1
EXHIBIT 10.11
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement ("Agreement") is entered into by and
among CITIZENS, INC., a Colorado corporation ("Citizens"), JANSEN ENTERPRISES,
INC., a Texas corporation ("Jansen"), JOE T. BAILEY, an individual residing in
Texas ("Bailey"), and D. STEVEN HANSEN, an individual residing in Texas
("Hansen").
WITNESSETH:
WHEREAS, Jansen owns all of the issued and outstanding capital stock
of National Security Life and Accident Insurance Company, a Texas-domiciled
stock life insurance company ("NSL"); and
WHEREAS, Citizens desires to purchase, and Jansen desires to sell,
405,000 shares of common stock, $1.30 par value, of NSL (the "Shares"), which
constitutes all of the issued and outstanding shares of capital stock of NSL;
NOW, THEREFORE, it is agreed among the parties as follows:
ARTICLE I
Purchase and Sale
Subject to the terms and conditions set forth in this Agreement,
Jansen agrees to sell. and Citizens agrees to purchase, all of the issued and
outstanding shares of capital stock of NSL as follows:
1.1 The transactions contemplated by this Agreement shall be
completed at a closing ("Closing") on a closing date ("Closing Date") to occur
as soon as possible after all regulatory approvals are obtained in accordance
with law and as required by this Agreement.
1.2 Citizens will pay to Jansen at the Closing $1,700,000 (the
"Purchase Price") by delivery of (i) cash in the amount of $1,000,000 payable
by wire transfer or delivery of other immediately available funds. and (ii)
$700,000 in restricted shares of Citizens Class A Common Stock, free and clear
of all security interests, liens, charges. encumbrances, or rights of any
third parties of any kind or nature, the number of shares representing same to
be determined based upon the average consolidated market closing price of
Citizens shares-on the American Stock Exchange for the ninety (90) calendar
days preceding the Closing of this Agreement.
1.3 At Closing, (i) Jansen will deliver to Citizens the various
certificates, instruments. and documents referred to in Section 6.6, (ii)
Citizens will deliver to Jansen the various certificates, instruments, and
documents referred to in Section 6.7, (iii) Jansen will deliver to Citizens
stock certificates representing 405,000 shares of NSL common stock, $1.30 par
value. endorsed in blank or accompanied by duly executed assignment documents
free and clear of all security interests, liens, charges, encumbrances.
restrictions or rights of any third parties of any kind or nature, and (iv)
Citizens will deliver to Jansen the consideration specified in Section 1.2.
ARTICLE II
Representations, Warranties and Covenants of Citizens
No representations or warranties are made by any director, officer,
employee or shareholder of Citizens as individuals. Citizens hereby
represents, warrants and covenants to Jansen, subject to the disclosures made
in the Citizens Disclosure Statement attached hereto, as follows:
2.1 Citizens is a corporation duly organized, validly existing and
in goo. standing under the laws of the State of Colorado, having the corporate
power and authority to own or lease its properties and to carry on its business
as it is now being conducted. The Articles of Incorporation and Bylaws of
Citizens, copies of which have been delivered to Jansen, are complete and
accurate, and the minute books of Citizens contain a record, which is complete
and accurate in all material respects, of all meetings, and all corporate
actions of the shareholders and Board of Directors of Citizens.
1
2
2.2 The aggregate number of shares which Citizens is authorized to
issue is 50,000,000 shares of Class A common stock, no par value, and 1,000,000
shares of Class B common stock, no par value: of which 22,')48,976 shares of
such Class A common stock are issued and 20,270,429 are outstanding, fully paid
and nonassessable as of June 30, 1997, and 621,049 shares of Class B common
stock are issued and outstanding, fully paid and nonassessable. There are
1,822.332 shares of Class A common stock of Citizens owned and held by its
subsidiary, Citizens Insurance Company of America. Citizens has no outstanding
options, warrants, or other rights to purchase. or subscribe to, or securities
convertible into or exchangeable for any shares of capital stock, except for
options exercisable with respect to a maximum of 15,555 shares of Class A
Common Stock as a result of the share exchange effected June 19, 1997 with
American Investment Network, Inc. ("AIN Exchange"). The two (2) classes of
stock of Citizens are equal in all respects, except (a) the Class B common
stock elects a simple majority of the Board of Directors of Citizens, and the
Class A common stock elects the remaining directors; and (b) each Class A share
receives twice the cash dividends paid on a per share basis to the Class B
common stock.
2.3 Citizens has complete and unrestricted power to enter into
and, upon the appropriate approvals as required by law, to consummate the
transactions contemplated by this Agreement. None of Citizens and its
subsidiaries have any liability or obligation to pay any fee or commission to
any broker, agent or finder other than Merger and Acquisition Profiles, Inc.
with respect to the transactions contemplated hereby.
2.4 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein by Citizens will conflict with or result in a breach or violation of its
Articles of Incorporation or Bylaws.
2.5 The execution. delivery and performance of this Agreement has
been duly authorized and approved by the Board of Directors of Citizens.
