For the purposes of this chapter, the following terms shall have the meanings respectively ascribed to them by this section:

(1) STOCK INSURER. An incorporated insurer with capital divided into shares and owned by its stockholders.

(2) DOMESTIC MUTUAL INSURER. An incorporated insurer without capital stock and the governing body of which is elected as provided in this chapter.

(a) Except as to proposed domestic insurers which are subject to the requirements of Section 27-27-16, the commissioner shall not issue a solicitation permit until the applicant therefor has filed with him a corporate surety bond in the penalty of $15,000.00 in favor of the State of Alabama and for the use and benefit of the state and of proposed Alabama investors in and creditors of the proposed organization.

(b) The bond shall be conditioned upon the payment of costs incurred by the state in event of any legal proceedings for liquidation or dissolution of the proposed organization before completion of organization or in event a certificate of authority is not granted and upon a full accounting for funds received until the proposed insurer has been granted its certificate of authority or until the proposed corporation, syndicate, organization or financing has been completed as defined in the solicitation permit.

(c) In lieu of filing such bond, the applicant may deposit with the State Treasurer through the commissioner $15,000.00 in cash, or its equivalent, or in United States government bonds at par value, to be held in trust under the same conditions as required for the bond.

(d) The commissioner may, in his discretion, waive the requirement for a bond or deposit in lieu thereof if the solicitation permit provides that:

(1) The proposed securities are to be distributed solely and finally to those few persons who are the active promoters intimate to the formation of the insurer or other corporation, syndicate, or organization; or

(2) The securities are to be issued in connection with subsequent financing as provided in Section 27-27-14.

(e) Any bond filed or deposited, or remaining portion thereof, held under this section shall be released and discharged upon settlement or termination of all liabilities against it.

Solicitation for sale of securities under a solicitation permit shall be made only by individuals licensed as securities salesmen pursuant to the provisions of the Alabama Securities Act.

(a) All funds received in Alabama pursuant to a solicitation permit, other than advance premiums for insurance which are subject to Section 27-27-18, shall, by the permit holder, be deposited and held in escrow in a bank or trust company located in this state under an agreement approved by the commissioner.

(b) No part of such funds shall be withdrawn from such deposit, except:

(1) For the payment of promotion, sales and organization expenses as authorized by the solicitation permit, and funds for such purposes may be withheld from the deposit;

(2) For the purpose of making any deposit with the commissioner required for the issuance of a certificate of authority to an insurer;

(3) If the proposed organization is not to be an insurer, upon completion of payments on securities subscriptions made under the solicitation permit and deposit or appropriation of such funds to the purposes specified in the solicitation permit; or

(4) For making of refunds as provided in Section 27-27-13.

(c) When the commissioner has issued a certificate of authority to an insurer, any such funds remaining in escrow for its account shall be released to the insurer.

(d) The commissioner may waive compliance with this section as to funds required to be deposited in escrow or trust in similar institutions and for similar purposes as set forth in this section pursuant to any other law of this state.

The commissioner shall withdraw all funds held in escrow under Section 27-27-12, and refund to securities subscribers or purchasers all sums paid in on securities subscriptions, less that part of such sums paid in as has been allowed and used for promotion, sales and organization expenses, and shall dissolve the proposed domestic insurer, corporation, syndicate or organization if:

(1) It fails to complete its organization or financing and obtain full payment for subscriptions and, if to be an insurer, it fails to secure its certificate of authority, all before expiration of the solicitation permit; or

(2) The commissioner revokes the solicitation permit.

(a) No insurer, or insurance holding corporation, or stock corporation for financing operations of a mutual insurer, or attorney-in-fact corporation, or a reciprocal insurer or any other type of organization existing for the same purpose, after:

(1) It has received a certificate of authority, if an insurer, in this or any other state; or

(2) It has completed its initial organization and financing, if a corporation, syndicate or other organization other than an insurer, shall in this state solicit or receive funds in exchange for its securities, other than when combining and selling, for the account of its stockholders entitled thereto, fractional shares to which they become entitled through a stock dividend to existing stockholders until it has applied to the commissioner for, and has been granted, a solicitation permit.

(b) The commissioner shall issue such a permit unless he finds:

(1) That the funds proposed to be secured are excessive in amount for the purposes intended;

(2) That the proposed securities or the manner of their distribution are inequitable; or

(3) That the offering or issuance of the securities would be unfair to existing or prospective holders of securities of the same insurer, corporation, syndicate or organization.

(c) Any such solicitation permit granted by the commissioner shall be for such duration and shall contain such terms, and be issued upon, such conditions as the commissioner may reasonably specify or require for the protection of existing or proposed policyholders or investors.

(d) This section is supplemental to other laws of this state applicable to the sale of securities.

(a) When newly organized, a domestic mutual insurer may be authorized to transact any one of the kinds of insurance listed in the schedule contained in subsection (b) of this section.

(b) When applying for an original certificate of authority, the insurer must be otherwise qualified therefor under this title and must have received and accepted bona fide applications as to substantial insurable subjects for insurance coverage of a substantial character of the kind of insurance proposed to be transacted, must have collected in cash the full premium therefor at a rate not less than that usually charged by other insurers for comparable coverages, must have surplus funds on hand and deposited as of the date such insurance coverages are to become effective or, in lieu of such applications, premiums and surplus and may deposit surplus, all in accordance with that part of the following schedule which applies to the one kind of insurance the insurer proposes to transact:

(NOTE: THIS TABLE IS DONE IN TWO PARTS BECAUSE THE TABLE IS TOO WIDE TO PRINT PROPERLY IN THE ALIS SYSTEM.)

The following provisos are respectively applicable to the foregoing schedule and provisions as indicated by like arabic numerals appearing in such schedule:

(1) No group insurance or term policies for terms of less than 10 years shall be included;

(2) No group, blanket or family plans of insurance shall be included. In lieu of weekly indemnity a like premium value in medical, surgical and hospital benefits may be provided. Any accidental death or dismemberment benefit provided shall not exceed $2,500.00;

(3) Only insurance of the owner's interest in real property may be included;

(4) Must include insurance of legal liability for bodily injury and property damage, to which the maximum and minimum insured amounts apply;

(5) The maximums provided for in column (f) are net of applicable reinsurance; and

(6) The deposit of surplus in the amount specified in columns (g) and (h) must thereafter be maintained unimpaired. The deposit is subject to the provisions of Chapter 6 of this title.

(a) Before soliciting any applications for insurance required under Section 27-27-15, as qualification for the original certificate of authority, the incorporators of the proposed mutual insurer shall file with the commissioner a corporate surety bond in the penalty of $15,000.00 in favor of the State of Alabama and for the use and benefit of the state and of applicant members and creditors of the corporation. The bond shall be conditioned as follows:

(1) Upon payment of any loss suffered by applicants who have cancelled or lapsed existing insurance policies due to misrepresentation by the incorporators or by persons soliciting such applications under authorization by the corporation, to the effect that the making of such application for insurance and prepayment of premiums in such proposed insurer provides insurance protection prior to issuance of a certificate of authority to such insurer by the commissioner; and

(2) That in event the corporation fails to complete its organization and secure a certificate of authority issued by the commissioner within one year after the date of its certificate of incorporation, all premiums collected in advance from applicant members will be promptly returned to them, all other indebtedness of the corporation, other than any compensation to directors, officers or solicitors of insurance applications, will be paid and for payment of costs incurred by the state in event of any legal proceedings for liquidation or dissolution of the corporation.

