Appendix — Securities & Exchange Commission v. National Securities, Inc.

Supreme Court brief1969

Ask Donna

What actually matters in this document.

Text

Lew

—

e ee

—

ai f bene Court of the’ = b States

5 Oorom TERM, 1968

e ee

2 . oA ve 3 N 75 set 3 ac. 5

J aoa te pO ERY

7 5 4 ö ; ¢

. : J 42

on Wain OF CERTIORARI TO THE UNITED srarzs COURT.

Srcunfr ES AND EXCHANGE CoMMIKSION,

Ls,

Us ee nes ee e Id, r M

: “PETITION FOR CERTIORARI FILED MARCH 4, 1968.

wee CERTIORARI GRANTED APRIL 22, 1968 >

\ *

e 1 1

3 :

—

7 ? 0 af

* * .

emen tf he n .

4 2 2 * 2 ; 5 No. 4 r ; i g 5 ’ wy : Te ;

2 a .* . J

* ° 6 4 ‘ a,

: N 5 . om}

SECURITIES * EXCHANGE Cours, :

; eee Petitioner,

——

ä ä eee ET AL. ,

ON WRIT OF CERTIORARI TO THE UNITED STATES con

f . or APPEALS FOR THE NINTH CIRCUIT 3 .

r ©)

. 1 . ce 4 Page

Relevant docket entries . RE 3

Complaint for mjunetion- 8 ee -

Motion for temporary restraining ‘order and W r ö

nlunction eae E W

pie ert!

- Excerpt from a affidavit of W. Stevens Tucker in’ camel of

motion for temporary restraining order and preliminary ec,

„„ - “fajunetion , 27

Excerpts from exhibits included ta affidavit of w. Stevens! i

Tucker: 29°

| 3 Excerpt trom Ininutes of special meeting ‘of board of |

6 directors of Producers Life n Company, Mon- 72

eee day, April 27, 1964 29

85 Exhibit 8, Producers Life. Insurance Company, flow 4

e chart of escrow—April 27, 1964. ee

_ Exhibit 8, Management agreement by. & A between Na- ae

. tional Seturities, Inc. and Producers Insurance

Company, dated May 15, 1964 — bE 2S ei, 88

ref

mr * se ro. ° 225 72

x fi * 2 om - » , *- * % A

5 aid st 8 12 1 4 1 a * I ~ i . J * ’ wd “gs 3 —

woh e * — . 1 2 4 “48 5 og

‘ 5 — 7 . ie

vie N 25 J 5 3

e eee er ene ͤ Sie

Excerpts from exhibit 9, wack ‘special — 3 of —

2 and merger, dated November + -

27, 1964; Consol on agreement and plan of re 33G

3 „ .

Excerpts from Exhibit 10, Letter Stockholders o we a

3 3 — dated ‘November 7 me

ee reef onder — 88

e 3 included * supplemental affidavit 6 ö

y i. 59- 43

ee e Notice to shereholders of Producers Life a es :

ede Insurance Company dated January 1. TE Spin” OO: 15

0. Exhibit C., Bocklet of Lite Insurance Dom- 5 1

Fs, , pamyzentitled Hes Report” — » 60 .

Answer of the defendants 3

_ Excerpt from affidavit of Robert H. Wallace 72.

- Bxverpte from partial partial transcript of proceedings’ on applica .

tion for preliminary injunction | 72

| Order and judgment dropping ositain defendants — |

Motion and, order 5 — 1

rest an mctions prepented July 12, 1965 , 7 +

: : and supplefnental complaint for injunetion 861 4

— to amended’ and tupplenestal com —

Cor m- — 9 |

"Min for Judean on pigs or Inthe aerate 3 a E

for summary judgment _ — (i cri

Aue of Robert H. Wallace „

5 ee to amend eee v a. 2 | 3

. = Phas tion fo amend i ad pat 1 1

—

Ve’ 725 aes Mee

\ a is ° 2 cs 4 ; 15 24

7 5 4 2 0 i 1 Be

- 2 * 5 - 2 7 * . 2 vee

5 : a 1 5 ras

ea aie, fe ,,

Table of Contents-—Continued OT ¥ ca Boge |

Excerpts from the Annual Statement for the year 1964 of

Producers Life Insurance Company” as filed wi th the State

of Nevada on March 80, 1965 (Exhibit 1 —

Excerpts from the “Annual Statement for the year 1964 ff 5

the National Life Insurance Company” as filed with the

State of Nevada on March 1, 1965 [Exhibit 14) CE ‘128

Excerpts from exhibit 15 entitled “Form 8.1 with Financials 5

as of December 81, 1964 for National Securities, ine.” —- 181 :

order granting motion for protective order a 186

Order denying plaintiff's motion to amend to add parties

oe iftban eak: — — u

8 Judgment granting defendant's notion tor judgment on the

' . pleadings 14⁵

"Notice of appeal e — ͤ K

Designation of record — — —-— 17

opinion of the Court of Appeals for the Ninth Cirenit 148

Order Allowing Certiorari * — — 168

. *

0 * : .

— . aee

* .

* 0

* x

. eee, UNITED STATES courr. OF APPEALS 1

55 . ron ran Nowra cou Kue, 5

as 8 .

—

Srobnrrms AND EXCHANGE COMMIBSION, TEL rr

Fa Pia, tt : .

> NATIONAL SECURITIES, INC. Er ., APPELLEE

‘ 7 eee 2 f

f 4 a , 7229 =

„ APPENDIX ; .

„ RELEVANT DOCKET ENTRIES

5 4 f : 7 P — :

— —

ee e e ee ee e ,

File Plaintiff's Complaint for Injunction.

File Fit a Motion for Temporary Restraining

File ande of W. Stevens Tucker in support

of Motion.

Hater and File Temporary Restraining Order.

that expires on April 9, 1965 at 4:50 p.m. -

Enter and File Order to show cause on Motion

for Preliminary Injanction returnable on April

i er meee ates Cap: Ove eee

Noted, CAM. 7 25

2 Or 4 eo

2 ae f nr

“DAB on = PROCREDINGS

‘Mar, 51 Issue Summons. | | 8

Apr. 5 8. File Defts’ Notice of taking deposition of . ‘

f Stevens Tucker.

* 5 5. File Summons with “Marshal’s ‘ieee showing -

cae service of ‘complaint, motion for temporary

. . restraining order, memorandum, affidavit etc.

maQiade upon Ernest A. Richards; Bonnie B.

ee Producers Thrift .and. Loan Co.;

, Richard G. Johnson ; William R. Reedy; Robert

wee Wallace; Robert C. Bohannan, Jr.; Na-

tional Life and Casualty. Ins. Co.p Natiohal —._ Pe

Securities, Inc.; Arthur W. Saffert; Producers

Life Ins. Co.; Ted Wilkins; Breeferd W. Large,

Jr.; Joseph B. Setter and John 8. Barrett. a

Apr. 9 — Minute Entry: order to “show cause on for

5 Seen 1 bearing in Chambers. Richard Gormley pres.

tor pltf. e ee hme 5

Tuhrift & Loan Roberg W. Perry pres.

_ for defts Johnson Richards, Bllbrey and Rich-

_ ards: John Frank and Jeremy Butler pres.

for remaining defts. It is ordered that this

| matter be passed for hearing before Jude —

William C. Mathes on Friday, April 16, 1965

W . at 9 a. m.; and that temporary restraining order

3 remain in effect until said date. All counsel

f id. tor defts state they do not stipulate to Rule

65. Date Order or Judgment Noted, CAM.

Ayr. 18 8. File r Affidavit of W. ‘Stevens

Ar. 18 9. File Certificate d. of 8 or afndavita.

Ar- 18. 10. File Affidavit of J. Grant Iverson, .

* 18 1. File Anden of Tomas 1. North.

9 5 . ; *

eae 222 . 0 s) os

— ens n ee”

; DATE’ „ — 3 ee

0 — —— — — . ge

85 . “Apr. 5 12 The Motion of dert Produeérs Thrift. 4 ln

V Company for, order dropping said defendant. ~

; bs hanes and. to Dismiss complaint as to gaiddeft., with .

A 2 ree Memorandum and Notice of hes ng on. Wa

7 4 April 16, 1965 at 9 a. m.

Apr. 15 13. File defts Johnson, Richards, Reedy ‘sa Bile

bery's resistarce to Pift’s Motion * Fre.

liminary Injunction. = ; |

Apr. 15 14. File ANSWER of the defts National - Securi-

ae Be 3 Inc.? National Life & Casualty Inaurancs

Oo.; Robert H. Wallace; ‘Robert C Bohannan,

3 hur W. Saffert; Ted Wilkins; mn S8.

a Barrett: Joseph Bs getter; Breeferd W. Large,

no See and Pryduders Life Insurance Company:

Apr. 46 16. File Befts' Motion for order dropping defts

Richard G. Johnson, Ernest A. Richards,

eh aes William P. Reedy and Bonnie B. Bilbrey; and

8 ee — 2

¢ Apr. 16 16. File Affidavit of Robert H. Wallace. Petr

| oS ;

. Apr. 16 17. File Affidavit ot Arthur w. Saler (Deft’s 5

1 8 Exhibit 0

5 Apr. 16 18. File Affidavit of Robert A. Mills. (Dette 8

: „Exhibit D) /

Apr. 16 — Minute Entry: Pits’ “Motion “el 8

Injug¢tion on for hearing. W. Stevens Tucker

and F. E. Kennam̃re, Jr. pres. for the pltf.

0 John Frank, A. Gordon Oldsen, Jeromy Butler

ö and Robert Mills are pres. for defts National-

os Security: Life and Casualty Ins.; Robert H.

5 Palle, Robert C. Bo Ir,, Arthur W.

ae : Saffert, Ted Wilkins; John Barrett, Joseph 3

5 BI. Setter, Bruferd We Large, Jr. and Produc!*

. ee ers Life Ins. Co. Roger Perry is pres. for défts

a ree ee Richards, Reedy and Bilbrey. Johnng

pr ee Madden is pres. for deft Producers Thrift &&

N ——

‘

barg

505 — e ee

Apr. 16 = Loan. Motion for Order dropping defts John- |

(Gounod) ‘gon Richards Reedy & Bilbry and Motion for

ö _ argued, Court reserves ruling, Hearing is had

“on Motion for Preliminary Injunction. Goyn>

ta!

missal. ee defts National Securities

Order. dropping ‘Producers Thrift & Loan are

sel for pltf moves to insert the name of Arthur

W. ert on page 2, line 8 following the

name of Bilbrey and page 12, line 6 following

the name of Bilbrey in the original complaint.

It is Ordered interlineation, may be made on

said pages in said original. complaint. Pltfs

Exhibits 18, 14, 1 through 12, inclusive, 16, 17

nd 18 admitted. Counsel for defts moves for

„Sibdzment on the case ad made and for denial

of the application for preliminary injunction.

It is Ordered that said motion is denied. Defts’

Exhibits A, B, C, D and E admitted. On stipu-

lation of counsel, Order defts Ex. F for ident.

Seater and E in evidence may be withdrawn to make

| photocopies and substituted for originals. Mo-

et al moves for AH order of dismissal, and to

deny the application for preliminary injunc-

tion without prejudice. Said motions argued.

The case stands submitted to the Court. Sub-

D a Acs

— * ° 2 .

DATS... suede — „ e

1965 me tee „

—

Avr. 16 1 b e t saan

f . Producers Group t Applation for yal |

Apr. 16. 202 File Brief and Opinions in conjunction with Os

Se 6

dugers group. 3

Apr. 16 21. Enter and File r tilt en Droppies

s 1 defts Richard G. Johnson, Ernest A. Richo +4,

William P. Reedy, Bonnie B. Bilbrey a o-

;, ducers Thrift & Loan Company. Date Order

S or Judgment Noted; VM < ;

Apr. 16. — 8 conformed copies of Order and Judgment

| | issued to counsel. : .

Apr. 16 22. File Motion of ‘defts Nat'! Sectirities, Ine.

. Nat'l Life & Casualty Ins. Co.; Ro om al

lace, Robert Bohannan, Jr., Arthur W. Saffert,

Ted, Wilkins, Don S. Barret, Joseph B. Setter,

Breeferd W. Large, Jr. and Prod Life

Ins. Co. that the temporary x order

be vacated with .exceptions; Enter and fle

; Order that the emporary restraining order :

is vacated except as to the ‘portions set forth .

in the motion as te which it is · eon ued pend-

ing bearing of pltf’s Motion for a

injunction, or: any other Watters this cause,

which further hearing may be tuted upon

8 ae application by any of the. parties. This con-

bs } tinuance shall be without prejudice to the

claims of any of the parties as to the jurisdic- .

tion of this Court or as to the applicable law

i OF factar Dein eee of eee

Apr. 26 28. File Reporter’s Partial T

: ings dated April 16, 1968. Date 0

went Noted, Ans Sa

DAT 2 50 PROCEEDINGS

P1965

‘Tine 14 24

hich 21 —

File. Motion of the Securities ont Anhangs +

Commission under Rule 84 for the Production

of Documents for ingpection and copying, with

notice of hearing on June 21, 1965 at 10 a.m.

in courtroom Ne. 8.

Minute Entry: Motion of the pltf. tor the

produetion of documents for inspection and

copying on for hearing. No appearancé’ for

- pitf: Jeremy Butler pres. for deft. Upon writ-

jay 6

7 "_ Joly 6 2

uu 6 21.

Mathes, at. 2:00 p. m., and = of Mail-

“daly 1

181

ten application of pltf and no objection on part

of deft, It is Ordered that this case is assigned

to the Hon. Wm. C. Mathes in San Francisco,

Calif. for hearing on the said motion and for

stich other matters as the Court may desire to

5 hear for the week of July 12, 1965 at the con-

venience of the court. Date Order or Judgment

Noted WEC %

‘File Motion to Dismiss, of det, and memor-

. andum of authorities. — — Bes

— —

File Motion of Defts. Nati National Securities, Inc;

National Life & Casualty Insurance Company

and Producers Life Ins. Co., to Strike Plain-

tiff’s Motion for Production of Documents for

Inspection and Copying.

File Deft’s Notice of Hearing on Motions at

San Francisco, Calif. before Hon. Wm. C.

ing Motions.

le Det Response fo Motion to Produce

+. 1%

A e e we ll ia 8

bealed envelope addressed to “Messrs. Lewis,

eee N

5 n

-“ sponse. of National Securities Produeers

July 16 31.

Julꝰ

Juby

82.

88.

Group to Application for Preliminary ker 5

tion, filed Jul. 12, 1966. f

Docket Pltf s Notice of Hearing . on Motion, :

filed July 12, 1965. :

Docket Pltf’s to Response to Motion to

Produce, filed Jul. 12, 1965.

Docket Pitf's'Memorandum of Points and Au-

thorities in Gpposition to Motion to Strike Mo-

tion for Production of Doguments, filed Jul.

12, 19856.

84. Docket Defts’ Revised Statement of Facts, fled: .

85. Docket Pitf’s Memorandum in Support of Mo- 55

tion to Reopen Hearing on Appl. for Interlocu- 325

July 12, 1965.

toxy Injunetion, filed July 12, 1965.

ö 36.

Docket Pitt's Certificate of Service, men a

12, 1965.

