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14  AN ACT concerning insurance; conversion of mutual insurer to stock
15    insurer; amending K.S.A. 40-4001, 40-4002, 40-4004, 40-4005, 40-
16    4006, 40-4007, 40-4008, 40-4009, 40-4010, 40-4011, 40-4012, 40-4013
17    and 40-4014 and repealing the existing sections; also repealing K.S.A.
18    40-4003.
19
20  Be it enacted by the Legislature of the State of Kansas:
21    Section 1.  K.S.A. 40-4001 is hereby amended to read as follows: 40-
22  4001. A domestic mutual insurer issuing nonassessable policies may be
23  converted into a domestic stock insurer. To that end, it may provide and
24  carry out a plan for such conversion by complying with the requirements
25  of this act. Because it is not possible to anticipate all of the circumstances
26  and considerations which may arise incident to a conversion from a mu-
27  tual insurer to a stock insurer, the commissioner has broad authority in
28  reviewing such conversion, and the procedures and criteria to be applied
29  by the commissioner are flexible within the parameters of this act. This
30  act shall be liberally construed to effect the legislative intent set forth in
31  this section and shall not be interpreted to limit the powers granted to
32  the commissioner by other provisions of law.
33    Sec. 2.  K.S.A. 40-4002 is hereby amended to read as follows: 40-
34  4002. (a) A resolution shall be adopted by a 2/3 majority of the entire board
35  of directors of the insurer which shall state the reason reasons such con-
36  version would benefit the insurer and be in the best interests of its poli-
37  cyholders. Following adoption of such resolution a detailed plan of con-
38  version shall be developed and shall be approved by a 2/3 majority of the
39  entire board of directors. The plan of conversion shall not be effective
40  unless the plan has been so approved by the board of directors.
41    (b)  A draft of the plan of conversion may be submitted to the com-
42  missioner for preliminary examination and comment prior to or after the
43  adoption of the resolution described in subsection (a).
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 1    (b) (c)  After the completion of the process of preliminary examination
 2  and comment, the plan shall be submitted to the commissioner of insur-
 3  ance for approval in writing, subject to the provisions of K.S.A. 40-4004
 4  and amendments thereto. The plan of conversion shall not be effective
 5  unless the plan has been approved by the commissioner.
 6    (c) (d)  If approved by the commissioner, the plan shall be approved
 7  by a majority vote  2/3 of the policyholders voting in person or by proxy at
 8  a meeting of the members policyholders called for that purpose, pursuant
 9  to the bylaws of the insurer. The , except that if a majority of all
10  policyholders vote in person or by proxy, then a majority of those
11  voting shall constitute approval, and the plan of conversion shall not
12  be effective unless the plan has been so approved by the policyholders.
13  No such proxy vote shall be effective unless the proxy specifically
14  provides the proxyholder with the authority to vote on the plan of
15  conversion, and unless the proxy is dated subsequent to the day on
16  which the plan of conversion is initially approved by the board of
17  directors of the mutual insurer. Proxy statements relating to the
18  plan may be mailed to the policyholders in accordance with the
19  bylaws of the insurer.
20    (d) (e)  The board of directors by a vote of not less than 2/3 of the
21  entire board may, at any time prior to the date of the meeting called
22  pursuant to subsection (c) issuance of the certificate of authority pursuant
23  to K.S.A. 40-4010 and amendments thereto:
24    (1)  Withdraw the plan, if conversion is deemed to be no longer in
25  the best interests of the insurer or its policyholders; or
26    (2)  amend the plan, except that no amendment which materially
27  changes the plan shall take effect unless a hearing in accordance with the
28  provisions of the Kansas administrative procedure act is held thereon and
29  such amendment is approved by the commissioner and the policyholders
30  subject to the same conditions and procedures applicable to the original
31  plan. such amendment is approved by the commissioner. In the event of
32  a material change to the plan, the commissioner:
33    (A)  Shall order a hearing to be conducted in accordance with the
34  provisions of the Kansas administrative procedure act before approving
35  or disapproving such material change; and
36    (B)  may require that such a change be approved by the policyholders
37  pursuant to subsection (d).
