S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  5121

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                              May 10, 2013
                               ___________

Introduced  by  Sen.  GRIFFO -- read twice and ordered printed, and when
  printed to be committed to the Committee on Insurance

AN ACT to amend the insurance law, in relation to the demutualization of
  domestic mutual health insurance companies

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  The insurance law is amended by adding a new section 7313
to read as follows:
  S 7313. REORGANIZATION OF DOMESTIC MUTUAL ACCIDENT AND  HEALTH  INSUR-
ANCE COMPANIES.
  (A) IN THIS SECTION:
  (1)  "AFFILIATE" OF A MUTUAL INSURER MEANS ANY PERSON WHO CONTROLS, IS
CONTROLLED BY OR IS UNDER COMMON CONTROL WITH, THE MUTUAL INSURER  BEING
CONVERTED. A CORPORATION IS AN AFFILIATE OF ANOTHER CORPORATION, REGARD-
LESS OF OWNERSHIP, IF SUBSTANTIALLY THE SAME GROUP OF PERSONS MANAGE THE
TWO CORPORATIONS.
  (2)  "CONTROL"  HAS  THE  MEANING  ASSIGNED  TO IT IN PARAGRAPH TWO OF
SUBSECTION (A) OF SECTION ONE THOUSAND FIVE HUNDRED ONE OF THIS CHAPTER.
  (3) A "DOMESTIC MUTUAL INSURER" OR "MUTUAL INSURER" MEANS  A  DOMESTIC
MUTUAL  ACCIDENT  AND  HEALTH  INSURANCE COMPANY ORGANIZED UNDER ARTICLE
TWELVE OF THIS CHAPTER AND LICENSED  UNDER  ARTICLE  FORTY-TWO  OF  THIS
CHAPTER AND NOT OPERATING UNDER AN ORDER OF REHABILITATION.
  (4)  "POLICYHOLDER"  MEANS A PERSON, AS DETERMINED BY THE RECORDS OF A
MUTUAL ACCIDENT AND HEALTH INSURER, WHO IS DEEMED TO BE THE "POLICYHOLD-
ER" OF A POLICY THAT IS OF  A  TYPE  DESCRIBED  IN  PARAGRAPH  THREE  OF
SUBSECTION  (A)  OF  SECTION  ONE  THOUSAND ONE HUNDRED THIRTEEN OF THIS
CHAPTER.
  (5) "POLICYHOLDERS' MEMBERSHIP INTEREST" MEANS AND INCLUDES ALL  POLI-
CYHOLDERS'  RIGHTS  AS  MEMBERS  ARISING UNDER THE CHARTER OF THE MUTUAL
ACCIDENT AND HEALTH INSURER OR THIS CHAPTER OR OTHERWISE BY LAW, INCLUD-
ING THE RIGHTS TO VOTE AND TO PARTICIPATE IN THE DISTRIBUTION OF SURPLUS