(b) In lieu of such a bond, the incorporators may deposit with the commissioner $15,000.00 in cash, or its equivalent, or in United States government bonds at par value, to be held in trust upon the same conditions as required for the bond.

(c) Any such bond filed or deposit, or remaining portion thereof, held under this section shall be released and discharged upon settlement and termination of all liabilities against it under this section.

(a) Upon receipt of the commissioner's approval of the bond or deposit as provided in Section 27-27-16 the directors and officers of the proposed domestic mutual insurer may commence solicitation of such requisite applications for insurance policies as they may accept and may receive deposits of premiums thereon.

(b) All such applications shall be in writing signed by the applicant, covering subjects of insurance resident, located or to be performed in this state.

(c) All such applications shall provide that:

(1) Issuance of the policy is contingent upon the insurer qualifying for and receiving a certificate of authority;

(2) No insurance is in effect unless and until the certificate of authority has been issued; and

(3) The prepaid premium or deposit and membership or policy fee, if any, shall be refunded in full to the applicant if organization is not completed and the certificate of authority is not issued and received by the insurer before a specified reasonable date, which date shall be not later than one year after the date of the certificate of incorporation.

(d) All qualifying premiums collected shall be in cash.

(e) Solicitation for such qualifying applications for insurance shall be by licensed agents of the corporation, and the commissioner shall, upon the corporation's application therefor, issue temporary agent's licenses expiring on the date specified pursuant to subdivision (c) (3) of this section to individuals qualified as for a resident agent's license, except as to the taking or passing of an examination. The commissioner may suspend or revoke any such license for any of the causes and pursuant to the same procedures as are applicable to suspension or revocation of licenses of agents in general under Chapter 7 of this title.

(a) All sums collected by a domestic mutual corporation as premiums or fees on qualifying applications for insurance therein shall be deposited in trust in a bank or trust company in this state under a written trust agreement approved by the commissioner and consistent with this section and with subdivision (c) (3) of Section 27-27-17. The corporation shall file an executed copy of such trust agreement with the commissioner.

(b) Upon issuance to the corporation of a certificate of authority as an insurer for the kind of insurance for which such applications were solicited, all funds so held in trust shall become the funds of the insurer, and the insurer shall, thereafter in due course, issue and deliver its policies for which premiums had been paid and accepted. The insurance provided by such policies shall be effective as of the date of the certificate of authority or thereafter as provided by the respective policies.

If the proposed domestic mutual insurer fails to complete its organization and to secure its original certificate of authority within one year from, and after, date of its certificate of incorporation, the corporation shall transact no further business, and the commissioner shall return, or cause to be returned, to the persons entitled thereto all advance deposits or payments of premiums held in trust under Section 27-27-18.

This chapter shall apply only to domestic stock insurers and domestic mutual insurers; except, that:

(1) Sections 27-27-4 through 27-27-14, relative to sale of securities or other financing of insurers or insurance operations, and subsection (b) of Section 27-27-24 shall also apply as to foreign and alien insurers; and

(2) This chapter shall be applicable as to mutual aid associations as stated in Chapter 30 of this title and as to fraternal benefit societies as stated in Chapters 34 and 35 of this title.

A domestic mutual insurer, after being authorized to transact one kind of insurance, may be authorized by the commissioner to transact such additional kinds of insurance as are permitted under Section 27-3-6, while otherwise in compliance with this title and while maintaining unimpaired surplus funds in an amount not less than the amount of paid-in capital stock required of a domestic stock insurer transacting like kinds of insurance, subject further to the additional expendable surplus requirements of Section 27-3-8 applicable to such a stock insurer.

(a) Each policyholder of a domestic mutual insurer, other than of a reinsurance contract, is a member of the insurer with all rights and obligations of such membership, and the policy shall so specify.

(b) Any individual, or firm or any public or private corporation, board or association in this state, or elsewhere, may make application, enter into agreements for and hold policies in any such mutual insurer. Any officer, stockholder, trustee or local representative of any such corporation, board, association or estate may be recognized as acting for, or on its behalf for, the purpose of such membership, but shall not be personally liable upon such contract of insurance by reason of acting in such representative capacity. The right of any corporation organized under the laws of this state to participate as a member of any such insurer is declared to be incidental to the purpose for which the corporation is organized and as much granted as the rights and powers expressly conferred.

(c) The right of certain governmental bodies or agencies of this state to become, and be, policyholders of mutual insurers shall be as provided by the laws of this state governing such bodies or agencies.

(a) A domestic mutual insurer shall have bylaws for the government of its affairs. The initial board of directors of a domestic mutual insurer shall adopt original bylaws, subject to the approval of the insurer's members at the next succeeding meeting. The members shall have power to make, modify and revoke bylaws.

(b) The bylaws shall provide:

(1) That each member is entitled to one vote upon each matter coming to a vote at meetings of members or to more votes in accordance with a reasonable classification of members as set forth in the bylaws and based upon the amount of insurance in force, number of policies held or upon the amount of the premiums paid by such member or upon other reasonable factors. A member shall have the right to vote in person or by his written proxy made not less than 30 days prior to the meeting. No such proxy shall be made irrevocable for longer than a period of three years;

(2) For election of directors by the members and the number, qualifications, terms of office and powers of directors;

(3) The time, notice, quorum and conduct of annual and special meetings of members and voting thereat. The bylaws may provide that the annual meeting shall be held at a place, date and time to be set forth in the policy and without giving other notice of such meeting;

(4) The number, designation, election, terms, powers and duties of the respective corporate officers;

(5) For deposit, custody, disbursement and accounting for corporate funds; and

(6) For any other reasonable provisions customary, necessary or convenient for the management or regulation of its corporate affairs.

(c) The insurer shall promptly file with the commissioner a copy, certified by the insurer's secretary, of its bylaws and of every modification thereof or addition thereto. The commissioner shall disapprove any bylaw provision deemed by him to be unlawful, unreasonable, inadequate, unfair or detrimental to the proper interests or protection of the insurer's members or any class thereof. The insurer shall not, after receiving written notice of such disapproval and during the existence thereof, effectuate any bylaw provision so disapproved.

(a) The affairs of every domestic insurer shall be managed by not less than three directors, and at least one-third of the directors shall be bona fide residents of this state.

(b) Directors must be elected by the members or stockholders of a domestic insurer at the annual meeting of stockholders or members. Directors may be elected for terms of not more than five years each and until their successors are elected and have qualified, and if to be elected for terms of more than one year, the insurer's bylaws shall provide for a staggered-term system under which the terms of a proportionate part of the members of the board of directors will expire on the date of each annual meeting of stockholders or members.

(c) If so provided in the insurer's bylaws, a director of a stock insurer shall be a stockholder thereof and a director of a mutual insurer shall be a policyholder thereof.

(a) At a special meeting of stockholders or members called for that purpose, any director of a stock or mutual insurer may be removed from office by an affirmative vote of stockholders or members holding in the aggregate a majority of the voting power of all stockholders or members of an insurer entitled to vote at an election of directors. If the board of directors, or any member thereof, is so removed, new directors may be elected at the same meeting.

(b) Vacancies in the board of directors may be filled by the remaining members of the board, and each person so elected shall be a director until his successor is elected by the stockholders or members at the next annual meeting of stockholders or members or at any special meeting of stockholders or members called for that purpose and held prior thereto.