38    (e) (f)  The plan shall be filed in the office of the commissioner of
39  insurance after having been approved as provided above by subsections
40    (a), (d) and (e) (c) and (d).
41    (g)  As used in this act: (1) ``Policyholder'' means a policyholder of the
42  mutual insurer on the day the plan of conversion is initially approved by
43  the board of directors of the mutual insurer; except that, with respect
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 1  to a mutual insurance company authorized to transact the business
 2  of insurance in the state of Kansas under the authority granted in
 3  article 10 or article 12 of chapter 40 of the Kansas Statutes An-
 4  notated, ``policyholder'' means a policyholder of the mutual in-
 5  surer on the day the plan of conversion is initially approved by the
 6  board of directors of the mutual insurer, whose policy or policies
 7  have been in effect for not less than two out of three years im-
 8  mediately prior to the date the board of directors approved the
 9  plan, or whose policy or policies have been in effect for at least 90
10  days during the 365 days immediately preceding the date the
11  board of directors approved the plan if the insured is a crop hail
12  insurance policyholder.
13    (2)  ``Commissioner'' means the commissioner of insurance.
14    New Sec. 3.  The plan of conversion shall comply with the terms and
15  conditions set forth in subsection (a), (b) or, (c) or (d) as follows:
16    (a)  Plan of conversion in which policyholders exchange their mem-
17  bership interests for cash, securities, policy credits, dividends, subscrip-
18  tion rights or other consideration, or some combination thereof. A mutual
19  insurer seeking to convert pursuant to this subsection may do so by:
20    (1)  Filing a plan of conversion containing:
21    (A)  A description of the structure, forms and allocation of the pro-
22  posed consideration to the policyholders, the projected range of the num-
23  ber of shares of capital stock, if any, to be issued by the new stock insurer
24  or parent company of the new stock insurer, or any other company, and
25  such other proposed conditions and provisions as determined by the mu-
26  tual insurer not to be inconsistent with this act. As used in this act, ``parent
27  company'' means any company which on or after the effective date of the
28  conversion owns, directly or indirectly, 51% or more of the capital stock
29  of the new stock insurer;
30    (B)  a description of any amendments to the insurer's articles of in-
31  corporation;
32    (C)  provisions establishing the method by which the initial board of
33  directors of the stock insurer will be selected; and
34    (D)  any other additional information as the commissioner of insur-
35  ance may reasonably request.
36    (2)  providing consideration to the policyholders entitled thereto in
37  the form of cash, stock, policy credits, dividends, subscription rights, a
38  combination thereof or such other valuable consideration as the commis-
39  sioner may approve. With the approval of the commissioner, such con-
40  sideration may be paid into a trust or other account or entity existing for
41  the benefit of policyholders, which is established by the company for the
42  purpose of effecting the conversion.