2.6 Citizens has delivered to Jansen consolidated financial
statements of Citizens and its subsidiaries, dated December 31, 1996 and March
31, 1997. All such statements, herein sometimes called "Citizens Financial
Statements," are complete and correct in all material respects and, together
with the notes to these financial statements, present fairly the financial
position and results of operations of Citizens and its subsidiaries for the
periods included. The December 31, 1996 and March 31, 1997 Citizens
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles.
2.7 Since the dates of the Citizens Financial Statements there
have not been any material adverse changes in the business or condition,
financial or otherwise, of Citizens and its subsidiaries. Citizens and its
subsidiaries do not have any material liabilities or obligations, secured or
unsecured (whether accrued, absolute, contingent or otherwise) except as
disclosed in the Citizens Financial Statements.
2.8 Citizens has delivered, or will deliver within two weeks of
the date of this Agreement, to Jansen a list and description of all pending
legal proceedings involving Citizens, none of which will materially adversely
affect it, and, except for these proceedings, there are no legal proceedings or
regulatory proceedings involving material claims pending, or to the knowledge
of the officers of Citizens, threatened against Citizens or affecting any of
its assets or properties. Citizens is not in any material breach or violation
of or default under any contract or instrument to which Citizens is a party,
and no event has occurred which with the lapse of time or action by a third
party could result in a material breach or violation of or default by Citizens
under any contract or other instrument to which Citizens is a party or by which
it or any of its properties may be bound or affected, or under its Articles of
Incorporation or Bylaws, nor is there any pending court or regulatory order
applicable to Citizens.
2.9 Citizens shall not enter into or consummate any transactions
prior to the Closing other than (i) in the ordinary course of business and (ii)
business acquisitions, combinations and exchanges. Citizens will not pay any
dividend or. except in the ordinary course of business, enter into an agreement
or transaction which would adversely affect its financial condition.
2.10 Citizens is not a party to any contract performable in the
future except agreements with subsidiaries, and those contracts which will not
adversely affect it.
2
3
2.11 Citizens has delivered, or will deliver within two weeks of
the date of this Agreement. to Jansen true and correct copies of Citizens'
Annual Report to Shareholders for the years ended December 31, 1996 and 1995.
Citizens will also deliver to Jansen on or before the Closing Date any reports
relating to the financial and business condition of Citizens which are filed
with the SEC after the date of this Agreement and any other reports sent
generally to its shareholders after the date of this Agreement. Citizens has
duly filed all reports required to be filed by it under the Securities Act of
193'), as amended, and the Securities Exchange Act of 1934, as amended, (the
"Federal Securities Laws"). No such reports, or any reports sent to the
shareholders of Citizens generally as of their respective dates, contained any
untrue statement of material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements in such
report, in light of the circumstances under which they were made, not
misleading.
2.12 Citizens has delivered, or will deliver within two weeks of
the date of this Agreement, to Jansen a copy of each of the consolidated
federal income tax returns of Citizens and its subsidiaries for the year ended
December 31, 1995 and for any additional open years. The provisions for taxes
paid by Citizens are believed by Citizens to be sufficient for payment of all
accrued and unpaid federal, state, county and local taxes of Citizens
(including any penalties or interest payable) whether or not disputed for the
periods then ended and for all prior fiscal periods. All returns and reports
or other information required or requested by federal, state, county, and local
tax authorities have been filed or supplied in a timely fashion, and all such
information is true and correct in all material respects. Provision has been
made for the payment of all taxes due to date by Citizens.
2.13 Citizens has no employee benefit plans, except for a
noncontributory, qualified profit-sharing plan and a group accident and health
insurance plan.
2.14 No representation or warranty by Citizens in this Agreement,
the Citizens Disclosure Statement or any certificate delivered pursuant hereto
contains any untrue statement of a material fact or omits to state any material
fact necessary to make such representation or warranty not misleading.
2.15 Citizens (i) understands that the Shares of NSL have not been,
and will not be, registered under any federal or state securities laws, and are
being offered and sold in reliance upon federal and state exemptions for
transactions not involving any public offering, (ii) is acquiring the Shares
solely for its own account for investment purposes, and not with a view to
public distribution thereof, (iii) is a sophisticated investor with knowledge
and experience in business and financial matters, (iv) has received certain
information concerning Shares and has had the opportunity to obtain additional
information as desired in order to evaluate the merits and the risks inherent
in holding the Shares, (v) is able to bear the economic risk and lack of
liquidity inherent in holding the Shares, and (vi) is an "accredited investor"
as that term is defined for purposes of Regulation D promulgated under the
Securities Act of 1933, as amended.
ARTICLE III
Representations, Warranties and Covenants of Jansen
Jansen, Bailey and Hansen, jointly and severally, hereby represent,
warrant and covenant to Citizens, subject to the disclosures made in the Jansen
Disclosure Statement attached hereto, as follows:
3.1 Jansen and NSL are. respectively, a corporation and a life and
accident and health insurance company duly organized, validly existing and in
good standing, under the laws of the State of Texas, each having the corporate
power and authority to own or lease its properties and to carry on its business
as it is now being conducted. The Articles of Incorporation and Bylaws of
Jansen and NSL, copies of which have been delivered to Citizens, are complete
and accurate, and the minute books of Jansen and NSL contain a record, which is
complete and accurate in all material respects, of all meetings, and all
corporate actions of the shareholders and Board of Directors of Jansen and NSL.