No person shall buy, or sell or barter a vote or proxy relative to any meeting of stockholders or members of an insurer or engage in any corrupt or dishonest practice in, or relative to, the conduct of any such meeting. Violation of this section shall be punishable as provided in Section 27-1-12.

(a) Any officer, or director, or any member of any committee or any employee of a domestic insurer who is charged with the duty of investing or handling the insurer's funds shall not deposit or invest such funds except in the insurer's corporate name; except, that such insurer may for its convenience hold any equity investment in a street name or in the name of a nominee; shall not borrow the funds of such insurer; shall not be pecuniarily interested in any loan, pledge or deposit, security, investment, sale, purchase, exchange, reinsurance or other similar transaction or property of such insurer except as a stockholder or member and shall not take or receive to his own use any fee, brokerage, commission, gift or other consideration for, or on account of, any such transaction made by, or on behalf of, such insurer.

(b) No insurer shall guarantee any financial obligation of any of its officers or directors.

(c) This section shall not prohibit such a director, or officer, or member of a committee or employee from becoming a policyholder of the insurer and enjoying the usual rights so provided for its policyholders, nor shall it prohibit any such officer, director, or member of a committee or employee from participating as beneficiary in any pension trust, deferred compensation plan, profit-sharing plan or stock option plan authorized by the insurer and to which he may be eligible, nor shall it prohibit any director or member of a committee from receiving a reasonable fee for legal services actually rendered to such insurer.

(d) The commissioner may, by regulations from time to time, define and permit additional exceptions to the prohibition contained in subsection (a) of this section solely to enable payment of reasonable compensation to a director who is not otherwise an officer or employee of the insurer, or to a corporation or firm in which a director is interested, for necessary services performed or sales or purchases made to, or for, the insurer in the ordinary course of the insurer's business and in the usual private professional or business capacity of such director or such corporation or firm.

(a) No domestic insurer shall hereafter make any contract whereby any person is granted or is to enjoy in fact the management of the insurer to the substantial exclusion of its board of directors or to have the controlling or preemptive right to produce substantially all insurance business for the insurer, unless the contract is filed with, and approved by, the commissioner. The contract shall be deemed approved unless disapproved by the commissioner within 20 days after date of filing, subject to such reasonable extension of time as the commissioner may require by notice given within such 20 days. Any disapproval shall be delivered to the insurer in writing, stating the grounds therefor.

(b) Any such contract shall provide that any such manager or producer of its business shall, within 90 days after expiration of each calendar year, furnish the insurer's board of directors a written statement of amounts received under, or on account of, the contract and amounts expended thereunder during such calendar year, including the emoluments received therefrom by the respective directors, officers and other principal management personnel of the manager or producer, and with such classification of items and further detail as the insurer's board of directors may reasonably require.

(c) The commissioner shall disapprove any such contract if he finds that it:

(1) Subjects the insurer to excessive charges;

(2) Is to extend for an unreasonable length of time;

(3) Does not contain fair and adequate standards of performance; or

(4) Contains other inequitable provision, or provisions, which impair the proper interests of stockholders or members of the insurer.

(d) This section does not apply as to contracts entered into prior to January 1, 1972, nor to extensions or amendments to such contracts.

An insurer shall promptly give the commissioner written notice of any change of personnel among the directors or principal officers of the insurer.

(a) Every domestic insurer shall have, and maintain, its principal place of business and home office in this state and shall keep therein complete records of its assets, transactions and affairs in accordance with such methods and systems as are customary or suitable as to the kind, or kinds, of insurance transacted.

(b) Every domestic insurer shall have, and maintain, its assets in this state, except as to:

(1) Real property and personal property appurtenant thereto lawfully owned by the insurer and located outside this state; and

(2) Such property of the insurer as may be customary, necessary and convenient to enable and facilitate the operation of its branch offices and 'regional home offices' located outside this state as referred to in subsection (d) of this section.

(c) Removal of all, or a material part of, the records or assets of a domestic insurer from this state except pursuant to a plan of merger or consolidation approved by the commissioner under this title, or for such reasonable purposes and periods of time as may be approved by the commissioner in writing in advance of such removal, or concealment of such records or assets, or material part thereof, from the commmissioner is prohibited. Any person who removes, or attempts to remove, such records or assets, or such material part thereof, from the home office or other place of business or of safekeeping of the insurer in this state with the intent to remove the same from this state or who conceals or attempts to conceal the same from the commissioner, in violation of this section, shall, upon conviction thereof, be guilty of a felony, punishable by a fine of not more than $10,000.00, or by imprisonment in the penitentiary for not more than five years or by both such fine and imprisonment in the discretion of the court. Upon any removal or attempted removal of such records or assets or upon retention of such records or assets, or material part thereof, outside this state beyond the period therefor specified in the commissioner's consent under which the records were so removed thereat or upon concealment of, or attempt to conceal, records or assets in violation of this section, the commissioner may institute delinquency proceedings against the insurer pursuant to the provisions of Chapter 32 of this title.

(d) This section shall not be deemed to prohibit or prevent an insurer from:

(1) Establishing and maintaining branch offices or 'regional home offices' in other states where necessary or convenient for the transaction of its business and keeping therein the detailed records and assets customary and necessary for the servicing of its insurance in force and affairs in the territory served by such an office, as long as such records and assets are made readily available at such office for examination by the commissioner at his request; or

(2) Having, depositing or transmitting funds and assets of the insurer in, or to, jurisdictions outside of this state required by the law of such jurisdiction or as reasonably and customarily required in the regular course of its business, including the retention of personal property or securities in a depository outside the State of Alabama for purposes of safekeeping or for the convenient operation of the insurer.

(e) For good cause shown and with the written permission of the commissioner, a domestic insurer may maintain its executive offices outside the State of Alabama, provided it keeps an office managed by one or more officers of the insurer and a complete duplicate set of records in Alabama and further agrees to make all records at the executive offices outside Alabama available to the commissioner of Alabama upon reasonable notice by him.

(f) This section shall not apply to those actions taken by insurance companies prior to January 1, 1972, but only applies to future actions of domestic insurance companies.

(g) Notwithstanding any other provision of this section, any company may evidence ownership of its assets by use of a clearing corporation or book-entry deposit system.

Without limiting the powers and authorities of domestic insurers, as provided in Section 27-27-61, a domestic insurer shall have the power and is hereby authorized to indemnify any director, officer or employee, or former director, officer or employee of the corporation, or any person who may have served at its request as a director or officer of another corporation in which it owns shares of capital stock or of which it is a creditor against expenses actually and reasonably incurred by him in connection with the defense of any action or proceeding, civil or criminal, in which he is made a party by reason of being, or having been, such director or officer, except in relation to matters as to which he shall be adjudged in such action or proceeding to be liable for negligence or misconduct in the performance of duty to the corporation and to make any other indemnification that shall be authorized by the articles of incorporation or by any bylaw or resolution adopted by the shareholders after notice or as may be authorized under any other statute of this state dealing with the right of a corporation to indemnify officers, directors and employees or to purchase insurance for such indemnification.

(a) No insurer shall make any disbursement of $25.00 or more unless evidenced by a voucher or other document correctly describing the consideration for the payment and support by a check or receipt endorsed or signed by, or on behalf of, the person receiving the money.

(b) If the disbursement is for services and reimbursement, the voucher or other document, or some other writing referred to therein, shall describe the services and itemize the expenditures.