43    (b)  Plan of conversion in which policyholders exchange their mem-
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 1  bership interests solely for subscription rights. A mutual insurer seeking
 2  to convert to a stock insurer pursuant to this subsection may do so by:
 3    (1)  Filing a plan of conversion containing:
 4    (A)  A provision that each policyholder is to receive, without payment,
 5  nontransferable subscription rights to purchase a portion of the capital
 6  stock of the converted stock company and that, in the aggregate, all pol-
 7  icyholders shall have the right, prior to the right of any other party, to
 8  purchase 100% of the capital stock of the converted company. As an
 9  alternative to subscription rights in the converted stock company, the plan
10  may provide that each eligible member is to receive, without payment,
11  nontransferable subscription rights to purchase a portion of the capital
12  stock of one of the following:
13    (i)  A corporation organized for the purpose of purchasing and holding
14  the stock of the converted stock company;
15    (ii)  a stock insurance company owned by the mutual company into
16  which the mutual company will be merged; or
17    (iii)  an unaffiliated stock insurance company or other corporation that
18  will purchase the stock of the converted stock company;
19    (B)  a provision that the subscription rights shall be allocated in whole
20  shares among the policyholders using a fair and equitable formula. This
21  formula may, but need not, take into account how the different classes
22  of policies of the policyholders contributed to the surplus of the mutual
23  company or any other factors that may be fair and equitable;
24    (C)  a fair and equitable means for allocating shares of capital stock
25  in the event of an oversubscription to shares by policyholders exercising
26  subscription rights received under this section;
27    (D)  at the option of the converting company, a provision that any
28  shares of capital stock not subscribed to by policyholders exercising sub-
29  scription rights received under this section may be sold in a public offer-
30  ing or through a private placement or other alternative method approved
31  by the commissioner that is fair and equitable to policyholders. The of-
32  fering to others of shares not purchased by policyholders exercising such
33  subscription rights shall be at a price not less than the offering price to
34  such policyholders;
35    (E)  a provision which sets the total price of the capital stock equal to
36  the estimated pro forma market value of the converted stock company
37  based upon an independent evaluation by one or more qualified experts.
38  This pro forma market value may be the value that is estimated to be
39  necessary to attract full subscription for the shares, as indicated by the
40  independent evaluation and may be stated as a range of pro forma market
41  value;
42    (F)  a provision which sets the purchase price per share of capital stock
43  equal to any reasonable amount;
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 1    (G)  a provision that any person or group of persons acting in concert
 2  shall not acquire, in the public offering or pursuant to the exercise of
 3  subscription rights, more than 5% of the capital stock of the converted
 4  stock company, except with the approval of the commissioner. This lim-
 5  itation does not apply to any entity that is to purchase 100% of the capital
 6  stock of the converted company as part of the plan of conversion approved
 7  by the commissioner; and
 8    (H)  a provision that the rights of a holder of a surplus note to partic-
 9  ipate in the conversion, if any, shall be governed by the terms of the
10  surplus note; and
11    (2)  providing subscription rights to the policyholders entitled thereto
12  in accordance with the provisions of the plan of conversion as described
13  in paragraph (1). With the approval of the commissioner, stock that will
14  be issued pursuant to such subscription rights may be provided to a trust
15  or other account or entity existing for the benefit of policyholders which
16  is established by the company for the purpose of effecting the conversion.
17    (c)  Plan of conversion in which policyholders exchange their mem-
18  bership interests for membership interests in a mutual holding company.
19    (1)  A plan of conversion adopted pursuant to this subsection shall
20  provide that the mutual insurer will become a stock insurer and that the
21  owners of policies of the converted insurer that are in force on the effec-
22  tive date of the plan of conversion or thereafter will become members of
23  a mutual holding company organized pursuant to paragraph (2) for as
24  long as their policies remain in force;
25    (2)  a mutual insurer seeking to convert to a stock insurer pursuant to
26  this subsection may do so by:
27    (A)  Forming a mutual holding company and continuing the corporate
28  existence of the insurer as a stock insurance company that is a wholly-
29  owned subsidiary (except to the extent qualifying shares are required to
30  be held by directors of an insurance company admitted and authorized
31  to do business in Kansas pursuant to K.S.A. 40-305 and amendments
32  thereto) of a stock holding company of which at least 51% of the voting
33  stock is held by the mutual holding company;
34    (B)  forming a mutual holding company and continuing the corporate
35  existence of the insurer as a stock insurance company of which at least
36  51% of the voting stock is held by the mutual holding company; or
37    (C)  forming a mutual holding company and continuing the corporate
38  existence of the insurer as a stock insurance company with another own-
39  ership structure that is approved by the commissioner with at least 51%
40  of the voting stock of the stock insurance company is ultimately held by
41  the mutual holding company.