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10871-01-3
              

S. 5121                             2

WHETHER OR NOT INCIDENT TO A LIQUIDATION OF A MUTUAL ACCIDENT AND HEALTH
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.
  (6) "REORGANIZATION"  MEANS  A  CONVERSION  IN  ACCORDANCE  WITH  THIS
SECTION.
  (B)(1)  A  DOMESTIC MUTUAL INSURER MAY APPLY TO THE SUPERINTENDENT FOR
PERMISSION TO REORGANIZE AND CONVERT INTO A DOMESTIC STOCK ACCIDENT  AND
HEALTH  INSURER  COMPLYING  WITH THE RELEVANT ORGANIZATION AND LICENSING
PROVISIONS OF ARTICLES TWELVE AND FORTY-TWO OF THIS CHAPTER. THE  APPLI-
CATION  TO THE SUPERINTENDENT SHALL BE PURSUANT TO A RESOLUTION, ADOPTED
BY NO LESS THAN A MAJORITY OF THE ENTIRE BOARD OF DIRECTORS,  SPECIFYING
THE  REASONS  FOR  AND  THE  PURPOSES OF THE PROPOSED CONVERSION AND THE
MANNER IN WHICH THE CONVERSION IS EXPECTED TO BENEFIT POLICYHOLDERS  AND
THE  PUBLIC.  A COPY OF THE RESOLUTION, TOGETHER WITH A STATEMENT OF ITS
ADOPTION, BOTH CERTIFIED BY THE PRESIDENT  AND  SECRETARY,  OR  OFFICERS
CORRESPONDING  TO EITHER OF THEM, AND AFFIRMED BY THEM AS TRUE UNDER THE
PENALTIES OF PERJURY AND UNDER THE SEAL OF THE MUTUAL INSURER, AND  SUCH
OTHER  INFORMATION AS THE SUPERINTENDENT MAY REQUIRE SHALL ACCOMPANY THE
APPLICATION.
  (2) THE SUPERINTENDENT SHALL ORDER AN EXAMINATION OF THE MUTUAL INSUR-
ER PURSUANT TO SECTION THREE HUNDRED TEN OF THIS CHAPTER AS OF THE  LAST
DAY  OF  THE  PERIOD  COVERED  IN  THE INSURER'S LATEST FILED STATEMENT,
EXCEPT THAT THE PROPOSED CONVERSION SHALL TERMINATE WITHOUT AN  EXAMINA-
TION IF THE SUPERINTENDENT FINDS THAT:
  (A) THE RESOLUTION IS DEFECTIVE UPON ITS FACE;
  (B)  THE  PROPOSED CONVERSION IS CONTRARY TO LAW OR IS NOT IN THE BEST
INTERESTS OF THE POLICYHOLDERS OR THE PUBLIC; OR
  (C) THE MUTUAL INSURER DOES NOT HAVE A  SURPLUS  TO  POLICYHOLDERS  AT
LEAST EQUAL TO THE MINIMUM CAPITAL AND SURPLUS REQUIRED TO BE MAINTAINED
FOR A NEWLY ORGANIZED STOCK INSURER DOING THE SAME KINDS OF INSURANCE.
  (C) THE SUPERINTENDENT SHALL ALSO APPOINT ONE OR MORE QUALIFIED DISIN-
TERESTED  PERSONS  TO APPRAISE AND REPORT TO THE SUPERINTENDENT THE FAIR
MARKET VALUE OF THE MUTUAL INSURER AND, TO  THE  EXTENT  NECESSARY,  ITS
AFFILIATES,  ON THE BASIS OF ITS LATEST FILED ANNUAL OR QUARTERLY STATE-
MENT, AND OF ANY SIGNIFICANT  SUBSEQUENT  DEVELOPMENTS.  THE  APPRAISERS
SHALL  CONSIDER THE ASSETS AND LIABILITIES OF THE MUTUAL INSURER AND ANY
FACTORS BEARING ON THE VALUE OF THE MUTUAL INSURER  OR  ITS  AFFILIATES.
THE  APPRAISERS  SHALL RECEIVE REASONABLE COMPENSATION AND BE REIMBURSED
FOR REASONABLE  EXPENSES  INCURRED  IN  DISCHARGING  THEIR  DUTIES.  THE
APPRAISERS  MAY,  AS NECESSARY, EMPLOY CONSULTANTS TO ADVISE THEM ON ANY
TECHNICAL MATTERS.
  (D) THE SUPERINTENDENT SHALL MAKE COPIES OF  SUCH  EXAMINATION  REPORT
AND  APPRAISAL REPORT AVAILABLE TO THE BOARD OF DIRECTORS WITHIN FIFTEEN
DAYS OF THE SUPERINTENDENT'S RECEIPT OF THE REPORTS. AFTER RECEIVING THE
REPORTS, THE SUPERINTENDENT MAY GRANT OR DENY PERMISSION TO THE BOARD OF
DIRECTORS TO SUBMIT TO THE  SUPERINTENDENT  A  PLAN  OF  CONVERSION.  IF
PERMISSION  IS  GRANTED,  THE  PLAN SHALL INCLUDE THE PROVISIONS, AND BE
SUBMITTED IN THE MANNER AND UNDER THE CONDITIONS, REQUIRED BY SUBSECTION
(E) OF THIS SECTION. IF PERMISSION IS DENIED, THE  SUPERINTENDENT  SHALL
MAKE  A WRITTEN STATEMENT OF THE SUPERINTENDENT'S FINDINGS AND THE BOARD
SHALL HAVE THE RIGHT TO A HEARING BEFORE THE SUPERINTENDENT WITHIN THIR-
TY DAYS OF THE DATE OF DENIAL.
  (E)(1) IN ORDER FOR THE CONVERSION TO PROCEED:
  (A) THE PLAN MUST BE ADOPTED BY A MAJORITY OF THE ENTIRE BOARD;