Doeket Order on Motions Presented July 12,

1965 and filed July 18, 1965 at San Francisco,

Calif., allowing pitf. to file its amended and

4 supplemental complaint within 30 days, allow-

ing defts. 80 days from receipt of copy there-

of to serve and file any motion or other re-

sponsive matter, placing Defts’. Motion to Dis- “.

miss Complaint and Pitf’s Motion for Re-

opening Hearin P

and for Additional Relief Pendente Lite both

off calendar without prej: ce to apply for

reinstatement and. consideration. Date Order

or . 2 e e pee |

a 30

. 12 . e ee bs

_, Plains for injunetlon: 5

dur 10 86. i meren engt ofthe amended

and supplemental =. for ——

upon the defts, 3

Aus. 26 - cy File Pits Notice of taking deposition of Ar.

ur W. Salter 5

* 1. 4. an N

tion and request to the Clerk to submit.

1 * a Fle ANOWHN of defendants to amended and

- gupplemantal complaint.

— 1 2 File Defts’ Mobion for Judgment on. the plead-

its, or in the ee, for Summary oe

ment.

Sept. - Vee File Dette Memorandum in support of motion

for judgment ct.

Sept. 1. . File Dette Motion for Protective Order.

Vonage 46. File Response of Securities and Exchange.

Commission

to Defendants’ Motion for Pros .

<tective Order.

Sept 14 41. File Motion of Securities and Exchange Com-

mission for Permission to Amend Complaint

to Add Parties’ Defendant, with proposed

Second Amended and tal Complaint -

| for Injunetion and . mat WE. Tucker

„ gtteched. .

ot | eh Fle reg, Bere gere on deu „

f 5 .

e (ot documents filed:

of Deft to Motion to Amend

PROCBEDINGS es ATE.

1965

6 22

—

ö gert 21 51. Fie e of W. - Toker dap:

. sition of A. W. Saffert.

"ppt 24 62, Ha Heere Wand igt Of Proceedings Be:

Deposition of Arthur W. Saffert.

oa. 26 el File ‘Third dcn of. W. Stevens Tucker,

tty. for pltt., in response to certain portions 5

be Commission's Motion for Production ot )

Documents. a

Oct 26 x54. Wile Pitt's Memorandum in opposition to dette

K *

2 72 6.

Motions for Judgment on the pleadings or. in

the alternative for Summary Judgment and

for a Protective order and in support of pts

a to amend complaint to add 5 ‘

Oct. 28 66. File Pitts Certificate of malling. ; y

Oct. 28 56. File Pitts Errata Sheet to Memorandum in

1966

nae eee ee

3 the pleadings ete.

Feb. 14 57. F

protective order to prevett the taking of a

depoaltion of deft Arthur W. Saffert is hereby .

. granted; it is further ordered that the Clerk

' . promptly serve copies of this order upon the res]

parties appearing in this cause. e 8 7

or Judgment Noted, WCMathes - ;

Feb. 14 58. CCC

—

[4] 3

"4 Feb. 14 59. r a

judgment on the pleadings is hereby granted;

thet defts serve and cased aes the recomend

additional parties deft is hereby denied; that

the Clerk serve copies of this order upon the |

ee Daye Leta Seleepens Nees.

— —— mH — — —

Bare arte PROCEEDINGS

1966

Feb, 14 69. “within 10 days trom we date of this order, 5

. ca) an approp form of judgment, which shall

2 2 provide that pltf a action be dismissed without

costs y any party, and that the judgment

shal! not constitute an adjudication upon the.

‘yherits; that the Clerk promptly serve copies ©

of this order upon the attys for the parties

-~ appearing in this cause. Date Order or Judg-

ment Noted, 2-14-66; WCMathes*

red. 14 Hern at each of above orders mailed to course |

for both aides.

‘Feb. 16 60. File Defts’ Notice of lodging opened judg:

7 ment with certificate of mailing.

Feb, 76 — Lodge proposed judgment.

Mar. 28 61. Enter and file judgment that Defendant’s Mo-

tion for Judgment on the Pleadings be and the

“same is granted, each party to bear its own

costs; and adjudging that this judgment shall

not constitute an adjudication upon the merits.

Date Order or Judgment Noted, WCMathes;

8-28-66

Mar. 22 Conform copy of judgment maden to Mr.

: Tlaucher and to Mr. Frank.

Apr. 27 62 File Pitf's Notice of Appeal, swith atidavit of

- service on counsel.

‘May 9 68. „

June 3 64. Enter and File Order that the record on appeal ö

time is hereby extended to and including July

“gaat tains medics Toe. CAM

Joly 1 (. Enter and file Order Exteriding Time to file

e record ahd docket appeal to and including

July 26, 1966. Date Order or Judgment Noted, —

[Filed March 80, 186587)

"UNITED STATES DISTRICT COURT... ~~

_...°. «DISTRICT OF ARIZONA. nth tee

(Phoenix Division?

Cusn Action No, Civ-6466 PN.

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF

NATIONAL SECURITIES, INC., a. corporation, NATIONAL

LR & CASUALTY INSURANCE COMPANY; a corporation,

: Ropert H. WALLACE, Ropert C. BOHANNAN, In.,

ARTHUR W. SAFFERT, TED WILKINS, JOHN S. BAR,,

JoskpH B. SETTER, BREEFERD W. LARGE, In., RICHARD

G. -JoHNSON, ERNST A. RICHARDS, WILLIAM A.

_ Reepy, Bonnie B. BARRT, Propucers LN INSUR-

ANCE @OMPANY, a corporation, and PRODUCERS THRIFT

& LOAN COMPANY, a corporation, DEFENDANTS _

9 0

CoMpLAINT FOR INJUNCTION

sys I 4

1. It appears to the Securities and Exchange Com-

mission, plaintiff herein, that the defendants National

Securities, Inc., a corporation (“National Securities),

National Life & Casualty Insurance Company, a corpora-

tion (“National Life“), Robert H. Wallace (“Wallace”),

Robert C. Bohannan, Jr. (“Bohahnan”), Ted Wilkins

( Wilkins“), John S. Barret (“Barret”), Joseph B. Set-

ter (“Setter”); Breeferd W. Large, Jr. (“Large”), Riek-

ard G. Johnson (“Johnson”), Ernest A. Richards (“Rich-

ards”), William A. Reedy (“Reedy”), Bonnie B. Bilbrey

. (“Bilbrey”), Arthur W. Saffert, (“Saffert”), Producers

‘Life Insurance Company (“Producers Life”), a corpora-

Becu

atates,

2 2

52 &

Se ge

sea. 33

2 1 2 3

23 4 3s 33

defendan

ery

all

221 817% ag a „

828 nee A

waz 32 1 3:

142 f 3%

e 1115

i 211215 ih

/ Gonal

10 Ae

! ° 2 4 3 . 2 u . : : Aes { ö 0

. , f } . : # j 2

I. Prior to March 16,.1964, and-eontinuing to the

proent time, the defendants have been and are making

use of means and { lities of interstate eom-

* merce and of the to on in manipulative and

1005 of thé Securities Exchange Act’ot 1984, 16 UB.C *

"connect! r

Eee eee

a) by e ng & be 1 5

, 5 by making untrue tements of material fects and

omitting to nts made, tn the ight of

4 3 . .

* y ‘ - : 2 2

. Prodctts Life 40 its stockholders, the e ih

- the objective of transferring control of and déminion-over -

the assets, business (including insurance in force) and

is other resources of Producers Life to National Life and

National Securities, and with the ultimate ‘objective of -

accomplishing the merger, consolidation or amalgamation 25

of Producers Life and National Life (with Producers

Life to remain as ‘surviving corporation under the

name National Producers Life Insurance Company, sub-

ject to the dominion and control of the defendant” Na-

tional Securities and its nominees), have conducted nego-

tiations ang x Senge atrangements — the 8211

ing:

(za) the sale and transfer of the stock of — —

‘Life owned by Messrs. Johnson, Richards, Reedy

and Bilbrey (‘the galing directors”), by Producers

Thrift and by Préducers Life “treasury stock”)

7 to National Life or National Securitiés; 5

1 b). the sale, surrender and transfer, by defendants |

Johnson, Richards, Bilbrey and Reedy td Natiénal:

Life or ‘National Securities and their designees of

their directorships and offices in Producers. Life,

together with the voting proxies of ordinary stock-

holders held by them;

(eo) the acquisition by defendant Ready ‘and is nomi-

nees from Producers Life of 111,088 shares of the

Gass A stock and 1,469 shares of the Class B. stock

of Dependable Life Insurance Company (Vepend- 8

able“) owned by Producers. Life;

(d) the acquisition by Producers Thrift ot 40.000

shares of its preferred stock, $100,479 of its Brom-

issory notes and assigned “collateral. and 25,248

_, shares of the stock of Producers Firtance Company

of Arizona owned by. Produce Life; ..- ie

(e) the execution of agreements under Which the sell

Lee ing directors are to receive-$979,000 from National

8 for their agreements not to compete in-

1 obligations of Pro-

du **

8 Gueer te; :

ot me

e business and the assumption by Na-

ae ee ä

(f) the consolidation of all G the business operations:

3 9 of Producers Life into those of National Life; oy,

and the defendants are seeking tp accomplish the follow.

ing additional elegfints of their gcheme and plan: eof

securities through an Sgreement of consolidation .

ch) the acquisition/of complete dominion over atid con-

4. On or about April 27, 1964, purspint to actions ©

taken by their directors, the corpdraté defendants Na-

„ Richards, Reedy and,Bilbrey entered into and performed

aan eserow agreement Which, by means of the documents,

approximately 74% bid, 8 asked. —

6. On or about April 27, 1964/ National Securities

_ purported to assume certain obligations of Producers Life

and Dependable in favor of persons nimed—Pound, Love- 2

2 PRN 2 „ . *

|e oo } Cee

lace, Heeder and Davis in the 3 of $627, 891.28 a8

an additional consideration for the purchase of the 60,208

shares of Producers Life as described in paragraph 5

hereof.- It was intended, however, that, after assum!

‘dominion over and control of- Producers Life, Nationa

Securities and National Li 5 their agents and

eos e 155 Ne or the surviving

corporation resulting p ve merger or con-

solidation of Producers Life and National Life to reim-

durse National Securities for moneys paid out pursuant

do its assumption of such obligations. ;

On or or about April 27, 1964, as an incident of the

~ eseroW described in paragraph 4 hereof, and in further- -

ance of defendants’ plan and scheme, National Securities, 3

Ine. and the ‘selling di executed and exchanged © £#£=#«

agreements by which the selling directors and Dependable

agreed (With, some limitations) not to compete in the

insurance business with Producers Life and National Life 8

or any entity emerging from the prospective merger or f

consolidation of those corporate defendants, and National

Securities agreed to compensate the selling directors in

an aggregate amount of $979,000 payable in 120 monthly be.

installments following pin 80, 1964. As an element —_—.

eoant to oni “non-compete” agreements, 1

8. On or about April 27, 1964, in Aurtbera nes t sata |

scheme and plan, the defendants Johnson, Reedy, Rich.

- ards and Bilbrey received approximately $570,000 from eet ee

National Securities through. said escrow. as consideration at ee,

ee ae ee the stock’ of Producers Life, con

Which sum is equivalent to $20.79 per share. 5

9. On or about April 27, 1964, in furtherance of said

' gcheme and and plas, the selling directors caused Producers

- ‘Thrift, which they owned and controlled, to sell through

‘said escrow to National Securities 38,894° shares of the

Stock of Producers Life for an aggregate consideration

C0 =

. 10. On or about Aprill 27, 1964, in furtherance of said

‘scheme and plan, at a meeting ot the directors of Pro-

ducers: Life, the selling directors resigned their positions -

as Officers and directors of Producers Life, one by one,

and caused the remaining directors to elelet in their stead

as directors, nominees of National Securities and National

Life, namely, the defendants Saffert, Barret, Setter and

Large, who thereupon assumed management and control

of the assets, business and affairs of Producers Life.

11. On or about April 27, 1964, in furtherance of said

plan and scheme, the defendants Saffert, Barret, Setter

‘ and Large, then constituting a majority of the board of

_ directors of Producers Life (called the “new board“);

forthwith caused the election of defendant Saffert as :

president and of -defendant Large as secretary of said

... Corporation. EE DIRE See 12 . 2

12. On or about April 27, 1964, in order to cement te

dominion and control over Producers Life by National -

Securities and National Life, and their agents and nomi-

nees, and in furtherance at said scheme and plan; the

defendants Johnson, Edwards and Reedy transferred

through said escrow to the defendant Wallace voting

outstanding stock of Producers Life, together .with docu-

‘a

cute a Management Agreement” between Producers Life,

8 met SEE ;

14. Shortly after April 27, 1964, all of the books, ree-

in the office of National Life. Hig

. pan thane Rene tS al

and Hunter, resigned. "The remaining: directors elected

"the defendants Walla Wilkins and Lene nominees of

National Securities, in their stead. This board then elect: —

ed defendant Bohannan as assistant secretary of Pro-

° ducers Life with specific powers. socio transactions —

in the Saga bonds and other in 15 seourities

1 sf

I. On or about Reader 1, 1964, fn 3

said. scheme and plan, the defenda 1 Life and

Producers Life entered into an agreement to consolidate

and reorganize. This agreement was a on behalf

Gf Produere Life by lis Board of Diretors all of whom

were nominees of National 3 The agreement

vides, inter alia, for the merger of National. Life

(described in paragraph 18 4 . ,

Producers Life an = issuance of LA of Producers .

(a) pursuant to the “non-compete” agreements

in favor of defendants Bilbrey, Johnson, Richards sad

‘Reedy as described in paragraph 7 hereof, and (b)

suant to its obligations to persons named Pound,

Heeder and Davis as described in paragraph 6 herein.

In addition, the agreement to consolidate and reorganize

provides for its submission to the stockholders vf Pro-

18 On or about November 27, 1964, nm ot

haiders ef Preducers Life copies of the consslidation agree- *°

" year, that the “non-compete” oi.

— 3 — i be renamed,

0 ational ace Life — adh ‘ ny)

B ‘Hoourktien (

pense) any sume paid by a beware

_ Of ite 1 e ae 0

| the selling. Trede 775 7

ton material nor —— have’

dio stockholders of

a pul 22 National fouritee — yor

0 5 Lov e the

defendants have i to stockholders of Producers

Life.in such proxy solicitation material or otherwise

that

3 mee gsc mee Pines Eee ke |

‘e

the

onal Securities and the sellf 2

— — 10 years mens Fe ri

2 3 14 ber 1. ——

fendants National Se — and National

bE ;

‘

addition, the consolidation mee

ba the the survivin corporation wi 1 8

— —

and 5 nn N

Large, as their agents and nominees, arranged ihe the :

eee Parner naman of Producers Life so recessed on

December 31, 1964, to be reconveried on March 26, 1965,

in Phoenix; Arizona. On March 18, 1965, said defendants

caused a notice · of the reconvening of the meeting to be

sent (over the signature of the defendant Large) to stock-

. holders of Producers Life with an enclosed communication

(over the signature of the defendant Saffert) soliciting

proxies in favor of the existing management to be voted

in favor of the consolidation agreement and plan of re-

tion described in paragraph 17 hereo f.

