyholder or the death of the insured, whichever occurs first; (C)\nthe consideration to be given to the policyholders is allocated among\nthe policyholders in a manner which is fair and equitable to\npolicyholders and which may take into account the estimated\nproportionate contribution of each class of participating policies and\ncontracts to the aggregate consideration being given to policyholders;\n(D) unless such issuance within a shorter or longer period is disclosed\nin the plan of reorganization, the issuer of such common shares has not\nissued and does not issue within two years of the effective date of the\nreorganization (i) any of its common shares, (ii) any securities\nconvertible, with or without consideration, into such common shares or\ncarrying any warrant or right to subscribe to or to purchase common\nshares, or (iii) any warrants or rights to subscribe to or purchase such\ncommon shares or other securities described in item (ii) of this\nsubparagraph, except for the issue of common shares to or for the\nbenefit of the policyholders pursuant to the reorganization and the\nissue of stock in anticipation of options for the purchase of common\nshares being granted to officers or employees of the reorganized insurer\nor its holding company, if any, pursuant to this chapter and a plan\napproved by the superintendent; (E) the issuer shall use its best\nefforts to encourage and assist in the establishment of a public market\nfor such common shares within two years of the effective date of the\nreorganization (or such longer period as may be disclosed in the plan of\nreorganization); (F) within one year after the offering of stock other\nthan the initial distribution, but no later than six years after the\neffective date of the reorganization the insurer, under a plan approved\nby the superintendent, which he finds not to be harmful to the\nreorganized insurer, shall offer to make available to policyholders who\nreceived and retained shares of stock with minimal values on\nreorganization, a procedure to dispose of those shares of stock at\nmarket value without brokerage commissions or similar fees; and (G) the\ncosts and expenses of the reorganization shall be borne by the insurer\nbut no costs and expenses incurred in any manner in connection with the\nreorganization shall be charged to the closed block.\n  (2) (A) The mutual life insurer's participating business comprised of\nits participating policies and contracts in force on the effective date\nof the reorganization shall be operated by the reorganized insurer as a\nclosed block of participating business in accordance with paragraph five\nof this subsection except that, at the option of the mutual life insurer\nsome or all classes of group policies and contracts may be excluded from\nthe closed block of participating business and in such event such group\npolicies and contracts shall continue to be eligible to receive\ndividends based on the experience of such class or classes; (B) the\nreorganized insurer or its parent corporation is to issue and sell\nshares of one or more classes of stock having a total offering price\nequal to the estimated value in the public market of the mutual life\ninsurer; (C) the policyholders' equity is equal to the excess of (i) the\namount of the mutual insurer's assets accumulated from the operations of\nparticipating policies and contracts in force on the effective date of\nthe reorganization, over the sum of (ii) the amount of assets allocated\nto the closed block of participating business and (iii) an amount equal\nto the statutory reserves and other statutory liabilities attributable\nto any group participating policies and contracts in force on the\neffective date of reorganization and not included in the closed block of\nparticipating business, provided however, that the policyholders' equity\ncannot be less than the amount of the policyholders' preference account.\nThe amount of the policyholders' equity shall be determined as of the\nstatement date and adjusted by the estimated percentage change in the\nmutual insurer's total assets, as reported in its statutory statements,\nbetween the statement date and the effective date of the reorganization.\nAny determination of policyholders' equity shall include adjustments for\nany events or matters deemed by the superintendent appropriate, which\nhave a material effect on policyholders' equity and occurred within\nseven years prior to the statement date; (D) the plan of reorganization\nprovides that the policyholders' membership interest will be exchanged\nfor consideration equal to (i) the policyholders' equity, (ii)\nnontransferable preemptive subscription rights to purchase all of the\nshares of such issuer, (iii) ten percent of the proceeds net of\nunderwriting commissions and fees raised by the insurer upon the sale of\nits initial offering of shares, and (iv) the establishment of a\npolicyholders' preference account for the benefit of policyholders\nexisting on the effective date of reorganization, and for the benefit of\nthe future policyholders of the reorganized insurer, in the event of a\nsubsequent complete liquidation of the reorganized insurer, such\npolicyholders' preference account having the terms described below in\nthis paragraph; (E) the consideration to be given to the policyholders\nis allocated among the policyholders in a manner which is fair and\nequitable to policyholders and which may take into account the estimated\nproportionate contribution of each class of participating policies and\ncontracts to the aggregate consideration being given to policyholders;\n(F) at the option of the mutual life insurer, any common shares of the\nreorganized insurer or its parent company, if any, included in the\npolicyholders' consideration, other than those acquired as a result of a\npolicyholder exercising any preemptive subscription rights, may be\nplaced in a trust or other entity existing for the exclusive benefit of\nthe policyholders and established solely for the purpose of effecting\nthe reorganization to which such common shares are issued by the issuer\non the effective date of reorganization, such consideration or the\nproceeds of the sale of such consideration to be distributed to\npolicyholders during a process specified in the plan and not to last\nmore than ten years after the effective date of reorganization or until\nnotification of the death of the policyholder or the death of the\ninsured, whichever occurs first; (G) the issuer shall use its best\nefforts to encourage and assist in the establishment of a public market\nfor such common shares within two years of the effective date of the\nreorganization; (H) within one year after the offering of stock other\nthan the initial distribution, but no later than six years after the\neffective date of the reorganization the insurer, under a plan approved\nby the superintendent which he finds not to be harmful to the\nreorganized insurer, shall offer to make available to policyholders who\nreceived and retained shares of stock with minimal values on\nreorganization, including but not limited to shares acquired by\npolicyholders exercising their preemptive subscription rights, a\nprocedure to dispose of those shares of stock at market value without\nbrokerage commissions or similar fees; (I) the costs and expenses of the\nreorganization shall be borne by the insurer, however if the\nreorganization is effected, no costs and expenses incurred in any manner\nin connection with the reorganization shall be charged to the\nparticipating business in force on the effective date of reorganization.