11537.3
. A plan of conversion adopted by a converting mutual life
company shall include the following:
(a) (1) The plan provides that each member's membership interests
and rights in surplus are extinguished and each eligible member will
receive, without payment, nontransferable subscription rights to
purchase a portion of the capital stock of a corporation which will
issue the subscription rights, or, in lieu thereof, shares of capital
stock or other securities of the issuer, cash, premium credits, or
credits to policy account values having an aggregate value equal to
the aggregate exercise price of the subscription rights that
otherwise would have been allocated to the member. The issuer is
either (A) the converted insurer, (B) a corporation, the voting stock
of which is owned by the mutual life insurer or the mutual holding
company, as the case may be, or by any other persons, that will
acquire in the conversion all the voting stock of the converted
insurer, or (C) a corporation, all of the voting stock of which is
owned by the mutual holding company into which both the mutual
holding company and the stock holding company will be merged.
(2) The subscription rights are allocated in whole shares among
the eligible members. The subscription rights, capital stock, cash,
premium credits, and credits to policy account values are allocated
among the eligible members using a fair and equitable formula. This
formula will either (A) allocate a fixed component per capita among
eligible members (specifying how joint owners will be treated for
this purpose) and allocate a variable component among eligible
members in proportion to the cash value of policies held by them, or
(B) allocate the subscription rights, capital stock, cash, or credits
in any other manner that the commissioner may approve.
(b) The plan specifies or authorizes the board of directors of the
converting mutual life company to set the expiration date of the
subscription rights, if any, allocated by the plan. The exercise
price per share of the subscription rights is 50 percent of the price
per share at which the capital stock of the issuer is first offered
to the public in the offering referred to in subdivision (d), as
fixed at the time of the offering by the boards of directors of the
converting mutual life company and the issuer or committees of the
boards.
(c) The plan provides that any eligible member not exercising the
subscription rights, if any, allocated to the member will instead
receive alternative forms of consideration having an aggregate value
equal to the aggregate exercise price of the subscription rights
allocated to the member. The alternative forms of consideration may
include shares of capital stock of the issuer, cash, premium credits,
or credits to policy account values. The choices available to the
eligible member shall be specified in the plan. The choices available
may take into account the type of policy, size of policy, tax status
of the member, and other factors that the commissioner determines
are appropriate.
(d) The plan provides that the issuer will make a public offering
of its capital stock at a price determined by the boards of directors
of the converting mutual life company and the issuer. The number of
shares to be offered is determined according to the plan and may
include any shares issuable upon exercise of subscription rights that
are not exercised. The plan may also provide for the issue and sale
of securities of the issuer to other persons at the time of the
public offering. However, any plan provisions pertaining to the
issuance and sale of securities to the insurer's officers, directors,
employees, agents, and employee benefit plans for their benefit
shall be subject to Section 11540.
(e) The plan of a mutual life insurer may provide for the
establishment, for policyholder dividend purposes only, of a closed
block. The closed block will consist of all of the participating
individual policies of life insurance of the mutual life insurer in
force on the effective date of the plan for which the insurer had an
experience-based dividend scale payable in the year in which the plan
is adopted. Assets of the insurer shall be allocated to the closed
block in an amount that produces cash-flows, together with
anticipated revenues from the closed block business, expected to be
sufficient (1) to support the closed block business, including
payment of claims and those expenses and taxes specified in the plan
and (2) to provide for continuation of dividend scales in effect on
the adoption date if the experience underlying the scales continues,
and for appropriate adjustments in the scales if the experience
changes. The plan may provide for conditions under which the
converted insurer may cease to maintain the closed block and its
allocated assets. Regardless of such a cessation, the obligation
under the policies constituting the closed block business remain the
obligations of the converted insurer. Dividends on those policies
shall be apportioned by the board of directors of the converted
insurer in accordance with the terms of the policies.
(f) In lieu of the provisions contemplated by subdivisions (a) to
(d), inclusive, a plan may be adopted by a converting mutual life
company that:
(1) Is fair and equitable to the members of the converting mutual
life company and provides for consideration to the members having a
value equal to or greater than the value of the consideration that
would have been payable to the members pursuant to a plan of
conversion contemplated by subdivisions (a) to (d), inclusive.
(2) Has been approved by a resolution of the majority of the board
of directors that specifies the basis on which the board of
directors of the converting mutual life company finds that adopting
the plan of conversion under this subdivision meets the requirements
of paragraph (1).
(3) Provides that each member's membership interests and rights in
surplus are extinguished and each eligible member will receive,
without payment by the member, consideration that is allocated among
the eligible members using a fair and equitable formula. This formula
will either (A) allocate a fixed component per capita among eligible
members, specifying how joint owners will be treated for this
purpose, and allocate a variable component among eligible members in
proportion to the cash value of policies held by them, or (B)
allocate the consideration in any other manner that the commissioner
may approve.
(4) Provides that eligible members may receive one or more kinds
of consideration, including shares of capital stock of the converting
mutual life company or shares of capital stock (or interests in
shares of capital stock) of a corporation that, after the conversion,
directly or indirectly, controls the converted insurer, cash,
premium credits, or credits to pay policy account values, as set
forth in the plan.
(5) Provides for either of the following:
(A) The conversion of the converting mutual life company into a
domestic stock corporation.
(B) The conversion of the converting mutual life company by means
of a merger (i) in the case of a mutual life insurer into a domestic
stock corporation, provided the corporation has been issued a
certificate of authority, or (ii) in the case of a converting mutual
holding company into a domestic or foreign stock corporation, and, in
the case of that merger:
(I) The merger and conversion shall be subject to the provisions
of this chapter other than subdivisions (a) to (d), inclusive.
(II) Chapter 11 (commencing with Section 1100), Chapter 12
(commencing with Section 1200), and Chapter 13 (commencing with
Section 1300), of Division 1 of the Corporations Code shall not apply
to the converting mutual life company in the merger except that
Section 1107 of the Corporations Code shall apply.
(III) The merger and conversion shall become effective upon the
filing of appropriate instruments with the Secretary of State.
(6) The plan may also provide for the converted company, or a
corporation that will directly or indirectly control the converted
insurer after the conversion, to issue and sell its securities to
other persons at the time of the conversion. Any plan provisions
pertaining to the issuance and sale of securities to the insurer's
officers, directors, employees, agents, and employee benefit plans
for their benefit shall be subject to Section 11540.