21. On or about March 2, 1965 in furtherance of said

scheme and plan, the defendant National Securities, Na-

tional Life, Wallace, Bohannan, Saffert and Large and the

defendant directors of Producers Life caused to be mailed —

of reorganization with which was enclosed a copy of an

investment advisory letter éntitled “North’s News Letter

and Special Report” dated February 9; 1964. Said “Spe-

cial Report” while purporting to be an analysis by an

independent ent advisory service of the financial

affairs ational Securities and its subsidiaries, includ-

ket value of said. Stock as ste December a

with a resulting redu of t

e e Tite in the mat

The defendants, Gelen restrained. peg enjoined, will. 7

wpa ont act ret the. acts and rections — :

above. 1985 2

sion demands a temporary restraining order, a p

nary injunction and ‘a permanent injunction’

and ‘enjoining the defendants National Securities, ine

- National Life & Casualty Insurance Company. Robert H.

Wallace, Robert C. Bohannan, Jr., Ted Wilkins, John 8.

Barret, Joseph B. Setter, Breeferd W. Large, Jr., Richard

G. Johnson, Ernest A. Richards, William A. Reedy, Bon-

nie- B. Bilbrey, Arthur W. Saffert, Producers Life Insur-

ance Company and Producers Thrift & Loan Company,

their officers, agents, employees, attorneys, successors or

assigns, cam eee

with them, from, directly or indirectly—

A fisking’‘use of an) Meng ‘or inetriithetitaltty of hr ee |

nipulative or deceptive device or contrivance, in violation

of Section 10 (b) of the Securities Exchange Act of 1934,

15. U.S.C. 78j(b), and Rule 106-5 thereunder, 17 CFR.

240.10b-5, in connection with the purchase or sale of se-

curities issued or to be issued by Producers Life or Na-

tional Life or National Securities, or any. affiliate or sub-

e ee tse gee ay Hee :

National Life and National Securities, or the ultimate

. consolidation or ¢ ve of Producers Life

Life, in of the rights and inter-

the stockholders’ of Life and in contra-

of the fiduciary obligations of the defendants or

. e and its stockholders, a), by

: device, cheats or artifice to defraud; b)

“untrue statement; of material fact or omit-

ate any material fact necessary in order to make

ts made, in the light of the circumstances

under which they are made, not misleading; or e) :

any act, practice or course of business whi

would operate as a fraud or deceit upon Pro-

ducers Life or ita stockholders, whether. through—

(1) the device of a plant of reorganization; consolida-

tion, merger or otherwise, and specifically through

_ implementation or consummation of the Consolida-

tion t and Plan of Reorganization exe-

cated by Producers Life Insurance Company,

National Life Insurance Company and National

Securities, Inc., bcm November 27 1964; or 2

(2) the solicitation of proxies or votes of stockholders

dio de used to accom ee ee Penge rae ara

zation, consolidation or merger; or

) amy untrue statement of material fact or omission _

0 state any: material fact eee

aks he ae made, in the * ring cir-

cumstances stent e ete not mis- ©

(b) the assets, Mabilities, surplus or

elt, income or losses of Producers Life or

tional Life or ot any other company }

which {t may be proposed to merge or combine

(e), any transaction which materially: affects tho

come or losses 92 — Life, National

Life, ety ar npg i wihich ft may

de .

Producers bre ö

(d) any forecast as to the n

amount of business of Producers ite,

> Life or of any surviving company into which

Producers Life may be merged, combined: or 25

consolidated ;

or engaging in any ‘act, practice or course of business of *

5 similar object or pu „ e

B. voting or asing to be voted sny proxies executed

by stockholdefs of Producers Life which have been re-

ceived by the defendant Wallace from the defendants He

Johnson, Richards or Reedy; ° |

C. voting any proxies executed by stockholders of es |

ducers Life appointing the defendants Saffert and Wallace,

or either of them, which were solicited or received subse-

quent to April 27, 1964;

D. voting any of the 135,008 eaves ot thie ot Pre

ducers Life held by National Life as of December 31,

oe 5

performing any aet which facilitates or is designed

to Kalle the e de of tha Comsstsdation Aapros.

ment and Plan of Reorganization dated November 27,

1964, hetween Producers Life, National Life, and National

Securities, |

The Securities and Exchange Commission demands such

; other and further relief that may be appropriate, just

and equitable, or necessary to effectuate and implement

* 3

Assistant Regional Adminstrator

„ William M. Ziering

as WL M. ZimRInG

Attorney A

‘Boourities and Exchange Commission

, .

7 *

7 x

(Filed Mareh 80, 1966)

UNITED STATES DISTRICT RT 14 5

N Dor or ARIZONA | f

(bon m 6 ren :

Ovi Action No. o 40 . 8

NATIONAL SEcunrries, Ino, 4 corporatigi’ NATIONAL”

Lire & CASUALTY INSURANCE Cour 27 75 5

Bon AN, In.,

8, J. N

Ropert H. WALLACE, Roserr

ARTHUR W. SAPFERT, : I Wit

ANCE COMPANY, # 1 sion, eee |

prone ty

MOTION OF SECURITIES AND EXCHANC he

B. Wallace, Robert C. Bohannan, A; Arthur W. Saftert, 3

Ted Wilkins, John S. Barret, Josep 8. Setter, Breeferd’ —

Wi. Large, MB, Richard G. Johnson, Ernest A. Richards,

William A. Reedy, Bonnie B. Bilbrey, Producers Life

Insurance Company and Producers Thrift & Loan Com-

pany have been and are engaged ‘iu acts and practices

in violation of Section 10(b) of the Securities Exchange

Act of 1984 (15'U.@C. 78j(b)), and Rule 10b-5 (17

CFR 240.10b-5) thereunder, and that said defendants,

unless enjoined, will continue to engage in such acts and

practices contrary to the public interest and to the serious

prejudice of Producers Life N Company and its

; stockholders. i. .

Assistant General Counsel ;

W. STEVENS TUCKER -

Assistant. Regional Administrator

‘ WILLIAM: M. ö

Attorney :

_« Attorneys for. the Securities and

. e ite

8 By u w. Stevens Tucker

g W. STEVENS TUCKER 1

yas Of Counsel: for Securities and

Exchange Commission

Affidavit of W. Stevens Tucker in Support of Motion for

Temporary Restraining Order and Preliminary Injunction

ee Lee ae

[9] 25. An additional communication. soliciting proxies

and advocating approval of the merger was caused to be

sent through the mails by the management of Producers

Life over the purported signature of A. W. Saffert, Presi-

dent, on or about.the 2d of March 1964, enclosing a copy

of a document entitled “North’s.News Letter Report”

dated February 9, 1965, describe as a leading inde-

pendent financial reporting service with a wide national

kollowing copies of which communication and report are

attached respectively, as Exhibits 12A and 128. Said

report, Exhibit 12B, purports to be based on information

supplied by the management of Producers Life, including - |

| 5

[Filed March 30, 196] os,

financial information as of June 30, 1964 and December

„ e eee ee,

[10] 26. In compiling and transmitting said letter of

Narch 2, 1964, and enclosure (Exhibits 12A and 128)

the management of Producers Life and A. W. Saffert, its

president, omitted to disclose to stockholders of Producers

Life that preliminary financial statements, including

statements of operations for the year ending December

31, 1964, had been prepared some time prior to February

18, 1965 by and for National’ Life and by and for Pro-

- ducers Life. They further omitted to disclose that these

financial. statements, including statements of operation,

reflected a net operating loss of $35,657 by National Life

and a net. operating loss of $69,716 by Producers Life for

the year 1964, They also failed to disclose that a formal

annual. statement of the financial condition and opera-

tions of National Life for the year ending December 31,

1964, had been sworn to by R. M. Wallace as. President,

George B. Sharp as Secretary and Arthur W. Saffert as

Actuary on February 26, 1965 and filed with the Insur-

ance Commissioner of Nevada on March 1, 1965 and that

this annmäl statement also reflected the net operating loss

of 835,657. The annual report of Producers Life for the

year 1964 had not been filed by 2 P.M. March 26, 1965

and the.

Its trans-

965 (Exhibits:

755

that the amounts pay-

time of execu-

Producers Life under the

State of Arizona

(Exhibit

been filed. with the In-

„ 1965 (the

State of Nevada.

) all fail to disclose

* sea

20,

of the

tion

1 Condtiseidobiir of the

wit); it dad

a tub

Consolidation Agree-

1 75 the

868 . ddes

nth

(on

ould amount to 88,167 per mo

pril 80,

@ to [11

‘Gisdlose the a

ov hye. eee ee

‘gross revenues to reim-

ments to be made to-the

iit

i -

( 5 that coples of the Aue nt (Exhibit

8) and Consolidation Agreement at eee :

appreciation. ot: lande e isSelatee.

the formulas to the figures in the finan ‘statements,

estimates and forecasts —_— by the worn in ;

Exhibit’ 10. —

po From Exhibits Included in Affidavit of

5 W. Stevens Tucker . a

& „ 9 4

a beak From Minutes of Special Meeting of Board of

Directors of Producers Life Insurance Company,

Monday, April 27, 1964

8 92 | *

: 641 Mr. Johnson then invited Mr. Wallace, to ‘site

for the benefit of the Board the plans which National

Securities, Inc., had in mind for-the future growth and

development of Producers. Mr. Wallace reminded all

present that National Securities, Inc., was in fact a hold- .

ing company and [5] engaged in business as such. He

. erally speaking, 9 to — pone ad This, be

noted, rere ret, & caretel couniination of te: lites ellie

| ‘gffairs and procedures of Producers with those of National

Lite and Casualty Insurance Company, a subsidiary of

National Securities. He said that he envisioned, if the

‘Board of Directors of Producers approved this transae-

tion, that the needed home office personnel, equipment,

supplies, and procedures of Producers would be trans-

terred to the home office of National-Securities and care-

Fully blended in with the operations of National and its

a a

‘subsidiaries to the end that efficiencies be achieved with-

out sacrificing the separate corporate identity of Pro-

ducers. He discussed in detail the economies which he

felt would be possible.

He noted further that it’ was the intent of National

Securities that subsequently one form or another of cor- |

porate reorganization or amalgamation be proposed to the

stoeckholders of Producers. He stated that at the present

time he felt it was not particularly important to determine

precisely the method to be chosen so long as it was clear

that the stockholders of Producers would, at the appro- |

priate time, have proposed to them a specific plan or re-

organization as a result of which they would formally —

join the National Securities group, and be offered the

ty to convert their present holdings to shares

ok the Common Stock of National Securities. Substantial

discussion ensued. during which the directors put ques-

tions to Mr. Wallace and Mr. Wallace answered all ques-

tions asked of him. , :

* * — & *

t ‘ee

‘3%

12 ‘ . N Ee,

| 2 i \

* : 1

ore *

a\ ‘PRODUCERS Ur INSURANCE COMPANY

Flow Chart of Escrow—April 27, a

i National Securities

A ts

2. r

N 4. Ps

Due From

Due To

$ 360,000.00 $

570,000.00

912.5 $_

ides

‘Notes 5 National Securities

Note to Reedy

Note to Producers Thrift

883,681.46

_ 872,769.41

4a. 40,000 s, Producers Thrift Pfd.

9,113 ‘Class A)

1,409 1577 7 B)

— ——

0 Cash

4. ° Note from Item 8(d)—Reedy

200,667.00

100,479.00

42,535.46

170,000.00

„ 3 32,616.25

20,000.00

18,588.00

170,000.00

7. f

8. cash ö . 0

Producers ee Bees

11.

17.

(Assumption) —

Note

627,891 16 | 15

114,964.87

—

742,856.68 ‘

: 742,856.68

ie er “TA,

20,000.

JI 880 58805 88200

$740,000.00.

$740,000.00

1 ————

31.812,742.84

‘ash 1 . ° § 860,000.00

7891.74

848.38 ° $1,685,626.04

_ $570,000.00

5176000 00

91206 8 70,000.00

$570,000.00

3 ; 5

$1,812,742.84

$100,000.00 poeta: Hk

. 09 $1,886, 588.09

_ $740,000.00

$740,000. 50

Securities, per above

Cash out of escrow 5

Cash to N : :

Marketable securities to Producers Life

EERIE

7131274234 7

$ 528,646.88

209,009.00

* 5 a ue ;

— SS G

. 1 . 9 .

3 2 7 4 27

3 st : 175 F e SAS Sees

4 * 3 e

Lat 4 73

* EXHIBIT 6

National Securities Former Principals Producers Life 2 Loan of Utagngn

Due From Due To Due From Due Io Due From Due To Due From Due To Duo pron Due T Due From Due o

$ 360,000.00 $. 91205. —wbén $30,000.00 %ß(ö . „„ 31 . „ $ $ $

870,000.00 570,000.00 | : | „„ N

222,769.41 ets . e 372,769.41 ze (ON

883,681.46 7 240,000.00 f ; | 343,681.46

25 70,000.00 BAe) 7000000

‘4 , . : 848,681.46 843, 68148 ;

200,667.00. 200,667.00

E 11ᷣ00, 479.00 F . e

4 | 42,585.46 | . : 42,585.46

170,000.00 170,000.00 | | 5

2 22,616.25 : : es 22,616.25

ZA „ „ spa SR. BER: | 20,000.00 |

. rs, | „„ k ¶ a 20,000.00 N 22,616.25

100, 000% 8 1̃0'00, 000. 0 00 3

FTT 3 „ ae „„ eee mp „ ieee 3

E T — 38,888.00 1 888.00 — 5

„ 742,856.68 se 742,856.68 „ „ 22 . 3 | 1

e,, pire 627,891.76 ee ren aaa Sata ee “ee

114864877 3 | * 114964.87 7 ; e 5 3

“= $1,686;588.09 $1,686,588.09 $740,000.00 740,000.00 $1,312,742.84 * $1,812,742.94 $716,450.87 $716,450.87 288888500 $34,588.00 $22,616.25 $22,616.25

$60,000.00 21206 $ 70,000.00. $570,000.00 $ . $ 5620425 $848,681.46 $872,769.41 $83,588.00 § $22,616.25 2

698.646.88 §1,685,626.04 $570,000.00 170,000 $1,812,742.84 8 528,646.88 $372,769.41 . $848,68146 223,888.00 $22,616.25

$627,801.76 | 2100000. 00 CV | 3 2

0 2 686,588.00 - $740,000.00 $740,000.00 $1,812,742.84 $1,812,742.84 $716,450.87 $716,450.87 $88,588.00 $88,588.00 $22,616.25 $22,616.25

Cash out of escrow e e . 5

„4 * 5 25 . . ae a 2 oe 4 eS ;

Marketable securities to Producers Life — ee

„

4 é

„

—

9 Pee

1 2

opera at Ernmrr 8 Pe iA

‘MANAGEMENT AGREEMENT )

BY AND BETWEEN A

_ NATIONAL SECURITIES, INC.

PRODUCERS LIFE INSURANCE COMPANY.

1 WITNESS ‘the terms of this agreement made an

entered into by and between NATIONAL SECURITI

INC., a corporation (hereinafter referred to as a-

tional”), and PRODUCERS LIFE INSURANCE COM-

PANY, a corporation organized and existing under and

by virtue of the laws of the State of Arizona (hereinafter

referred to as “Producers”) ; this 30th day of April, 1964.

