Loan Agreement, Security Agreement And Note.

EXHIBIT 10.10


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LOAN AGREEMENT


DATED AS OF MARCH 22, 2004


BETWEEN


CITIZENS, INC.


AND


REGIONS BANK


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TABLE OF CONTENTS


Page
---- ARTICLE I DEFINITIONS AND USE OF TERMS.............................................................. 1


Section 1.1 Defined Terms............................................................................. 1
Section 1.2 Heading................................................................................... 14
Section 1.3 Number and Gender of Words................................................................ 14
Section 1.4 Money..................................................................................... 14
Section 1.5 Accounting Terms.......................................................................... 14
Section 1.6 Articles, Sections, and Exhibits.......................................................... 14
Section 1.7 Construction.............................................................................. 14


ARTICLE II REVOLVING LOAN............................................................................ 15


Section 2.1 Revolving Advances........................................................................ 15
Section 2.2 Procedures for Requesting Revolving Advances.............................................. 15
Section 2.3 Voluntary Prepayments..................................................................... 15
Section 2.4 Mandatory Prepayments..................................................................... 16
Section 2.5 Repayment of the Revolving Loan........................................................... 16
Section 2.6 Interest.................................................................................. 16
Section 2.7 Computation of Interest................................................................... 16
Section 2.8 Payments Generally........................................................................ 16
Section 2.9 Termination of Revolving Commitment....................................................... 17


ARTICLE III COLLATERAL................................................................................ 17


Section 3.1 Collateral................................................................................ 17


ARTICLE IV REPRESENTATIONS AND WARRANTIES............................................................ 18


Section 4.1 Existence and Authority................................................................... 18
Section 4.2 Corporate Authorization................................................................... 18
Section 4.3 Compliance with Laws and Documents........................................................ 18
Section 4.4 Litigation................................................................................ 19
Section 4.5 Taxes..................................................................................... 19
Section 4.6 Financial Statements...................................................................... 19
Section 4.7 Purpose of Loan........................................................................... 19
Section 4.8 Investment Company Act.................................................................... 19
Section 4.9 Properties................................................................................ 19
Section 4.10 Subsidiaries.............................................................................. 20
Section 4.11 Compliance with Law....................................................................... 20
Section 4.12 Capital Stock............................................................................. 20
Section 4.13 Existing Indebtedness..................................................................... 20
Section 4.14 Material Agreements....................................................................... 20
Section 4.15 Insiders.................................................................................. 20


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Page
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Section 4.16 ERISA..................................................................................... 20
Section 4.17 Full Disclosure........................................................................... 21
Section 4.18 No Default................................................................................ 21
Section 4.19 Principal Office.......................................................................... 21
Section 4.20 Licenses, Patents and Trademarks.......................................................... 21
Section 4.21 Insurance Licenses........................................................................ 21
Section 4.22 No Assumed Names.......................................................................... 22
Section 4.23 Sufficiency of Capital.................................................................... 22


ARTICLE V CONDITIONS PRECEDENT...................................................................... 22


Section 5.1 Conditions Precedent to Revolving Advances on the Closing Date............................ 22
Section 5.2 Conditions Precedent to All Revolving Advances............................................ 24
Section 5.3 Conditions Precedent to All Acquisition Advances.......................................... 24
Section 5.4 Conditions Precedent to All Acquisition Advances in Excess of $12,000,000................. 24