\nCosts and expenses shall include but not be limited to legal fees,\nappraisal fees, printing and/or mailing costs; (J) notwithstanding\nsubparagraph (I) of this paragraph, if the plan of reorganization\nprovides for or permits a person to directly or indirectly acquire in\nany manner the beneficial ownership of five percent or more of the\nvoting securities of such reorganized insurer or of any institution\nwhich owns a majority or all of the voting securities of the reorganized\ninsurer, or if the superintendent determines that a person will control,\nas defined in paragraph sixteen of subsection (a) of section one hundred\nseven of this chapter, such reorganized insurer or any institution which\nowns a majority or all of the voting securities of the reorganized\ninsurer then, unless the superintendent determines that it is in the\npolicyholders' interest to waive all or part of this condition, the\nmutual life insurer shall not, directly or indirectly, pay for any of\nthe costs or expenses of a proposed reorganization whether or not such\nreorganization is effected and in no event shall any of the costs and\nexpenses incurred in any manner in connection with the reorganization be\ncharged to the participating business in force on the effective date of\nreorganization. Costs and expenses shall include but not be limited to\nlegal fees, appraisal fees, printing and/or mailing costs; (K) the\npolicyholders' preference account referred to above shall be equal to\nthe excess of the amount of the mutual insurer's total admitted assets\nover the sum of (i) the total amount of assets allocated to the closed\nblock of participating business and (ii) the policyholders' equity and\n(iii) statutory reserves and liabilities attributed to policies and\ncontracts not included in the closed block of participating business.\nThe policyholders' preference account shall be calculated as of the\nstatement date and adjusted appropriately to reflect any changes in the\ncomponents used in determining the amount of the policyholders'\npreference account between the statement date and the effective date of\nreorganization; (L) a mutual life insurer whose policyholders' equity is\npaid in the form of stock may show, as a write-in item labeled\n"Reorganization surplus" immediately following "Capital paid up" on the\nannual statement of the reorganized insurer, a negative amount equal to\nthe excess of the policyholders' equity which was paid in the form of\nstock over its unassigned surplus on the date of reorganization; and (M)\nthe policyholders' preference account shall be so designated and shown\nas a footnote to the surplus of the reorganized insurer in all of its\npublished and filed statements. In the event of a subsequent complete\nliquidation of the reorganized insurer, and only in such event, the\npolicyholders' preference account shall be allocated among the then\npolicyholders in a manner found by the superintendent to be fair and\nequitable to policyholders, first to policyholders having participating\npolicies and contracts in force on the effective date of the\nreorganization and then to all other policyholders of the reorganized\ninsurer. The function of the policyholders' preference account shall be\nsolely to establish a priority on liquidation and its existence shall\nnot operate to restrict the use or application of the surplus of the\nreorganized insurer except that the reorganized insurer, after complying\nwith all other requirements of this chapter, cannot declare or pay a\ncash dividend on, or repurchase any of, its shares if, after such\ndeclaration or payment, the amount of net preference assets of the\nreorganized insurer is less than the amount of the policyholders'\npreference account. For this purpose, the net preference assets shall be\nequal to the insurer's total admitted assets less the sum of (i) the\nassets in the closed block of participating business (ii) the statutory\nreserves and liabilities with respect to business not in such closed\nblock and (iii) the reorganized insurer's capital and paid in surplus.\n  (3) (A) The mutual life insurer's participating business comprised of\nits participating policies and contracts in force on the effective date\nof the reorganization shall be operated by the reorganized insurer as a\nclosed block of participating business, for policyholder dividend\npurposes only, to which shall be allocated admitted assets of the mutual\nlife insurer in an amount equal to the statutory reserves and statutory\nliabilities of the mutual life insurer; (B) the consideration to be\ngiven in exchange for the policyholders' membership interest shall be\nequal to the statutory surplus of the mutual life insurer; (C) the\namount of statutory reserves and statutory liabilities and statutory\nsurplus shall be determined as of the statement date and adjusted by the\nestimated percentage change in the mutual insurer's total admitted\nassets between the statement date and the effective date of\nreorganization. Any determination of statutory surplus shall include\nadjustments for any events or matters deemed by the superintendent\nappropriate, which have a material effect on policyholders'\nconsideration and occurred within seven years prior to the statement\ndate; (D) the consideration shall be allocated among the policyholders\nin a manner which is fair and equitable to the policyholders and which\nmay take into account the estimated proportionate contribution of each\nclass of participating policies and contracts to the aggregate\nconsideration being given to policyholders; (E) the reorganized insurer\nor its parent corporation is to issue and sell shares of one or more\nclasses of stock having a total offering price equal to the estimated\nvalue in the market of the mutual life insurer; (F) the costs and\nexpenses of the reorganization shall be borne by the insurer; however,\nif the plan of reorganization provides for or permits a person to\ndirectly or indirectly acquire in any manner the beneficial ownership of\nfive percent or more of any class of a voting security of such\nreorganized insurer or of any institution which owns a majority or all\nof the voting securities of the reorganized insurer, or if the\nsuperintendent determines that a person will control, as defined in\nparagraph sixteen of subsection (a) of section one hundred seven of this\nchapter, such reorganized insurer or any institution which owns a\nmajority or all of the voting securities of the reorganized insurer\nthen, unless the superintendent determines that it is in the\npolicyholders' interest to waive all or part of this condition, the\nmutual life insurer shall not, directly or indirectly, pay for any of\nthe costs or expenses of a proposed reorganization whether or not such\nreorganization is effected. Costs and expenses shall include but not be\nlimited to legal fees, appraisal fees, printing and/or mailing costs;\nand (G) none of the assets, including the revenue therefrom, allocated\nin accordance with subparagraph (A) of this paragraph shall revert to\nthe benefit of the stockholders of the reorganized insurer.