3.2 All of the issued and outstanding shares of Jansen are owned
by Bailey and Hansen. Jansen has no outstanding options, warrants or other
rights to purchase or subscribe to, or securities convertible into or
exchangeable for any shares of capital stock. The aggregate number of shares
which NSL is authorized to issue is 810,000 shares of common stock, $1.30 par
value, of which 405,000 are issued and outstanding, fully paid,
3
4
nonassessable. All issued and outstanding shares of NSL are owned of record
and held by Jansen and are not subject to any security interests, liens,
charges, encumbrances, restrictions or rights of any third parties of any kind
or nature. NSL has no outstanding options, warrants or other rights to
purchase or subscribe to, or securities convertible into or exchangeable for
any shares of capital stock. NSL has no subsidiaries.
3.3 Jansen has complete and unrestricted power to enter into and,
upon the appropriate approvals as required by law, to consummate the
transactions contemplated by this Agreement. None of Jansen and its
subsidiaries have any liability or obligation to pay any fee or commission to
any broker, agent or finder with respect to the transactions contemplated
hereby.
3.4 Neither the making of nor the compliance with the terms and
provisions of this Agreement and consummation of the transactions contemplated
herein by Jansen will conflict with or result in a breach or violation of any
Articles of Incorporation or Bylaws of Jansen or its subsidiaries.
3.5 The execution of this Agreement has been duly authorized and
approved by Jansen's Board of Directors and shareholders.
3.6 Jansen has delivered to Citizens the annual and quarterly
convention statements of NSL as of December 31, 1996 and the three months ended
March 31, 1997, as filed with the Texas Department of Insurance. All such
statements, herein sometimes called "NSL convention statements," are complete
and correct in all material respects and, together with the notes to these
financial statements. present fairly the financial position and results of
operations NSL for the periods indicated. The December 1, 1996 and March 1,
1997 NSL convention statements have been prepared in accordance with statutory
accounting practices. All amounts owed (including agent balances) to NSL by
any "affiliate" (as defined under Federal Securities Laws and shall include
Jansen, Insurance Facility Management, Inc., Texas Co-op Plans, Inc. and
Lifestyles Insurance Agency) are entirely recoverable in the ordinary course of
business and are not subject to offset or reduction.
3.7 Since the dates of the NSL convention statements there have
not been any material adverse changes in the business or condition, financial
or otherwise, of NSL. NSL has no material liabilities or obligations, secured
or unsecured (whether accrued. absolute. contingent or otherwise), except for
contractual liability pursuant to policies of insurance issued or assumed by
NSL, and except as disclosed in the NSL convention statements.
3.8 Jansen, Bailey and Hansen have delivered to Citizens a list
and description of all pending legal proceedings involving NSL, and, except for
these proceedings, there are no legal proceedings or regulatory proceedings
involving, or to the knowledge of the officers of Jansen, threatened against
NSL or affecting any of its assets or properties. The aggregate adverse
consequences to NSL of all pending legal proceedings shall not exceed $100,000.
As used in this Agreement, the term "adverse consequences" means all actions,
suits, proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments. orders, decrees, rulings, damages, dues,
penalties, fines, costs, amounts paid in settlement. liabilities, obligations,
taxes, liens, losses, expenses, and fees, including court costs and reasonable
attorneys' fees and expenses. NSL is not in any material breach or violation
of or default under any contract or instrument to which NSL is a party, and no
event has occurred which with the lapse of time or action by a third party
could result in a material breach or violation of or default by NSL under any
contract or other instrument to which NSL is a party or by which it or any of
its properties may be bound or affected, or under its Articles of Incorporation
or Bylaws, nor is there any pending court or regulatory order applicable to
NSL.
3.9 Except for the Permitted Transactions, NSL shall not enter
into or consummate any transactions prior to the Closing other than in the
ordinary course of business and will pay no dividend, or increase the
compensation of officers or employees and will not enter into any agreement or
transaction which would adversely affect its financial condition in a material
manner. As used herein, "Permitted Transactions" shall mean the transfer from
NSL to Jansen, and the marketing by Jansen and its affiliates, of the
Columbia-HCA PPO contract to third parties.
3.10 The assets of NSL had admissible values at least equal to
those attributed to them on its December 31, 1996 and March 31, 1997 convention
statements.
4
5
3.11 NSL is not a party to any sales, agency, lease, rental,
license, royalty, union or other material contracts or agreement, written or
otherwise, other than insurance policies issued or assumed by NSL and those
contracts or agreements disclosed in the NSL Disclosure Statement.
3.12 All policy and claim reserves of NSL have been properly
provided for and are adequate to comply with all regulatory requirements
regarding same.
3.13 Jansen (i) understands that the Citizens Class A Common Stock
has not been, and will not be, registered under any federal or state securities
laws, and are being offered and sold in reliance upon federal and state
exemptions for transactions not involving any public offering, (ii) is
acquiring the Citizens Class A Common Stock solely for its own account for
investment purposes, and not with a view to public distribution thereof, (iii)
is a sophisticated investor with knowledge and experience in business and
financial matters, (iv) has received certain information concerning Citizens
and has had the opportunity to obtain additional information as desired in
order to evaluate the merits and the risks inherent in holding the restricted
Citizens Class A Common Stock, (v) is able to bear the economic risk and lack
of liquidity inherent in holding the Citizens Class A Common Stock, and (vi) is
an "accredited investor" as that term is defined for purposes of Regulation D
promulgated under the Securities Act of 1933, as amended.