42    (3)  a mutual holding company is not an insurer for purposes of this
43  act, but the provisions of this act with regard to corporate organization
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 1  and procedure of mutual insurers and the election of directors by mutual
 2  insurers, and those provisions of chapter 17 of the Kansas Statutes An-
 3  notated and amendments thereto that are applicable to mutual insurers,
 4  shall apply to the mutual holding company;
 5    (4)  a mutual holding company and any stock holding company shall
 6  each be deemed to be a ``holding company'' of the insurer within the
 7  meaning of article 33 of chapter 40 of the Kansas Statutes Annotated and
 8  amendments thereto. Approval of the plan of conversion by the commis-
 9  sioner pursuant to this act shall constitute approval of the acquisition of
10  control by the mutual holding company and stock holding company, if
11  applicable, under K.S.A. 40-3304 and amendments thereto, without any
12  separate filings or other action;
13    (5)  a mutual holding company shall not dissolve, liquidate or wind-
14  up and dissolve except through proceedings under article 36 of chapter
15  40 of the Kansas Statutes Annotated and amendments thereto for the
16  liquidation or dissolution of the converted insurer or as the commissioner
17  of insurance may otherwise approve. A mutual holding company may,
18  however, convert to a stock corporation in accordance with the terms of
19  this article and a plan of conversion approved by the commissioner of
20  insurance to be fair and equitable after a hearing upon notice to the
21  company's members;
22    (6)  the charter of the mutual holding company shall be filed with the
23  commissioner and shall contain the matters required to be contained in
24  the charter of a mutual insurer by article 5 or article 12 of chapter 40 of
25  the Kansas Statutes Annotated and amendments thereto, as applicable,
26  except that the name of the mutual holding company shall contain the
27  word ``mutual'' and shall not contain the word ``insurance'' and the com-
28  pany's powers shall not include doing an insurance business;
29    (7)  the commissioner of insurance may, by adoption of rules and reg-
30  ulations, require a mutual holding company to file annual statements with
31  the commissioner in such form as the commissioner prescribes;
32    (8)  any subsidiaries of the company that have been reorganized pur-
33  suant to this act and amendments thereto may remain as subsidiaries of
34  such company or become subsidiaries of the mutual or stock holding
35  company provided that if such subsidiaries shall become subsidiaries of a
36  stock holding company, then the reorganized company shall be reim-
37  bursed the value of its holdings in such subsidiaries, as reflected on the
38  company's most recently filed financial statements, in the event shares of
39  the stock holding company are or have been issued to other than the
40  mutual holding company;
41    (9)  with the written approval of the commissioner, and subject to
42  conditions that the commissioner may impose, a mutual holding company
43  may:
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 1    (A)  Merge or consolidate with, or acquire the assets of, a mutual
 2  holding company;
 3    (B)  together with its converted insurer subsidiary, merge or consoli-
 4  date with or acquire the assets of any other insurer; or
 5    (C)  engage in any other merger, consolidation or acquisition trans-
 6  action which may be approved by the commissioner;
 7    (10)  a member of a mutual holding company is not, as a member,
 8  personally liable for the acts, debts, liabilities or obligations of such com-
 9  pany. No assessment of any kind may be imposed upon the members of
10  a mutual holding company by the board of directors, members or credi-
11  tors of such company or because of any liability of any company owned
12  or controlled by the mutual holding company or because of any act, debt
13  or liability of the mutual holding company;
14    (11)  a membership interest in a mutual holding company shall not
15  constitute a security under the laws of this state; and
16    (12)  the commissioner shall retain jurisdiction over any mutual hold-
17  ing company or stock holding company organized pursuant to this section
18  to assure that policyholder interests are protected.
19    (d)  Plan of conversion in which policyholders exchange their
20  membership interests for an option to purchase a proportionate
21  amount of stock in the converted company.
22    A mutual insurer seeking to convert pursuant to this subsection
23  may do so by filing a plan of conversion containing:
24    (1)  A description of any amendments to the insurer's articles
25  of incorporation to effect a conversion from a mutual corporation
26  into a stock corporation. Any other amendments proposed for the
27  articles of incorporation shall be set forth in the plan.