\n  (4) (A) Any method approved by the superintendent under which the\npolicyholders' membership interest is converted into or exchanged for\nconsideration determined by the superintendent to be fair and equitable\nto policyholders and meeting the requirements of this section; (B) the\nconsideration to be given to the policyholders is allocated among the\npolicyholders in a manner which is fair and equitable; (C) unless the\nsuperintendent determines that it is in the policyholders' interest to\nwaive all or part of this condition, the mutual life insurer does not,\ndirectly or indirectly, pay for any of the costs or expenses of a\nproposed reorganization whether or not such reorganization is effected.\nCosts and expenses shall include but not be limited to legal fees,\nappraisal fees, printing and/or mailing costs; and (D) in determining\nwhether any reorganization is fair and equitable, the superintendent\nshall be guided by the legitimate economic interests of participating\npolicyholders as delineated in this section.\n  (5) (A) When the mutual life insurer's participating business\ncomprised of its participating policies and contracts in force on the\neffective date of the reorganization shall be operated by the\nreorganized insurer as a closed block of participating business in\naccordance with paragraphs one and two of this subsection, then it shall\nbe so operated for the exclusive benefit of such policies and contracts\nincluded therein, for policyholder dividend purposes only; (B) to such\nclosed block shall be allocated assets of the mutual life insurer in an\namount which together with anticipated revenue from such business is\nreasonably expected to be sufficient to support such business including,\nbut not limited to, provisions for payment of claims, expenses and\ntaxes, and to provide for continuation of current payable dividend\nscales, if the experience underlying such scales continues and for\nappropriate adjustments in such scales if the experience changes; (C)\nthe amount of such assets shall be determined as of the statement date\nand brought forward to the effective date of the reorganization using\nmethods which would have been used had the closed block been established\non the statement date with appropriate recognition of new issues; and\n(D) none of the assets, including the revenue therefrom, allocated in\naccordance with subparagraph (B) of this paragraph shall revert to the\nbenefit of the stockholders of the reorganized insurer.\n  (6) If any amount of the policyholders' consideration for certain\nclasses of policies or contracts is to be paid in the form of increased\nannual dividends to the policyholders in those classes, that amount is\nto be added to the assets previously allocated in accordance with\nparagraph three or five of this subsection and is to be paid out to\nthose classes in a fair and equitable manner.\n  (e) Adoption of plan of reorganization. (1) A mutual life insurer\nseeking to reorganize under this section shall, by action of\nthree-fourths of its entire board of directors, adopt a plan consistent\nwith the provisions of this section and that it finds is fair and\nequitable to the policyholders. The board of directors of the mutual\nlife insurer, in selecting one of the methods described in subsection\n(d) of this section, shall set forth the basis for their selection. The\nplan of reorganization shall set forth (A) a demonstration of the\npurpose for the proposed reorganization; (B) the form of the\nreorganization; (C) the proposed charter of the reorganized insurer set\nout in accordance with section one thousand two hundred one of this\nchapter and its proposed by-laws which shall provide for the removal of\nthe word "mutual" from the name of the company; (D) the manner and basis\nby which the reorganization shall take place; (E) the consideration to\nbe given to the policyholders in exchange for their policyholders'\nmembership interest or the manner of converting the policyholders'\nmembership interest into securities or other consideration; (F) the\nmethod of allocating the consideration among policyholders; (G) the\nmethod of operation of the mutual life insurer's participating business\ncomprised of its participating policies and contracts in force on the\neffective date of the reorganization; and (H) a plan of operation for\nthe reorganized insurer including actuarial projections for a ten-year\nperiod and a statement indicating its intentions with regard to issuing\nany nonparticipating business. If the reorganized insurer proposes to\ncontinue to issue for delivery in this state participating policies or\ncontracts, the plan of reorganization shall so specify. In such event,\nupon the superintendent's approval of the plan of reorganization\npursuant to this section, the superintendent shall, in accordance with\nsection four thousand two hundred thirty-one of this chapter, issue a\nrevocable permit to the reorganized insurer authorizing it to issue\nparticipating policies and contracts in this state. The plan of\nreorganization may contain any other conditions and provisions which the\nboard of directors of the mutual life insurer may deem necessary or\nadvisable in connection with the proposed reorganization.\n  (2) The consideration to be given in exchange for the policyholders'\nmembership interest or into which such membership interest is to be\nconverted may consist of cash, securities of the reorganized insurer or\nsecurities of another institution or institutions, a certificate of\ncontribution, additional life insurance or annuity benefits, increased\ndividends or other consideration or any combination of such forms of\nconsideration. The consideration, if any, given to any class or category\nof policyholder need not be the same as the consideration given to any\nother class or category of policyholder. The certificate of contribution\nreferred to above shall be repayable in five years and bear annual\ninterest at the published monthly average, as defined in section three\nthousand two hundred six of this chapter, for the calendar month ending\ntwo months before the effective date of reorganization.