3.14 Jansen will deliver to Citizens on or before the Closing Date
any reports relating to the financial and business condition of NSL which are
filed with any governmental authority after the date of this Agreement. No
such reports will contain any untrue statement of material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements in such report, in light of the circumstances under which they were
made, not misleading. With respect to any convention statements of NSL filed
subsequent to the latest NSL convention statement referenced in Section 3.6,
the representations and warranties contained in Sections 3.6, 3.7 and 3.10
shall apply thereto at, and subject to, Closing.
3.15 Jansen has delivered to Citizens a copy of each of the federal
income tax returns of NSL for the years ended December 31, 1996, 1995 and 1994
and for any additional open years. All accrued and unpaid federal, state,
county and local taxes of NSL (including any penalties or interest payable)
whether or not disputed for the periods then ended and for all prior fiscal
periods shall not exceed by more than $100,000 the sum of (i) the provision for
taxes reflected in the NSL March 31, 1997 convention statement and (ii) any tax
refunds hereafter received by NSL for the years ended December 31, 1996, 1995
and 1994 and for any additional open years. All returns and reports or other
information required or requested by federal, state, county, and local tax
authorities have been filed or supplied in a timely fashion, and all such
information is true and correct in all material respects.
3.16 NSL has no employee benefit plans.
3.17 Since December 31, 1996, NSL has continued actively in the
conduct of its business, meeting and performing all of its obligations in the
regular course of business, and (i) there has been no material adverse change
in the assets or liabilities or in the condition, business, financial or
otherwise, of NSL since said date; (ii) except for the Permitted Transactions,
NSL has not transferred, conveyed, or acquired any material assets or property
or entered into any transaction which by reason of its size or otherwise is not
in the ordinary course of its business; (iii) NSL has not paid to any employee
any bonus or special compensation except in the ordinary course of business;
(iv) NSL has not declared or paid any dividend or authorized or made any other
distribution of any kind to its shareholders, or issued or sold, or issued
rights or options to purchase or subscribe to, or subdivided or otherwise
changed, or agreed to repurchase or redeem. any shares of its capital stock
(however, NSL has amended its Articles of Incorporation to increase par value
from $1.00 to $1.30); and (v) NSL has not made or agreed to make any changes in
the designations, preferences or restrictions with respect to its capital stock
as regards dividends, redemption, voting powers or restriction or
qualifications of voting powers as presently exist in its Articles of
Incorporation.
3.18 NSL is not in default in the payment of any of its
obligations. Other than those normal liabilities incurred by NSL since
December 31, 1996 in the ordinary course of its routine business affairs, there
are no material liabilities, whether such liabilities are contingent, absolute.
direct, or indirect, matured, unmatured or otherwise, and including, but not
limited to, liabilities for federal, state or local taxes, penalties and
assessments. which do not appear on the aforesaid financial statements of NSL
as of December 31, 1996 and March 31, 1997.
5
6
3.19 NSL has no outstanding corporate bonds, debentures, trust or
premium certificates or other income, surplus, debt or capital obligations of a
similar nature.
3.20 NSL has now, and at Closing will have, good and indefeasible
title to all of its properties and assets, including the property and assets
set forth in the balance sheet of NSL as of December 31, 1996, and in each case
other than deposits held in joint custody with insurance regulatory authorities
such assets and properties are free and clear of all mortgages, pledges, liens,
leases, restrictions, security interests, encumbrances or charges whatsoever,
and of every kind and nature.
3.21 Article VIII of the Articles of Incorporation of NSL prohibits
preemptive rights of stockholders to subscribe to additional shares of NSL
capital stock, and Article VII of the Articles of Incorporation prohibits
cumulative voting for members of NSL's Board of Directors. The capital stock
shares of NSL are equal and the same in all rights and respects.
3.22 NSL has not issued and does not have in force any insurance or
annuity contracts which provide for participation or sharing in the profits,
earnings, accumulations or expense savings of NSL except as disclosed in the
NSL Disclosure Statement.
3.23 No representation or warranty by Jansen, Bailey or Hansen in
this Agreement, the Jansen Disclosure Statement or any certificate delivered
pursuant hereto contains any untrue statement of a material fact or omits to
state any material fact necessary to make such representation or warranty not
misleading.