(c) If the disbursement is in connection with any matter pending before any legislature or public body or before any public official, the voucher or other document shall also correctly describe the nature of the matter and of the insurer's interest therein.

(a) Each member of a domestic mutual insurer shall, except as otherwise provided in this chapter with respect to nonassessable policies, have a contingent liability, pro rata and not one for another, for the discharge of its obligations, which contingent liability shall be expressed in the policy and be in such maximum amount as is specified in the insurer's articles of incorporation.

(b) Termination of the policy of any such member shall not relieve the member of contingent liability for his proportion, if any, of the obligations of the insurer which accrued while the policy was in force.

(c) Unrealized contingent liability of members does not constitute an asset of the insurer in any determination of its financial condition.

(a) If at any time the assets of a domestic mutual insurer are less than its liabilities and the minimum amount of surplus required to be maintained by it under this title for authority to transact the kinds of insurance being transacted and the deficiency is not cured from other sources, its directors shall levy an assessment only upon its members who held policies providing for contingent liability at any time within the 12 months preceding the date notice of such assessment was mailed to them, and such members shall be liable to the insurer for the amount so assessed.

(b) The assessment shall be for such an amount as is required to cure such deficiency and to provide a reasonable amount of working funds above such minimum amount of surplus, but such working funds so provided shall not exceed five percent of the insurer's liabilities as of the date as of which the amount of such deficiency was determined.

(c) In levying an assessment on a policy providing for contingent liability, the assessment shall be computed on a basis of premium earned on such policy.

(d) No member shall have an offset against any assessment for which he is liable on account of any claim for unearned premium or loss payable.

(e) As to life insurance, any part of such an assessment upon a member which remains unpaid following notice of assessment, demand for payment and lapse of a reasonable waiting period as specified in such notice may, if approved by the commissioner as being in the best interests of the insurer and its members, be secured by placing a lien upon the cash surrender values and accumulated dividends held by the insurer to the credit of such member.

(a) Any assessment made by an insurer under Section 27-27-32 or 27-27-42 is prima facie correct. The amount of such assessment to be paid by each member as determined by the insurer is likewise prima facie correct.

(b) The insurer shall notify each member of the amount of the assessment to be paid by written notice mailed to the address of the member last of record with the insurer. Failure of the member to receive the notice so mailed, within the time specified therein for the payment of the assessment or at all, shall be no defense in any action to collect the assessment.

(c) If a member fails to pay the assessment within the period specified in the notice, which period shall not be less than 20 days after mailing, the insurer may institute an action to collect the same.

(a) While possessing surplus funds in amount not less than the paid-in capital stock required of a domestic stock insurer transacting like kinds of insurance, a domestic mutual insurer may, upon receipt of the commissioner's order so authorizing, extinguish the contingent liability of its members as to all its policies in force and may omit provisions imposing contingent liability in all its policies currently issued.

(b) A foreign or alien mutual insurer may issue nonassessable policies to its members in this state pursuant to its articles of incorporation and the laws of its domicile.

The commissioner shall revoke the authority of a domestic mutual insurer to issue policies without contingent liability if at any time the insurer's assets are less than the sum of its liabilities and the surplus required for such authority or if the insurer, by resolution of its board of directors approved by a majority of its members, requests that the authority be revoked. During the absence of such authority, the insurer shall not issue any policy without providing therein for the contingent liability of the policyholder nor renew any policy which is renewable at the option of the insurer without endorsing the same to provide for such contingent liability.

Unless prohibited by its articles of incorporation, a domestic stock or domestic mutual insurer may issue any, or all, of its policies with, or without, participation in profits, savings or unabsorbed portions of premiums, may classify policies issued on a participating and nonparticipating basis and may determine the right to participate and the extent of participation of any class, or classes, of policies. Any such classification or determination shall be reasonable and shall not unfairly discriminate as between policyholders within the same such classifications. A life insurer may issue both participating and nonparticipating policies only if the right or absence of right to participate is reasonably related to the premium charged.

(a) A domestic stock insurer shall not pay any cash dividend to stockholders except out of that part of its available surplus funds which is derived from realized net profits on its business.

(b) A stock dividend may be paid out of any available surplus funds in excess of the aggregate amount of surplus loaned to the insurer under Section 27-27-40.

(c) A dividend otherwise proper may be payable out of the insurer's surplus even though its total surplus is then less than the aggregate of its past contributed surplus resulting from issuance of its capital stock at a price in excess of the par value thereof if payment is conditioned upon receipt of the commissioner's approval and the insurer does not pay the dividend until the commissioner has done the following:

(1) Approved the payment of the dividend, or

(2) Not disapproved the payment of the dividend within 30 days after receipt of notice from the insurer of the declaration thereof.

(a) The directors of a domestic mutual insurer may, from time to time, apportion and pay or credit to its members dividends only out of that part of its surplus funds which represents net realized savings and net realized earnings in excess of the surplus required by law to be maintained.

(b) A dividend otherwise proper may be payable out of the savings and earnings even though the insurer's total surplus is then less than the aggregate of its contributed surplus if payment is conditioned upon receipt of the commissioner's approval and the insurer does not pay the dividend until the commissioner has done the following:

(1) Approved the payment of the dividend, or

(2) Not disapproved the payment of the dividend within 30 days after receipt of notice from the insurer of the declaration thereof.

(a) Any director of a domestic stock or mutual insurer who knowingly votes for, or concurs in, declaration or payment of a dividend to stockholders or members except as authorized in Sections 27-27-37 or 27-27-38 shall, upon conviction thereof, be guilty of a misdemeanor and shall be jointly and severally liable, together with other such directors likewise voting for or concurring, for any loss thereby sustained by the insurer.

(b) Any stockholder receiving such an illegal dividend shall be liable in the amount thereof to the insurer.

(c) The commissioner may revoke or suspend the certificate of authority of an insurer which has declared or paid such an illegal dividend.

(a) No person forming, or proposing to form, in this state or secure funds in this state for the financing of an insurer, or insurance holding corporation or stock corporation to finance an insurer or corporation to be attorney-in-fact for a reciprocal insurer or a syndicate, association, firm, partnership or organization for any such purposes, whether domestic or foreign, shall advertise or solicit or receive any funds, subscription or membership on account thereof in this state except as authorized by a currently effective solicitation permit issued by the commissioner, in addition to complying with other applicable provisions of the law.

(b) Any person violating this section shall, upon conviction thereof, be subject to a fine of not more than $10,000.00 or imprisonment for not more than 10 years, or by both such fine and imprisonment.

(c) Any insurer violating this section, in addition to any other penalties provided by law, shall be forever barred from being authorized to transact insurance in this state.

(a) A domestic stock or mutual insurer may borrow money to defray the expenses of its organization, provide it with surplus funds or for any purpose of its business, upon a written agreement that such money is required to be repaid only out of the insurer's surplus in excess of that stipulated in such agreement. The agreement may provide for interest at a reasonable rate per annum, which interest shall, or shall not, constitute a liability of the insurer as to its funds other than such excess of surplus, as stipulated in the agreement. No commission or promotion expense shall be paid in connection with any such loan.

(b) Money so borrowed, together with the interest thereon if so stipulated in the agreement, shall not form a part of the insurer's legal liabilities except as to its surplus in excess of the amount thereof stipulated in the agreement or be the basis of any setoff, but, until repaid, financial statements filed or published by the insurer shall show as a footnote thereto the amount thereof then unpaid together with any interest thereon accrued but unpaid.