28    (2)  The establishment of a conversion value, as of the calendar
29  quarter ending immediately preceding the date of the adoption of
30  the resolution specified in subsection (a) of K.S.A. 40-4002, and
31  amendments thereto. The conversion value shall be equal to the
32  company's policyholders' surplus, determined in accordance with
33  the statutory method of accounting used in preparing the last an-
34  nual statement filed with the commissioner of insurance. The in-
35  surer shall submit a list of qualified disinterested appraisers, from
36  which the commissioner shall appoint one or more such appraisers,
37  who shall establish the conversion value in accordance with the
38  above procedure.
39    (3)  The procedure by which each policyholder shall receive a
40  proportionate amount of the conversion value in the manner pre-
41  scribed herein and in paragraph (4). Such amount shall be based
42  upon net premium paid to the general account of the insurer
43  within three years prior to the date on which the board of directors
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 1  approved the plan.
 2    (4)  Provisions whereby the insurer or any holding company of
 3  the insurer shall distribute such proportionate conversion value,
 4  in the following method:
 5    (A)  Each policyholder will be issued an option to purchase
 6  stock in the converted company;
 7    (B)  the total stated value of the stock to be issued shall be equal
 8  to the conversion value as determined in paragraph (2);
 9    (C)  the stock option shall provide that the policyholders may
10  purchase the stock at its stated value;
11    (D)  the maximum amount of stock that may be purchased by
12  each policyholder shall be in proportion to the policyholder's share
13  of the conversion value, with the number of shares rounded to the
14  nearest whole number, plus any shares purchased pursuant to pur-
15  chased stock options, subject to the limitations provided in sub-
16  paragraph (J);
17    (E)  policyholders not exercising their option to purchase the
18  stock shall be entitled to sell such option to any person or corpo-
19  ration, including the parent corporation;
20    (F)  the sale of any such stock option shall transfer to the pur-
21  chaser all rights in and conditions to the option;
22    (G)  all stock options shall be exercised within 60 days from the
23  date such options are distributed to the policyholders and the op-
24  tions shall expire at the end of such sixty-day period;
25    (H)  the converted company or the parent corporation shall
26  purchase, at a price not less than the amount set forth in the plan,
27  all stock options that have not been exercised within 60 days from
28  the date such options are distributed to the policyholders;
29    (I)  the converted company or the parent corporation shall pur-
30  chase, at the stated value, all stock not purchased pursuant to the
31  stock options and such purchase must be made within 60 days from
32  the date the stock options expire;
33    (J)  notwithstanding the provisions of subparagraph (D), own-
34  ership of the voting stock of the insurer is subject to the provisions
35  of K.S.A. 40-4008.
36    The above distribution method shall constitute full payment and
37  discharge of the policyholder's proportionate conversion value,
38  but this provision shall shall not be held to prohibit the converted
39  company or the parent corporation from including in the plan pro-
40  visions for the distribution of any other valuable consideration to
41  policyholders. Notwithstanding any other provision of law, the pol-
42  icyholders shall have no other rights resulting from membership
43  in a mutual insurance company with respect to the insurer.
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 1    (5)  A statement as to the number of shares to be authorized for
 2  the insurer and their value. The paid-in capital and surplus of the
 3  converted capital stock insurer shall be in an amount not less than
 4  two times the minimum initial paid-in capital and surplus required
 5  of a domestic stock insurer doing business as of the same date as
 6  the converted company, to transact like kinds of insurance.
 7    (6)  Provisions establishing the method by which the initial
 8  board of directors of the stock insurer will be selected.