WHEREAS, The Board of Directors of Producers is

composed of persons affiliated with National and its sub-

sidiaries; and

WHEREAS, National through its subsidiaries is the

owner of such physical plant and facilities and an em-

ployer of such experienced personnel as may be gainfully ©

employed to manage the affairs of Producers; and

- WHEREAS, National and Producers each desire at

some future date and during the term of this *

to propose to the appropriate stockholders a

organization or amalgamation wherein and whereby Na-

tional directly, or indirectly through its subsidiaries now

or hereafter existing, shall acquire ownership of all the

assets and-assume all the lisbilities of Producers; and

WHERE AS, the Board of Directors of each party here- 55

to believes that it is in the best interests of the stock.

holders of each of the parties hereto and the policyholders

of Producers that prior to any such corporate amalgama-

tion or reorganization as aforesaid National shall manage

the affairs of Producers, subject to the supervision of the

Board of Directors of th the latter;

_. NOW,,. ‘THEREFORE, FOR AND. IN CONSIDERA- |

TION OF the Menges wae — the mutual covenants .

2 „

0 5 7 A * N 5

. —

84 8 4 ‘ * =

ad bet out the maint hereto do mutially agree

the one with the other as follows: : i

c b ies 25

he = hall manage Producers in all material respects 5

f 4 corporation separate and apart from the af-

3 fain of its subsidiaries, affiliates or itself.

2. It shall provide the time and effort of trained and

. capable employees for the preformance of all under-

| writing, processing, servicing od ony ite duties

and functions normally carried on by life insur- :

ande company personnel. \ oe

3. It shall employ such personnel of Producers as 5 it ;

may gainfully employ in the supervisio es man-

agement of the affairs of Producers or of the

affiliates of National.

4. It shall cause to be paid with the funds bf .

Aducers all costs of personnel, premium coll ions

“issuance: of folicy contracts, preparation of records

pertaining to policy contracts, office rental, and

andi all other ‘costs or expenses incurred by and „

dehalf of. Producers in the operation of its insur-

ance) statin, eee een ene

available.

5. It shall provide the féregoing <p nnel, facilities |

and space at its home Office or in its discretion, in| bie

fais ay, other of the tee balldings i Arizons, at

6. Tt shall

tdorm from - applicants, policyholders, obligees, or

agents, for the benefit of Producers, and deposit

2 i ie e or e accounts of

5 2 1, in a 11 855 1 name apes as

* acer, fo its’ benefit, in Secs oi standard

Aaa and sul r

accept: at its ens ne in any . 8 ö

-and accounts as shall have heretofore

, pared by Producers, and shall upon request war-

rant the completeness and accuracy of the same to

the stockholders of Producers and the appropriate

10.

state departments of insurance.

provide service to policyholders and pay or deny

benefits or claims of claimants under the terms. of

: insurance. policies, all in accordance with standard

„.

12.

13.

insurance practices, and under the supervision of

the Board of Directors of Producers.

It shall maintain reserves of Producers as Fanulred |

It may sell, offer for sale, purchase, offer to pur-

chase, negotiato, mortgage, rent and in every man-

ner manage the investments, assets and properties

_ (whether. real, personal, or mixed) on behalf of

Producers, in the same manner as a prudent man

in the same or similar circumstances might or

would do and it may in no event sell to any of its

affiliates any asset of Producers at less than the

value at which any such asset is carried on the

books of Producers at the time of sgle. a

It may dispose of such assets of Producers. as shall

not be necessary to maintain Producers’ insurance

See mS

* Tt all cane to be prepared sch tial reports

pre-

It shall manage the sales personnel of. Producers

‘conscientiously. and with the intent of retaining

and maintaining the aggressive sales program cur- -

rently in effect. for the benefit of Producers, sub

ject to prudent 1 management.

It shall issue insurance contracts to applicants, |

business while operating under the terms and con-

ditions of this agreement, at.reasonable and pru-

dent values, provided, however, that it may dispose

of any security now owned by. Producers, including

but not limited to ‘ities. of corporations pres-

ently or heretofore affiliated with Producers (as

the term affiliated is construed by the Securities :

and Exchange Commission of the government of.

. the United State) to persons interested in buying

the same, wheth

or are affliated with Shire for the value at

or not such persons have been

Ses

Which such. securities are. carried on the books of |

| Producers; nothing herein contained to the con- 11

„ ttrary withstanding, National shall have and has 3

: the authority to sell any securities owned by Pro- |

| „ ducers at less than book value in transactions with |

a persons other than affiliates of Producers or Na-

. . tional in the normal course of buying, selling, trad-

a ing and investing in securities. E

14. It ee pay all taxes, licenses, fees, permits, and

i other costs of doing business the funds of

Producers by and for and as the act and deed of

. Jt shall’ cause to be done any and all other acts

2 and cause to be ‘executed any and all instruments

dd'eemed reasonable, desirable, convenient, or neces-

gary, 8 Ne T out 8 hereafter

agreed to, to the end that the possible manage-

ment of the affairs of Producers, for its benefit and

chat of its policyholders and stockholders, shall be

the result, fis ual ne

16. It shall propose the corporate amalgamation or rt- .

1. Tt shall cope to’ be delivered to National at its

a 5 ‘i 5 ea ne its x See 10 0 0 a a i :

$8, It shall cause to be delivered to National at its

home office all its stationery, checks, forms (for

policies and other matters) to the end that person- 5

nel provided by Nationa] may. possess, employ and

execute them by, for and 48 the act and deed of

Producers.

4. It shall cause to be forwarded to National at its

address. all correspondence and communications re-

ceived by Producer 7 td permit National to alter

Producers’ ma and telephone number -

to rage th E

and exchange, t all policyholders and

—— the publie at large receive proper and

immediate service in relation to thelr affairs with

Producers.

The parties hereto do arses || covenant, and agree

that: YZ

I- This agreement shall be liberally construed to per-

mit all necessary and usual services to policyhold-

ers, stockholders, and creditors. of Producers con-

_ sistent with economical management of Producers’

- ‘affairs by National. 2

2. From the gross receipts of Producers (defined: as

all receipts of Producers other than proceeds real -

ized from a bulk sale of insurance in force and

other than that portion of the proceeds from the

„sale of any admitted asset represented by its ad-

- mitted asset value as carried on- the books of Pro-

* ducers) ‘ F

order the sums necessary to:

a. Maintain required reserves; :

[4]- b. Make all payments required —— any and all

F poliey contracts of Producers, as the same be-

come payable from time to time;

e. Contribute to the surplus of the corporation, for

ss 3 r

FFC —

| any such excess shall be and is the t

fee due and shall be paid to National; in the ud

the foregolrig contribution to the

So eee surplus or security valu:

‘ation reserve shall also be increased (or decreased)

( IN WITNESS WHERE OF, ‘the 3 85 hereto have

caused this agreement to be executed by their officers,

duly auth and their seals to be hereunto affixed as

of the day date first hereinabove written. re

5 NIN AL. SECURITIES, IN.”

DS ee „ By /s/ R. H. Wallace, President

e „ „ a .

Arb N

e George B. Sharp . 50 7

Grorce B. SHARP, Secretary | wep

4 Priopvers Lars INsuRANCE ‘

eels COMPANY { ® |

By /s/ Arthur W. Saffert

Arraun W. Sarrurt, President

i /s/ Breeterd W. Large, Jr. 555

. BREEFERD W. Land, In., Secretary a 5 |

ee May, 1 1964; 5

0 A. Bushnell | |

"Gated nt, Directee ?

Department of Insurance, State of Arona

EXHIBIT 9

STOCKHOLDERS AND PROPOSED MERGER ;

TO. THE STOCKHOLDERS OF PRODUCERS Fs: Do

1 , INSURANCE: COMPANY: BREA:

NOTICE 18 HEREBY GIVEN that a pected 8

of the stockholders of Producers Life ce Compan}

will be held at 10:00 A. M., Mountain Standard ssi

Thursday, December 31, 1964, at Phoenix Little Theate

25 East Coronado, Phoenix, Arizona, for the purpose of

considering the following special topics and such other

iim 7

any adjournments thereof:

1. The approval of a Consolidation 11 and

Plan of Reorganization dated November 27, 1964, by and

between Producers Life Insurance Company and National

Life & Casualty Insurance Company, providing for the

merger of National Life & Casualty. Insurance · Company

into Producers Life Insurance Company, which shall be

the surviving corporation, to be thenceforth known as

“National Producers Life Insurance Company”. . ee

2. The approval of the resolution of the Board of Di-

rectors which authorizes, subject to stockholders’ approval

of the Consolidation Agreement and Plan of Reorgariza-

tion, of the payment of a dividend in eommon stock in

the amount of one share for each five shares now out-

standing to the stockholders of record as of 10 days fol-

bouing the “final -effective date“ as defined in this agree-

ment.

1 3. The approval of an amendment to the Articles of

Incorporation to effect à change in the date of the annual

meeting or any adjournments thereof. - ae

, The vais 8% the ‘tal eee cand tote)’ Minds in-

; audi ‘required er det at Pee UMe’Sdientancs

Company as of June 30, 1964, are set forth in Paragraph

2 18 of the Consolidation Agreement and Plan of Reorgani- :

zation, forming a part thereof. The Consolidation Agree

5 — and Plan of Reorganization is in@luded herewith 2 as

rt of this notice. 5

notice is dated November 27, 1564 5

/ Breeferd W. Large, Jr.

Secretary:

CONSOLIDATION AGREEMENT rtr

“PLAN OF REORGANIZATION -

- WITNESS THE TERMS OF THIS CONSOLIDATION’

AGREEMENT AND PLAN OF: REORGANIZATION

made and entered into as of the 27th day of November,

1964, by and between PRODUCERS LIFE INSURANCE

COMPANY, a corporation orgdnized and existing under

the laws of the State of Arizona (hereinafter called

Producers or the “surviving corporation”), and NA-

TIONAL LIFE & CASUALTY INSURANCE COM-

PANY, a corporation organized and existing under the

laws of the State of Arizona (hereinafter called National

Life“). For the limited purposes set forth herein, includ-

, ing specifically the cancellation of that certain manage-

ment agreement, dated April 36, 1964, by and between

National Securities, Inc. and Producers, NATIONAL — 3

_. SECURITIES, INC., a corporation organized and existing

i wai Che lw of he Beste eee,

„ “Qe bentnne in the State of Arizona. * called

National Securities”), is also a party hereto. The said

2 =a a be

! . Identity 4 Parties. ee the surviving corpo-

ration, was incorporated December 15, 1949, under the

insurance laws of the State of Arizona, and National Life

Vas incorporated May 26, 1936, under the insurance ws

ot the State of Arizona. Producers commenced business

‘on July 31, 1952, and National Life commenced business

— 4

n September 1, 1936. As of December

* * ° * i

3. The Consélidation Provisions of. 1 hoes. Un-

der provisions of § 20-781A, Arizona Revised Statutes, an

Arizona domestic stock insurer of any kind may merge

or consolidate with another domestic or foreign stock in-

‘agreement is hereinafter called the Manage-

surer by complying with the provisions of the Arizonre

la governing the merger or consolidation of stock corpo-

“rations formed for profit, subject only to the requirements

that no such merger or ‘consolidation shall be effected

unless in advance thereof the plan and agreement therefor

of Insuranee of the State of Arizona. By, the terms of

63 e 10-849, both inclusive, Arizona Revised

. . and continued as one of the constitu-

| orporations or by forming a new corporation subject

to ¢ ertain requ ats, including the submission of the

reen 21 . merger to vend :

* t *

* * Pee e 74 oe Ks ast 4 21 1 224

E thi: 8 abe d forthe an

1 filed and approved in writing by the Directors

two or more ‘corporations formed for profit

9 g 3 ~ se

* v4 . 75 * .

tion of the W 1 by and between Na-

tional Securities and Producers, Dee Ato. the further

provisions hereof. r

NowW, THEREFORE, for adil in A of the

foregoing recitals and for and in ‘consideration of the mu-

tual covenants and warranties hereinafter set fotth, the

merging. parties hereto, deciding to merge, and. National

Securities, desiring to bind itself to the terms and condi-

5 0 hereof as relate to it, 5 AOE, one with the other as .

OLLOWS: -: * i

6. Merging Parties to Submit 8 to Director.

3 — upon execution of this Agreement, National

Life and Producers shall join in submitting forthwith a

counterpart of this Agreement to the Director df ‘Insur-

ance of the State of Arizona: Each merging party agrees

to take every legal and reasonable step to secure approval

of this Agreement by the Director of Insurance. Such

approval shall be endorsed on a counterpart of this Agree-

ment as a condition precedent to the consummation of the

merger; provided, however, that if any modifications of

this Agreement are subsequently executed by and between

dhe parties hereto, they shall be immediately submitted by

the merging parties in the same manner as the counter-

part of this Agreement was submitted, and all legal and

reasonable steps to secure approval of any modification °°

shall be undertaken and performed by the merging parties

in the same manner as required of them in *

the counterpart of this Agreement.

7. Submission to Stockholders. Immediately upon exe-

5 eution of this Agreement, each merging party shall issue

do its stockholders a notice substantially in the form of

Exhibit A“, in the case of Producers, and. substantially

in the form df Exhibit “B”, in the case of National Life

| (but such exhibits shall not, be deemed a part of this

> Agreement for the purpose ‘of subsection 4 of § 10-343B, .

Arizona Revised Statutes)... The special meeting of the

stockholders of the companies hereto referred to in Ex-

_ hibits “A” and “B” shall be held on the same. day and

at ‘such ‘special: meetings this Agreement shall be sub-

mitted to the stockholders of each company. At such

‘ a if a quorum sufficient to approve this Agree-

shall

abilities

‘pur-

as of _

bea

to exist

stockholders of the

if at either

meeting a

shall

shall be deemed for pur-

the “final effective date“?

rtheless for all

ng in person or by proxy)

W af the later i

policy. liabili

and National Life

as a corporate entity. a

. , *

—

or.

by.

assets and assume all

I. If this

(voting

n the day

n or

ecember 31,

I date,

the-owner of all

of National Life, ini

Dos

submitted to the

4 be submitted

124105

consideration: of other

H+

{after

December 31, 1964,

——

“become

ai 10 M Ie

N 11

{fication or Abandonment of Merger. Until

Agreement has been approved by the stockholders of

6]. 20. Modi

[

4 rar. 10 e ee : ec Pe

_ PRODUCERS LIFE INSURANCE:COMPANY:: =

: 3 A Orp. Lr LEGAL RESERVE COMPANY > ae

2300 N. Gea, ¢ PROENEE, ANZONA * AL 8-711 · ro Box 1270 8

r Ngrember 27, 1664 re

Vour Board of Sida, wholeheartedly oma your 3 a se

favorable consideration’ of several proposals of utmost

. These proposals peas :

a " * * Pore ‘

Tue merger of ‘your Company and National] Lite 3

Casualty. Insurance Company, whereby Producers

Life will be the surviving company. We would also

tate National into our name and become National

Producers Life Insurance Company’. Your’ Company

would have nearly two-hundred million of life insur-

ance ip force, over nineteen million of assets andy

maore than seven million per year income; ä

ee Immediately upon approval of the merger. proposal - .

by stockholders (and their ratification of the Sate: SEE

tion adopted by its Board of Directors) Producers 5

Life will declare 4 twenty percent. stock dividend to

all stockholders of Producers Life. ;

i 37% . 2 t

should improve the image and prestige of your Company,

multiply its profit potential, increase its ability to expand

into new areas, secure more business from the markets

it is currently serving, and improve the market for your

: stock. All of these factors are discussed in gregter detail 6

in this letter: “the other: p ) eee

he neeger Vd eee :

‘Special Stockholders Meeting on December 81, 1964. This

c =

7 5 7 : . 5 b 1 8

‘ 4 1 : ie ae 7 * .

| : ; ee ast aoe — 5 5 : ° io is

oes „ : 4 . ‘ 8 ‘

a a 2 er

8 effective upon the e ot. two-thirds. of the -

outstanding stock. Therefore Ja were, is of critical

importaneg.