(c) Any such loan shall be subject to the commissioner's approval. The insurer shall, in advance of the loan, file with the commissioner a statement of the purpose of the loan and a copy of the proposed loan agreement. The loan and agreement shall be deemed approved unless, within 15 days after date of such filing, the insurer is notified of the commissioner's disapproval and the reasons therefor. The commissioner shall disapprove any proposed loan or agreement if he finds the loan is unnecessary or excessive for the purpose intended, or that the terms of the loan agreement are not fair and equitable to the parties and to other similar lenders, if any, to the insurer or that the information so filed by the insurer is inadequate.

(d) Any such loan, or substantial portion thereof, shall be repaid by the insurer when no longer reasonably necessary for the purpose originally intended. No repayment of such a loan shall be made, unless in advance approved by the commissioner.

(e) This section shall not apply to any loan other than one obtained upon a written agreement that such loan is required to be repaid only out of the insurer's surplus in excess of that stipulated in such agreement.

(f) The value of the surplus debenture issued under this section shall not be considered as the deciding authority for valuing the asset received for the above note, but shall only be taken into account with all other factors in determining admitted value.

(a) If a stock insurer's capital, as represented by the aggregated par value of its outstanding capital stock, becomes impaired or the assets of a mutual insurer are less than its liabilities and the minimum amount of surplus required to be maintained by it under Sections 27-27-15 or 27-27-20 for authority to transact the kinds of insurance being transacted, the commissioner shall, at once, determine the amount of deficiency and serve notice upon the insurer to make good the deficiency within 60 days after service of such notice.

(b) The deficiency may be made good in cash or in assets eligible for the investment of the insurer's funds, or, if a stock insurer, by reduction of the insurer's capital to an amount not below the minimum required for the kinds of insurance thereafter to be transacted or, if a mutual insurer, by amendment of its certificate of authority to cover only such kind or kinds of insurance thereafter for which the insurer has sufficient surplus under this title.

(c) If the deficiency is not made good and proof thereof filed with the commissioner within such 60-day period, the insurer shall be deemed insolvent and the commissioner shall institute delinquency proceedings against it under Chapter 32 of this title; except, that if such deficiency exists because of increased loss reserves required by the commissioner or because of disallowance by the commissioner of certain assets or reduction of the value at which carried in the insurer's accounts, the commissioner may, in his discretion and upon application and good cause shown, extend, for not more than an additional 60 days, the period within which such deficiency may be so made good and such proof thereof so filed.

Any insurer receiving the commissioner's notice mentioned in Section 27-27-41:

(1) If a stock insurer and if its articles of incorporation and laws of this state so permit, by resolution of its board of directors and subject to any limitations upon assessment contained in its articles of incorporation, may assess its stockholders for amounts necessary to cure the deficiency and provide the insurer with a reasonable amount of surplus in addition. If any stockholder fails to pay a lawful assessment after notice given to him in person or by advertisement in such time and manner as approved by the commissioner, the insurer may require the return of the original certificate of stock held by the stockholder and, in cancellation and in lieu thereof, issue a new certificate for such number of shares as the stockholder may then be entitled to, upon the basis of the stockholder's proportionate interest in the amount of the insurer's capital stock, as determined by the commissioner to be remaining at the time of determination of amount of impairment under Section 27-27-41, after deducting from such proportionate interest the amount of such unpaid assessment. The insurer may pay for or issue fractional shares under this subdivision;

(2) If a mutual insurer, shall levy such an assessment upon members as is provided under Section 27-27-32; and

(3) Neither this section nor Section 27-27-41 shall be deemed to prohibit the insurer from curing any such deficiency through any lawful means other than those referred to in such sections.

(a) A stock insurer other than a title insurer may become a mutual insurer under such plan and procedure as may be approved by the commissioner after a hearing thereon.

(b) The commissioner shall not approve any such plan, procedure or mutualization unless:

(1) It is equitable to stockholders and policyholders;

(2) It is subject to approval by the holders of not less than three fourths of the insurer's outstanding capital stock having voting rights and by not less than three-fourths of the insurer's policyholders who vote on such plan in person, by proxy or by mail pursuant to such notice and procedure as may be approved by the commissioner;

(3) If a life insurer, the right to vote thereon is limited to holders of policies other than term or group policies and whose policies have been in force for more than one year;

(4) Mutualization will result in retirement of shares of the insurer's capital stock at a reasonable price as specified in the plan;

(5) The plan provides for the purchase of the shares of any nonconsenting stockholder in the same manner and subject to the same applicable conditions as provided by the general corporation laws of the state as to rights of nonconsenting stockholders with respect to consolidation or merger of private corporations;

(6) The plan provides for definite conditions to be fulfilled by a designated early date upon which such mutualization will be deemed effective; and

(7) The mutualization leaves the insurer with surplus funds reasonably adequate for the security of its policyholders and to enable it to continue successfully in business in the states in which it is then authorized to transact insurance and for the kinds of insurance included in its certificates of authority in such states.

(c) This section shall not apply to mutualization under order of court pursuant to rehabilitation or reorganization of an insurer under Chapter 32 of this title.

(a) A mutual insurer may become a stock insurer under such plan and procedure as may be approved by the commissioner after a hearing thereon.

(b) The commissioner shall not approve any such plan or procedure unless:

(1) It is equitable to the insurer's members;

(2) It is subject to approval by vote of not less than three-fourths of the insurer's current members voting thereon in person, by proxy or by mail at a meeting of members called for the purpose pursuant to such reasonable notice and procedure as may be approved by the commissioner; if a life insurer, right to vote may be limited to members who hold policies other than term or group policies and whose policies have been in force for not less than one year;

(3) The equity of each policyholder in the insurer is determinable under a fair formula approved by the commissioner, which such equity shall be based upon not less than the insurer's entire surplus, after deducting contributed or borrowed surplus funds, plus a reasonable present equity in its reserves and in all nonadmitted assets;

(4) The policyholders entitled to participate in the purchase of stock or distribution of assets shall include all current policyholders and all existing persons who had been policyholders of the insurer within three years prior to the date such plan was submitted to the commissioner;

(5) The plan gives to each policyholder of the insurer, as specified in subdivision (b) (4) of this section a preemptive right to acquire his proportionate part of all of the proposed capital stock of the insurer, within a designated reasonable period, and to apply upon the purchase thereof the amount of his equity in the insurer as determined under subdivision (b) (3) of this section;

(6) Shares are so offered to policyholders at a price not greater than to be thereafter offered to others;

(7) The plan provides for payment to each policyholder not electing to apply his equity in the insurer for, or upon, the purchase price of stock to which preemptively entitled of cash in the amount of his equity not so used for the purchase of stock, and which cash payment, together with stock so purchased, if any, shall constitute full payment and discharge of the policyholder's equity as an owner of such mutual insurer; and

(8) The plan, when completed, would provide for the converted insurer paid-in capital stock in an amount not less than the minimum paid-in capital required of a domestic stock insurer transacting like kinds of insurance, together with surplus funds in amount not less than one-half of such required capital.

(a) A domestic stock insurer may merge or consolidate with one or more domestic or foreign stock insurers by complying with the applicable provisions of the statutes of this state governing the merger or consolidation of stock corporations formed for profit, but subject to subsections (b) and (c) of this section.

