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SECTION 7302
Conversion of stock life insurance companies into mutual companies
Insurance (ISC) CHAPTER 28, ARTICLE 73
§ 7302. Conversion of stock life insurance companies into mutual
companies. (a) A domestic stock life insurance company may become a
mutual life insurance company, whether or not its policyholders have
become entitled to vote for directors pursuant to section four thousand
two hundred twelve of this chapter or the former insurance law, and to
that end may formulate and carry out a plan for the acquisition of its
outstanding shares, as follows:

(1) Such plan shall have been adopted by a vote of a majority of the
directors of the company.

(2) Such plan shall have been approved by a vote of shareholders
representing a majority of the outstanding shares at a meeting called
for that purpose.

(3) Such plan shall have been approved by the vote of a majority of
the policyholders eligible to vote who vote at a meeting called for that
purpose. Any policyholder who holds life insurance in such company in an
amount at least equal to one thousand dollars or an equivalent thereto
as hereinafter provided and whose insurance is then in force and has
been in force for at least one year prior to such shareholders' meeting,
shall be eligible to vote thereat, either in person or by proxy or by
mail. The aforementioned reference to life insurance in an amount at
least equal to one thousand dollars shall be deemed to include, as
equivalent thereto, an annuity contract which at normal date of maturity
requires the payment of one hundred dollars or more annually, a pure
endowment contract for the principal sum of one thousand dollars or
more, and a policy of accident or health insurance requiring the payment
of a premium of not less than twenty-five dollars annually. In the case
of every policy or contract of group insurance or group annuity
contract, issued by such company, the employer, or other person, firm,
corporation or association to whom or in whose name the master policy
shall have been issued and held, shall be deemed one policyholder within
the meaning of this paragraph. Notice of such meeting shall be given by
mailing such notice from the home office of such company at least thirty
days prior to such meeting, in a sealed envelope, postage prepaid,
addressed to each policyholder at his last known post office address.
Such meeting shall be conducted in such manner as may be provided for in
such plan, with the approval of the superintendent. The superintendent
shall supervise and direct the methods and procedure of such meeting
and, to conduct the voting, shall appoint an adequate number of
inspectors who shall have power to determine all questions concerning
the validity and verification of the ballots, the qualifications of the
voters and the canvass of the vote. Such inspectors, or any one thereof
designated by the superintendent, shall certify to the superintendent
and to such company the result of such vote, under such rules as shall
be prescribed by the superintendent. All necessary expenses incurred by
the superintendent or incurred with his approval by the inspectors
appointed by him shall be paid by such company upon the certificate of
the superintendent.

(4) Such plan may specify the purchase price to be paid by such
company for its shares, and in such case the price so specified shall be
adhered to. If such plan does not specify the price to be paid for such
shares, the company shall first obtain the approval of the
superintendent for every payment made for the acquisition of any shares.

(5) The plan shall name three trustees authorized to receive shares of
the company and hold them in trust for all policyholders until the
conversion process has been completed. The plan shall provide a method
for filling vacancies among the trustees.

(6) The plan shall have been submitted to the superintendent and
approved as conforming to the requirements of this chapter and as not
prejudicial to the policyholders of the company or to the insuring
public. Before approving any such plan or any such payment, the
superintendent shall be satisfied, by such investigation as he may make
or by such evidence as he may require, that such company, after
deducting the aggregate sum appropriated by such plan for the
acquisition of any or all of its shares, and in the case of any payment
not fixed by such plan, after deducting also the amount of such payment,
will be possessed of admitted assets in an amount equal to the sum of:

(A) its entire liabilities, including the net values of its
outstanding contracts computed in accordance with the provisions of this
chapter,

(B) the minimum surplus prescribed by this chapter for mutual life
insurance companies organized to do the same kinds of business, and

(C) an additional contingent surplus deemed by the superintendent
necessary to protect the company's policyholders and the insuring
public, in view of the past experience of such company, the character of
its assets, its present management, and its probable future earnings.

(7) No change shall be made in any such plan, adopted and approved as
aforesaid, except upon the formulation, adoption and approval of a new
plan in accordance with the foregoing requirements.

(8) In pursuance of any such plan to convert a domestic stock life
insurance company into a mutual life insurance company, such company
shall have power, and shall be privileged, to acquire any of its shares
by gift, bequest, or purchase. Until all of its outstanding shares are
acquired, any shares so acquired shall be taken and held in trust for
all the policyholders of such company, by the trustees named in such
plan. Before undertaking any of the duties of the appointment each
trustee shall file with the company an acceptance of the appointment and
a declaration that he will faithfully discharge his duties as trustee,
subscribed and affirmed by him as true under the penalties of perjury.
All shares held by the trustees shall be deemed admitted assets of the
company at their par value. The trustees shall have power to vote any
shares so acquired at all corporate meetings at which shareholders have
the right to vote. All dividends and other sums received by such
trustees on the shares acquired by them, after paying the necessary
expenses of the trust, shall be immediately repaid to such company for
the benefit of all who are or may become policyholders of such company
and entitled to participate in the profits thereof, and shall be added
to and become a part of the surplus earned by such company,
apportionable as a part of such surplus among such policyholders. The
provisions of section six hundred twenty-one of the business corporation
law and of section 9-1.1 of the estates, powers and trusts law shall not
apply to the trust hereinbefore authorized.