ARTICLE VI AFFIRMATIVE COVENANTS..................................................................... 25


Section 6.1 Proceeds.................................................................................. 25
Section 6.2 Reporting Requirements.................................................................... 25
Section 6.3 Insurance Matters......................................................................... 26
Section 6.4 Notice of Litigation or Changes in Fact................................................... 27
Section 6.5 Taxes..................................................................................... 27
Section 6.6 Payment of Debts.......................................................................... 27
Section 6.7 Insurance................................................................................. 27
Section 6.8 Maintenance of Existence.................................................................. 27
Section 6.9 Maintenance of Assets..................................................................... 27
Section 6.10 Expenses of Bank.......................................................................... 27
Section 6.11 Compliance with Material Agreements....................................................... 27
Section 6.12 Books and Records: Access................................................................. 28
Section 6.13 Compliance with Law....................................................................... 28
Section 6.14 Authorization and Approvals............................................................... 28
Section 6.15 Information and Other Documents........................................................... 28
Section 6.16 Environmental Law Compliance.............................................................. 28
Section 6.17 Acquisitions and Subsidiaries............................................................. 28
Section 6.18 Preferred Stock........................................................................... 28


ARTICLE VII NEGATIVE COVENANTS........................................................................ 29


Section 7.1 Indebtedness.............................................................................. 29
Section 7.2 Negative Pledge........................................................................... 29
Section 7.3 Restrictions on Dividends................................................................. 29
Section 7.4 Limitation on Liquidation, Merger, Consolidation, and Disposition of Assets............... 29


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Page
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Section 7.5 No Assignment............................................................................. 30
Section 7.6 Prepayments............................................................................... 30
Section 7.7 Loans, Advances and Investments........................................................... 30
Section 7.8 Surplus Debenture......................................................................... 30
Section 7.9 Leverage Ratio............................................................................ 30
Section 7.10 Fixed Charge Coverage Ratio............................................................... 30
Section 7.11 Funded Debt to Equity Ratio............................................................... 30
Section 7.12 Reinsurance............................................................................... 30
Section 7.13 Transactions With Affiliates.............................................................. 30
Section 7.14 Business.................................................................................. 30
Section 7.15 Limitation on Issuance of Capital Stock................................................... 31
Section 7.16 Limitation on Leases...................................................................... 31
Section 7.17 Capital Expenditures...................................................................... 31
Section 7.18 Employee Plans............................................................................ 31
Section 7.19 Subsidiaries.............................................................................. 32
Section 7.20 Use of Proceeds........................................................................... 32
Section 7.21 Composition of Corporate Group............................................................ 32
Section 7.22 Preferred Stock........................................................................... 32


ARTICLE VIII DEFAULT................................................................................... 32


Section 8.1 Payment of Obligations.................................................................... 32
Section 8.2 Certain Covenants......................................................................... 32
Section 8.3 Default under Loan Documents.............................................................. 32
Section 8.4 Other Covenants........................................................................... 33
Section 8.5 Voluntary Debtor Relief................................................................... 33
Section 8.6 Involuntary Proceedings................................................................... 33
Section 8.7 Judgments................................................................................. 33
Section 8.8 Attachment................................................................................ 33
Section 8.9 Material Agreements....................................................................... 33
Section 8.10 Other Indebtedness........................................................................ 33
Section 8.11 Misrepresentation......................................................................... 34
Section 8.12 Surplus Debenture Payments................................................................ 34
Section 8.13 Action by Governmental Authority.......................................................... 34
Section 8.14 Full Force and Effect..................................................................... 34
Section 8.15 Stock Ownership........................................................................... 34
Section 8.16 Change of Control......................................................................... 34
Section 8.17 Liquidation or Dissolution................................................................ 34
Section 8.18 Preferred Stock........................................................................... 34


ARTICLE IX RIGHTS OF BANK............................................................................ 35


Section 9.1 Remedies Upon Default..................................................................... 35


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Section 9.2 Cumulative Rights......................................................................... 35
Section 9.3 Reimbursement of Expenses................................................................. 35
Section 9.4 Performance by Bank....................................................................... 35
Section 9.5 Bank Not in Control....................................................................... 36
Section 9.6 Waivers................................................................................... 36
Section 9.7 Application of Proceeds................................................................... 36


