C.R.S.
Section 10-3-604
Procedure for exchange
(1)
Any domestic company may adopt a plan of exchange with any acquiring corporation providing for the exchange of the outstanding stock of the domestic company for shares of stock or other securities issued by the acquiring corporation, or cash, or other consideration, or any combination thereof, in the following manner:(a)
The boards of directors of the domestic company and of the acquiring corporation, by resolutions approved by a majority of the whole of each such board, shall adopt a plan of exchange which shall set forth the terms and conditions of the exchange and the mode of carrying the same into effect and such other provisions with respect to the exchange as may be deemed necessary or desirable.(b)
The domestic company and the acquiring corporation shall submit to the commissioner three copies of the plan of exchange certified by an officer of each as having been adopted in accordance with paragraph (a) of this subsection (1). Such copies of the plan of exchange shall be accompanied by:(I)
The annual statement of the domestic company for its last preceding calendar year prepared pursuant to section 10-3-208;(II)
Fully audited financial information as to the earnings and financial condition of the acquiring corporation for the preceding five fiscal years of each such acquiring corporation, or for lesser period as such acquiring corporation and any predecessors thereof have been in existence, and similar unaudited information as of a date not earlier than ninety days prior to the date of filing the statement;(III)
A pro forma financial statement of each acquiring corporation based on the assumption that the plan of exchange was effective as proposed at the end of the last preceding calendar year of the domestic company;(IV)
An estimate of expenses already incurred and expenses expected to be incurred in connection with the proposed plan of exchange;(V)
A written statement which sets forth for each corporation the proposed changes, if any, in management policies and the identity of officers and directors of the domestic company and of the acquiring corporation which are initially contemplated should the plan of exchange be effective as proposed; and(VI)
If the plan of exchange is submitted to the commissioner after March 31 of any year, a balance sheet of the domestic company, as of a date within ninety days prior to the date the plan is submitted, a summary of operations of the domestic company for the period between the preceding December 31 and the date of such balance sheet, and financial statements of each acquiring corporation based on the assumption that the plan of exchange was effective as proposed on the date of such balance sheet.(c)
The commissioner shall hold a hearing upon the fairness of: The terms, conditions, and provisions of the plan of exchange; and the proposed exchange of stock or other securities of the acquiring corporation, or cash, or other consideration, or any combination thereof, for the stock of the domestic company, at which hearing the policyholders and the shareholders of both the domestic company and the acquiring corporation and any other interested party shall have the right to appear and to become party to the proceeding. The commissioner shall require the domestic company and the acquiring corporation to produce such evidence as he deems necessary to establish the fairness to be ascertained at the hearing, including in any event evidence concerning the valuation of the respective companies and the method utilized by the management of each corporation to accomplish such valuation, inclusive of the value established with respect to the stock of the domestic company which is proposed to be exchanged, as well as the value of the stock, securities, and consideration, other than cash, to be offered by the acquiring corporation in such exchange.(d)
Such hearing shall be commenced not less than twenty days after the date on which the plan of exchange is presented to the commissioner. The hearing shall be held in the city and county of Denver at such place, date, and time as the commissioner specifies. Notice of the hearing shall be published in a newspaper of general circulation in the city wherein is located the principal office of the domestic company and of the acquiring corporation, and in the city and county of Denver, once a week for two successive weeks. Written notice of the hearing shall be mailed at least ten days prior to the hearing by the domestic company and by the acquiring corporation to all of their respective shareholders. All expenses of publication shall be borne by the domestic company or the acquiring corporation, or both, as specified in the plan of exchange. The hearing shall be conducted in accordance with the provisions of section 24-4-105, C.R.S.(e)
The commissioner shall issue an order approving the plan of exchange as delivered to him by the domestic company and the acquiring corporation and such modifications therein as a majority of the whole board of directors of each such corporation approves if he finds: That the plan, including all such modifications, if effected, will not tend adversely to affect the financial stability or management of the domestic company or the general capacity or intention to continue the safe and prudent transaction of the insurance business of the domestic company or of the acquiring corporation if it is a domestic insurance company; that the interests of the policyholders and shareholders of the domestic company and, if the acquiring corporation is a domestic insurance company, the policyholders of the acquiring corporation are adequately protected; that the fulfillment of the plan will not affect either the contractual obligations of the domestic company and of the acquiring corporation, if it is a domestic insurance company, to its policyholders or the ability and tendency of either to render service to its policyholders in the future; that the effect of the merger or other acquisition of control would not substantially lessen competition in the business of providing insurance in this state or tend to create a monopoly therein; that all plans or proposals which the acquiring corporation has to liquidate the domestic company or to sell its assets, consolidate or merge it with any person, or make any other material change in its business or corporate structure or management have been fully disclosed and are not unfair or unreasonable to policyholders of the domestic company and are in the public interest; that the competence, experience, and integrity of those persons who would control the operation of the insurer are such that it would be in the interest of the policyholders of the domestic company and of the public to permit the merger or other acquisition of control; and that the terms and conditions of the plan of exchange and the proposed issuance and exchange are otherwise fair and reasonable.(f)
The order of the commissioner approving or disapproving the plan of exchange shall be filed in his office within sixty days after the date the plan of exchange is presented to him. Upon filing such order, the commissioner shall send a copy thereof to each party to the proceeding, such copy to be sent to each such party by certified mail directed to such party at the address of such party as shown by the record of the hearing. Any final order of the commissioner approving or disapproving a plan of exchange pursuant to this section shall be subject to judicial review by the court of appeals pursuant to section 24-4-106 (11), C.R.S.(g)