(b) No such merger or consolidation shall be effectuated unless in advance thereof the plan and agreement therefor have been filed with the commissioner and approved in writing by him after a hearing thereon. The commissioner shall give such approval within a reasonable time after such filing unless he finds such plan or agreement:

(1) Is contrary to law;

(2) Inequitable to the stockholders of any domestic insurer involved; or

(3) Would substantially reduce the security of, and service to be rendered to, policyholders of the domestic insurer in this state or elsewhere.

(c) No director, officer, agent or employee of any insurer party to such merger or consolidation shall receive any fee, commission, compensation or other valuable consideration whatsoever for in any manner aiding, promoting or assisting therein except as set forth in such plan or agreement.

(d) If the commissioner does not approve any such plan or agreement, he shall so notify the insurer in writing, specifying his reasons therefor.

(e) If any domestic insurer involved in the proposed merger or consolidation is authorized to transact insurance also in other states, the commissioner may request the insurance commissioner, director of insurance, superintendent of insurance or other similar public insurance supervisory official of the two other such states in which such insurer has in force the larger amounts of insurance to participate in the hearing provided for under subsection (b) of this section, with full right to examine all witnesses and evidence and to offer to the commissioner such pertinent information and suggestions as they may deem proper.

(f) Any plan or proposal through which a stock insurer proposes to acquire a controlling stock interest in another stock insurer through an exchange of stock of the first insurer, issued by the insurer for the purpose, for such controlling stock of the second insurer is deemed to be a plan or proposal of merger of the second insurer into the first insurer for the purposes of this section and is subject to the applicable provisions of this section.

(a) A domestic mutual insurer may merge or consolidate with another insurer under the applicable procedures prescribed by the statutes of this state applying to corporations formed for profit, except as provided in this section.

(b) The plan and agreement for merger or consolidation shall be submitted to, and approved by, at least two-thirds of the members of each mutual insurer voting thereon at meetings called for the purpose pursuant to such reasonable notice and procedure as has been approved by the commissioner. If a life insurer, right to vote may be limited to members whose policies are other than term and group policies and have been in effect for more than one year.

(c) No such merger or consolidation shall be effectuated unless in advance thereof the plan and agreement therefor have been filed with the commissioner and approved by him in writing after a hearing thereon. The commissioner shall give such approval within a reasonable time after such filing unless he finds such plan or agreement:

(1) Inequitable to the policyholders of any domestic insurer involved; or

(2) Would substantially reduce the security of, and service to be rendered to, policyholders of the domestic insurer in this state and elsewhere.

(d) If the commissioner does not approve such plan or agreement, he shall so notify the insurers in writing specifying his reasons therefor.

(e) Subsection (e) of Section 27-27-45 shall also apply as to mergers and consolidations of such mutual insurers.

(a) A domestic stock insurer may reinsure all, or substantially all, of its insurance in force or a major class thereof with another insurer by an agreement of bulk reinsurance, but no such agreement shall become effective unless filed with the commissioner and approved by him in writing after a hearing thereon.

(b) The commissioner shall approve such agreement within a reasonable time after such filing unless he finds that it is inequitable to the stockholders of the domestic insurer or would substantially reduce the protection or service to its policyholders. If the commissioner does not approve the agreement, he shall so notify the insurer in writing, specifying his reasons therefor. If the commissioner does not approve or disapprove such agreement and notify the insurer thereof in writing within 30 days after such filing, it shall conclusively be presumed that the agreement is approved by the commissioner.

(a) A domestic mutual insurer may reinsure all, or substantially all, its business in force or all, or substantially all, of a major class thereof with another insurer, stock or mutual, by an agreement of bulk reinsurance after compliance with this section. No such agreement shall become effective unless filed with the commissioner and approved by him in writing after a hearing thereon.

(b) The commissioner shall approve such agreement within a reasonable time after filing if he finds it to be fair and equitable to each domestic insurer involved, and that such reinsurance if effectuated would not substantially reduce the protection or service to its policyholders. If the commissioner does not so approve, he shall so notify each insurer involved in writing, specifying his reasons therefor.

(c) The plan and agreement for such reinsurance must be approved by vote of not less than two-thirds of each domestic mutual insurer's members voting thereon at meetings of members called for the purpose, pursuant to such reasonable notice and procedure as the commissioner may approve. If a life insurer, right to vote may be limited to members whose policies are other than term or group policies and have been in effect for more than one year.

(d) If for reinsurance of a mutual insurer in a stock insurer, the agreement must provide for payment in cash to each member of the insurer entitled thereto, as upon conversion of such insurer pursuant to Section 27-27-44, of his equity in the business reinsured as determined under a fair formula approved by the commissioner, which equity shall be based upon such member's equity in the reserves, assets, whether or not 'admitted' assets, and surplus, if any, of the mutual insurer to be taken over by the stock insurer.

(a) If an order for liquidation or rehabilitation of a domestic insurer has been entered, the receiver appointed under such order shall have a right to recover on behalf of the insurer, (i) from any parent corporation or holding company or person or affiliate who otherwise controlled the insurer, the amount of distributions (other than distributions of shares of the same class of stock) paid by the insurer on its capital stock, or (ii) any payment in the form of a bonus, termination settlement, or extraordinary lump sum salary adjustment made by the insurer or its subsidiary to a director, officer, or employee, where the distribution or payment pursuant to (i) or (ii) is made at any time during the one year preceding the petition for liquidation, conservation, or rehabilitation, as the case may be, subject to the limitations of subsections (b), (c), and (d) of this section.

(b) No such distribution shall be recoverable if the parent or affiliate shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.

(c) A person who was a parent corporation or holding company or a person who otherwise controlled the insurer or affiliate at the time such distributions were paid shall be liable up to the amount of distributions or payments under subsection (a) which the person received. A person who otherwise controlled the insurer at the time the distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately. If two or more persons are liable with respect to the same distributions, they shall be jointly and severally liable.

(d) The maximum amount recoverable under this section shall be the amount needed in excess of all other available assets of the impaired or insolvent insurer to pay the contractual obligations of the impaired or insolvent insurer and to reimburse any guaranty funds.

(e) To the extent that any person liable under subsection (c) of this section is insolvent or otherwise fails to pay claims due from it pursuant to the subsection, its parent corporation or holding company or person who otherwise controlled it at the time the distribution was paid, shall be jointly and severally liable for any resulting deficiency in the amount recovered from the parent corporation or holding company or person who otherwise controlled it.

(a) Upon any liquidation of a domestic mutual insurer, its assets remaining after discharge of its indebtedness, policy obligations, repayment of contributed or borrowed surplus, if any, and expenses of administration shall be distributed to existing persons who were its members at any time within 36 months next preceding the date such liquidation was authorized or ordered or date of last termination of the insurer's certificate of authority, whichever date is the earlier; except, that if the commissioner has reason to believe that those in charge of the management of the insurer have caused or encouraged the reduction of the number of members of the insurer in anticipation of liquidation and for the purpose of reducing thereby the number of persons who may be entitled to share in distribution of the insurer's assets, he may enlarge the 36-month qualification period provided for in this subsection by such additional period as he may deem to be reasonable.

(b) The distributive share of each such member shall be in the proportion that the aggregate premiums earned by the insurer on the policies of the member during the combined periods of his membership bear to the aggregate of all premiums so earned on the policies of all such members. The insurer may, and if a life insurer shall, make a reasonable classification of its policies so held by such members and a formula based upon such classification for determining the equitable distributive share of each such member. Such classification and formula shall be subject to the approval of the commissioner.