 9    New Sec. 4.  The commissioner may require that the conversion plan
10  of a mutual life insurer provide for the establishment, for policyholder
11  dividend purposes only, of a closed block. In the event that the commis-
12  sioner requires such a closed block, the closed block will consist of all of
13  the participating individual policies of life insurance of the mutual life
14  insurer in force on the effective date of the plan of conversion for which
15  the insurer has an experience-based dividend scale payable in the year in
16  which the plan is adopted. Assets of the insurer shall be allocated to any
17  such closed block in an amount that produces cash flows, together with
18  anticipated revenues from the closed block business, expected to be rea-
19  sonably sufficient: (1) To support the closed block business, including
20  payment of claims and those expenses and taxes specified in the plan, and
21    (2) to provide for continuation of dividend scales in effect on the adoption
22  date if the experience underlying the scales continues and for appropriate
23  adjustments in the scales if the experience changes. The plan may provide
24  for conditions under which the converted insurer may cease to maintain
25  the closed block and its allocated assets. Regardless of such a cessation,
26  the obligation under the policies constituting the closed block business
27  remain the obligations of the converted insurer. Dividends on those pol-
28  icies shall be apportioned by the board of directors of the converted in-
29  surer in accordance with the terms of the policies.
30    New Sec. 5.  (a) All policies in force on the effective date of conver-
31  sion remain in force under the terms of the policies, except that the
32  following rights, to the extent they existed in the mutual company, shall
33  be extinguished on the effective date of the conversion:
34    (1)  Any voting rights of the policyholders in the mutual insurance
35  company that were provided under the policies;
36    (2) any assessment provisions provided for under the policies; and
37    (3) any right to share in the surplus of the mutual company provided
38  for under the policies, except that:
39    (A)  Holders of participating policies in effect on the date of conver-
40  sion continue to have a right to receive dividends as provided in the
41  participating policies, if any, unless the holders of such participating pol-
42  icies receive a nonparticipating policy as a substitute for the participating
43  policy pursuant to subparagraph (B); and
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 1    (B)  upon the renewal date of a participating policy, the converted
 2  stock company may issue the insured a nonparticipating policy as a sub-
 3  stitute for the participating policy, except that no such substitutions may
 4  be issued for the mutual company's life policies, guaranteed renewable
 5  accident and health policies and guaranteed renewable, noncancelable
 6  accident and health policies.
 7    (b)  Unless otherwise ordered by the commissioner of insurance and
 8  notwithstanding any provisions of law to the contrary, policyholders are
 9  not required to be given preemptive rights, and, except as provided in
10  the plan of conversion and in subsection (a), policyholders shall have no
11  other rights resulting from membership in a mutual insurance company
12  with respect to the insurer.
13    Sec. 6.  K.S.A. 40-4004 is hereby amended to read as follows: 40-
14  4004. (a) The commissioner of insurance shall examine the plan submit-
15  ted pursuant to subsection (b) (c) or (d) (b) or (c) of K.S.A. 40-4002, and
16  amendments thereto. As a part of the such examination, the commissioner
17  of insurance, within 30 days after its receipt, shall order a hearing on the
18  plan to be conducted in accordance with the provisions of the Kansas
19  administrative procedure act and shall give not less than 20 days' written
20  notice of the date of hearing to the insurer and give not less than 20 days'
21  written notice to policyholders by publication or otherwise. The commis-
22  sioner of insurance shall approve the plan unless if the commissioner of
23  insurance finds the plan is unfair or inequitable to policyholders, will
24  cause the insurer to become unable to fulfill such insurer's contractual
25  obligations or is not in accordance with the provisions of this act. that:
26    (1)  The plan of conversion is fair and equitable to policyholders;
27    (2)  the plan of conversion complies with the provisions of this act;
28    (3)  the plan of conversion does not unjustly enrich any director, of-
29  ficer, agent or employee of the insurer; and
30    (4)  the new stock insurer would meet minimum requirements to be
31  issued a certificate of authority by the commissioner to transact business
32  in this state and the continued operations of the new stock insurer would
33  not be hazardous to existing or future policyholders or the public.
34    (b)  The amount of consideration provided by the converting insurer
35  to policyholders shall be deemed to be fair and equitable pursuant to
36  subsection (a), if the consideration is at least the amount of statutory
37  surplus attributable to contributions of policyholders.