S. 5121                             3

  (B) THE PLAN MUST BE SIGNED BY THE PRESIDENT AND ATTESTED  TO  BY  THE
SECRETARY, OR OFFICERS CORRESPONDING TO EITHER OF THEM, UNDER THE CORPO-
RATE SEAL OF THE INSURER; AND
  (C) A COPY OF THE PLAN AND RESOLUTION, BOTH CERTIFIED BY SUCH OFFICERS
AS  TRUE UNDER THE PENALTIES OF PERJURY AND UNDER THE SEAL OF THE INSUR-
ER, SHALL BE SUBMITTED TO THE SUPERINTENDENT NOT LATER  THAN  FORTY-FIVE
DAYS AFTER PERMISSION WAS GRANTED UNDER SUBSECTION (D) OF THIS SECTION.
  (2) THE PLAN SHALL INCLUDE:
  (A)  THE PROPOSED CHARTER AND BY-LAWS OF THE INSURER AS A STOCK CORPO-
RATION SET OUT IN ACCORDANCE WITH PARAGRAPH FIVE OF  SUBSECTION  (A)  OF
SECTION ONE THOUSAND TWO HUNDRED ONE OF THIS CHAPTER;
  (B) THE MANNER OF TREATING A HOLDER OF AN AGREEMENT SUBJECT TO SECTION
ONE THOUSAND THREE HUNDRED SEVEN OF THIS CHAPTER, IF ANY; THE HOLDER, IF
OTHERWISE  QUALIFIED, MAY, AT ITS OPTION, EXCHANGE SUCH AGREEMENT FOR AN
EQUITABLE SHARE OF THE SECURITIES OR OTHER CONSIDERATION,  OR  BOTH,  OF
THE CORPORATION INTO WHICH THE INSURER IS TO BE CONVERTED.
  (C)(I)  THE MANNER AND BASIS OF EXCHANGING THE EQUITABLE SHARE OF EACH
ELIGIBLE MUTUAL POLICYHOLDER'S MEMBERSHIP INTERESTS  FOR  SECURITIES  OR
OTHER  CONSIDERATION,  OR  BOTH, OF THE STOCK CORPORATION INTO WHICH THE
MUTUAL INSURER IS TO BE CONVERTED AND THE DISPOSITION OF  ANY  UNCLAIMED
SHARES.
  (II)  THE PLAN SHALL ALSO PROVIDE THAT EACH PERSON WHO HAD A POLICY OF
INSURANCE IN EFFECT AT ANY TIME DURING THE THREE-YEAR PERIOD IMMEDIATELY
PRECEDING THE DATE OF ADOPTION OF THE RESOLUTION DESCRIBED IN SUBSECTION
(B) OF THIS SECTION SHALL BE ENTITLED TO RECEIVE  IN  EXCHANGE  FOR  THE
EQUITABLE  SHARE,  WITHOUT  ADDITIONAL PAYMENT, CONSIDERATION PAYABLE IN
VOTING COMMON SHARES OF THE INSURER OR OTHER CONSIDERATION, OR BOTH. THE
EQUITABLE SHARE OF THE POLICYHOLDER  IN  THE  MUTUAL  INSURER  SHALL  BE
DETERMINED  BY  THE  RATIO  THAT  THE  NET PREMIUMS (GROSS PREMIUMS LESS
RETURN PREMIUMS AND DIVIDEND PAID) SUCH POLICYHOLDER  HAS  PROPERLY  AND
TIMELY  PAID  TO  THE INSURER ON INSURANCE POLICIES IN EFFECT DURING THE
THREE YEARS IMMEDIATELY PRECEDING THE ADOPTION OF THE RESOLUTION BY  THE
BOARD  OF  DIRECTORS  UNDER  SUBSECTION (B) OF THIS SECTION BEARS TO THE
TOTAL NET PREMIUMS RECEIVED BY THE MUTUAL  INSURER  FROM  SUCH  ELIGIBLE
POLICYHOLDERS.  IN COMPUTING A POLICYHOLDER'S EQUITABLE SHARE, NO CREDIT
SHALL BE GIVEN FOR ANY NET PREMIUMS WHICH  RESULT  FROM  AN  ENDORSEMENT
WHICH IS EFFECTIVE ON OR AFTER THE DATE OF ADOPTION OF THE RESOLUTION.
  (III)  NOTWITHSTANDING ITEM (II) OF THIS SUBPARAGRAPH, CREDIT SHALL BE
GIVEN FOR ANY NET PREMIUMS RESULTING  FROM  AN  AUDIT  OR  RETROSPECTIVE
PREMIUM  ADJUSTMENT  THAT IS BILLED WITHIN ONE HUNDRED EIGHTY DAYS AFTER
THE DATE OF ADOPTION OF THE RESOLUTION DESCRIBED IN  SUBSECTION  (B)  OF
THIS SECTION, PROVIDED THE PREMIUM IS PAID TIMELY.
  (IV)  IF THE EQUITABLE SHARE OF THE ELIGIBLE POLICYHOLDER ENTITLES THE
POLICYHOLDER TO THE PURCHASE OF A FRACTIONAL SHARE OF STOCK, THE POLICY-
HOLDER SHALL HAVE THE OPTION TO RECEIVE  THE  VALUE  OF  THE  FRACTIONAL
SHARE IN CASH OR PURCHASE A FULL SHARE BY PAYING THE BALANCE IN CASH;
  (D)  THE  NUMBER OF VOTING COMMON SHARES PROPOSED TO BE AUTHORIZED FOR
THE STOCK CORPORATION, THEIR PAR VALUE AND THE PRICE AT WHICH THEY SHALL
BE OFFERED, WHICH PRICE MAY NOT EXCEED ONE-HALF OF THE MEDIAN  EQUITABLE
SHARE  OF ALL POLICYHOLDERS UNDER ITEM (II) OF SUBPARAGRAPH (C) OF PARA-
GRAPH TWO OF THIS SUBSECTION.
  (E) ANY OTHER INFORMATION OR OTHER ITEM THAT  THE  SUPERINTENDENT  MAY
REQUIRE.
  (F)  THE  MUTUAL  INSURER  SHALL GIVE PROMPT NOTICE TO ALL PERSONS WHO
BECOME POLICYHOLDERS OR HOLDERS OF AGREEMENTS  SUBJECT  TO  SECTION  ONE
THOUSAND THREE HUNDRED SEVEN OF THIS CHAPTER ON OR AFTER THE DATE OF THE