ARTICLE X MISCELLANEOUS............................................................................. 36


Section 10.1 Notices................................................................................... 36
Section 10.2 GOVERNING LAW............................................................................. 37
Section 10.3 Choice of Forum: Service of Process and Jurisdiction...................................... 37
Section 10.4 Expenses; Indemnification................................................................. 38
Section 10.5 Right of Set-off.......................................................................... 39
Section 10.6 Severability.............................................................................. 39
Section 10.7 Survival.................................................................................. 39
Section 10.8 Further Assurances........................................................................ 39
Section 10.9 Counterparts.............................................................................. 39
Section 10.10 Parties Bound............................................................................. 39
Section 10.11 Amendments and Waivers.................................................................... 40
Section 10.12 Form of Documents......................................................................... 40
Section 10.13 Confidentiality........................................................................... 40
Section 10.14 Exception to Covenants.................................................................... 40
Section 10.15 No Usury Intended; Usury Savings Clause................................................... 40
Section 10.16 WAIVER OF JURY TRIAL...................................................................... 40
Section 10.17 ENTIRE AGREEMENT.......................................................................... 41


iv


LOAN AGREEMENT


LOAN AGREEMENT (the "Agreement") dated as of March 22, 2004 between CITIZENS, INC., a Colorado corporation ("Borrower"), and REGIONS BANK, an Alabama banking association ("Bank"), recites and provides as follows:


R E C I T A L S:


A. Borrower has applied to Bank for a revolving line of credit.


B. The proceeds of the Revolving Loan shall be used by Borrower for the acquisition of insurance companies or holding companies engaged solely in the business of insurance through one or more subsidiaries and for general corporate purposes.


C. Bank is willing to make the Revolving Loan to Borrower upon the terms and conditions herein and subject to the covenants and agreements herein set forth.


NOW, THEREFORE, in consideration of the premises and the mutual covenants, representations, warranties and agreements herein set forth and for other valuable consideration, the receipt and adequacy of which are hereby acknowledged, Bank and Borrower covenant and agree as follows:


ARTICLE I


DEFINITIONS AND USE OF TERMS


Section 1.1 Defined Terms. As used herein, the following terms shall have the meanings indicated, unless the context otherwise requires:


"Acquisition" means the acquisition by any Person of (a) a majority of
the capital stock or other equity interests of another Person, (b) all
or substantially all of the assets of another Person or (c) all or
substantially all of a line of business of another Person, in each case
(i) whether or not involving a merger or consolidation with such other
Person and (ii) whether in one transaction or a series of related
transactions.


"Acquisition Advance" means a Revolving Advance to be used for an
Acquisition by Borrower of an operating insurance company or a holding
company engaged solely in the business of insurance through one or more
subsidiaries.


"Acquisition Consideration" means the consideration given by Borrower
for an Acquisition, including but not limited to the sum of (without
duplication) (a) the fair market value of any cash, property (including
capital stock) or services given, plus (b) consideration paid with
proceeds of Indebtedness permitted pursuant to this Agreement, plus (c)
the amount of any Indebtedness assumed, incurred or guaranteed (to the
extent not otherwise included) in connection with such Acquisition by
Borrower.


Loan Agreement - Page 1


"Affiliate" means with respect to any Person (a) each Person that,
directly or indirectly, owns or controls, whether beneficially, or as a
trustee, guardian or other fiduciary, 10% or more of the securities
having ordinary voting power in the election of directors of such
Person, (b) each Person that controls, is controlled by or is under
common control with such Person or any Affiliate of such Person, or (c)
each of such Person's officers, directors, joint venturers and
partners. For the purpose of this definition, "control" of a Person
shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of its management or policies, whether
through the ownership of voting securities, by contract or otherwise.


"Aggregate Permitted Exceptions" means the aggregate amount of the
baskets utilized by Borrower and its Subsidiaries with respect to the
exceptions to those certain covenants set forth in Sections 7.1(g),
7.1(h), 7.16, 7.17 and clause (k) of the definition of Permitted
Investments.


"Aggregate Permitted Exceptions Amount" means, during any fiscal year
of Borrower, $5,000,000.