\n  (3) The policyholders who shall be entitled to notice of and to vote\nupon the proposal to approve the plan of reorganization and to notice of\nthe public hearing required by this section shall be the policyholders\nwhose policies or contracts are in force on the date of adoption of the\nplan of reorganization. Each such policyholder whose policy has been in\nforce on such date shall be entitled to the consideration, if any,\nprovided for such policyholder in the plan based on such policyholder's\nmembership interest determined pursuant to this section but only to the\nextent that such policyholder's membership interest arose from policies\nor contracts that shall be in force on the date of adoption of the plan.\n  (4) Upon adoption of the plan of reorganization, it shall be duly\nexecuted by the chairman of the board, the president or a vice president\nand attested by the secretary or an assistant secretary of the mutual\nlife insurer under such insurer's corporate seal and shall be submitted\nto the superintendent with a copy of the resolutions adopting such plan\nand finding that it is fair and equitable to the policyholders,\naccompanied by a certificate of adoption of such resolutions subscribed\nby such officers and affirmed by them as true under penalties of perjury\nand under the seal of the mutual life insurer.\n  (f) Amendment or withdrawal of plan. The mutual life insurer may, by\naction of a majority of the entire board of directors, at any time\nbefore the plan of reorganization becomes effective as provided by this\nsection (1) amend the plan of reorganization; or (2) withdraw the plan\nof reorganization. On adoption of an amendment it shall be duly executed\nby the chairman of the board, the president or a vice president and\nattested by the secretary or an assistant secretary of the mutual life\ninsurer under such insurer's corporate seal and shall be submitted to\nthe superintendent with a copy of the resolutions adopting such\namendments subscribed by such officers and affirmed by them as true\nunder penalties of perjury and under the seal of the mutual life\ninsurer. In case of an amendment, all references in this section to the\nplan of reorganization shall be deemed to refer to the plan as amended.\nNo amendment made after any public hearing required by this section or\nafter approval by the policyholders as provided in this section shall\nchange the plan in a manner which the superintendent determines is\nmaterially disadvantageous to any of the policyholders unless a further\npublic hearing is held on the plan as amended if the amendment is made\nafter the public hearing, or the plan as amended is submitted for\nreconsideration by the policyholders if the amendment is made after the\nplan has been approved by the policyholders, under the conditions and\nprocedures determined by the superintendent in accordance with this\nsection.\n  (g) Additional information. Upon submission to him of the plan of\nreorganization, the superintendent may request any additional documents\nor information and may examine the mutual life insurer or any of its\naffiliates, to the extent he may determine to be necessary to enable him\nto make the findings required by this section for the approval by him of\nthe plan of reorganization. If the reorganized insurer proposes to\ncontinue to issue for delivery in this state participating policies or\ncontracts, the superintendent may also request such information or\nagreements relative thereto as he may require pursuant to section four\nthousand two hundred thirty-one of this chapter.\n  (h) Consultants and certifications. (1) The superintendent may appoint\none or more qualified disinterested persons or institutions as\nconsultants to advise him on any matters related to the reorganization.\nThe appointment of a consultant shall be in writing and shall set forth\nthe duties and responsibilities of the consultant. Copies of such\nappointment shall be given to the consultant and concurrently to the\nmutual life insurer.\n  (2) If the plan of reorganization satisfies the conditions set forth\nin paragraph one or two of subsection (d) of this section, the\nsuperintendent shall appoint one or more qualified and disinterested\nactuaries for the purpose specified in paragraph three of this\nsubsection. Such actuary shall be a member of the American Academy of\nActuaries, and shall be knowledgeable and experienced as to the matters\nto be certified.\n  (3) Such actuary shall certify in writing as to (A) in the case of a\nplan of reorganization pursuant to paragraph two of subsection (d) of\nthis section, the amount of the mutual insurer's assets accumulated from\nthe operations of participating policies and contracts in force on the\neffective date of the reorganization and (B) in the case of a plan of\nreorganization pursuant to paragraphs one or two of subsection (d) of\nthis section, the reasonableness and sufficiency of the asset allocation\nreferred to in subparagraph (B) of paragraph five of subsection (d) of\nthis section. Such certification shall be in form satisfactory to the\nsuperintendent and shall be made in accordance with professional\nstandards and practices generally accepted by the actuarial profession\nand such other factors as such actuary in his professional judgment\nbelieves are reasonable and appropriate at the time such certification\nis made. Any such certification shall be accompanied by a memorandum of\nthe actuary, in form satisfactory to the superintendent, describing the\ncalculations made in support of such certification and the assumptions\nused in such calculations.\n  (4) The consultant and the actuary may request of the mutual life\ninsurer access to its books and records and the furnishing by it of any\nother information in its possession, to the extent it may reasonably be\ndeemed necessary to make the valuations and certifications contemplated\nby this subsection, or to advise the superintendent on any matters\nrelated to the reorganization. The consultant and the actuary shall\nreport to the superintendent any instance in which the mutual life\ninsurer fails to provide any information requested by them. The\nconsultant and the actuary shall not, under judicial process or\notherwise, be obligated or permitted to divulge to any one except the\nsuperintendent any information not otherwise publicly available which is\nso obtained by them. The consultant and the actuary shall receive\nreasonable compensation and shall be reimbursed for reasonable expenses\nincurred in performing their duties.