S. 5121                             4

ADOPTION  OF THE RESOLUTION DESCRIBED IN SUBSECTION (B) OF THIS SECTION.
THE NOTICE SHALL SPECIFY THE PENDENCY OF A PROPOSED CONVERSION  AND  THE
EFFECT THE CONVERSION SHALL HAVE ON THEM.
  (G) THE SUPERINTENDENT SHALL HOLD A PUBLIC HEARING, ADEQUATE NOTICE OF
WHICH  SHALL BE MAILED BY THE MUTUAL INSURER TO EACH POLICYHOLDER ON THE
DAY PRECEDING THE DATE  OF  ADOPTION  OF  THE  RESOLUTION  DESCRIBED  IN
SUBSECTION  (B)  OF  THIS  SECTION, ACCOMPANIED BY A COPY OF THE PLAN OF
CONVERSION AND ANY COMMENT THE SUPERINTENDENT  CONSIDERS  NECESSARY  FOR
THE  ADEQUATE INFORMATION OF THE POLICYHOLDERS. THE MUTUAL INSURER SHALL
ALSO IMMEDIATELY CAUSE THE NOTICE TO BE POSTED ON ITS WEBSITE. IN  ADDI-
TION, THE MUTUAL INSURER SHALL GIVE NOTICE OF THE HEARING BY PUBLICATION
IN  A NEWSPAPER OF GENERAL CIRCULATION IN THE COUNTY IN WHICH THE MUTUAL
INSURER HAS ITS PRINCIPAL OFFICE AND IN THE TWO LARGEST CITIES  IN  EACH
STATE  IN  WHICH  THE INSURER HAS UNDERWRITTEN INSURANCE WITHIN THE FIVE
YEARS PRECEDING THE DATE OF THE ADOPTION OF THE RESOLUTION DESCRIBED  IN
SUBSECTION  (B)  OF  THIS  SECTION. THE NOTICE SHALL BE ACCOMPANIED BY A
SUMMARY APPROVED BY THE SUPERINTENDENT OF THE PLAN AND ANY  COMMENT  THE
SUPERINTENDENT  CONSIDERS  NECESSARY  FOR  THE  ADEQUATE  INFORMATION OF
FORMER POLICYHOLDERS AND THE PUBLIC.
  (H) (1) AFTER THE HEARING, THE SUPERINTENDENT SHALL APPROVE  THE  PLAN
AS SUBMITTED, REFUSE TO APPROVE THE PLAN, OR REQUEST MODIFICATION OF THE
PLAN  BEFORE  GRANTING APPROVAL. THE SUPERINTENDENT MAY APPROVE THE PLAN
UNLESS THE SUPERINTENDENT FINDS THAT THE PLAN VIOLATES THIS CHAPTER,  IS
INCONSISTENT  WITH  LAW,  OR  IS  NOT  FAIR AND EQUITABLE OR IN THE BEST
INTERESTS OF THE POLICYHOLDERS AND THE  PUBLIC.  IF  THE  SUPERINTENDENT
FINDS  THAT THE PLAN DOES NOT MEET THE FOREGOING STANDARDS FOR APPROVAL,
THE SUPERINTENDENT SHALL EITHER REFUSE TO APPROVE THE PLAN AND THE  PLAN
SHALL  BECOME NULL AND VOID OR RETURN THE PLAN TO THE MUTUAL INSURER FOR