To apply for a solicitation permit, the person shall:

(1) File with the commissioner a request therefor showing:

a. Name, type and purpose of insurer, corporation, syndicate, association, firm, partnership or organization formed or proposed to be formed;

b. Names, addresses, business background and qualifications of each person associated, or to be associated, in the enterprise or in the formation of the proposed insurer, corporation, syndicate, association, firm, partnership or organization;

c. Full disclosure of the terms of all pertinent understandings and agreements existing or proposed among persons so associated; and copies of all such agreements, relative to the proposed financing of the insurer, corporation, syndicate, association, firm, partnership or organization, or the formation thereof;

d. The plan according to which solicitations are to be made; and

e. Such additional information as the commissioner may reasonably require;

(2) Submit to the commissioner:

a. The executed and acknowledged triplicate originals of the proposed articles of incorporation of any proposed domestic insurer, a certified copy of the articles of incorporation of any proposed domestic insurer, a certified copy of the articles of incorporation of any foreign insurer or of any other corporation proposing to sell its securities as referred to in Section 27-27-4, and copy of any syndicate, association, firm, partnership, organization or other similar agreement, by whatever name called, if funds for any of the purposes referred to in Section 27-27-4 are to be secured through the sale of any security, interest, or right in, or relative to, such syndicate, association, firm, partnership or organization and, if the proposed insurer is a domestic reciprocal insurer, an original and duplicate copy of the proposed power of attorney and of any other agreements proposed as affecting investors, subscribers, the attorney-in-fact and the insurer or proposed insurer;

b. Original and duplicate copy of any proposed bylaws;

c. Copy of any security, receipt or certificate proposed to be issued and copy of the proposed application or subscription agreement therefor;

d. Copy of any insurance contract proposed to be offered by a proposed domestic mutual or reciprocal insurer and copy of application therefor;

e. Copy of any prospectus, advertising or sales literature proposed to be used;

f. Copy of proposed form of any escrow agreement required; and

g. Irrevocable appointment of the commissioner as process agent to receive service of process issued in this state arising out of any transactions under a solicitation permit, if issued, the appointment to be on a form as prescribed and furnished by the commissioner;

(3) Deposit with the commissioner the fees required under Section 27-4-2 and otherwise by law to be paid for the application, for filing of the articles of incorporation of an insurer, for filing the subscribers' agreement and attorney-in-fact agreement, if the proposed insurer is a reciprocal, and for the solicitation permit, if granted; and

(4) In lieu of a special filing of the information, or part thereof, called for in subdivision (1) of this section, the commissioner may, in his discretion, accept a duplicate copy of any filing made with any other state or federal agency relative to the same offering or proposed offering.

(a) The corporate charter of any corporation formed under the laws of this state more than three years prior to January 1, 1972, for the purpose of becoming an insurer and which corporation within such three-year period has not actively engaged in business as a domestic insurer under a certificate of authority issued to it by the commissioner under laws then in force is hereby extinguished and nullified.

(b) The corporate charter of any other corporation formed under the laws of this state for the purpose of becoming an insurer and which corporation during any period of 36 consecutive months after January 1, 1972, is not actively engaged in business as a domestic insurer under a certificate of authority issued to it by the commissioner under laws currently in force is automatically hereby extinguished and nullified at the expiration of such 36-month period.

(c) The period during which any such corporation referred to in subsection (b) of this section is the subject of delinquency proceedings under Chapter 32 of this title shall not be counted as part of any such 36-month period.

(d) Upon merger or consolidation of a domestic insurer with another insurer under this chapter, the corporate charter of such merged or consolidated domestic insurer shall thereby automatically be extinguished and nullified.

The commissioner shall have the power, and it shall be his duty, to prescribe, publish and disseminate to all domestic stock insurance companies uniform written rules and regulations of proxies, consents and authorizations, including the solicitation thereof, and information necessary, or appropriate to, such solicitation or to the authorization sought thereby, in respect of securities issued by such domestic stock insurance companies; and it shall be unlawful for any person to solicit or to permit the use of his name to solicit any proxy, consent or authorization in respect of any such securities in contravention of such rules and regulations as may be prescribed, published and disseminated pursuant to this section.

Sections 27-27-52 through 27-27-60 shall be known as the 'Insider Trading of Domestic Stock Insurer Equity Securities Law.'

Every person who is, directly or indirectly, the beneficial owner of more than 10 percent of any class of any equity security of a domestic stock insurance company or who is a director or an officer of such company shall file in the Office of the Commissioner of Insurance of Alabama on or before January 31, 1972, or within 10 days after he becomes such beneficial owner, director or officer, a statement, in such form as the commissioner may prescribe, of the amount of all equity securities of such company of which he is the beneficial owner and, within 10 days after the close of each calendar month thereafter, if there has been a change in such ownership during such month, shall file in the office of the commissioner a statement, in such form as the commissioner may prescribe, indicating his ownership at the close of the calendar month and such changes in his ownership as have occurred during such calendar month.

For the purpose of preventing the unfair use of information which may have been obtained by such beneficial owner, director or officer by reason of his relationship to such company, any profit realized by him from any purchase and sale or any sale and purchase, of any equity security of such company within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to, and be recoverable by, the company, irrespective of any intention on the part of such beneficial owner, director or officer in entering into such transaction of holding the security purchased or of not repurchasing the security sold for a period exceeding six months. An action to recover such profit may be instituted in any court of competent jurisdiction by the company or by the owner of any security of the company in the name, and in behalf, of the company if the company shall fail or refuse to bring such action within 60 days after request or shall fail diligently to prosecute the same thereafter; but no such action shall be brought more than two years after the date such profit was realized. This section shall not be construed to cover any transaction where such beneficial owner was not such both at the time of the purchase and sale or the sale and purchase of the security involved or any transaction or transactions which the commissioner, by rules and regulations, may exempt as not comprehended within the purpose of this section.

It shall be unlawful for any such beneficial owner, director or officer, directly or indirectly, to sell any equity security of such company if the person selling the security or his principal:

(1) Does not own the security sold; or

(2) If owning the security, does not deliver it against such sale within 20 days thereafter or does not within five days after such sale deposit it in the mails or other usual channels of transportation; but no person shall be deemed to have violated this section if he proves that, notwithstanding the exercise of good faith, he was unable to make such delivery or deposit within such time or that to do so would cause undue inconvenience or expense.

The provisions of Section 27-27-54 shall not apply to any purchase and sale or sale and purchase and the provisions of Section 27-27-55 shall not apply to any sale of an equity security of a domestic stock insurance company not then, or theretofore, held by him in an investment account by a dealer in the ordinary course of his business and incident to the establishment, or maintenance by him, of a primary or secondary market, otherwise than on an exchange as defined in the Securities Exchange Act of 1934, for such security. The commissioner may, by such rules and regulations as he deems necessary or appropriate in the public interest, define and prescribe terms and conditions with respect to securities held in an investment account and transactions made in the ordinary course of business and incident to the establishment or maintenance of a primary or secondary market.

The provisions of Sections 27-27-53 through 27-27-55 shall not apply to foreign or domestic arbitrage transactions unless made in contravention of such rules and regulations as the commissioner may adopt in order to carry out the purposes of this chapter.