Only. the endloned: jokony. dan: 50 e i Maso the

- merger, Even though you may have a proxy on file

with the Company, it is nece@jary that the special

a eens oe ee ees —

. SIE } or es ore

The Agniflekpee of the size of your: one often the. ‘

merger, can be more easily appréciated by making er-.

tain comparisons. The nearly two-hundred million of in-

Burance in- forcé, over nineteen million of assets and ¢

projected 1965 income: of more than seven million Seer

means ‘that your Company: 5 |

Would have approximately: twice the premium income

and assets of the next largest Arizona 5 insurance

company;

Would have nearly ton percent of the total insurance

in foros of all 146 Arizona life insurance panies ; ee:

Would rank in the upper 20% of. all of the life in-

surance companies in the United States in insurance

in force.

In addition, the merger ow. gi sing, 9 Sales 0

organizations promises the highest volume of new sales

in our history. This sales force of approximately 250

licensed agents can reasonably be expected to write an

average of five million 1 business per month during

oe wore of i nee for th« a: te

’ PROFITS ©

In shins ry phase of company operations, this marger

should eliminate duplication of work and result in sub-

‘stantially lower operating costs, The effect of anticipated © |

3 operational economies can easily be seen by reviewing the

Pro-forma operating statement, which projects manage-- - _

ment’s estimates for 1965, printed at the end of this re-

port. The before.tax net profit from e 1965

OD OF AAO, 00: STIRS Dee: ~~ .

41 Greater than the total before rene refit of National

Life & Casualty for the past five years; and

s More than twice, the total before tax profits of Pro- ;

ducers. Life oe the same five year period. 5

This comparison can be seen more clearly Fhen Wed

by Vears 7.

> 10969 1960 1961 1962 1968 5 Vr. reti

Nat{Bnal 1 Life $141,908. $70,615. § 25,778. ‘ $189,268. 3 8,591. $486,155.

Producers £85,948.) 5,770. 152,781, 127,758. eee 229,559.

(The dove l are thé deh profits Gases) before Federal ‘Income Taxes

— reported on annual statements filed with the Insurance Department. ) -

4 ; The. combination of lower operating costs plus higher vol-

tal for he should further strengthen: our Lents poten- :

ial for future. .

[31 MARKET FOR YOUR STOCK

In the past, lack of continuous investor interest has re-

‘sulted in neither Producers Life nor National Life stock

2 having a consistently good market. This is apparent from

published ‘market reports contained in our flies ànd avail-

ch to stockholders on request. Your Board feels that

major reasons for this investor. apathy were a combina-

— tion of: Failure to show consistent and increasing profits,“

0 .

—

— *

lack of size, regionalized sales activities, and lack ck of a a

bdeoad market for the Sto. **.

“this nierger your Company’ will. have the size,

| strength, ‘profit potential and expanding sales activities

that should! attract substantial investor interest. Your

oe Board firmly e otha nay and increasing demand

for the stock of ‘company would move the price of

4 . a eee ae ee *

<a MANAGEMENT. AGREEMENT ENDS.

. mms 1

1 ‘wrote You that it was our intent to merge Producers Life i

1 8 FFF * b

1 . e gs

0 =* 6 \ 7 * 2

cS > 1 , 3 ° * an : — nA

= A * 7 ’ 25

| ref ö 15 ey 175 2 2 \

| ae ‘@ method a, 3 tonigrtls an =”

es orderly consolidation: method was the Management

; Agreement.

Under the Management 12 it was 84 for

vour company to retain its identity, protect the. interests

of all stockholders, policyholders and employees, and still

have all the advantages of highly efficient and automated

facilities. We were able, during the past seven months,

to develop may common methods of operation with Na-

tional Life that: e far more effective and efficient| than He

Producers Life had ever known in the past. We were

. able to develop new insurance policies, competitive rates,

* and new. Services for policyholders that brought our two

companies. closer together. At the same time, we had the

services of top men in their: fields to help us work towards

this merger. pont 0

Now we are ‘able to recommend the merger with the firm

knowledge that the transition will a ay to the ad-

: ‘vantage i all stockholders.

14) NATIONAL SECURITIES’ POSITION

With the merger, National Securities will give ap

its.70% ownership in National Life and its position

under the Management Agreement. After the merger, |

| National Securities will own approximately 30% f =

ee the outstanding stock in in the merged’ company.

As a minority. ‘stockholder, the profits. per, share on its

. stock will be exactly the same as on yours. Its interest

as a stockholder will be the same as yours in building

company earnings for the benefit of all stockholders. Na-

tional Securities believes, as does your Board of Directors,

oe that the growth and profit. opportunities fer a company

ol the size being created by this merger are far beyond

what could be expeeted for the separate companies or

many many years to come. For these reasons National

. —˙ ‘to take. minority’ position im the,

* merged ew.

“BASIS. OF THE MERGER,

The merber ts proposed on the basis of the relative asset

value of the two companies, including the fair value of

business. in force., Management believes that this method

of determining relative value is the most equitable for a

merger. For un analysis of these values, see the financial :

statements ‘contained in this report. |

The purpose of the propoded Kiten is to thepuene

| your stock ownership in Producer aoe See

oe Pe ee ee Oe Eee ee

* ; 3

ler. sub mors 50 BE'VOTED ON AT :

_- SPECIAL MEETING DECEMBER 31, 1964.

__& Merger with’ National’Life & “Casualty . - (with

# Producers Life to to be the surviving Company)

» Ratification by stockholders of resolution of the a

Board of Directors declaring a 20% stock dividend l

2 (payment of this, dividend is subject. to the

approval of the merger) /

: ® Increase inthe Board of Directors to nine - -- (to

provide for representation on. the Board ‘of all prin-

eipal departments of our Company's operatiofi)

0 Staggering the terms of the Directors - - - (to assure 2

297 a continuity of policy and e

MAIL. THIS SPECIAL PROXY TODAY

It extremely important to you sid to tether 19,000 *

_ stockholders of Producers Life that you send in the en-

closed proxy ‘now. This is the only proxy that can be

This merger requires the affirmative approval: of stock.

holders owning two-thirds of the outstanding stock, Fail.

Regardless of whether you have a proxy on file, n proxy

voted in favor of the merger . and the 20% stock divi- ;

dend is payable only if the merger is approved.

“this mega ie ee even can be voted in favor of

Won't you please sign and mail this | proxy today?

pits 5 1.

7 ee President :

. N . 5 4 ‘ 2 : | 5 ee

4 a | ö 4 ; ; : i

J 5 | * * 2, * f : : 2

3 — r 1.9 .

900. 08 8 (HLS 1898-8 J ou ar (en emoouy AN

000812 998˙98 . a saopjoysood 04 ⁰,di G

660.849 8 996 9- 4% IS Lol s aner! pur en weg e N,

9. 287.24 88.8214 12.860. Psd *

00006 89. g 28 DD aul peyooqjooun bus pexiezep uo Zufpvol uf 5

000881 918˙9 9 28669 ˙5 f 1 see PUB soPUS] —

4 000 “Tl. T HOTS 18099 * 2 ure p’ B nN

Ze Q00'LLOTS 029.129 K 652 VIF 2 n * 3 A W ee

Dorle SSL 0 3 a * „3

ö 900. P %% 162.282. 18 97.78.13 ee ee i

_ 000°SL6'T ro ces STS 1 dne ale el uf earl

00.80 % eg 972.881.15 A ee een. 4

90000 SL 620.022.83 229.090.838 ‘ees

. 2 5 SIL‘8z es - emoouy ano :

a 000'Z6L TI6‘L68 990˙208 em wegn dN

00. 288.98 891 82 let 222

00070 89.80 _ ¢8TIT'62 * 8 eeuc axequounjddag 25

000285 909‘SLT 18984 N ven pus vp

7 5 000,809 98 506·8%e / vr ö a souBInSUy OFF] ,

pe * . ieee ame ees oe: :

Abe suedur0g Auedu0y suedu0p

: a, QOUBINGU] OFT soUBINSU].e;IT souvAnsUy 2 N

f a onpong non,, sxeonporg Tzlansvo F re

2 gget te jj, Gg OFT EN 1

7 ; Zufpug zeex

noe eee 8961 118 a qu,νthd̃ pop Xx

. (sywouzed0q couvmnsuy 04 zus grzg lenuuv

2 es 5 177 112 . g Baxvy, eulou] lap 1 ue

F ie 7215 — S MM us

Dee ens Soe ß

: 3 — ea x N aN, 5 5 ae te 2 : : 7 85 : N

. g 2 : * . ‘ : 5

> [Entered March’ 80, 2560 e e wee

r 8 1:02 3

— 88 ai UNITED STATES DISTRICT couRT~ j

Secs, .. DISTRICT OF ARIZONA — Pest

Bee > (Phoenix Division) . e

et te Givi Action No: Civ-5466 Phx. 2 1 4 ee

ee 2 . | SECURITIES. AND. EXCHANGE Counastion, PLAINTIFF . =

* 8 7 . * f 2 is d 85 ie 7 ts 8 5 : ¢

2 .

NATIONAL ‘acne ING. a F banish

3 LIFE & CASUALTY INSURANCE COMPANY, a corporation,

| ' RoBert H. WALJACE, RohERT C. BOHANNAN: . N.,

8 AxrHURH W. SAFFERT, TED Wu K nis, JOHN 8. 2

75 Josh B. SETTER, W., LARGE, In., Rit

8. Jo NSN, Ernest A. ‘RICHARDS, WILLIAM A.

'REEDY? BONNIE B. BILBREY, ‘PRODUCERS. “Eire INSun-

8 “ANCE COMPANY, a corpératign, and PRODUCERS THRIFT.

J ri. COMPANY, 8 corpofation, DEFENDANTS, 0

TEMPORARY RES}RAINING ORDER

pal iy

The Securities and Exchan Commission having moved

order and it appearing to

the Court from the complaint for injunction and the affi-

ee ä davit of W. Stevens Tucker filed herein that the defend-

4 ants Natidnal Securities, Inc., a corporation; Nati nal

3 Ife & Casualty Insurance Company, a corporation,

5 ert H. Wallace, Robert C. Bohannan, Jr., Arthur W.

Let, Ted. Williains, John 8. Barrett, Japch B. Setter,

Breeferd W. Large, Jr., Ri G. Johnson, Ernest A.

Richards, William A. Reedy, Sonnie B. Bilbrey, [2] Pf

ducers Life Insurance Company, a corporation, and Pro-

ducers’ Thrift, & Loan Company, a corporation, are en-

| oa a ind ait ee Ne kote andl antes Chip. :

| + constitufe violations of Segtion 10(b). of the Ss ind

* Exchange Act of 1934 ( Act“), 15 U.S.C. 78 j (by and

Rule 10b-5. thereunder, 17 CFR 240. 10b-5, to-the herious

injury and prejudice of Producers Life Insurance, Com-

* and its stockhajders— ~ . — AS

8 ‘ 8

3 5 3 ; N

‘ > * > *

2 : 8 : ° ere 8

N 8 > e.

° : ‘ 8 ra 5 2

, “are — 8

_IT IS ORDERED, ADJUDGED AND DECREED that

said defendants, and each of them, their agents, attor-

neys, employees and assigns, and all persons acting in

= concert or ‘participation with them, be and they are tem-

: _porarily restrained and enjoined from, W or in-

eae making use of any means or Wie ente of

interstate commerce or of the mails to engage in any

manipulative or decéptive device or contrivance, in viola-

tion of Section 10 (b) of the Securities Exchange Act of

1934, 15 U.S.C. 78j(b), and Rule 10b-5 thereunder, 17

CFR 240.10b-5, in connection with. the purchase or ‘sale

of securities issued or to be issued by Po dee Life or

National Life or National Securities, or any affiliate or

subsidiary of any of such issuers, involving any plan or

arrangement between the nanaging directors of

rs of National Securities

‘ender and transfer to ‘National

roducers

Life and the managing

or National Life to s

Life the directorships or offices of the managing directors

of Producers Life, together with voting proxies sufficient

to ensure. dominion over and control of Producers Life

by National Life and National Securities, or the ultimate

merger, consolidation or amalgamation of Producérs Life

and National Life, in derogation of the rights and inter-

ests of the stockholders of Preducers Life and in contra-

vention of the fiduciary obligations of the defendants or

any of them to Producers Life and its. stockholders, a)

by employing any . device, scheme or artifice to defraud;

b) by making any untrue statement of material fact or

omittity to state any..materiai fact necessary in order

to make the statements made, in the light. of the. circum-

stances. under which they are made, not misleading; or

e). by engaging in an) act, practice or course of business :

-. Which operates or would operate as a fraud or deceit upon

‘ 1 one or tax: ee whether e

00 ae

tio merger or otherwise, and ‘s

vis ny 4 pla: of ae Leonsolida-

lementation or ‘consommation of the Consolida- .

ial

N e is

tion Ale and Plan of Rioegaiiention’ ers-

_ uted by Producers Life Insurance Company, Na-

tional Life Insurance-Company and National Se-

1 curities, Ine, dated Novemher 27, hen,,

(2) the solicitation of proxies or votes of ‘stockholders

3 to be used to accomplish any such plan of reorgan-

ination, consolidation or merger; or :

8 (3) any untrue’ statement of material fact or omission 1

5 to state any material fact, necessary in order to

| a make the statements made in the light of the cir-

ceumstances under which they de made not mis-

leading, with respect to:

5 (a) the dollar amount of any liabilities or obliga’

Mae ; tions a ed or to be assumed by Producers

: Life or thé surviving company in any merger

involving Producers Life;

(b) the assets, liabilities, capital, surplus or defi- |

cit, income or losses of Producers Life or

National Life or of any other company with

_ which it may be proposed to merge or combine

5 Producers Life; N

S2 be) any transaction which materially affect the

, ; ö assets, liabilities, capital surplus. or deficit, in-

a te come or losses of Producers Life, National 0

Life, or of any other company in which it may

be proposed to merge, combine or consolidate 5

i Producers Life; or ples

„(d) any- forecast as to the earnings, income or

1 Aa qount of business of Producers Life WMational

* Life or of any surviving company into which

1 Producers Life = be — combined « or

| a isa consolidated’; 3

[4] o or engaging’. in any act, practice ¢ or course: e of businese

of similar object or purport; or ;

B. voting or causing to be voted any - pixies executed

by stockholders of. Producers Life which have been re-

ceived by the defendant Wallace from the defendants “

Johnson, Richards or Reedy; fe

Ci. voting any proxies executed by stockholders of.Pro- .