\n  (5) The report of the consultant and the certification of the actuary\nshall be made to the superintendent. In making the determinations\ncontemplated by this section, the superintendent shall not be bound by\nany findings, conclusions, certifications or recommendations made by the\nconsultant or the actuary. All information obtained by the\nsuperintendent pursuant to this section, including without limitation\ninformation obtained through examinations by him, the report of the\nconsultant, the certification of the actuary, the memorandum of the\nactuary and other information secured by the consultant or the actuary\nand turned over to the superintendent, are hereby specifically exempted,\nas contemplated by paragraph (a) of subdivision two of section\neighty-seven of the public officers law, from disclosure by the\nsuperintendent under said section eighty-seven of such law. Such\nexemption shall not preclude or exempt the superintendent from\ndisclosure of such information pursuant to judicial process under\nprovisions of law other than said section eighty-seven of the public\nofficers law, nor prohibit any disclosure which in the opinion of the\nsuperintendent, and after an opportunity for the insurer to be heard,\nthe superintendent deems should be made public for the benefit of the\ninsurer, its policyholders or the public. If the department intends to\nmake any report or certification public, then such report or\ncertification shall be made available to the company at least fifteen\ndays prior to such public disclosure.\n  (6) Nothing contained in this section shall be construed to exclude\nany person or employee or member of an institution from the category of\n"disinterested person" solely because such individual is a policyholder\nof the insurer or that such person or institution is to be one of the\nunderwriters of any shares to be sold pursuant to the plan of\nreorganization.\n  (i) Public hearing. The superintendent shall hold a public hearing\nupon the fairness of the terms and conditions of the plan of\nreorganization, the reasons and purposes for the mutual life insurer to\ndemutualize, and whether the reorganization is in the interest of the\nmutual life insurer and its policyholders, and not detrimental to the\npublic. Notice stating the time, place and purpose of the hearing shall\nbe mailed by the mutual life insurer to each policyholder entitled to\nnotice of the hearing in accordance with paragraph three of subsection\n(e) of this section, at his last known address as shown on the records\nof the mutual life insurer; such notice shall be mailed at least thirty\ndays before the date of the hearing. Such notice shall be preceded or\naccompanied by a true and complete copy of the plan, or by a summary\nthereof approved by the superintendent, and such other explanatory\ninformation as the superintendent shall approve or require. In addition,\nthe mutual life insurer shall give notice of the time, place and purpose\nof the hearing by publication in three newspapers of general\ncirculation, one in the county in which the insurer has its principal\noffice and two in other cities within or without this state approved by\nthe superintendent. Such newspaper publications shall be made not less\nthan fifteen days nor more than sixty days before the hearing, and shall\nbe in a form approved by the superintendent.\n  (j) Approval of plan by superintendent. The superintendent shall after\nthe public hearing required by subsection (i) of this section approve\nthe plan of reorganization if he finds that the proposed reorganization,\nin whole and in part, does not violate this chapter, is fair and\nequitable to the policyholders and is not detrimental to the public and\nthat, after giving effect to the reorganization, the reorganized insurer\nwill have an amount of capital and surplus the superintendent deems to\nbe reasonably necessary for its future solvency. If approval is denied,\nthe denial shall be in writing setting forth a statement of the reasons\ntherefor and the mutual life insurer shall have the right to a hearing\nbefore the superintendent within thirty days of the date of such denial.\nThe superintendent shall not disapprove of a plan of reorganization for\nthe reason that the mutual life insurer selected one of the methods\nprovided for in subsection (d) of this section rather than another. The\nsuperintendent shall approve or disapprove the plan in writing on or\nbefore sixty days after the conclusion of the public hearing required by\nsubsection (i) of this section.\n  (k) Approval by policyholders. (1) A proposal to approve the plan of\nreorganization shall be submitted to policyholders. Notice stating the\ndate, time and place for voting on such proposal shall be mailed by the\nmutual life insurer to each policyholder entitled to notice of and to\nvote on the proposal in accordance with paragraph three of subsection\n(e) of this section, at his last known address as shown on the records\nof the mutual life insurer; such notice shall be mailed at least thirty\ndays before the date of the action. Such notice may be combined with\nnotice of the public hearing required by this section. Such notice shall\nbe preceded or accompanied by a true and complete copy of the plan, or\nby a summary thereof approved by the superintendent, and such other\nexplanatory information as the superintendent shall approve or require.\n  (2) Each policyholder entitled to vote on the proposal shall be\nentitled to cast one vote, unless otherwise provided in the charter or\nby-laws of the mutual life insurer, on the proposal, either in person or\nby mail or by proxy, irrespective of the number or amount of the\npolicies or contracts he holds. Any proxy shall be revocable at any time\nexcept to the extent that, at the time of exercise, the power conferred\nthereby has been exercised. All votes shall be by written ballot cast in\nperson or by mail by policyholders entitled to vote or by proxy agents\nduly appointed by policyholders entitled to vote. The voting on the\nproposal shall be held at the home office of the mutual life insurer.\nThe polls shall be opened at ten o'clock in the forenoon and remain open\nuntil four o'clock in the afternoon of the day fixed for such voting, at\nwhich time they shall be closed. The proposal to approve the plan of\nreorganization may be adopted by the affirmative vote of two-thirds of\nall votes cast by policyholders entitled to vote.\n  (3) The superintendent shall have power to supervise and direct and\nprescribe rules governing the procedure for the conduct of the voting on\nthe proposal to such extent, consistent with the provisions of this\nsection, as he deems necessary to insure a fair and accurate vote. Such\npowers shall include, but not be limited to, power to supervise and\nregulate (A) the determination of policyholders entitled to notice of\nand to vote on the proposal; (B) the giving of notice of the proposal;\n(C) the receipt, custody, safeguarding, verification and tabulation of\nproxy forms and ballots; and (D) the resolution of disputes.