ARTICLE IV
Obligations of the Parties Pending the Closing
4.1 At all times prior to the Closing, during regular business
hours each party will permit the other to examine its books and records and the
books and records of any subsidiaries and will furnish copies thereof on
request. It is recognized that, during the performance of this Agreement, each
party may provide the other parties with information which is confidential or
proprietary information. During the term of this Agreement, and for four years
following the termination of this Agreement. the recipient of such information
shall protect such information from disclosure to persons, other than members
of its own or affiliated organizations and its professional advisers, in the
same manner as it protects its own confidential or proprietary information from
unauthorized disclosure, and not use such information to the competitive
detriment of the disclosing party. In addition, if this Agreement is
terminated for any reason, each party shall promptly return or cause to be
returned all documents or other written records of such confidential or
proprietary information, together with all copies of such writings and, in
addition, shall either furnish or cause to be furnished, or shall destroy, or
shall maintain with such standard of care as is exercised with respect to its
own confidential or proprietary information, all copies of all documents or
other written records developed or prepared by such party on the basis of such
confidential or proprietary information. No information shall be considered
confidential or proprietary if it is (a) information already in the possession
of the party to whom disclosure is made; (b) information acquired by the party
to whom the disclosure is made from other sources; or (c) information in the
public domain or generally available to interested persons or which at a later
date passes into the public domain or becomes available to the party to whom
disclosure is made without any wrongdoing by the party to whom the disclosure
is made.
4.2 Jansen and Citizens shall promptly provide each other with
information as to any significant developments in the performance of this
Agreement, and shall promptly notify the other if it discovers that any of its
representations, warranties and covenants contained in this Agreement or in any
document delivered in connection with this Agreement was not true and correct
in all material respects or became untrue or incorrect in any material respect.
4.3 All parties to this Agreement shall take all such action as
may be reasonably necessary and appropriate and shall use their best efforts in
order to consummate the transactions contemplated hereby as promptly as
practicable.
6
7
4.4 JANSEN, BAILEY AND HANSEN AGREE THAT NSL WILL NOT, BETWEEN THE
DATE HEREOF AND CLOSING:
(a) issue or sell, or agree to issue or sell, any stocks, bonds or
other corporate securities, or declare or pay any dividends on capital stock,
or make any other payments or distributions to its stockholders;
(b) incur any obligation or liability, absolute, contingent,
direct or indirect, other than current liabilities incurred in the ordinary and
usual course of its business;
(c) incur any indebtedness for money borrowed; make any loans or
advances to any individual, firm or corporation other than commission advances
to sales agents and others in the normal course of business, or assume,
guarantee, endorse or otherwise become responsible for the obligations of any
other individual, firm or corporation;
(d) discharge or satisfy any lien or encumbrance or pay any
obligation or liability other than current liabilities shown on the NSL
convention statement as of March 31, 1997, or those incurred thereafter;
(e) mortgage, pledge, or subject to lien or security interest,
charge or otherwise encumber any of its assets or properties;
(f) sell or transfer any of its properties or assets, or cancel,
release or assign any indebtedness owed to it or any claims held by it, except
in the ordinary and usual course of business and for a consideration equal to
the fair value thereof,
(g) except in the ordinary course of business, pay any bonuses or
special remuneration to any officer or employee, increase the salaries or other
remuneration of any officer or employee, enter into any contract of employment,
management or consultation, or enter into any contract or adopt or amend any
plan providing for such bonuses or for stock options or warrants, pensions,
retirement benefits, profit sharing or the like;
(h) waive any right of any substantial value;
(i) sell or transfer any of its real properties;
(j) make any investment of a capital nature;
(k) enter into any long-term contracts or commitments, except in
the ordinary course of business;
(l) use any of its assets or properties except for proper
corporate purposes;
(m) except for the Permitted Transactions, modify, amend, cancel
or terminate any existing agreement except in the ordinary and usual course of
its business;
(n) issue, sell, or contract to sell any equity or debt
securities;
(o) except for the Permitted Transactions, enter into any
transaction or agreement other than in the usual and ordinary course of its
business;
(p) have any proceedings pending or threatened against it, either
administrative or judicial, which would in any manner affect its rights to
continue such business;
(q) have any outstanding contracts, agreements, options, warrants,
calls or commitments relating to its authorized, unissued stock;
(r) have any material liabilities, whether such liabilities are
contingent, absolute, direct or indirect, matured, unmatured or otherwise,
which do not appear on the NSL convention statement as of December 31, 1996,
7
8
and except those later incurred in the normal course of its business, none of
which have materially adversely affected it;
(s) issue or grant any outstanding corporate bonds, debentures,
trust or premium certificates or other income, surplus or capital obligations
of a similar nature, except as specified herein; or
(t) have any material adverse change in its financial condition
from that reflected by the NSL convention statement as of December 31, 1996.
ARTICLE V
Regulatory Filings
Within 15 days after the execution of this Agreement, Citizens shall
file with the Insurance Commissioner of Texas all of the regulatory approval
documents required by Texas law in order to close this Agreement.
ARTICLE VI
Conditions Precedent
Each of the following are conditions precedent to the consummation of
the Agreement by Citizens and Jansen to the extent failure of any such
condition is not caused by any willful, reckless or negligent act or omission
of such party or any "control person" (as defined for Federal Securities Laws)
of the party seeking to rely thereon:
6.1 This Agreement is in all things subject to the provisions of
the applicable insurance laws and the regulations promulgated thereunder, and
shall not become effective until all necessary approvals are obtained from the
Commissioner of Insurance of the State of Texas and any other applicable
governmental authority. Citizens agrees to file and to use its best efforts to
obtain such approvals of the transactions contemplated by this Agreement.