38    (c)  Upon submission of a plan of conversion, the commissioner may
39  request any additional documents or information in the possession of the
40  insurer or its affiliates as are reasonably necessary to enable the commis-
41  sioner to make the findings required by this section for the approval of
42  the plan.
43    Sec. 7.  K.S.A. 40-4005 is hereby amended to read as follows: 40-
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 1  4005. The meeting called for approval of the plan by the policyholders
 2  prescribed by K.S.A. 40-4002 and amendments thereto shall be called by
 3  a majority of the board of directors, the chairperson of the board or the
 4  president. A copy of the plan and any information the commissioner of
 5  insurance deems necessary to policyholder understanding, including a
 6  comprehensible summary of the plan in a form approved by the
 7  commissioner, shall accompany the notice.
 8    Sec. 8.  K.S.A. 40-4006 is hereby amended to read as follows: 40-
 9  4006. (a) For five years from the conversion date, no person (including
10  any individual, corporation, firm or affiliated group of individuals, cor-
11  porations or firms), other than a parent corporation, may own, directly
12  or indirectly, more than 5% of the voting stock (including any securities
13  that may be convertible into voting stock) of the converted insurer, unless:
14    (1)  The person is a policyholder whose allocated share of the consid-
15  eration provided for in the plan of conversion is 5% or more of the voting
16  stock (including any securities that may be convertible into voting stock),
17  and such individual may not purchase stock totaling more than the in-
18  dividual's allocated share of such consideration; or
19    (2)  the purchase is permitted by the commissioner and authorized by
20  the converted company's board of directors.
21    (b)  In the event of any violation of this section, or in the event of any
22  action that, if consummated, would constitute a violation of this section,
23  all voting securities of the converted insurer (or of the person controlling
24  the converted insurer) that is acquired by any person in excess of the
25  maximum amount permitted to be acquired by the person pursuant to
26  this section shall be deemed to be nonvoting securities of the converted
27  insurer (or of the person controlling the converted insurer). The violation
28  or action may be enforced or enjoined by an appropriate proceeding com-
29  menced by the converted insurer, the person controlling the converted
30  insurer, the commissioner, any policyholder or stockholder of the con-
31  verted insurer on behalf of the converted insurer (or on behalf of the
32  person controlling the converted insurer) in the district court in which
33  the converted insurer has its home office or in any other court having
34  jurisdiction. The court may issue any order it finds necessary to cure the
35  violation or to prevent the proposed action that would constitute a vio-
36  lation.
37    (c)  Nothing herein provided in this act shall be deemed to prohibit
38  the insurer's directors, officers, agents or employees from being eligible
39  to purchase stock or other securities of the insurer, subject to the provi-
40  sions of subparagraphs (A) and (B) of paragraph (10) of subsection (e) of
41  K.S.A. 40-4003 subsection (a).
42    Sec. 9.  K.S.A. 40-4007 is hereby amended to read as follows: 40-
43  4007. (a)  No director, officer, agent or employee of the insurer shall
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 1  secure any unfair advantage through a plan of conversion by reducing
 2  the volume of new business written, by cancellation or by reducing or by
 3  any other means seeking to reduce, limit or alter the number or identity
 4  of the insurer's policyholders entitled to participate in such plan.
 5    (b)  No director, officer, agent or employee of the insurer shall receive
 6  any fee, commission or other valuable consideration whatsoever, other
 7  than regular salary and compensation, for in any manner aiding, promot-
 8  ing or assisting in the conversion except as set forth in the plan approved
 9  by the commissioner of insurance. This provision shall not be deemed to
10  prohibit the payment of reasonable fees and compensation to attorneys
11  at law, accountants, appraisers, actuaries, financial advisers or other sim-
12  ilar professionals for services performed in the independent practice of
13  their professions, even though they such person may also be directors of
14  the insurer.