4 ducers. Life e the defendants ac and: Wal-

* ag quent to Ap a Whe" 188 509 darts 0 ‘slack af Pre-

— Life bed by. ‘National Life 2 as of December 31,

964; or i

E. performing any act Which facilitates or is eee

to facilitate the consummation of the Consolidation Agree-

a ment and Plan of ‘Reorganization dated November 27,

1964, between Producers Life, National Life, and National

Securities,

This temporary restraining order shall expire at 4 750

P.M. on April 9th, 1965, unless otherwise ordered ol the

Court for good cause stiown.

Dated March 30, 1965, at 4:50 P.M. | —

. by:

—

7s, W. Stevens Tucker

W. STEVENS TUCKER

Of Counsel for the United States

Securities and Exchange Commission

Nee —ů—ů

* IInegible! uae

United States District J udge ä

f We * * *

“Filed April 18, 1965). atrial 5

tA 1

G SIPs Nn

e From Exhibits. Included in Sup 92 Ab

1 ads Affidavit. of -W.. Stevens Tucker] es 1 i

4 ‘EXHIBIT A

PRODUCERS LIFE ‘INSURANCE COMPANY

AN OLD LINE LEGAL RESERVE COMPANY >

22300 N. CENTEAL-® PHOENIX, Arona ? Al. 8.5711 T P.O. Box 1870

217,329.

J. anuary 1, 1965

STOCKHOLDERS GIVE MANAGEMENT

OVERWHELMING SUPPORT . 3

: Stockholders voted two to one in favor of Producers Life

management on every issue voted on at the December 31,

1964 special. meeting. z

85 Management’s candidate to the Board BBP gan se . 2

Joseph C. Shorrock, was elected *. a vote + 536,787

to 222,820.

— 7

Management's proposal to 8 the terms of the

members of the Board to provide for a continuity of

nt. was approved by a vote of 542, 384 to

eee 8 to move the date of the an-

nual meeting to June was ee by 2 vote of

542,172 to 217,497. te gs

Unfortunately, because of the snarl of last hadi —— 5

actions filed by the ‘stockholder’s committee’, the merger

was not voted on. This legal tangle was by the

committee just two days before the meeting, Pion i

Fommittee' was rapidly losing stockholder support..

The meeting was recesséd and will be re-convened as soon *

as practical for the vote on the merger. We are as anxious

as you are to have the merger approved. a

While we believe there is not one chance in @ pcs

that any of these desperation legal maneuvers hy the

: * 5

N 3 «

‘4

Be gt

ee Committee can succeed, we did not wish to hazard the

problems of un-merging the two companies. Therefore,

: Precast believes it best to 17 5 the short delay.

ria" % a’ 22 ie

SI — *

„ : . ~

505 5 (Exe 021 Bg 175

ä Producers Life Insurance Company]

, Rio ahh 3

Headquarters BOs) 5 —.— 1"

CUTTING ‘Cos TS . , INCREASING PROFITS ©

: ational, Securities-headquarters 5 served all affiliated com-

- panies including Southwest Savings & Loan Association; —

' Tucson. Title Insurance Company, Western States Title

Insurance Company, Associated Mortgage & Investment

Company, and National General Agency ... . in addition

to Producers Life and National Life. These affiliated

A. i companies have more than $75 million dollars in assets.

Individually, the companies are of moderate size. Collec-

tivel they represent a powerful financial force with im-

pressive resources. Through the centralization of major

equipment and top personnel, every affiliate has access to

all. available services and facilities. This centralization at

f National Securities has ereated an impressive, modern,

> prone, audio nerve t ons all companies better 6

e e operations and lower over-

1 e ee expenses they could afford individually.

— hs computer facilities are an excellent example of this.

5 eee eee eee All clerieal and ac-

were done by hand, or by standard ac- .

5 ” pan and processing machines, Today, computers cal-

culate agi A 2 100 er ere per month

<. _ direetly forms for mailing to poli ers dr process-

ee ing, at at the Home Office. Computers make sigan ge

1 een 400,000) Ree Pe a

—

a 8

121 Tor ‘PERSONNEL + 15 1

_ IMPROVING SALES POTENTIAL, 1

4 Pive re companies are in the N dene Seeutitics

group, so it is not strange that the heat ters staff

Includes top, nationally known and respected: insurance

personnel. In fact, this is a primary reason why former

Producers Life management came to Masten ee

hen they decided to step down.

This headquarters group includes life insaratice spocialints -

In accounting, auditing, advertising, sales promotion, ac- .

‘> taarial science, data processing, investments, administra-

tion, personnel and other important phases ‘of corporate

activities. Prodncer Life could never afford to maintain

a staff of this magnitude, yet your company has the serv-

ices of all these people available at all times. This ad-

vantage is matched by very, very few companies. The

cost of this headquarters staff is shared by all National

Securities companies and your company draws on those

people and those talents it needs.

For Producers, this concentration of top personnel has

already had. some important benefits.

For example, within six months the National. Securities

headquarters staff had changed Producers Life to the 1958

CSO tables which immediately put your company in a

better competitive position through more competitive life

insurance rates. Also within six months, this staff added

over 45 new policies to those offered by your company,

put new audio-visual materials i in the hands of salesmen, ©

and developed an entire series of sales promotion materi-

als to help your salesmen do'a more effective selling job.

In nine months, new payment plans were introduced for

| policyholders, ne sales advance plans were in effect and

new, faster, more efficient systems developed and in per

ation for billing, delinquency notices, etc.

This is only a. sample of the way in which the National .

Securities headquar ers group is capable of produeing

Kors profitable — for tl» erged 8

5 5

x tay MAKING COMPANIES GROW:

‘For an iden of what, can happen - fe the future for the

merged company, you can look back on what jas hap-

pened to other National Securities affiliates. Here you .

can see how the National Sears headquarters opera-

tions and practices put. compa in excellent positions

to move forward quickly. for the, benefit of stockholders.

Southwest Savings, Acquired i in 1960. Assets at that time

were approximately six ion dollars. Today, assets are

over fifty million dollars (.. . an increase of over 800%

Since 1960, assets per e have increased 524%; sav-

ings have increased 574%; reserves, capital, surplus and

undivided profits have increased 852%. One office in 1960

has grown to five offices today. :

Associated Mortgage & Investment Company. “Founded in in

1957. Since 1960, assets have increased 2,772.

gage loan service portfolio has increased 67%. 3 f

has expanded into Tueson, Salt Lake City, Los Angeles.

Tucson Title Insurance Company. Acquired in 1962.

Today it is the largest title company in southern Arizona,

doing over 80% of the total volume of the Tueson area.

Western States Title Insurance Company. Acquired in

1963. Since then, sales have increased 42%, profits are

up 11% and the company has expanded into Ogden and

: Bountiful. Western States is the largest title insurance

underwriter in Utah. Headquarters are in Salt Lake City.

_. National General Agency. Founded in 1963 as a manag-

, meral agency in the fire and casualty fields. Cur-

1 g in serving affiliated companies with

*Be pans bang finalized for expansion ito other areas

‘ \ ‘ . ead *

4 * . 4 . ,

4 25 * „

* — *

Pu . 1

2 .

. >

5 7

; —

PRODUCERS LIFE

On the preceding

age you saw pertinent facts on the

growth of Nation ent 0

ities affiliates. This is just a

‘sample of the potential that exists for the merged com- .

pa 5 i: ig. Lot ee tieg ies

@rhe chart at right Ip. 64] stows the year-by-year profit

- picture, for both companies for the past five years. The

total profits for National Life for this period were 5436,

155. . and the total profits for Producers Life for the

same period were $229,559. However, our projected prof-

its for the merged company for only one year, 1965, are

$460,000: This is twice the total net profits before taxes

from operations for Producers Life for the entire five

year period. Sie, Sy 3 1

The two companies afe remarkably similar in premium

income, equity value and assets. Premium income of Pro-

ducers for the first six months of 1964 was $1,440,049 .

compared to $1,391,867. for National Life. Equity value

(which includes capital, surplus and value of insurance

in force) on June 30, 1964 was $5,765,809 for Producers

and $5,555,788 for National Life. On -the same date as-

sets of Producers were $10,452,900 and for National Life

were 89,298,710. PE?

—

a : 5 9

28 25 eee

„„ H- ee eh 1 .

2 4 1 th gb. 7

4280000 RODUCERS

a 4 * f

$300,000— * a

$50,000— : |

2 ö i

. 7

280,000 :

, n 1859 1960 | 1961 1962 | 1963 1

2Jq„%%% aren ea re Federal

Taxes i

; * ä iet with

* 5 . „

„

‘

aru

75 ANCE CoMPANy, a corporation, and PHoοu

2 @#

bre“ April. 15, 19651

UNITED STATES DISTRICT covet 70

|. DISTRICT or ARONA. ° | +

7 0 TFboenir Division) Mie oe 5

1 2 7 ch Action No. Cli6466 Phx,

neun AND EXCHANGE Comin, aner

LIFE & CASUALTY INSURANCE COMPANY, a a

ROBERT H. WALLACE, Roper C. BOHANNAN,

.. ARTHUR W. SAPFERT, Ep WIE, JOHN 8. E

JOSEPH B. Setrek, BREEFERD W. LARGE, In., RICHARD

G. JOHNSON, ERNEST’ A. RICHARDS, Wiliam A.

RED, BONNIE B. BHRRET, Propucers Lire IxSUn- a

THRIFT

& LOAN COMPANY, a corporation, D

ANSWER OF THE DEFENDANTS | NA {ONAL SE.

CURITIES, INC: NATIONAL LIFE &/ CASUALTY:

INSURANCE COMPANY, ROBERT t WALLACE,

‘ROBERT C. BOHANNAN JR., ART UR W. SAF- ||

FERT, TED WILKINS, JOHN S. BARRETT; JOSEPH |

i B. ‘SETTER, BREEFERD W. ‘LARGE, JR. AND PRO-

DUCERS LIFE INSURANCE COMPANY.

Defendants listed. shove, for brevity hereafter called

: : — Seite tler Producers Group, for their answer .

Leben ee e un e thee 5

matters complained of not in fact being within’ any juris-

"1984.

: 5 can 372 —

1254. e fhe Court under the Securities Act ot 3

The complaint. 7 to state a 4 upon which /

vn ah the ee for farther answer, fol-

— of the e answer

as fll:

* 1 „

* 7 - 4 * ° ‘ * V 7

‘ '

. 2 . ‘ “4 2 5 * *

7 ‘ / 4 F P

5 J f „ © - *

wi »

. * A 2 ‘ * . ‘

52 " 8

1 . “ 2 1 1 ‘ 8 .

8 0 i

% .

z a . aX — E.

a Of Hed pei |

1. “The n ‘of . 1 are denied in 1 „

respects, including expressly a denial that it “appears to

the Securities and Exchange Commission.” The defend-

ants S&Hege that they have made their best efforts to deter-

mine whether at the time of filing this complaint the

matter involved did “appear to the Securities and Ex-

change Commission” and have been unable to do so. There-

fore, being unable to. saci a Lars yo they expressly deny,

this allegation. —.

2. Paragraph 2 alleges ‘at: this action arises under

Sec. 21 (e) of the Aet, 15 U.S.C. Sec. 78 (e). Defendants

assume that this is a a. typographical error: and that the

section intended is 15 U.S.C. Sec. 78 (u) (e). The de-

fendants deny, as set forth in the preceding paragraph, .

that this matter does “appear to the Commission” and in

any case deny that any: matter is all which, even if

proved, would constitute violation of the’ provisions of

this chapter.

3. The allegations of paragra aph 3 are denied. a. :

1. The Alle be of W 0 1 are admitted,

2. The allegations of paragraph 2 are admitted.

3. The allegations of paragraph 3 are admitted ex-

cept insofar as the paragraph alleges that these various

persons are subject to the direction. and control.of the

defendant Wallace, and in this respect, the paragraph is

denied; and it is further denied that Mr. Bohannan is

an Executive Vice President of National Life; n that

Wilkins was employed as alleged.

4. The allegations of paragraph 4 are admitted

5. The allegations of paragraph 5 are admitted in: =

sofar as they allege that these were the Board N D

rectors at the time in question; as to the remainder con- -

cerning: the control and management of the corporation,

these defendants d not have sufficient information to

- form a belief.

6, The ee of Peragraph, 6. are admitted.

d ne on eae

7 Ve 7. The. 3 of pe üer 7 re | .in-

; sofar as the number vf hare W "the ‘named: per-

, sons. As to the “control” of the shares 0 Producers

* Thrift, this relates to the internal 5 nent 0

corporation and these defend Hicien

formation or belief to plead to. Howey it is be-

lieved that the number of shares to which the plaintiff

meant to make reference was 38, 984 instead. of 38,904 as

pleaded. 10

8. The Allegations of. paragra 8 are admitted.

23 aes | :

“9 : m a N

. . of paragraph 1 are denied in 7

Land every particular . oe

„ 2. The ee of paragraph 2 are 80 multifarious :

that defendants are compelled to plead in respect to lines — |

or parts thereof and therefore plead as follows: mm

(a) The-defendarits gre without sufficient infortaation\ |

to form a belief as rig relationships of the

directors” to Producers Life although they deny the im-

‘plication that the phrase “selling directors” 1 ap-

ay riate description of these persons. ae

.. (b) Defendants. deny that there was anythine sonteary 9

to the fduciary obligations, if such there were, on the

part of the “successor directors as set forth in Eines 30

and 81 of page 3 and Line: 1 of page 4.

beo) The defendants deny that the transaction was

- undertaken for the ultimate purpose of-accomplishing dhe

„ merger, ete., as set forth in Lines 8-8 of page 4, this

being instead a subsequent developmmſt. ö

| (a) The defendants admit that sales and transfers

were made as set forth in Lines 11-15 of page 4.

e) The defendants deny that there was any sale of

ee directorships’ and nerd or proxies: as set forth in Lines

17.21 of page 4.

[k k) The defendants. admit the allegations of Lines

23.26 of page 4 | a

(g) The defendants admit the eee, ‘Lines

28-82, of page 4.

CCC i

15-18, and the allegation that there was a so-called

“scheme” on Line 18 of page 5 is ally denied as an

AEE 4 : *

oF ‘ * 5 ; . . —

4 , . 2 : : ‘

ofa 68 /

zy ch) The allegations of Lines 1-7 on page 5 are ad-

E mitted.

(i) Lines 9 and 10 of page 5 are denied. | ay

(J) It is denied that at the time of the ante tien

offensive choice of words on the part of pleader.

or were not meetings of the di

Life and Producers Ihritt. All other allegations of para-

graph 8 are denied.

(k) The allegations of Lines 20-23“ on page 5 are de-

‘nied, and all other allegations of paragraph 2 are denied.

3. The defendants admit that there were meetings on

April 27, 1964 of the directors of National Securities and

of Producers Lifé These defendants have not sufficient

rs of Dependable

. information to form a belief as to Dre there were

4. The allegations of Faragraph 4 ie admitted and

denied in accordance with the various admissions and

denials of the preceding paragraphs to which this refers.

5. The allegations of paragraph 5 are denied as they

are deliberately misleading and a palpably partial state-

ment of the facts, there -being substantial other considera-.

tion for the transfer in question, all of which is well

known to the plaintiff; and the allegations as to market 5

| value are denied. <

6. It is denied that National Securities “purported

to assume” the obligations and direction, the fact being

that they were assumed. The remaining allegations, of

a paragraph 6 are denied.