Neither Citizens nor Jansen shall be obligated to file a suit or to appeal from
any Commissioner's adverse ruling, nor shall Citizens or Jansen be obligated to
make any material changes in any lawful, good faith management policy in order
to gain such approval. In the event approval is denied, this Agreement shall
terminate.
6.2 Citizens and Jansen shall have performed and complied with all
of their respective obligations hereunder which are to be complied with or
performed on or before the Closing Date pursuant to the terms of this
Agreement.
6.3 No action, suit or proceeding shall have been instituted or
shall have been threatened before any court or other governmental body or by
any public authority to restrain, enjoin or prohibit the transactions
contemplated herein, or which might subject any of the parties hereto or their
directors or officers to any material liability, fine. forfeiture or penalty
on the grounds that the transactions contemplated hereby, the parties hereto or
their directors or officers, have violated any applicable law or regulation, or
have otherwise acted improperly in connection with the transactions
contemplated hereby, and the parties hereto have been advised by counsel that,
in the opinion of such counsel, such action, suit or proceeding raises
substantial questions of law or fact which could reasonably be decided
adversely to any party hereto or its directors or officers.
6.4 All actions, proceedings, instruments and documents required
to carry out this Agreement and the transactions contemplated hereby and the
form and substance of all legal proceedings and related matters shall have been
approved by counsel for Citizens and Jansen.
6.5 The representations and warranties by Citizens, Jansen, Bailey
and Hansen in this Agreement shall be true as though such representations and
warranties had been made or given on and as of the Closing, except to the
extent that such representations and warranties may be untrue on and as of the
Closing because of (1) changes caused by transactions suggested or approved in
writing by the other party, or (2) events or changes (which shall not, in the
aggregate. have materially and adversely affected the business, assets, or
financial condition of NSL or Citizens) during or arising after the date of
this Agreement.
8
9
6.6 JANSEN SHALL HAVE FURNISHED CITIZENS WITH:
(a) a certified copy of a resolution or resolutions duly adopted
by the Board of Directors of Jansen approving this Agreement and the
transactions contemplated by it in accordance with applicable law;
(b) a certified copy of a resolution or resolutions duly adopted
by the shareholders of Jansen approving this Agreement and the transactions
contemplated by it in accordance with applicable law;
(c) a certificate of Jansen, Bailey and Hansen dated the Closing
Date to the effect that each of the conditions specified above in Sections 6.1
through 6.5 have been, to the extent applicable to Jansen or NSL, satisfied in
all respects;
(d) an agreement to the effect and in form and substance
satisfactory to counsel for Citizens that (i) Jansen is familiar with SEC
Regulation D and Rule 144 and acknowledges that the Citizens Class A common
stock will be "restricted securities" within the meaning thereof and the stock
certificates therefor will bear restrictive legends; (ii) Jansen is an
"accredited investor" within the meaning of Regulation D; and (iii) none of the
shares of Citizens Class A common stock will be transferred in violation of the
Federal Securities Laws; and
(e) at Closing, the directors and officers of NSL shall be
individuals acceptable to Citizens.
6.7 CITIZENS SHALL HAVE FURNISHED JANSEN WITH:
(a) a certified copy of a resolution or resolutions duly adopted
by the Board of Directors of Citizens, approving this Agreement and the
transactions contemplated by it; and
(b) a certificate of Citizens dated the Closing Date to the effect
that each of the conditions specified above in Sections 6.1 through 6.5 have
been, to the extent applicable to Citizens, satisfied in all respects.
ARTICLE VII
Termination and Abandonment
7.1 Anything contained in this Agreement to the contrary
notwithstanding, the Agreement may be terminated and abandoned at any time
prior to the Effective Date:
(a) By mutual consent of the Boards of Directors of Citizens and
Jansen;
(b) By Citizens or Jansen for failure of a condition precedent in
Article VI if such failure was not caused by any willful. reckless or negligent
act or omission of such party or any control person (as defined for Federal
Securities Law) of such party seeking to rely thereon;
(c) By Citizens or Jansen, if any suit, action or other proceeding
shall be pending or threatened by the federal or a state government before any
court or governmental agency, in which it is sought to restrain, prohibit or
otherwise affect the consummation of the transactions contemplated hereby;
(d) By Citizens or Jansen, if there is discovered any material
error, misstatement or omission in the representations and warranties of the
other party; or
(e) By Citizens or Jansen if the Closing does not occur within
ninety (90) days from the date hereof.
7.2 Any of the terms or conditions of this Agreement may be waived
(if a corporation, by action of its Board of Directors) at any time by the
party which is entitled to the benefit thereof. This Agreement may be amended
upon approval of the Board of Directors of each party except that modification
of the Purchase Price shall also require approval of the Jansen shareholders.
9
10
ARTICLE VIII
Noncompetition; Confidentiality; Indemnification; Consultation
8.1 For a period of five years from and after the Closing Date and
except for Permitted Services, Jansen. Bailey and Hansen will not engage
directly or indirectly in any business competitive with the business conducted
by NSL as of the Closing Date in the geographic area in which NSL conducts
business. If the final judgment of a court of competent jurisdiction declares
that any term or provision of this covenant not to compete is invalid or
unenforceable, the parties agree that the court making the determination of
invalidity or unenforceability shall have the power to reduce the scope,
duration, or area of the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
the covenant not to compete shall be enforceable as so modified after the
expiration of the time within which the judgment may be appealed. As used
herein, "Permitted Services" shall mean (i) service to or on behalf of
Citizens, (iii) direct or indirect service as a sales agent or broker for any
insurance company, and (iv) such other services as shall be approved in writing
by the Chairman of Citizens.