15    Sec. 10.  K.S.A. 40-4008 is hereby amended to read as follows: 40-
16  4008. Within 30 days of receipt of the filing of the approved plan in
17  accordance with subsection (e) (f) of K.S.A. 40-4002 and the amended
18  articles of incorporation, the commissioner of insurance shall issue a new
19  certificate of authority to the insurer. Notwithstanding the actions of any
20  other jurisdiction, the issuance of such certificate shall be deemed the
21  final act of conversion and the mutual insurer shall concurrently become
22  a stock insurer. The date of the issuance of such certificate shall be the
23  ``conversion date'' of the insurer. The stock insurer shall be a continuation
24  of the mutual insurer and deemed to have been organized at the time
25  the converted mutual insurer was organized. The conversion shall in no
26  way annul, modify or change any of such insurer's existing suits, rights,
27  contracts or liabilities except as provided in the plan. The insurer, after
28  conversion, shall exercise all the rights and powers and perform all the
29  duties conferred or imposed by law upon insurers writing the classes of
30  insurance written by it and shall retain the rights and contracts existing
31  prior to conversion, subject to the effect of the plan.
32    Sec. 11.  K.S.A. 40-4009 is hereby amended to read as follows: 40-
33  4009. The directors and officers of the mutual insurer shall serve until
34  new directors and officers have been duly elected and qualified pursuant
35  to the plan and articles of incorporation or bylaws of the insurer converted
36  insurer or of the affiliates of the converted insurer, if applicable, unless
37  otherwise determined by the board of directors of the converting insurer.
38    Sec. 12.  K.S.A. 40-4010 is hereby amended to read as follows: 40-
39  4010. The offer or sale of securities issued pursuant to under the plan
40  developed and approved in accordance with the provisions of this act shall
41  be exempt from the Kansas securities laws.
42    Sec. 13.  K.S.A. 40-4011 is hereby amended to read as follows: 40-
43  4011. No action challenging the validity of a conversion, or any aspect of
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 1  such conversion under this act, may be commenced more than 30 days
 2  after the final act of conversion.
 3    In any action challenging the plan of conversion or charging that the
 4  directors of the insurer or converted insurer converting insurer, the con-
 5  verted insurer, the mutual holding company or the stock holding com-
 6  pany, as applicable or any other person or persons have acted improperly
 7  in connection with any aspect of the conversion, the insurer or converted
 8  insurer in whose right such action is brought or the defendant or defend-
 9  [chants shall be entitled at any state stage of the proceedings before final
10  judgment to require the plaintiff or plaintiffs to give security for the rea-
11  sonable expenses including attorney fees, which may be incurred by the
12  converting insurer, converted insurer or any other parties defendant in
13  connection with such action. Thereafter, the amount of such security,
14  from time to time, may be increased or decreased in the discretion of the
15  court having jurisdiction of such action upon a showing that the security
16  provided has or may become inadequate or excessive.
17    Sec. 14.  K.S.A. 40-4012 is hereby amended to read as follows: 40-
18  4012. The commissioner of insurance shall have the authority to may
19  adopt such rules and regulations as may be necessary to carry out the
20  provisions of this act.
21    Sec. 15.  K.S.A. 40-4013 is hereby amended to read as follows: 40-
22  4013. The commissioner of insurance shall also have the authority to
23  retain experts and may charge and collect from the insurer the actual
24  amount of expenses, including the expenses of retaining experts, reason-
25  ably incurred by the state in discharge of the commissioner's duties here-
26  under[, including the determination of a valuation of the insurer].
27    Sec. 16.  K.S.A. 40-4014 is hereby amended to read as follows: 40-
28  4014. Within Not later than 24 hours of after issuance of the certificate
29  of authority to the converted stock insurer, a certified copy of the
30  amended articles of incorporation of the insurer shall be filed with the
31  secretary of state.
32    Sec. 17.  K.S.A. 40-4001, 40-4002, 40-4003, 40-4004, 40-4005, 40-
33  4006, 40-4007, 40-4008, 40-4009, 40-4010, 40-4011, 40-4012, 40-4013
34  and 40-4014 are hereby repealed.
35    Sec. 18.  This act shall take effect and be in force from and after its
36  publication in the statute book.