(b) (1) Whenever:

(A) a plan adopted and approved in accordance with subsection (a) of
this section shall have been in effect for more than ten years,

(B) the company shall have acquired and transferred to the trustees
under the plan at least ninety percent of its outstanding shares,

(C) the plan itself contains no provision for the compulsory
completion of the mutualization of the company inconsistent with the
terms of subsection (a) hereof, the directors by a vote of a majority
may offer to acquire by purchase all of the shares of the company not
theretofore acquired under the plan, at a specified price, uniform as to
class and series of shares, which the company considers to be their fair
value as of the date of making such offer. Before such offer shall be
made, it shall be submitted to the superintendent for approval. Before
approving any such offer the superintendent shall be satisfied, by such
investigation as he may make or by such evidence as he may require, that
the offer complies with the requirements of this chapter, that such
acquisition of such shares pursuant to such offer will not be
prejudicial to the policyholders of the company and that such company,
after deducting the sum required to acquire such shares at the price
stated in such offer, or any lesser price agreeable to shareholders,
will be possessed of admitted assets in an amount equal to the sum of:

(i) its entire liabilities, including the net values of all
outstanding contracts computed in accordance with the provisions of this
chapter;

(ii) the minimum surplus prescribed by this chapter for mutual life
insurance companies organized to do the same kind or kinds of business;
and

(iii) such additional contingent surplus based upon the past
experience of such company, its assets, its present management and its
probable future earnings as the superintendent deems necessary to
protect its policyholders.

(2) If the offer is approved by the superintendent, the company may
make a written offer, by registered mail, to each shareholder whose
shares have not theretofore been acquired by the company under the plan
or otherwise, to acquire all his shares at the specified price if
accepted in writing within thirty days after the mailing of such offer.
Such offer shall be accompanied by a copy of this subsection and by the
most current available balance sheet of the company, which shall be as
of a date not earlier than twelve months before the mailing of such
offer, and a profit and loss statement or statements for not less than a
twelve month period ended on the date of such balance sheet. Any
shareholder accepting such offer within the thirty day period shall,
within sixty days after his acceptance, transfer his shares and
surrender the certificates representing such shares, to the company and
shall thereupon be paid the offered price. All such shares shall be
assigned to the trustees referred to in paragraph five of subsection (a)
hereof and held by them as shares acquired pursuant to the plan.

(3) Each shareholder who does not accept such offer to acquire his
shares within such thirty day period shall within thirty days after the
expiration of such period apply to the supreme court, at any special
term thereof held in the district in which is situated the county in
which the company making the offer has its principal place of business,
upon at least eight days' notice to such company, for the appointment of
three disinterested persons to appraise the value of his shares as of
the date of making such offer, and the court shall appoint such
appraisers and designate the time and place of their first meeting, with
such directions in respect to their proceedings as shall be deemed
proper. The court may fill any vacancies in the board of appraisers
occurring by refusal to hold such office or neglect to act. The
appraisers shall meet at the time and place designated and, after being
duly sworn, shall hear the parties, faithfully and fairly discharge
their duties, estimate and certify in writing the fair value of such
shares as of the date of the offer, and deliver one copy of such
certificate to such company and another to each such shareholder. Within
twenty days after such delivery any party to the appraisal proceedings
may apply to the supreme court, at any such special term thereof upon at
least eight days' notice to all the parties to such appraisal
proceedings and to the superintendent, for approval of the report of the
board of appraisers. The court, after hearing the parties and the
superintendent, may approve the report and the value of the shares as
stated therein, or may itself, upon the evidence and proceedings before
the appraisers, determine the fair value of the shares as of the date of
such offer, or may refer the matter back to the same appraisers or other
appraisers to be so appointed by the court, to proceed in the same
manner. Whenever the court shall approve or determine the fair value of
such shares, it may also determine the terms of payment thereof by the
company. The charges and expenses of the appraisers, after approval by
the court, shall be paid by the company. Upon any such order approving
or determining the value of the shares and the method of the payment
thereof becoming final and from which no appeal is pending, or when the
time to appeal therefrom has expired, each shareholder party to the
proceeding shall transfer his shares and surrender the certificates
representing such shares to the company and the company shall make
payment therefor as provided in such order. Any shares so acquired by
the company shall be assigned and transferred to the trustees and held
by them as shares acquired pursuant to the plan.

(4) Any shareholder who does not make application to the court in the
manner and within the time prescribed in paragraph three hereof shall be
deemed to have accepted the offer referred to in paragraph two hereof,
effective, however, upon the expiration of the time prescribed in
paragraph three hereof for making such an application and such
shareholder's time for accepting such offer shall, for that purpose
only, be deemed to have been extended accordingly.

(5) Any offer to acquire shares made pursuant to this subsection
shall, except as otherwise provided in paragraphs two and four hereof
limiting the time for acceptance at the offered price, be irrevocable
until all proceedings upon such offer provided by this subsection have
been completed or all shares have otherwise been earlier acquired by the
company.

(6) Upon application by the company or by any aggrieved shareholder,
and upon at least eight days' notice to all persons to be affected
thereby and to the superintendent, the supreme court, at any special
term thereof held in the district in which is situated the county in
which the company has its principal place of business, may make any
order appropriate in the circumstances to implement or enforce the
provisions of this subsection. If any proceeding in respect of any of
the shares shall have been commenced pursuant to paragraph three hereof,
all subsequent applications pursuant to this subsection shall be made or
transferred to, and be heard and determined by, the court in which such
proceeding has been commenced.

(c) When all of the outstanding shares of the company have been
acquired, they shall be retired and cancelled, and thereupon the company
shall become a mutual life insurance company without shares.