8.2 Jansen, Bailey and Hansen will maintain the confidentiality of
all information concerning NSL and its business which is confidential or
proprietary, refrain from using any of such information except in connection
with this Agreement, and deliver promptly, to Citizens or destroy, at the
request and option of Citizens, all tangible embodiments (and all copies) of
such information which are in his or its possession. In the event that any of
Jansen, Bailey and Hansen is requested or required (by oral question or request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar process) to disclose any such
information, Citizens will be promptly notified of the request or requirement
so that Citizens may seek an appropriate protective order or waive compliance
with the provisions of this Section. If any of Jansen, Bailey and Hansen is,
on the advice of counsel, compelled to disclose any such information to any
tribunal or else stand liable for contempt. he or it may disclose such
information to the tribunal; provided, however, that the disclosing party shall
use his or its best efforts to obtain, at the request of Citizens, an order or
other assurance that confidential treatment will be accorded to such portion of
the information required to be disclosed as Citizens shall designate.
8.3 The representations and warranties in Sections 3.8 and 3.15
shall survive the Closing hereunder and continue in full force and effect for a
period of five years thereafter. All other representations and warranties of
the parties contained in this Agreement shall survive the Closing hereunder and
continue in full force and effect for a period of three years thereafter.
8.4 After the Closing, the parties shall indemnify each other as
follows:
(a) In the event any party ("Indemnifying Party") breaches (or in
the event any third party alleges facts that, if true, would mean such party
has breached) any of his or its representations, warranties or covenants
contained herein, and another party ("Indemnified Party") makes a written claim
for indemnification pursuant to this Section 8.4 within the applicable survival
period specified in Section 8.3, then the Indemnifying Party agrees to
indemnify the Indemnified Party from and against the adverse consequences the
Indemnified Party may suffer through and after the date of the claim for
indemnification (including any adverse consequences suffered after the end of
any applicable survival period) resulting from, arising out of, or relating to
such breach or alleged breach.
(b) If any third party shall notify any party ("Indemnified
Party") with respect to a matter ("Third Party Claim") which may give rise to a
claim for indemnification against another party ("Indemnifying Party") under
this Section 8.4, then the Indemnified Party shall promptly notify the
Indemnifying Party thereof in writing; provided, however, that no delay on the
part of the Indemnified Party in notifying any Indemnifying Party shall relieve
the Indemnifying Party from any obligation hereunder unless (and then solely to
the extent) the Indemnifying Party thereby is prejudiced.
(c) Each of Jansen, Bailey and Hansen hereby agrees that he or it
will not make, and hereby waives effective as of Closing, any claim (whether
such claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) now existing or hereafter arising against NSL for indemnification
with respect to (i) any judgments, damages, penalties, fines, costs, amounts
paid in settlement, losses or expenses incurred in whole or in part because
10
11
he or it was (A) a director, officer, employee, agent, shareholder of, or
served in any other capacity with respect to. NSL, or (B) serving at the
request or for the benefit of NSL as a partner, trustee, director, officer,
employee, or agent of, or in any other capacity with respect to, another
entity, plan or trust, or (ii) any action, suit, proceeding, complaint, claim,
or demand brought by Citizens against such individual or entity (whether such
action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).
8.5 After the Closing, Citizens shall use commercially reasonable
efforts either to consult, or cause NSL to consult, with Bailey and Hansen
regarding the handling and disposition of the pending legal matters referenced
in Section 3.8 hereof.
ARTICLE IX
Miscellaneous
9.1 This Agreement (including the schedules and exhibits referred
to herein and which are hereby incorporated herein) constitutes the entire
agreement between the parties and supersedes any prior understandings,
agreements, or representations by or between the parties. written or oral, to
the extent related to the subject matter hereof.
9.2 To facilitate the execution of this Agreement, any number of
counterparts hereof may be executed, and each such counterpart shall be deemed
to be an original instrument,. but all such counterparts together shall
constitute but one instrument.
9.3 Each of the parties hereto will pay its own fees and expenses
incurred in connection with the transactions contemplated by this Agreement,
and NSL shall not bear any such fees or expenses.
9.4 All parties to this Agreement agree that if it becomes
necessary or desirable to execute- further instruments or to make such other
assurances as are deemed necessary, the party requested to do so will use its
best efforts to provide such executed instruments or do all things necessary or
proper to carry out the purpose of this Agreement.
9.5 Any notices, requests, or other communications required or
permitted hereunder shall be delivered personally or sent by overnight courier
service, fees prepaid, addressed as follows:
To Citizens. and to Jansen, Bailey & Hansen:
Citizens, Inc. Jansen Enterprises, Inc.