\n  (4) The superintendent shall appoint as inspectors an adequate number\nof personnel of the department of financial services or other competent\nand disinterested persons and may appoint, if necessary, expert\naccountants and other assistants and may authorize the procurement of\nstationery and supplies necessary for conducting the voting on the\nproposal and canvassing the votes. The inspectors shall have power to\ndetermine all questions concerning the verification of the ballots and\nproxies, the ascertainment of the validity thereof, the qualifications\nof the voters and the canvass of the vote, and with respect thereto\nshall act under such rules as shall be prescribed by the superintendent.\nAny disagreement among the inspectors shall be reported to and shall be\nresolved by the superintendent. Any determinations by the inspectors or\nthe superintendent shall be subject to judicial review.\n  (5) Representatives of the policyholders, including representatives of\npolicyholders favoring or opposing the approval of the plan, shall be\nentitled to be present during the casting, verification and canvassing\nof the proxies and ballots and shall be entitled to examine and object\nto any such proxy or ballot. The superintendent or the inspectors may\nlimit the number of persons representing any interested person or group\nand may specify fair and reasonable procedures for the examination of\nand presentation of objections to the proxies and ballots. Costs and\nexpenses incurred in providing such representation shall not be a charge\nupon or paid from the funds of the mutual life insurer or the person\nresponsible for the costs and expenses of the reorganization.\n  (6) Neither the mutual life insurer nor any officer, agent or employee\nthereof shall knowingly omit, from any list of policyholders entitled to\nnotice of and to vote on the proposal, the name of any policyholder\nrequired to be included therein, or shall, in connection with any such\nlist, knowingly omit to give the name and address, as last shown on the\nrecords of the mutual life insurer, of any policyholder. No person shall\nconceal or withhold or aid or abet any other person in concealing or\nwithholding any proxy or ballot from the authorized custodians thereof\nor from the inspectors. No policyholder shall sell or offer to sell any\nvote or proxy for any sum of money or anything of value other than the\nconsideration provided for in the plan or reorganization if such plan\nbecomes effective.\n  (7) All ballots and proxies received by the inspectors shall\nimmediately upon the completion of the canvass be placed in sealed\npackages and shall be preserved by the inspectors for a period of four\nyears, subject to the order of any court having jurisdiction of any\nproceedings relating thereto, and then shall be turned over to the\nmutual life insurer, or the reorganized insurer if the reorganization\nhas become effective.\n  (8) The conduct of the voting on the proposal shall at all times, on\npetition of the superintendent or of any person or persons whose rights\nmay be affected, be subject to the supervision and control of the\nsupreme court in the judicial district in which the mutual life insurer\nhas its home office.\n  (9) The inclusion by the mutual life insurer of the name of any person\nin any list of policyholders required by this section shall not be\nconstrued as an admission by such insurer of the validity of any policy\nor contract and no such list shall be competent evidence against such\ninsurer in any action or proceeding in which the question of the\nvalidity of any policy or contract or of any claim under it is involved.\n  (10) The provisions of section four thousand two hundred ten of this\nchapter shall not apply to the action by policyholders pursuant to this\nsection.\n  (11) Upon the conclusion of the vote, the mutual life insurer shall\nsubmit to the superintendent (A) a certified copy of the plan of\nreorganization, subscribed by the chairman of the board, the president\nor any vice president and attested by the secretary or an assistant\nsecretary of the mutual life insurer; (B) a certificate, subscribed by\nthe chairman of the board, the president or any vice president and\nattested by the secretary or assistant secretary of the mutual life\ninsurer, or subscribed by the person or persons, if any, designated by\nthe superintendent to supervise the giving of notice of the date for\naction on the proposal, to the effect that such notice was given in\naccordance with this section to all policyholders entitled to such\nnotice; and (C) a certificate subscribed by the inspectors of the\nresults of the vote, as evidenced by valid ballots received before the\npolls were closed. Each such certificate shall be affirmed as true under\nthe penalties of perjury by the person or persons subscribing the same\nand, in the case of a certificate signed by officers of the mutual life\ninsurer, shall be affirmed under the corporate seal of the mutual life\ninsurer.\n  (l) Effective date of reorganization. When the superintendent has\ngiven his approval of the plan of reorganization as provided in\nsubsection (j) of this section and certification of approval of the plan\nhas been made to the superintendent as provided in subsection (k) of\nthis section, a copy of the plan of reorganization, with the\nsuperintendent's approval endorsed thereon, shall be filed in the office\nof the superintendent. A copy of such plan certified by the\nsuperintendent shall also be filed by the mutual life insurer in the\noffice of the clerk of the county where the principal office of the\nmutual life insurer is located. The plan of reorganization shall take\neffect in accordance with its terms on the date when the filings\nrequired by this subsection have been made or on such later date, if\nany, as may have been specified in or determined in accordance with said\nplan or pursuant thereto. The superintendent shall issue an amended\ncertificate of authority to the reorganized insurer and such license, if\nany, as may be required under section one thousand two hundred four of\nthis chapter for the sale of its securities as specified in its plan of\nreorganization.\n  (m) Corporate existence. Upon the reorganization of the mutual life\ninsurer in the manner herein provided, the reorganized insurer shall be\ndeemed a continuation of the corporate existence of the mutual life\ninsurer or, in the case of a merger, of the company specified in the\nplan of reorganization as the continuing company, which may be either\nthe mutual life insurer or the domestic stock life insurer with which it\nis merged. All the rights, franchises and interests of the mutual life\ninsurer and, in the case of a merger, of the domestic stock insurer, in\nand to every species of property, real, personal and mixed, and things\nin action thereunto belonging, shall be deemed transferred to and vested\nin the continuing company, without any other deed or transfer; and\nsimultaneously therewith such continuing company shall be deemed to have\nassumed all of the obligations and liabilities of the mutual life\ninsurer and, in the case of a merger, of the domestic stock insurer,\nother than obligations and liabilities with respect to the\npolicyholders' membership interest eliminated by the plan of\nreorganization.