"Annual Statement" means the annual financial statement of any
Subsidiary of Borrower as required to be filed with the insurance
commissioner (or similar authority) of respective state of domicile,
together with all exhibits or schedules filed therewith, prepared in
accordance with SAP.


"Applicable Environmental Laws" means and includes the collective
aggregate of the following: any law, statute, ordinance, rule,
regulation, order or determination of any governmental authority or any
board of fire underwriters (or other body exercising similar
functions), or any restrictive covenants or deed restrictions (recorded
or otherwise) affecting Borrower pertaining to health, safety or the
environment, including, without limitation, all applicable flood
disaster laws and health, safety and environmental laws and regulations
pertaining to health, safety or the environment, including without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, the Resource Conservation and Recovery Act of
1976, the Superfund Amendments and Reauthorization Act of 1986, the
Occupational Safety and Health Act, the Texas Water Code, the Texas
Solid Waste Disposal Act, the Texas Workers' Compensation Laws, and any
federal, state or municipal laws, ordinances, regulations or law which
may now or hereafter require removal of asbestos or other hazardous
wastes from any property of Borrower or impose any liability on Bank
related to asbestos or other hazardous wastes in any property of
Borrower.


"Audited Financial Statements" means the audited consolidated balance
sheet of Borrower and its Subsidiaries for the fiscal year ended
December 31, 2002 and the related consolidated statements of income or
operations, shareholders' equity and cash flows for such fiscal year of
Borrower and its Subsidiaries, including the notes thereto, prepared in
accordance with GAAP.


Loan Agreement - Page 2


"Authorized Representative" means any of Mark Oliver, Harold Riley,
Rick Riley or any other person designated in a writing sent to Bank by
Borrower notifying Bank that such person is authorized and empowered to
act on behalf of Borrower.


"Business Day" means every day on which banks in Texas are required by
Law to be open for banking business.


"Capital Leases" means capital leases and subleases, properly
classifiable in relevant financial statements as a capitalized cost.


"Change of Control" means, with respect to Borrower, an event or series of events by which:


(a) any "person" or "group" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but
excluding any employee benefit plan of such person or its subsidiaries,
and any person or entity acting in its capacity as trustee, agent or
other fiduciary or administrator of any such plan) becomes the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Securities Exchange Act of 1934, except that a person or group shall be
deemed to have "beneficial ownership" of all securities that such
person or group has the right to acquire (such right, an "option
right"), whether such right is exercisable immediately or only after
the passage of time), directly or indirectly, of 25% or more of the
equity securities of Borrower entitled to vote for members of the board
of directors of Borrower on a fully-diluted basis (and taking into
account all such securities that such person or group has the right to
acquire pursuant to any option right); or


(b) during any period of 12 consecutive months, a
majority of the members of the board of directors of Borrower cease to
be composed of individuals (i) who were members of that board on the
first day of such period, (ii) whose election or nomination to that
board was approved by individuals referred to in clause (i) above
constituting at the time of such election or nomination at least a
majority of that board or (iii) whose election or nomination to that
board was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least
a majority of that board (excluding, in the case of both clause (ii)
and clause (iii), any individual whose initial nomination for, or
assumption of office as, a member of that board occurs as a result of
an actual or threatened solicitation of proxies or consents for the
election or removal of one or more directors by any person or group
other than a solicitation for the election of one or more directors by
or on behalf of the board of directors); or


(c) any of Rick Riley, Harold Riley, or Mark Oliver shall
cease to actively manage Borrower's day-to-day business activities.


"CICA" means Citizens Insurance Company of America, a Colorado
insurance company.


"Closing Date" means the first date all the conditions set forth in
Section 5.1 are satisfied


Loan Agreement - Page 3


"Code" means the United States Internal Revenue Code of 1986, as
amended, and regulations promulgated thereunder.


"Collateral" has the meaning set forth in Section 3.1.


"Controlled Group" has the meaning set forth in Section 7.18(a).


"Corporate Advances" means Revolving Advances to be used for general
corporate purposes not related to ...