P.O. Box 149151 P.O. Box 91502
Austin, Texas 78714-9151 Arlington, Texas 76015-0002
Attn: Harold E. Riley, Chairman Attn: D. Steven Hansen and Joe T. Bailey
Phone: (512) 837-7100 Phone: (817) 467-4911
Fax: (512) 836-9334 Fax: (817) 784-9936
with copies to: with copies to:
Heath, Davis & McCalla Sneed Vine & Perry PC
200 Perry Brooks Building 901 Congress Avenue
Austin, Texas 78701 Austin, Texas 78701
Attn: Will D. Davis, Esq. Attn: Jim Shawn
Phone: (512) 478-5671 Phone: (512) 476-6955
Fax: (512) 476-1451 Fax: (512) 476-1825
or such other addresses as shall be famished in writing by any party, and any
such notice or communication shall be deemed to have been given as of the date
received.
11
12
9.6 No press release or public statement will be issued relating
to the transactions contemplated by this Agreement without prior approval of
Citizens and Jansen. However, either Citizens or Jansen may issue at any time
any press release or other public statement it believes on the advice of its
counsel it is obligated to issue to avoid liability under the law relating to
disclosures to itself or any of its affiliates, but the party issuing such
press release or public statement shall make a reasonable effort to give the
other party prior notice of and opportunity to participate in such release or
statement.
9.7 The par-ties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or
interpretation arises, this Agreement shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement. Any reference to any federal, state, local, or foreign statute
or law shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context otherwise requires. The word "including" shall
mean including without limitation. The section headings contained in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
9.8 This Agreement shall be binding upon and inure to the benefit
of the parties named herein and their respective successors and permitted
assigns. No party may assign either this Agreement or any of his or its
rights, interests, or obligations hereunder.
9.9 Each party acknowledges and agrees that the other parties
would be damaged irreparably in the event any of the provisions of this
Agreement are not performed in accordance with their specific terms or
otherwise are breached. Accordingly, each party agrees that the other parties
shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in any action instituted in any court of the United
States or any state thereof having jurisdiction over the parties and the matter
in addition to any other remedy to which they may be entitled, at law or in
equity. All remedies identified in this Agreement are cumulative of any
remedies available at law or in equity.
9.10 This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Texas without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Texas or any other jurisdiction) that would cause the application of the laws
or any jurisdiction other than the State of Texas. Any term or provision of
this Agreement that is invalid or unenforceable shall not affect the validity
or enforceability of the remaining terms and provisions hereof.
IN WITNESS WHEREOF, the parties have set their hands and seals this
13th day of August, 1997.
CITIZENS, INC. JANSEN ENTERPRISES, INC.
By: /s/ Mark A. Oliver By: /s/ D. Steven Hansen
------------------------------- ----------------------------------
Mark A. Oliver President D. Steven Hansen, President
/s/ D. Steven Hansen
-------------------------------------
D. Steven Hansen
/s/ Joe T. Bailey
-------------------------------------
Joe T. Bailey
12
13
CITIZENS DISCLOSURE STATEMENT
Pursuant to the provisions of Article II of the Stock Purchase
Agreement between and among Citizens, Jansen, Bailey and Hansen, Citizens
hereby makes the following disclosures respecting the similarly numbered
sections in the Stock Purchase Agreement:
2.7 Citizens has the liabilities disclosed in the Citizens
Financial Statements and those incurred thereafter in the
ordinary course of business.
2.10 (a) Computer Maintenance Agreement between Computing
Technology, Inc. and Wang Laboratories, effective 7/l/91 and
amended 8/26/91.
(b) Marketing Consultant Agreement dated April 1, 1997
with Worldwide Professional Associates, Inc.
13
14
JANSEN DISCLOSURE STATEMENT
Pursuant to the provisions of Article III of the Stock Purchase
Agreement between and among Citizens, Jansen, Bailey and Hansen, Jansen hereby
makes the following disclosures respecting the similarly numbered sections in
the Stock Purchase Agreement:
3.7 NSL has liabilities disclosed in NSL's convention statements
and those incurred thereafter in the ordinary course of business.
3.8 National Security Life and Accident, Successor in interest in
National Life Insurance Company of Texas -vs- Commissioner of Internal Revenue.
Allen D. Pierce -vs- National Security Life and Accident
Insurance Company, Cause No. 96-08782-C, 68th Judicial District Court.
3.11 NSL has a contractual obligation to an affiliated party on the
home office lease, which term ends December 31, 1997.
NSL has a claims payment contract with an affiliate, Insurance
Facility Management, Inc. This agreement is capable of being terminated by
giving proper notice.
NSL is under a management agreement with an affiliate, Jansen
Enterprises, Inc. This agreement is capable of being terminated by giving
proper notice.
NSL has vested commission agency contracts with affiliated
agencies and individuals. The agreements are with Texas Co-op Plans, Inc.,
Lifestyles Agency, Joe T. Bailey, and D. Steven Hansen.
3.15 Jansen has delivered all requested income tax returns except
1996. The 1996 Federal Income Tax Return is being prepared.
3.16 NSL has a group insurance policy through United Health Care,
Group Number 90050. Jansen's 401K Program has employees of NSL as
participants.
3.17 The Board of Director's of NSL have declared a dividend to
Jansen. This declared dividend will not be paid during the period of this
agreement.
14