\n  (n) Actions and proceedings. No action or proceeding pending at the\ntime of the reorganization to which the mutual life insurer may be a\nparty shall be abated or discontinued by reason of such reorganization,\nbut the same may be prosecuted to final judgment in the same manner as\nif the reorganization had not taken place, or the reorganized insurer\nmay be substituted in place of such mutual life insurer by order of the\ncourt in which the action or proceeding may be pending.\n  (o) Directors and officers. The directors and officers of the mutual\nlife insurer, unless otherwise specified in the plan of reorganization,\nshall serve as directors and officers of the reorganized insurer until\nnew directors and officers have been duly elected and qualified pursuant\nto the charter and by-laws of the reorganized insurer.\n  (p) Costs and expenses. (1) The mutual life insurer shall deliver to\nthe superintendent at the time of submission of the plan of\nreorganization a written undertaking in form and substance satisfactory\nto the superintendent and signed by the mutual life insurer, and by such\nother persons as the superintendent may require, specifying the manner\nin which all costs and expenses incurred in any manner in connection\nwith the plan of reorganization shall be paid or reimbursed. Such\nundertaking shall provide for the payment or reimbursement of all\nexpenses incurred by the superintendent or the department in connection\nwith the plan of reorganization, other than normal operating expenses of\nthe department.\n  (2) Such undertaking, other than a reorganization pursuant to\nparagraph one of subsection (d) of this section, shall also provide that\nno payment of costs and expenses by the mutual life insurer or the\nreorganized insurer shall, after giving effect to any reimbursement or\ncontribution received by such insurer with respect thereto, have the\neffect of reducing the consideration, other than the policyholders'\npreference account referred to in paragraph two of subsection (d) of\nthis section, to be paid to the policyholders pursuant to the plan of\nreorganization. The requirements of this paragraph may be waived in a\nreorganization pursuant to paragraphs three and four of subsection (d)\nof this section if the superintendent determines that it is in the\npolicyholders' interest to do so.\n  (3) The said undertaking shall apply to costs and expenses incurred\nprior to the submission of the plan of reorganization as well as those\nincurred thereafter and shall be binding whether or not the plan of\nreorganization takes effect. The consideration to be given to\npolicyholders pursuant to the plan shall not be deemed a cost or expense\nof the reorganization subject to this subsection nor to such\nundertaking.\n  (q) Notice of proposed reorganization. Notice of the pendency of the\nproposed reorganization and of the effect thereof shall be given by the\nmutual life insurer in a manner satisfactory to the superintendent to\nall persons to whom the mutual life insurer delivers policies or\ncontracts which are issued after the date on which the plan of\nreorganization is adopted by the mutual life insurer and before the plan\ntakes effect or is withdrawn. Such persons shall have the right, unless\nthe laws of their domiciliary state gives other rights, to rescind such\npolicies or contracts, and to be refunded any amounts paid with respect\nthereto, by written notice to such insurer or its agent given within ten\ndays of their receipt of the aforesaid notice given by such insurer.\n  (r) Effect of reorganization. If the plan of reorganization takes\neffect, the rights of all policyholders thereafter shall be as specified\nin their policies or contracts, in the charter of the reorganized\ninsurer and in the plan of reorganization, except for the elimination of\nthe right to vote, if any, and they shall have no rights under the\ncharter of the mutual life insurer. The reorganized insurer shall\nthereafter be subject to all laws, rules and regulations applicable to\ndomestic stock life insurers and shall not be subject to any laws, rules\nor regulations of this state applicable to domestic mutual insurers and\nnot to domestic stock life insurers.\n  (s) Failure to give notice. If the mutual life insurer complies\nsubstantially and in good faith with the requirements of this section\nwith respect to the giving of any required notice to policyholders, its\nfailure in any case to give such notice to any person or persons\nentitled thereto shall not impair the validity of the actions and\nproceedings taken under this section or entitle such person to any\ninjunctive or other equitable relief with respect thereto, but this\nsubsection shall not impair any claim for damage such person or persons\nwould otherwise have due to such failure.\n  (t) Limitation of actions; security. (1) Any action challenging the\nvalidity of or arising out of acts taken or proposed to be taken under\nthis section must be commenced within one year after a copy of the plan\nof reorganization, with the superintendent's approval endorsed thereon,\nshall be filed in the office of the superintendent or six months from\nthe effective date of the reorganization, whichever is later, or if the\nplan of reorganization is withdrawn, within six months of such\nwithdrawal.\n  (2) In any action arising out of acts taken or proposed to be taken\nunder this section, the mutual life insurer of the reorganized insurer\nshall be entitled at any stage of the proceedings before final judgment\nto petition the court to require plaintiff or plaintiffs to give\nsecurity for the reasonable expenses, including attorneys' fees, which\nmay be incurred by it in connection with such action and by any other\nparties defendant in connection therewith or for which the mutual life\ninsurer or the reorganized insurer may become liable under this chapter,\nunder any contract or otherwise by law, to which security the mutual\nlife insurer or the reorganized insurer shall have recourse in such\namount as the court having jurisdiction of such action shall determine\nupon the termination of such action. The amount of security may\nthereafter from time to time be increased or decreased in the discretion\nof the court having jurisdiction of such action upon showing that the\nsecurity provided has or may become inadequate or excessive.