MODIFICATION TO MEET THE SUPERINTENDENT'S STATED OBJECTIONS.
  (2) IF WITHIN  NINETY  DAYS  AFTER  RECEIPT  OF  THE  SUPERINTENDENT'S
REQUEST  FOR MODIFICATIONS THE MUTUAL INSURER DOES NOT SUBMIT AN AMENDED
PLAN SATISFACTORY TO THE SUPERINTENDENT AND THAT MEETS  THE  SUPERINTEN-
DENT'S OBJECTIONS AND COMPLIES WITH THE STANDARDS FOR APPROVAL, THE PLAN
SHALL BECOME NULL AND VOID.
  (I)  AFTER  APPROVAL BY THE SUPERINTENDENT THE PLAN SHALL BE SUBMITTED
TO A VOTE OF THE PERSONS WHO WERE POLICYHOLDERS OF THE MUTUAL INSURER ON
THE DAY PRECEDING THE DATE OF ADOPTION OF THE  RESOLUTION  DESCRIBED  IN
SUBSECTION  (B) OF THIS SECTION. THE PLAN SHALL PROVIDE FOR PROXY VOTING
IN A MANNER TO BE PRESCRIBED BY  THE  SUPERINTENDENT.  THE  BOARD  SHALL
SUBMIT THE QUESTION OF THE PLAN TO THE POLICYHOLDERS AT A MEETING THERE-
OF,  BY  CAUSING  A  FULL,  TRUE  AND  CORRECT COPY OR A SUMMARY THEREOF
APPROVED BY THE SUPERINTENDENT, TOGETHER WITH NOTICE, STATING THE  TIME,
PLACE  AND PURPOSE OF THE MEETING, TO BE DELIVERED PERSONALLY, OR DEPOS-
ITED IN THE POST OFFICE, POSTAGE PREPAID, AT LEAST THIRTY DAYS (UNLESS A
SHORTER TIME, NOT LESS THAN TEN DAYS, BE APPROVED BY THE SUPERINTENDENT)
PRIOR TO THE TIME FIXED FOR SUCH MEETING, ADDRESSED TO EACH POLICYHOLDER
AT THE POLICYHOLDER'S LAST POST OFFICE ADDRESS APPEARING ON THE  RECORDS
OF  THE  INSURER OR OTHER FORM OF DELIVERY INTENDED TO ENCOURAGE PARTIC-
IPATION ACCEPTABLE TO THE SUPERINTENDENT.
  (J) EACH SUCH POLICYHOLDER ELIGIBLE TO VOTE PURSUANT TO SUBSECTION (I)
OF THIS SECTION SHALL BE ENTITLED TO THE  NUMBER  OF  VOTES  AS  MAY  BE
PROVIDED  FOR  IN  THE  BY-LAWS  OF  THE  MUTUAL  INSURER.  THE VOTES OF
TWO-THIRDS OF ALL THE VOTES CAST BY  POLICYHOLDERS  REPRESENTED  AT  THE
MEETING  IN PERSON OR BY PROXY, OR BY SUCH OTHER MEANS ACCEPTABLE TO THE
SUPERINTENDENT INTENDED TO ENCOURAGE PARTICIPATION, SHALL  BE  NECESSARY
FOR THE ADOPTION OF THE PLAN. UPON THE CONCLUSION OF THE VOTE THE INSUR-