7. It is admitted that a non-compete agreement was

5 tae entered into between National Securities, Inc. and cer-

tain directors and their successors or assigns. It is

denied that there was any provision as alleged for some

emerging entity and it is further denied that there Was

any agreement with Dependable in this respect... The re-

mainder of the paragraph is deniect. |

8. The allegations of paragraph 8 are denied, the fact

being that National Securities agreed to pay $942,769.41

for 66.400 shares, or an average of $14.20. a share. No

i N of e — a how this sum should be

€

—

7 *

allocated among the sellers and this was in fact of no

concern to these defendants. $57,230.59 was. Subsequent-

ly paid for 10,376 shares are.

a. The ‘allegations of paragraph 9 are denied, the

fact being that National Securities agreéd to pay 5942,

769.41 — 66,400 shares, or an average of $14.20 a

share. No part of the agreement governed how this sum

should be allocated the sellers and this was in fact

of no concern to these defendants: - $57,280. 59 was sub- .

sequently paid for 10,376 shares.

1 It is admitted that the named persons did resign

and that. the other named persons were elected to the posi-

tions of directors and the allegations are othewise denied.

11. It is admitted that Messrs. Saffert, and Large,

were elected to the offices named and the ene e of

paragraph 11 are otherwise denied. : - |

12. The allegations | of paragraph 12 are denied ex-

cept ‘that proxies. were in fact substituted. :

1 13. The allegations of paragraph 13 are denied ex- =

cept that an agreement was entered in 2

14. It is admitted tnat the books : d records were

moved to the premises of National Life, in which offices

have been maintained for Producers and the allegations :

| are otherwise denied. |

15. In regard to the allegations in 3 15,

N ) these defendants allege as follows: - eae

The resignation of J. Grant Iverson was el by

the Board of Directors of Producers Life en June 5,

| 1964; that the resignations of John J. Faleoner and Jess

Hunter were accepted by that Board on May 28, 1964;

that defendant Robert 0. Bohannan, Jr. was appointed .

assistant secretary on May 28, 196‘; that*the defendant

Ted Wilkins was appointed to 'the Board of Directors on

June: 5, 1964; that defendant Robert, H. Wallace and

| Ron Larson were e Board of Directors on

—ͤ ä Nove 7, 1964 that Mr. Robert Sampley was ap-

pointed to the. Board of Directors on October 15, 1964.

The allegations of paragraph 15 in conflict with the al-

legations herein are denied. The allegation in paragraph

15. ited. the duties of the defendant Bohannan is

= Ske

co ee n

> .

48. Ph

1% The

that

‘

* x

nine K 5

2 2 „ N 7

ya * fy BY é

1 . 8

2 * N 1 *

0 1 2 j

75 .

The’ alle non of — 16 are 3

e allegations of paragraph 17 are denied in

1 aise ee? wholly independent of the action of

18. ‘The defendants admit that on November 27 1964

dation ent was in fact submitted to the

a lidation

_ stockholders: of ! ie po ee

pan e e, a .

de dee ed altes f, the sl o the r en r

* notice.

The allegations of paragraph 20 are denied in-

sates as they purport to attribute the acfivities therein

contained to either National Securities or National Life,

and it is further denied that the defendant Bohannan had

any connection whatsoever with the meetings therein in-

all activities covered in this paragraph being

Producers and its management. It is admitted

a notice was sent with the signatures alleged.

21. The defendants admit that a copy of the North

Report was sent out with the proxy solicitation, this hav-

ra been in all respects a proper and appropriate thing

Pie

toi

sd “achemne and plan” for reasons previously set forth.

y that the repor! was in any respect misleading

8 their’ own, connèetion. with it, the report on its face

ing completely clear that the underlying information

“obtai . defendants. The North Report

pres stated that the an he ena in. 298

yaree N company and has not been otherwise

Although believed to be authentic.” The state-

PI e - contained a ‘second express nr

ey deny that this was in furtherance of the so-

— &

| bordered announcement by Prodhewrs putting the proper .

a “limitations upon any assurances made as to the North 8

22. The ¢ allegations of paragraph 22 are denied.

: AFFIRMATIVE DEFENSE A ee ae

ay A n rents defense, if such it should re these 4

0 defendants allege: | 5

1. There is pending a vote of the shareholders of pa :

ducers Life as to whether they wish to approve a merger

with National Life. 2

2. The National Securities group owns approximately

. 15% of the stock of Producers Life. Under che lav ;

the State of Arizona, the vote of 66-2/3% of all of. ‘Ga -

outstanding wag of Producers would be req ired to ap-

pore the merge

eee merger should not be approved, most of the

issues involved in this injunction action will become moot.

If it should be approved, the vote of a majority of tlie

Producers shareholders other than the National Securi-

ties group will be required.

4 Nothing in any law sdinthietéred by the plaintiff

or in any regulation issued thereunder, bears upon any

matter concerned .in this , purported merger vote by the +

two insurance companies,

Wherefore, it is prayed that the plaintiff take noth-

ing by its complaint, and that the temporary restraining .

order issued herein be quashed, and a the —.

be dismissed. —

Respectfully submitted,

a LEWIS ROCA: SCOVILLE

. BEAUCHAMP & LINTON

„

; JOHN P. FRANK |

7s, Jeremy Butler

IEA BUTLER

98 2 @ *

[Filed April 16, 1965}

| AFFIDAVIT OF ROBERT H. WALLACE

Wit ets * 2 2 2

„ 8 ine betweant Match 15, 1964 and April 27,

1964 or at any other time, did he or any affiliated per-

son or corporation conduct or carry on any negotiations

with Messrs; Johnson, [2] Richards, Reedy or Bilbrey

ies for pres of N ational Life with Producers Life.

* * * 58

[PARTIAL TRANSCRIPT ö OF PROCEEDINGS ON AP.

PLICATION FOR PRELIMINARY INJUNCTION]

[i6}- THE COURT: ****

: What they are going to do, 8 it, 1

will probably hold this meeting and try to vote this

„ ~ stock and put through this matterz-go over to the In-

_ ‘gurance Commissioner. They have 5 that aay

opponents will have a week. Isn't that it?

MR. FRANK: That's right, your Honor.

IHE COURT: After the matter is approved by the

_ stockholders, if it is approved? N

MR. FRANK: Tes.

THE COURT: In which to apply to the Insurance

is not bei: sve. 1) wil be ready at any [16] time to

bear you, on any notice practically. We will continue

this matter for a further hearing, sublet. to appliea-

1 Gen by sa. 2 a notice as the rules *

‘Commission is unhappy or feels that the public interest

to consummate the merger agreement;

2 any

position, they could certainly make it known to the

reetor of Insurance, and. oll, Sani, machinery |.can

in motion.

Insurance Commissioner for his approval or disapp

say that in

that Frank would interpret the order as if,

in the form in which it would remain; amended by the

that have been suggested, they would be at liberty

to proceed to vote the proxies and would be at liberty to

proceed to hold the meeting, they would be at liberty to

„6! ae on

to come in—

THE COURT: They would be permitted to

meeting and to vote the proxies, and that the

holders vote to approve the merger, to present. it to

ere

MR. FRANK: Your Honor, the stipulation—

120 THE COURT: Beyond that, if there is

485

1 . aa

1221 THE COURT: All right. a say that wider my

interpretation of it—I don’t know how many times I

must say it—under my. interpretation of it, you can

—

5 |

hold your meeting, you can vote your proxies, you can

submit it to the Insurance Commissioner or Director of

— Jnguranee,

All right, now, are you going to say anything more in

opposition to what you handed up to me here?

MR. FRANK: Your. Honor, at that point we are

indeed content. W

* * * *

of the Director of Insurance?

MR. TUCKER: I don't—

THE COURT:. The agreement to Sitbbeld it tor’ a.

week, and so forth? You are lecving thet for vet

shown on the record, I ‘take it? an

MR. TUCKER: I don't quite understand the thrust

ot your Honor’s

THE COURT: It is hot included in this motion and

ree e e

(50 ‘THE COURT: Are you gentlemen leaving it for

5 9

3 ee

—

of Yneuranco—or the application will not be presentat—

How do you

MR. : Your Honor, I had assured the Court

earlier, and aceept with ‘pleasure the courtesy of Mr.

cker in taking my word for it on the record, that we

cha not make application to the Director of Insurance

5 approve the merger under the statute, until at least

week after the matter is determined by the sharehold-.

pa if it is determined by the shareholders. And I have

further said that J will give [51]. ‘telegraphic notice. to

Mr. Tucker, personally, at least a week in advance of our

1 such an application, so that he. will be fully

acquainted with any ion we are taking in that regard.

IIR. TUCKER: 1 ‘that counsel’s assurances are

entirely satisfactory to us, your Honor.

THE COURT: Very well. I am sure the record does

show it, if not expressly, im plicitly. But I am not ruling

on the sufficiency or insufficiency of any proxy or of any

action that has been taken or proposed to be taken, or

as to the sufficiency of any notice of any meeting or of

any continued meeting, or any of those matters.

MR. FRANK: It is fully understood, your Honor. 5

MR. TUCKER: It is understood, your Honor.

THE COURT: In other words, I'don’t want, for in-

matter which I would like clear, if I ny, as we [52] tidy

the record, of exactly the sort we have been speaking of.

have: during this extended argument indulged in

theses as to possible fra take it

—

As I recall, this meeting has been continued from time

to time? :

MR. FRANK: That's right. “Your Honor, one other

U FOR _

5 .

: . ay 5

ay 2 2

2 * „

„ * * 2

* 5 ts 1

ye 29 Kary

8 ‘THE COURT: rani le ota ast

UR PRANK: e en e o

f MR. FRANK: Les. oh ake e a

THE COURT: N ippen if other

people decide. they are to happen, without ang expression

in any way of any . a fe e Way ote

MR. FRANK: This is completely understood, and on

behalf of our table we thank you for givin ing :

may

s what

THE COUR It is a difficult matter. ‘There ma

come a question, of cqurse, before the (

before the state courts, perhaps, bedr 1 ‘ever’ boar of

this matter again, which „

of these proxies mentioned here, some of them, the validi-

ving us

been a very long day and.a hard one,

of the contracts, procedure, te 1581 procedures

ad thar een e of fig, meetings.. I have

not and do not intend at > to express any opinion

whatever. a A

IEntered April 16, 1965

IN THE UNITED STATES DISTRICT COURT |

FOR THE DISTRICT OF ARIZONA ,

No. Civ. 5466 Phx.

» Secunrmms: AND EXCHANGE COMMISSION, PLAINTIFF — 5

a 5 f

; NATIONAL SECURITIES, ING., a corporation, Maren

LIFE & CASUALTY INSURANCE COMPANY, a corporation,

ROBERT H. WALLACE, Ropert C. BOHANNAN, IR.,

ARTHUR W. SAFFERT, TED WILKINS, JoHN ©. BARRET, :

Josy B. SETTER, BREEFERD W. Lance, Je, RICHARD

G. JOHNSON, Ernest A. A. RICHARDS, WILLIAM A.

REEDY, BONNE B. BILBREY, PRODUCERS LR INSUR-

ANCE COMPANY a corporation, and PRODUCERS THRIFT

4 Loan Comrany, a corporation, DEFENDANTS — Ii.

"ORDER AND JUDGMENT DROPPING —

- DEFENDANTS

e Motions of defendants RICHARD G. JOHNSON, ip

5 ST A. RICHARDS, ‘WILLIAM P, REEDY, BON-

* ;

int herein be, ‘and

fendants as defendants ‘as to defendants RICH-

_ ARD d. JOHNSON, ERNEST A. RICHARDS, WIL-

. LIAM F. REEDY- and BONNIE B. BILBREY, and

PRODUCERS THRIFT & LOAN COMPANY, a corpora-

DATED this 16th day of April, 1966,

| „/ Wm. C. Mathes

D. 8. District Judge

„ te 6 aur

[Entered April 16, 1566)

a UNITED STATES: DISTRICT - Co

; ‘Disraier: ‘OF SEMA: A ce

No. ow bade Ph.,

SECURITIES AND ) EXCHANGE Coueasston, “PLAINTIFF ~

NATIONAL sr INC, ’ a oni eal,

The ‘Defendants National Securities, Ine. "National

Life & Casualty Insurance Company, Robert H. Wallace,

Robert C. Bohannan, Jr., Arthur W.Saffert, Ted Wil-

kins, Don S. Barret, Joseph B. Setter, Breeferd W.

Jr., and Producers Life Insurance Company.

move this Court that the temporary restraining pared

Zé

1 ‘ $9 75

“MOTION AND ORDER” 1 5 a

previously entered in this cause be vacated except for

the language following, which shall be kept in, effect

pending further hearing which may be instituted upon

application of any of the ee! This continuance shall

: ＋ without . e the elaims of any of the parties

„ Court or as to the ay licable

. con-

Ane be ise on thin’ e 0 as follows:

IT IS ORDERED, ADJUDGED AND DECREED

5 3 17 CFR 240. 10b-5, in 8 with }

‘the purcliase or sale of securities issued er to be

issued by Producers Life in derogation of the rights

and interests of, the olders of Producers Life

and in contravention of the fiduciary obligations of

the defendants or any of them to Producers Life

and its stockholders, a) by employing any device,

scheme or artifice to defrand; b) by making any un- *

true statement of material Tach or omitting to state

any material fact necessary in order to make the

statements made, in the light of the circumstances.

under which they are made, not misleading; or c)

by engaging in any act, practice or course of business

Which operates or would operate as a fraud or deceit

upon Producers Life or its stockholders.” —

Respectfully submitted,

TwIS ROCA SCOVILLE |

" BEAUCHAMP & LINTON.

Joan BR FRANK

ORDER

‘The foregoing motion having W heard, |

IT IS HEREWITH ORDERED that the 8

as to the portions set forth in the motion, as to which

it is continued pending further hearing which may be

} ted upon application by any of the parties. This

-." “continuance shall be without prejudice to the claims of

any of the parties as to the jurisdiction. of 77 Court

5 or as to the applicable law. eter

| DONE IN 9 COURT this 16th day af - April |

335 1965. f ate N

. 7e, William C. Mathes

_ District. Judge

* 2989 =)

. ol tsa? mp b's

8 3 order previously entered is vacated except

n July 18, 15560

1 8 UNITED STATES DISTRICT couRT.

DISTRICT . OF ARIZONA b 1 a .

. Division)

Civil Actin No. Civ. 5466 Phx,

— -Secunrriss. AND “EXCHANGE: COMMISSION, PLAINTIFF

ieee. : v.

