Appeal from the Order of the Pennsylvania Insurance Commissioner in case of In the Matter of: The Application of Midwestern Fidelity Corporation To Acquire Beneficial Ownership of More Than 10 Per Cent of the Capital Stock of Zemarc, Ltd., No. C74-8-13.
Tom P. Monteverde, with him, of counsel, Pelino, Wasserstrom, Chucas & Monteverde, for appellant.
John H. Isom, Assistant Attorney General, with him Andrew F. Giffin, Assistant Attorney General, for appellee.
John S. Stith, with him Thomas J. Gardner, and, of counsel, Frost & Jacobs; Robert L. Rubendall ; and Metzger, Hafer, Keefer, Thomas and Wood, for intervening appellee.
President Judge Bowman and Judges Crumlish, Jr., Wilkinson, Jr., Mencer and Blatt. Judges Kramer and Rogers did not participate. Opinion by Judge Mencer.
[ 26 Pa. Commw. Page 213]
This case had its genesis in an application by Midwestern Fidelity Corporation (MFC) to the Pennsylvania Insurance Commissioner (Commissioner) seeking approval, pursuant to Section 337.6 of The Insurance Company Law of 1921 (Insurance Company Law), Act of May 17, 1921, P.L. 682, as amended, 40 P.S. § 459.6, of MFC's proposed acquisition of beneficial ownership of more than 10 percent of the capital stock of Zemarc, Ltd. (Zemarc), a Pennsylvania insurance corporation.*fn1
After a considerable number of hearings, during which the present management of the appellant Zemarc vigorously opposed the petition,*fn2 the Commissioner,
[ 26 Pa. Commw. Page 214]
on December 1, 1975, issued his order granting approval to MFC's proposed tender. Zemarc subsequently petitioned for reconsideration and rehearing. It is from the denial of that petition and the order of December 1, 1975 that this appeal is taken.
As amended, Section 337.6 of the Insurance Company Law provides in relevant part:
"(b) Without first complying with all applicable provisions of this section:
"(1) No person shall, directly or indirectly through an intermediary or otherwise, acquire or offer to acquire beneficial ownership of insurance stock or insurance holding company stock if such acquisition (together with any past or proposed acquisitions from others) would cause such person to have beneficial ownership of more than ten per centum (10%) of the outstanding insurance stock or insurance holding company stock of any class of any issuer, . . . and
"(3) No person shall, directly or indirectly through an intermediary or otherwise, acquire or offer to acquire beneficial ownership of insurance stock or insurance holding company stock pursuant to a plan whereby such person would become the beneficial owner of more than ten per centum (10%) of the outstanding insurance stock or insurance holding company stock of any class of any issuer . . . .
"(c) There shall be filed with the Insurance Commissioner a statement, signed by the person proposing to make the acquisition, and verified by oath or affirmation, which shall contain the information specified in this subsection, and copies of all material proposed to be used in connection with the offer or acquisition (which shall set forth the information contained in the statement filed with the Insurance Commissioner), copies of which statement and material and all amendments thereto, shall simultaneously
[ 26 Pa. Commw. Page 215]
with such filing, also be sent by registered or certified mail to the issuer of the insurance stock or insurance holding company stock proposed to be acquired. The statement filed with the Insurance Commissioner shall be filed on such form or forms, if any, as the Insurance Commissioner shall prescribe, and shall contain the following information and such additional information as the Insurance Commissioner shall by regulation prescribe as appropriate to enable him to make a determination under subsection (d) of this section:
"(1) The name and address of each person who proposes to acquire or offer to acquire insurance stock or insurance holding company stock, and (i) if such person is an individual, his principal occupation during the past five (5) years, or (ii) if such person is not an individual, an informative description of the business done and intended to be done by such person and such person's subsidiaries and the general development of such business during the past five (5) years.
"(2) If such person is not an individual, a list of all persons who are directors or executive officers of such person, or who perform similar functions, and all persons who have been chosen to become directors or executive officers or to perform similar functions, but who have not yet assumed their positions. The list shall include all positions and offices held by the persons named in the particular organization and their principal occupations during the past five (5) years.
"(3) The terms and conditions of any proposed offer and acquisition and the manner in which such offer and acquisition are to be made.
"(4) The source of the funds to be used in the proposed acquisition, and, if the funds are to be borrowed,
[ 26 Pa. Commw. Page 216]
the name or names of the lender or lenders and a summary of the terms and conditions of the loan transactions.
"(5) Such plans, arrangements, understandings and intentions as such person may have for the future business and management of the issuer whose capital stock is to be acquired and, if such issuer is an insurance holding company, of the insurance company sixty-six and two-thirds per centum (66 2/3%) or more of whose capital stock of any class is beneficially owned by such insurance holding company, including any plans, arrangements, understandings or intentions with respect to total or partial liquidation, sale of assets, merger, material change in business, corporate structure, management or composition of the board of directors.
"(6) The number of shares of each class of insurance stock or insurance holding company stock proposed to be acquired which are beneficially owned by the person proposing to acquire or offer to acquire insurance stock or insurance holding company stock, as the case may be, or which are subject to rights of acquisition by such person, the dates of any sales and purchases of such stock by such person and each associate of such person within the past two years, and the prices received or paid in connection with such sales and purchases.
"(7) Information as to any contracts, arrangements or understandings with any person with respect to any securities of the insurance company or insurance holding company whose capital stock is to be acquired, including but not limited to contracts, arrangements or understandings with respect to transfer of any of the securities, joint ventures, loan or option arrangements, puts or calls, guaranties of loans, guaranties against loss or guaranties of profits,
[ 26 Pa. Commw. Page 217]
division of losses or profits, or the giving or withholding of proxies, naming the persons with whom such contracts, arrangements, or understandings have been entered into, and giving the details thereof.
"(8) A consent to service of process if required by subsection (e) of this section.
"(9) Complete audited statements as to the earnings and financial condition of such person for the preceding five (5) fiscal years of such person and similar unaudited information as of a date not more than ninety (90) days prior to the filing of the statement with the commissioner.
"(d) If the Insurance Commissioner shall determine:
"(1) That the statement and other material filed pursuant to subsection (c) of this section comply with the requirements of subsection (c) of this section and any regulations promulgated thereunder;
"(2) That he has no reason to believe that after such acquisition the insurance company whose capital stock is to be acquired or sixty-six and two-thirds per centum (66 2/3%) or more of whose outstanding capital stock of any class is beneficially owned by the insurance holding company whose capital stock is to be acquired will not continue to comply in all respects with the laws and regulations of this Commonwealth governing insurance;
"(3) That, upon completion of the acquisition, the insurance company whose capital stock is to be acquired or sixty-six and two-thirds per centum (66 2/3%) or more of whose outstanding capital stock of any class is beneficially owned by the insurance holding company whose capital stock is to be acquired would satisfy the requirements for the issuance of a license to ...