S. 5121                             5

ER SHALL SUBMIT TO THE SUPERINTENDENT A CERTIFIED COPY OF THE PLAN VOTED
ON  TOGETHER  WITH  A CERTIFICATE SETTING FORTH THE RESULTS OF THE VOTE,
BOTH OF WHICH SHALL BE SUBSCRIBED BY THE PRESIDENT AND ATTESTED  BY  THE
SECRETARY, OR OFFICERS CORRESPONDING TO EITHER OF THEM, UNDER THE CORPO-
RATE  SEAL OF THE MUTUAL INSURER, AND AFFIRMED BY THEM AS TRUE UNDER THE
PENALTIES OF PERJURY.
  (K) IF AT ANY STAGE IN THE PROCESS OF A CONVERSION UNDER THIS  SECTION
THE SUPERINTENDENT FINDS THAT THE MUTUAL INSURER IS IMPAIRED OR THAT THE
FURTHER  TRANSACTION OF BUSINESS BY THE MUTUAL INSURER WILL BE HAZARDOUS
TO ITS POLICYHOLDERS, ITS CREDITORS, OR THE PUBLIC, THE PROPOSED CONVER-
SION SHALL TERMINATE.
  (L) IF THE CONVERSION PLAN IS ADOPTED PURSUANT TO  SUBSECTION  (J)  OF
THIS  SECTION, THE SUPERINTENDENT, UPON BEING SATISFIED THAT THE INSURER
WILL HAVE AT LEAST THE MINIMUM CAPITAL AND SURPLUS REQUIRED TO BE  MAIN-
TAINED FOR A NEWLY ORGANIZED DOMESTIC STOCK INSURER DOING THE SAME KINDS
OF INSURANCE, SHALL ISSUE A NEW CERTIFICATE OF AUTHORITY TO THE INSURER,
THEREBY  CONVERTING THE MUTUAL INSURER INTO A STOCK INSURER. AT THE SAME
TIME, THE SUPERINTENDENT MAY ISSUE  SUCH  LICENSE  AS  MAY  BE  REQUIRED
PURSUANT TO SECTION ONE THOUSAND TWO HUNDRED FOUR OF THIS CHAPTER.
  (M)  UPON  THE CONVERSION, THE STOCK INSURER SHALL GIVE NOTICE THEREOF
BY PUBLICATION IN A NEWSPAPER OF GENERAL CIRCULATION IN  THE  COUNTY  IN
WHICH THE INSURER HAS ITS PRINCIPAL OFFICE AND IN THE TWO LARGEST CITIES
IN  EACH STATE IN WHICH THE INSURER SHALL BE LICENSED TO DO BUSINESS. IN
ADDITION, THE STOCK INSURER SHALL ALSO IMMEDIATELY CAUSE THE  NOTICE  TO
BE POSTED ON ITS WEBSITE. THE NOTICE SHALL INCLUDE A CORRECT COPY OF THE
PLAN, OR A SUMMARY THEREOF APPROVED BY THE SUPERINTENDENT.
  (N)  UPON  THE  CONVERSION  OF THE MUTUAL INSURER IN THE MANNER HEREIN
PROVIDED, ALL THE RIGHTS, FRANCHISES AND INTERESTS OF THE FORMER  MUTUAL