The plan of exchange as approved by the commissioner shall be submitted to a vote of the shareholders of the domestic company at an annual or special meeting of the shareholders. Notice of the submission of the plan to the shareholders shall be included in the notice of the meeting. The plan shall be approved by the shareholders of the domestic company upon receiving the affirmative votes of the holders of shares of the domestic company having at least two-thirds of the total voting power of the outstanding shares of the domestic company. Notwithstanding shareholder approval of the plan of exchange, and at any time prior to the filing of the certificate setting forth the plan of exchange by the commissioner pursuant to section 10-3-605, the plan of exchange may be abandoned pursuant to a provision for such abandonment, if any, contained in the plan of exchange.(h)
Within ten days after the plan of exchange is approved by the shareholders of the domestic company, a written notice of the approval of the plan of exchange shall be mailed or delivered personally to each shareholder of record of such company who was entitled to vote thereon. The domestic company shall thereafter file with the commissioner an affidavit of the secretary or an assistant secretary of such company, or of an officer of the transfer agent of such company, that such notice was given.(i)
Any shareholder of the domestic company owning shares not voted in favor of such plan at the meeting at which the plan was approved by the shareholders of the domestic company may object in writing to the plan and demand payment, should the plan become effective, of the fair value of any of such shares, as of the day on which the plan of exchange was approved by the shareholders of the domestic company pursuant to paragraph (g) of this subsection (1). Such objection and demand shall be received, together with the certificate representing the shares with respect to which objection and demand have been made, for notation thereon that such objection and demand have been made, by the domestic company or its transfer agent within thirty days after the date of said meeting of shareholders. No such objection and demand shall pertain to any shares which were voted in favor of the plan. No such objection and demand may be withdrawn unless the domestic company, by a duly authorized officer, consents thereto in writing.(j)
Upon the plan of exchange becoming effective, the holder of any shares, with respect to which such objection and demand have been made and certificates for which have been delivered to the domestic company or its transfer agent for notation, or any transferee thereof, shall cease to be a shareholder of the domestic company with respect to such shares and shall have no rights with respect to such shares, except the right to receive payment therefor in accordance with the provisions of paragraph (k) of this subsection (1). Every shareholder failing to make objection and demand accompanied by certificates representing the shares with respect to which such objection and demand have been made or withdrawing such objection and demand as provided in paragraph (i) of this subsection (1) shall be conclusively presumed to have assented to, and to have agreed to be bound by, the plan of exchange in accordance with its terms.(k)
Within forty-five days after the date of the meeting of shareholders of the domestic company at which the plan of exchange was approved by such shareholders, the domestic company, or, if the plan of exchange so specifies, the acquiring corporation, shall mail a written offer to each holder of record of shares with respect to which an objection and demand have been made, as provided in paragraph (i) of this subsection (1), to pay for such shares a price per share deemed by such corporation to be the fair value thereof as of the date of such meeting. The form of written offer to be used, including the price per share, shall first be submitted to and approved by the commissioner. If such offer is accepted in writing by such holder, such corporation shall pay such holder, within forty-five days after the date of the plan of exchange becoming effective, such price upon the surrender of the certificate representing such shares.(l)
If, within thirty days after the date of the mailing of such written offer, the domestic company or the acquiring corporation, as the case may be, and a shareholder do not agree on the price, such corporation or the shareholder may, within ninety days after the date of the mailing of such written offer, file a petition in any court of competent jurisdiction in the county where the registered office of the domestic company is located asking for a finding and determination of the fair value of such shares as of the date of the meeting of shareholders of the domestic company at which the plan of exchange was approved by such shareholders; and payment of the fair value thereof shall be made by the domestic company or, if the plan of exchange so specifies, the acquiring corporation within sixty days after the entry of the judgment or order determining such fair value, upon the surrender of the certificate representing such shares.(m)
All shares acquired by the domestic company, upon payment of the value therefor, shall be canceled by the board of directors of the domestic company, upon the plan of exchange becoming effective, or at any time thereafter in the manner provided in section 7-106-302 (2)(b), C.R.S., and any statement of cancellation made pursuant to said section shall first be filed with the commissioner prior to filing thereof with the secretary of state. If the commissioner finds such statement of cancellation to have been lawfully executed, and to be in due legal form and not in conflict with the provisions of law governing the domestic company, such statement of cancellation shall be filed with the secretary of state.(n)
If the plan of exchange does not become effective, the right of shareholders or transferees to be paid the fair value of their shares under this subsection (1) shall cease, and their status shall be the same as that of shareholders who voted in favor of the plan. If a shareholder or his transferee, with respect to any share for which objection and demand have been made: Withdraws such objection and demand in the manner provided by this subsection (1), or fails to submit a certificate at the time and in the manner required by this subsection (1), or does not file a petition for the determination of fair value within the time and in the manner provided in this subsection (1) and neither the domestic company nor the acquiring corporation files a petition for such determination, or is adjudged by a court of competent jurisdiction not to be entitled to the relief provided by this subsection (1), then the right of the shareholder or his transferee to be paid the fair value of such share shall cease, and his status with respect to such share shall be the same as that of a shareholder who voted in favor of the plan.
Source:
Section 10-3-604 — Procedure for exchange, https://leg.colorado.gov/sites/default/files/images/olls/crs2023-title-10.pdf (accessed Oct. 20, 2023).
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