\n  (u) Modification or exchange of existing policies. Nothing in this\nsection shall preclude either the mutual life insurer or the reorganized\ninsurer, on compliance with all applicable requirements of this chapter,\nfrom offering at any time or from time to time to any class or category\nof policyholders to modify their policies or contracts or to exchange\ntheir policies or contracts for other policies or contracts in the\nmanner set forth in the offer.\n  (v) Prohibitions on certain offers to acquire and acquisitions of\nshares. Prior to, and for a period of five years following the date when\nthe distribution of consideration to the policyholders in exchange for\ntheir membership interests is completed pursuant to such plan of\nreorganization, no person, other than the reorganized insurer or an\ninstitution referred to in subsection (b) of this section that is a part\nof the plan of reorganization as provided by said subsection (b) or an\ninstitution that is formed, with the approval of the superintendent,\nsubsequent to the effective date of the reorganization in order to\nacquire all of the common shares of the reorganized insurer in a\ntransaction where holders of common shares of the reorganized insurer\nreceive all of the common shares of such institution on a basis that is\nproportionate to the number of common shares of the reorganized insurer\nheld by each such holder, shall directly or indirectly offer to acquire\nor acquire in any manner the beneficial ownership of five percent or\nmore of any class of a voting security of such reorganized insurer or of\nany institution which owns a majority or all of the voting securities of\nthe reorganized insurer, without the prior approval of the\nsuperintendent. In the event of any violation of this subsection, or of\nany action which, if consummated, might constitute such a violation, (1)\nall voting securities of the reorganized insurer or of such institution\nacquired by any person in excess of the maximum amount permitted to be\nacquired by such person pursuant to this subsection shall be deemed to\nbe non-voting securities of the reorganized insurer or of such\ninstitution, as the case may be, and (2) such violation or action may be\nenforced or enjoined, as the case may be, by appropriate proceeding\ncommenced by the reorganized insurer, such institution or the\nsuperintendent, the attorney general or any policyholder or stockholder\nof the reorganized insurer or such institution on behalf of the\nreorganized insurer or such institution in the supreme court in the\njudicial district in which the reorganized insurer has its home office\nor in any other court having jurisdiction, and such court may issue any\norder, injunctive or otherwise, it finds necessary to cure such\nviolation or to prevent such action. For the purposes of this\nsubsection, the term "beneficial ownership", with respect to any\nsecurity, means the sole or shared power to vote, or direct the voting\nof, such security and/or the sole or shared power to dispose, or direct\nthe disposition, of such security; the term "voting security" includes\nvoting securities as defined in paragraph forty-five of subsection (a)\nof section one hundred seven of this chapter, any preorganization\ncertificate or subscription (including subscription rights issued\npursuant to a plan of reorganization), or any security convertible (with\nor without consideration) into any such security, or carrying any\nwarrant or right to subscribe for or purchase any such security, or any\nsuch warrant or right; the term "offer" includes every offer to buy or\nacquire, solicitation of an offer to sell, tender offer for, or request\nor invitation for tenders of, a security or interest in a security for\nvalue; and the term "person" means an individual, group, firm,\ncorporation, partnership, association, joint stock company, trust, any\nsimilar entity or any combination of the foregoing acting in concert.\n  (w) Prohibited transactions by officers, directors or employees. (1)\nPrior to, and for a period of five years following the date when the\ndistribution of consideration to the policyholders in exchange for their\nmembership interests is completed pursuant to such plan of\nreorganization, no officer, director or employee of the mutual insurer\nor of the reorganized insurer, including family members and their\nspouses, shall directly or indirectly offer to acquire or shall acquire\nin any manner the beneficial ownership of any securities of the\nreorganized insurer or of the institution referred to in subsection (b)\nof this section unless the acquisition is (A) made pursuant to a stock\noption plan approved by the superintendent; (B) made pursuant to the\nplan of reorganization; (C) made by employees, including their family\nmembers and their spouses, from a broker or dealer registered with the\nSecurities and Exchange Commission at the then quoted prices on the date\nof purchase; or (D) made by officers or directors, including their\nfamily members and their spouses, at least two years after the initial\npublic offering from a broker or dealer registered with the Securities\nand Exchange Commission at the then quoted prices on the date of\npurchase.\n  (2) For purposes of this subsection, the term "beneficial ownership",\nwith respect to any security, means the sole or shared power to vote, or\ndirect the voting of, such security and/or the sole or shared power to\ndispose, or direct the disposition, of such security.\n  (3) For purposes of this subsection, the term "securities", includes\nvoting securities as defined in section one hundred seven of this\nchapter, any preorganization certificate or subscription (including\nsubscription rights issued pursuant to a plan of reorganization), or any\nsecurity convertible (with or without consideration), into any such\nsecurity, or carrying any warrant or right to subscribe for or purchase\nany such security, or any such warrant or right.\n  (4) For purposes of this subsection, the term "family member",\nincludes a brother, sister, spouse, ancestor or descendant of the\nofficer, director or employee of the mutual insurer or of the\nreorganized insurer.\n  (5) No officer, director or employee shall receive any fee or other\nconsideration, other than regular salary, director fees, or\nconsideration as a policyholder in connection with any proposed\nreorganization. This paragraph, however, shall not prohibit the mutual\nlife insurer from compensating in cash any firm with which one of its\ndirectors is associated for services rendered in connection with any\nproposed reorganization.\n  (x) Effect on department personnel. Notwithstanding subsection (a) of\nsection five hundred one of the financial services law, the\nsuperintendent, any deputy or other employee of the department shall be\npermitted to receive and exercise any rights received as a policyholder\nin connection with a reorganization.\n