INSURER,  IN AND TO EVERY SPECIES OF PROPERTY, REAL, PERSONAL AND MIXED,
AND THINGS IN ACTION THEREUNTO BELONGING, SHALL BE DEEMED AS TRANSFERRED
TO AND VESTED IN THE STOCK INSURER, WITHOUT ANY OTHER DEED OR  TRANSFER;
AND  SIMULTANEOUSLY  THEREWITH  SUCH  COMPANY  SHALL  BE  DEEMED TO HAVE
ASSUMED ALL OF THE OBLIGATIONS AND  LIABILITIES  OF  THE  FORMER  MUTUAL
INSURER.
  (O)  NO ACTION OR PROCEEDING, PENDING AT THE TIME OF THE CONVERSION TO
WHICH THE MUTUAL INSURER MAY BE A PARTY SHALL BE ABATED OR  DISCONTINUED
BY  REASON  OF  SUCH CONVERSION, BUT THE SAME MAY BE PROSECUTED TO FINAL
JUDGMENT IN THE SAME MANNER AS IF THE CONVERSION HAD NOT TAKEN PLACE, OR
THE STOCK CORPORATION MAY BE SUBSTITUTED IN PLACE OF THE MUTUAL  INSURER
BY ORDER OF THE COURT IN WHICH THE ACTION OR PROCEEDING MAY BE PENDING.
  (P) THE DIRECTORS AND OFFICERS OF THE MUTUAL INSURER SHALL SERVE UNTIL
NEW DIRECTORS AND OFFICERS HAVE BEEN DULY ELECTED AND QUALIFIED PURSUANT
TO THE CHARTER AND BY-LAWS OF THE STOCK INSURER.
  (Q)  THE  INSURER,  WHETHER  BEFORE  OR AFTER CONVERSION, SHALL PAY NO
COMPENSATION OF ANY KIND TO ANY PERSON OTHER THAN  REGULAR  SALARIES  TO
EXISTING  PERSONNEL,  IN  CONNECTION WITH THE PROPOSED CONVERSION, OTHER
THAN FOR CLERICAL AND MAILING EXPENSES, EXCEPT  THAT,  WITH  THE  SUPER-
INTENDENT'S APPROVAL, PAYMENT MAY BE MADE AT REASONABLE RATES FOR PRINT-
ING  COSTS, AND FOR LEGAL AND OTHER PROFESSIONAL FEES FOR SERVICES ACTU-
ALLY RENDERED.  ALL EXPENSES OF THE CONVERSION, INCLUDING  THE  EXPENSES
INCURRED BY THE DEPARTMENT, SHALL BE BORNE BY THE INSURER.
  (R)  NO  VOTING  COMMON  SHARES  SHALL  BE  SUBSCRIBED BY OR ISSUED TO
PERSONS OTHER THAN  ELIGIBLE  POLICYHOLDERS  OR  HOLDERS  OF  AGREEMENTS
SUBJECT  TO  SECTION  ONE  THOUSAND  THREE HUNDRED SEVEN OF THIS CHAPTER
UNTIL ALL SUBSCRIPTIONS BY SUCH POLICYHOLDERS OR AGREEMENT HOLDERS  HAVE
BEEN  FILLED OR OTHER CONSIDERATION HAS BEEN PROVIDED IN ACCORDANCE WITH