The term 'equity security,' when used in this chapter, means any stock or similar security or any security convertible, with or without consideration, into such a security, or carrying any warrant or right to subscribe to or purchase such a security, or any such warrant or right or any other security which the commissioner shall deem to be of similar nature and consider necessary or appropriate, by such rules and regulations as he may prescribe in the public interest or for the protection of investors, to treat as an equity security.

The provisions of Sections 27-27-53 through 27-27-55 shall not apply to equity securities of a domestic stock insurance company if:

(1) Such securities shall be registered, or shall be required to be registered, pursuant to Section 12 of the Securities Exchange Act of 1934, as amended; or

(2) Such domestic stock insurance company shall not have any class of its equity securities held of record by 100 or more persons on the last business day of the year next preceding the year in which equity securities of the company would be subject to the provisions of Sections 27-27-53 through 27-27-55 except for the provisions of this subdivision.

(a) The commissioner shall expeditiously examine the application for a solicitation permit and make such investigation relative thereto as he deems necessary, subject to subsection (b) of this section, if he finds that:

(1) The application is complete;

(2) The documents therewith filed are proper in form; and

(3) The proposed articles of incorporation of any proposed domestic insurer comply with this title and are not in conflict with the Constitution and laws of the United States or of this state;

He shall give notice to the applicant that he will approve and file the articles of incorporation, if a proposed corporation, and issue a solicitation permit, stating the terms to be contained therein, upon the filing of any bond required by Sections 27-27-10 or 27-27-16.

(b) If the commissioner does not so find, or finds that any proposed sale of securities would be, or tend to be, fraudulent or inequitable as to present or proposed security holders or investors, or if he finds that any of the individuals associated or to be associated in the insurer, corporation, snydicate, association, partnership, firm, organization or financing are not of good character, or that the insurer if formed or, if an applicant for a certificate of authority, would not be able to qualify for a certificate of authority by reason of the provisions of subdivision (3) of Section 27-3-4, he shall give notice to the applicant that a solicitation permit will not be granted, stating the grounds therefor, return any proposed articles of incorporation to the applicant and refund to the applicant all sums so deposited, except the fee for application for a solicitation permit.

The commissioner shall have the power to make such rules and regulations as may be necessary for the execution of the functions vested in him by Sections 27-27-53 through 27-27-59 and may for such purpose classify domestic stock insurance companies, securities and other persons or matters within his jurisdiction. No provision of Sections 27-27-53 through 27-27-55 imposing any liability shall apply to any act done or omitted in good faith in conformity with any rule or regulation of the commissioner, notwithstanding that such rule or regulation may, after such act or omission, be amended or rescinded or determined by judicial or other authority to be invalid for any reason.

The applicable statutes of this state relating to the powers and procedures of domestic private corporations formed for profit shall apply to domestic stock insurers and to domestic mutual insurers, except where in conflict with the express provisions of this title and the reasonable implications of such provisions.

(a) Upon the filing of any bond required by Sections 27-27-10 or 27-27-16, after notice by the commissioner provided for in subsection (a) of Section 27-27-6, or upon his decision to grant a solicitation permit if such a bond is not so required, the commissioner shall issue to the applicant or to the newly formed corporation, if the application is on behalf of a newly formed incorporated domestic insurer, a solicitation permit. Every solicitation permit issued by the commissioner shall contain provisions in substance as follows:

(1) State the securities or other rights or interests for which subscriptions are to be solicited, the number, classes, par value and selling price thereof, or identify the insurance contract, or contracts, for which applications and advance premiums or deposits of premium are to be solicited in the case of mutual or reciprocal insurers;

(2) Require that any particular class of securities, rights and interests proposed to be sold or offered under the permit shall be so sold and offered at the same price to all parties and that, if more than one class of securities, rights, or interests are to be offered, each subscriber shall have the right to acquire some of each such class in accordance with such reasonable combination of classes into subscription units as may be approved by the commissioner;

(3) Require that all such subscriptions and premiums shall be payable only in lawful money of the United States of America except where stock or other securities are to be issued in exchange for securities or rights thereto under a plan approved by the commissioner of merger, consolidation, recapitalization or refinancing of an insurer or other corporation;

(4) Limit the portion of funds received on account of stock or syndicate, association, partnership, firm or organization subscriptions which may be used for promotion, securities sales and organization expenses to such amount as the commissioner deems to be reasonably adequate under the proposed plan of solicitation, but in no event to exceed 15 percent of such funds as and when the funds are actually received;

(5) If to be a mutual or reciprocal insurer, limit the portion of funds received on account of applications for insurance which may be used for promotion, sales or organization expenses to a reasonable commission upon such funds, giving consideration to the kind of insurance and policy involved and to the costs incurred by insurers generally in the production of similar business and provide that no such commission shall be deemed to be earned or paid until the insurer has received its certificate of authority and the policies applied for, upon which the commission is to be based, have been actually issued and delivered;

(6) Prohibit the granting of any options to subscribe to, buy or acquire, in any way, any securities, rights or interests other than options made a part of convertible securities constituting the proposed offering, in whole or in part, and made available on a uniform basis to all subscribers to any such securities, rights or interests;

(7) Prohibit, by any promoter or other person associated or to be associated in the proposed insurer, corporation, syndicate, firm, partnership or organization or in solicitations under the permit, the resale or transfer of his interest in any security, right or interest of the kind proposed to be offered under the solicitation permit or any other interest or right which he may have in, or as to, the same entity prior to the completion of sale of all securities, rights and interests proposed to be offered or sold under the solicitation permit. In connection with this subdivision, the commissioner may, in his discretion, require that any security, right or interest the resale or transfer of which is prohibited in this subdivision shall be deposited and held in escrow pending the completion of the sales or offering under the solicitation permit;

(8) State in boldface type that the permittee must comply with Chapter 6 of Title 8 of this code, if such chapter is applicable, and with other applicable laws of the State of Alabama;

(9) That the permit shall expire not more than two years from its date of issue, unless earlier terminated by the commissioner; if, however, in connection with a proposed offering of securities by a domestic insurer or corporation a registration thereof, or filing with respect thereto, is required by law to be made with any federal agency, the effective period of the permit may, in the commissioner's discretion, commence upon the effective date of such registration or filing if subsequent to the date of issuance of the permit; and

(10) Contain such other reasonable conditions relative to accounting, reports, deposits or other matters consistent with the provisions of this chapter as the commissioner deems advisable for the protection of existing or prospective investors.

(b) The holder of the solicitation permit and its directors, officers, employees, agents and representatives shall comply with the terms of the permit.

The granting of a solicitation permit is permissive only and shall not constitute an endorsement by the commissioner of any person or thing related to any such insurer, corporation, syndicate, association, partnership, firm, organization or financing, and the existence of the permit shall not be advertised or used as an inducement in any solicitation. The commissioner shall place the substance of this section in boldface type at the top of each solicitation permit issued by him.

(a) The commissioner may, for cause, modify a solicitation permit theretofore issued or may, after a hearing, revoke any solicitation permit for violation of any provision of this title, or of the terms of the permit, or of any proper order of the commissioner or for misrepresentation in the offering or sale of securities or policies under the permit.

(b) The commissioner shall revoke the solicitation permit if requested in writing by a majority of the syndicate members, or by a majority of the incorporators and two-thirds of the subscribers to stock or applicants for insurance in the proposed incorporated insurer or corporation or if he is so requested by a majority of the subscribers of a proposed reciprocal insurer.