S. 5121                             6

THE PLAN. THEREAFTER, ANY NEW ISSUE OF COMMON SHARES WITHIN THREE  YEARS
AFTER  THE  CONVERSION  SHALL  FIRST  BE OFFERED TO THE PERSONS WHO HAVE
BECOME VOTING COMMON SHAREHOLDERS, PURSUANT TO SUBSECTION  (E)  OF  THIS
SECTION IN PROPORTION TO THEIR HOLDINGS OF SUCH SHARES.
  (S)  NO INSURER BECOMING A DOMESTIC STOCK INSURER UNDER THE PROVISIONS
OF THIS SECTION SHALL:
  (1) FOR A PERIOD OF TEN YEARS AFTER CONVERSION, REDOMESTICATE DIRECTLY
OR INDIRECTLY OR REMOVE ITS PRINCIPAL OFFICES FROM WITHIN THE STATE; OR
  (2) FOR A PERIOD OF FIVE YEARS AFTER CONVERSION:
  (A) ENTER INTO ANY AGREEMENT BY THE TERMS OF WHICH ANY  PERSON,  PART-
NERSHIP OR CORPORATION AGREES TO PAY ALL OR A PORTION OF THE EXPENSES OF
MANAGEMENT OF THE INSURER IN CONSIDERATION OF THE INSURER'S AGREEMENT TO
PAY  SUCH  PERSON OR OTHER ENTITY EITHER COMMISSIONS ON PREMIUMS DUE THE
INSURER OR ANY OTHER COMPENSATION FOR SERVICES, OR
  (B) ENTER INTO ANY AGREEMENT WITH AN OFFICER OR DIRECTOR OF THE INSUR-
ER OR WITH ANY FIRM OR CORPORATION IN WHICH ANY OFFICER OR  DIRECTOR  OF
THE  INSURER  IS  PECUNIARILY  INTERESTED, DIRECTLY OR INDIRECTLY, UNDER
WHICH AGREEMENT THE INSURER AGREES TO PAY, FOR THE ACQUISITION OF  BUSI-
NESS,  ANY  COMMISSIONS  OR OTHER COMPENSATION THAT BY THE TERMS OF SUCH
AGREEMENT VARIES WITH THE AMOUNT OF THE BUSINESS OR WITH THE EARNINGS OF
THE INSURER ON THE BUSINESS.
  (T) NOTHING IN THIS SECTION SHALL IN ANY  WAY  IMPEDE  OR  IMPAIR  THE
EXERCISE  BY  THE SUPERINTENDENT OF THE SUPERINTENDENT'S AUTHORITY UNDER
ANY OTHER PROVISION OF THIS CHAPTER.
  S 2. This act shall take effect immediately.