„Nahen SECURITIES, ING, a 5 1

Lire & CASUALTY INSURANCE CoMPANY; a corporation,

. + sar Ropert H. WALLACE, Rosert C. BOHANNAN, In.,

ARTHUR W. SAFFERT, TED WILKins, JOHN S. BARRET,,

JosErpH B. SETTER, BREEFERD W. LARGE, IR., and

PRODUCERS LIFE INSURANCE COMPANY, a corporation,

DEFENDANTS a. anel

ORDER- ON MOTIONS PRESENTED JULY 12 1965

This matter having come before the undersigned Judge

sitting in the United States District Court for the Dis-

trict of Arizona, on the 12th day of July, 1965, at San

| Francisco, California, pursuant to stipulation, upon the

{1) Motion of the Securities and Exchange Com-

mission. for Reopening of Hearing on Motion for

Preliminary Injunction and. for nee Relief

Pendente Lite, ah 7

(2) Defendants’ . Motion to Dismiss plaints com-

plaint, ;

(83) Defendants’ Motion to Strike Plainitift’s Mitton i

for [2] Production of Documents or Inspection and

Copying, 8 ö

(A) Motion of the Securities and Exchange Com-

3 7 mission for Production pf Documents. Under Rule 34,

— | . Plaintiff appearing through Mr. W. Stevens Tucker and

Ur. J ames G. nents, its attorneys, mm defendants ap-

‘pune 7 ;

‘ ’ ;

a oh 3 ° a esi

earing through Mr. John P. Frank and Mr. Jeremy

utler, their attorneys, and the Court having received

the statements of counsel and having considered the docu-

ments in the record and the proceedings before it, and

It having been. stipulated that the Securities and Ex-

change Commission may file herein an amended and

upplemental complaint within the period of thirty days

_ from the date of this order and that the defendants may

have a period of thirty days frem receipt of a copy of

auch amended and supplemental cumplaint in which to-re-

spond thereto, ana : a

It appearing that the parties also have stipulated for

poh sherry of the documerits requested by the Se-

curities and Exchange Commission, in accordance with-

7 a er ruling of the Judge from the bench on July 12,

the matters having been continued to and heard further

‘on July 13, 1965, now therefore |

Ix IS. ORDERED that:

(1) The Securities and Exchange Commission may

serve and file its amended and supplemental complaint

herein within thirty days from the date of this order,

(2) The defendants shall have à period of thirty

days from the receipt of a copy of such amended and

supplemental complaint in which to serve and file herein

and serve any, motion or other responsive matter, ee

{3} (3) The defendants’ Motion for Dismissal of the

aplaint and the Securities and Exchange Commission's

Motion for Reopening Hearing on Preliminary Injunc-

ton and for Additional Relief Pendente Lite are both

placed off calendar without prejudice to the right of either

party id apply to the Court for reinstatement and con-

Dated July 18th, 1966.

./ Wm. C. Mathes Ae

uited States District Judge

8 5

82989 | ¢@ * ͤ— 2

- 2 1 vs

—

[Filed August 12, 1965]

UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA —

(Phoenix Division)

Civil Action No. 5466 Phx.

SECURITIES AND EXCHANGE COMMISSION, PLAINTIFF

NATIONAL ‘Sebueerin, IN., a 3 NATIONAL

Lire & CASUALTY INSURANCE COMPANY, a corporation,

| Ropert. H. WALLACE, ROBERT. C. BOHANNAN, JR,

ARTHUR W. SAFFERT,: TED WILKINS, JOHN S. BARRETT,

JOSEPH B. ‘SETTER, BREEFERD W. “LARGE, IR., and.

PRODUCERS LIFE INSURANCE COMPANY, a corporation

(also known as NATIONAL PRODUCERS Lire INSURANCE —

COMPANY) ,: DEFENDANTS

AMENDED AND SUPPLEMENTAL COMPLAINT i

FOR INJ UN ogg |

1. It appears to the Securities and’ Exchange 8

sion; plaintiff herein, that the defendants National Se-

curities, Inc., a corporation (“National 5 Na-

tional Lite & Casualty Insurance Company, a. corpora-

tion (“NationajsLife”), Robert H. Wallace (“Wallace”) ,

Robert C. Bohannan, Jr: (“Bohannan”), Arthur W. Saf.

fert (“Saffert’”), Ted Wilkins ( Wilkins“), John S. Bar-

rett (“Barrett”), Joseph B. Setter ( Setter), Breeferd

—

W. Large, Jr. ( Large“), and Producers Life Insurance

Company (“Producers Life”), a corporation, have engaged

and are about to engage in acts and practices which con-

eee violations of Section 10 (b) of the Securities Ex-

nge Act of 1934 ai 15. U.S. C. 3 and

Rule 1 17 CFR 240. 10b-5.

2. This ation erie under Section 21 (e) of the Ast,

4 * ‘

ee. This Court has {uriadition of this action: under Sec-

Hon 87 of the Act, 16 U.S.C. 1.786.

2 1. me ‘defendant National Life. ts an Abend corpora-

tion engaged in the life insurance business in ‘Arizona and

—

ese other western states,

N. The defendant: National Securities is a Colorado

| corporation eens business in Arizona as 4 holding

vane & majority of and the controlling in-

‘Yan is in the stock of National Life.

8. At all times material hereto, the defendant Wallace

bas been president, chief executive officer and a director

of National Securities and National Life; the defendant

Bohannan has been executive vice-president of National

3 l by Neth pie efendant. Beret =

Y. Nation e as as actuary; an e

‘defendants Wilkins, Barrett, Setter and Large have been

__- employees of National Securities, or of National Life or

of another 3 of National Securities, and subject

do the direction control of the defendant Wallace

as principal: executive officer of National Life and Na-

‘tonal Securities.

4. The defendant Producers Life is an Avizona cor-

| poratiog engaged in the life insurance business in Ari-

_ Bona other western states. Since July 9, 1966, this

orporation has been known as National Producers Life

Insurance any. (National Producers’ Life“).

5. Prior to 27, 1964, Richard G. Johnson (“John-

son”), Ernest A: Richards (“Richards”), William A.

Reedy (“Reedy”) and Bonnie B. Bilbrey (“Bilbrey’”’) ,

Sometimes referred to as “selling directors“,

ee _ euutrolied and managed the business and affairs of Pro-

» ducers Life. They, together with J. Grant Iverson, Jess

K Hunter und John J. Falconer, made up the board of

directors of Producers Life.

. As of April 27. 1964, “Producers Life had ‘approxi- ee

— ee 5 shares of common 3

6 : ducers. Life and its

| Re istied ' ‘and outatinding, including 60,208 e

7. Prlor to and on April 27, 1964, the selling directors

owned in the a ite 27,416 shares of the common stock

of Producers Life, In addition, the selling directors con-

trolled 88,904 —— of such stock w were held in

the name or Producers Thrift & Loan Company (Pro-

ducers Thrift“), all of whose stock was owned by the

‘gelling directors and one other

person.

8. Prior to and on April 27, 1964, the selling di

other than Bilbrey held voting proxies representing ap-

proximately 565,000 out of approximately 880,000 ‘shares

of - amar common stock of Producers Life.

6 III ,

* Since March 16, 1964, the defendants, in concert

with the selling directors, have made use of means and

instrumentalities of interstate commerce and of the mails

to engage in manipulative and deceptive devices and con-

trivances, in violation of Section 10¢b) of the Securities

l Exchange Act of 1984, 15 U.S.C: 5 78j, and Rule 17 CFR

240.10b-5,. in connection with the purchase and sale of

securities issued and ¢o. be issued by Producers Life and

National Life, a) by employing a device, scheme and arti-

fice to defraud; b) by making untrue statements of mate-

rial facta and omitting to state material facts necessary .

in order to make the statements made, in the light of

. the circumstances under which they were made, not mis-

leading; and c) by engaging in aets, practices and a

course of business which operate and would operate as a

fraud and deceit upon the defendant Producers Life and

its stockholders, as.more fully set forth below.

2. Since March 15, 1964, in derogation of, the rights

and interests of the stockholders of Producers Life, and

in contravention of the fiduciary obligations of the selling

directors to Producers Life and its stockholders, and con-

trary to the fiduciary obligations of the defendants Wal-

ace, Saffert, Wilkins, Barrett, and Large, sometimes

hereinafter referred to as “successor directors,” to Pro-

ders, the defendants with the

control of and doininion over the

— of : ‘transf i

1 5

assets, business (including insurance in force) and other

resources of Producers Life to National. Life and National

Securities, and with the ultimate objective of accomplish- —

ing a merger, consolidation or amalgamation of Producers

Life and National Life (with the surviving corporation

to be subject to the dominion and control of the defendant

National Securities and its nominees), have conducted

8 and effected eee including the *

owing: >

(a) the sale and 8 of the stock of Producers

N Life owned by the selling directors, by Producers

-, ... | Thrift and by Producers Life ( “treasury stock“)

to National Life or National Securitie

(b) the sale, surrender and transfer by the selling di-

rectors to National Life or National Securities and

their designees of their directorships and offices in

Producers. Life, together with the voting proxies

of ordinary stockholders held by them;

(e) the sition by the selling director Reedy and

his nominees from Producers Life of 111,088 shares

of the Class A stock and 1,469 shares of the Class

B stock of Dependable Life

( Dependable“) owned by Producers Life;

(d) the acquisition by Producers Thrift of 40,000

Ly shares of its preferred stock, $100,479 of its prom-

-+ issory notes and assigned ‘collateral and 25,248

| shares of the stock of Producers Finance Company :

of Arizona owned by Producers Life; :

(e) the execution of agreements under which the sell-

-ing directors are to receive $979,000 from National :

- Securities for their agreements not to ote se

| te insurance business and the assumption by Na-

3 tional Securities of pre-existing obligations of Pro-

‘ 5 ducers Life to 8 other persons under similar

Z : : an : 75

ae 0 e of the be “operations

del Producers Life into those of National Life;

and the defendants, acting in concert with the

selling

directors, have accomplished the following e ele-

ments of ane scheme and Plan: 7

* —5 4 2

(g) the merger and conmlidatin of Beer, Life and

3 tional Life by means of purchdses-and sales f

. — Lee an ea! ol enen

i (hy the prac es of ‘complete dend peers aud

Vg Ste decors and pein ofa

\\ assete,,

3 business and affairs of Producers Life. 25

38. On or about April 27, 1964, the! individual defend--

ants and the selling directors in theit respective capaci-

ties as directors of National Securities, of Producers Life,

of Dependable Life and of Producers Thrift met in Phoe-

| nix, Arizona, to authorize the corporate actions necessary.

to put the foregoing plan and scheme into tion.

4. On or about April 27, 1964, to actions

taken by their directors, the defendants. National Life,

National Securities, Producers Life and Producers Thrift

and the selling directors entered into and performed an

escrow agreement wilich, by means of thé documents,

moneys and -securities passing through said escrow, ac-

complished the purposes of Items (a), (b), le), (d) and

am Be: (0) of paragraph 8 hereot

1 5. The selling directors, in fürtheränos of the glen

and scheme, caused Producers Life to transfer to National -

Securities through said escrow 50,203 shares of the treas-

ufy stock of Producers Life for a stated consideration of

$114,964.87 in cash or securities (equivalent to $2.29 per

share, the then book value of said stock) at a time Wen

the market price for said stock on the over-the-counter

market was approximately 7½ bid, 8 asked and National

Securities purported to assume certain obligations of Pro-

ducers Life and Dependable in favor of. persons named

Pound, Lovelace, Heeder and Davis in the amount of.

$627, 891. 28 as an additional consideration for the pur-

chase of the 50,203. shares of Producers Life as described

above. It was intended. ‘by de defendants, however, that

National Securities and National Life, after

dominion over and control of Producers Life, would by

ets: some means cause Producers Life, or the surviving cor.

: e e from’ me Sean Pee or con-

: 6

7 * 1

re ie and National. Lb, to ro.

imburse National Securities for moneys paid out pursuant

to its assumption of ‘such’

obligations.

6. On or about April 27, 1964, as an incident of the

ere, 4 hereof, and in further-

scheme, e; National Securities

pan gi

aten executed and exchanged agree-

a by ile selling ‘ directors and Dependable :

agreed dee e not. to compete in the in-

rance n ss With Fee the’ Life and National ite

| sida those ¢ rate defendants, arfd National

~“uritiet agreed to compensate the selling directors in

amount of $979,000 payable in 120 monthly

32 following April 30, 1964. As an element of

said scheme and plan, it was intended by the defendants

that National Securities and National Life, after assum-

ing dominion over and control of Producers Life, would

cause Producers Life, or the, corporation surviving from

said me or consolidation, to reimburse. National Se-

curities for moneys paid out. pursuant to said “ton-com-

5 E agreements,

| 3 and plan, the selling directors received approxi-

mately: $570, 8 from National Securities though said

ee eration for their 27,416 shares of the |

tik b of Poke Life, which sum is equivalent to $20:79

8. On or ‘April 27, 1964, in furtherance of said

scheme and the selling directors caused Producers

Thrift, . eee to sell through

said escrow to National Securities 38,894 shares of the

stock of Producers Life for an aggregate «consideration.

4 of . or approximately 89.00 per share.

or about “April 27, 1964, fy e dernde off said

and p A meeting of the. directors. of Pro-

ad director 1 01 Producers Life, one by one,

j the remaining directors to elect, in their stead

b minges of National Securities and National

| de ee

11. on or about April 27 1964, W cement the

dominion and control over Producers Life National

Securities and National Life, and their agents and nomi-

nees, and in furtherance of said scheme and plan, the

selling directors other than Bilbrey transferred through

said escrow to the defendant Wallace voting proxies rep-

_ resenting in excess of 60 per cent of the then outstanding

stock of Producers Life, together with documents of as-

signment and substitution.

12. The selling directors, in carrying out and executing

the transactions described above, d thereby enriching

themselves, were acting in concert with the defendants 3

and in contravention of their fiduciary obligations to the

"i . Stockholders of Producers Life as a group, and such sell-

ing directors knew or should have known that the defend-

ants were engaged in accomplishing a device and scheme

to effect a merger or consolidation of Producers Life.and -

National Life for the benefit and advantage of N ationa!l

Securities or to accomplish some other similar arrange-

ment for the benefit and advantage of National Securities.

18. -On or about April 27, 1964; as a further incident

of said scheme and plan, the new board of directors of

Producers Life forthwith caused ‘its officers Saffert and

Large to execute a “Management Agreement” between

Producers Life and National Securities under which Na-

tional Secu ties assumed full and complete .

of the business and affairs of Producers Life.

14. Shortly after April 27, 1964, all of the books, rec-

N ords and business- operations of Producers Life were re-

moved to the premises of National Life and blended into 5

the erbe, of National Life, the offices of Producers’

Life were closed and its affairs since have been conducted

in the offices of National Life. -' in oie

15. In May, 1964, the 116,608 shares of Producers Life

acquired by National Securities through the escrow re-

ation represented to be $1,114,964.87. ,

Life resigned as follows: Messrs. Falconer and Hunter

in May, 1964, and Mr. Ivergon in June, 1964. In further-

ance of said scheme and plan the board of directors of

Producers Life’ appointed as directors to fill vacancies the

following: on June 5, 1964, Ted E. Wilkins; on October’ .

15, 1904, Robert Sampley; on November 27, 1964, Robert

M. Wallace (président and a director of National Securi-

ties; president and a director of National Life) and Ran-

| 26, have refused to yeveal lis information. 5 e ths

17. On May 28, 1964; the board of directors of Pro-

ducers Life elected defendant Bohannan (executive vice-

president and a director of National Securities and treas-

urer a of National Life) as assistant secre-’

tary h specific powers. respecting transactions in the

stocks, bonds and other securities in its portfolio. . 28

18. The directors of Producers Life who were selected

vas described in paragraphs 9 and 16 at all times since

their selection have served, and continue to serve, as di-

rectors of Producers Life and have used their positions

—

statements and omissions de-

provides, inter alia, for the merger of National Life into

termination of the management agreement

(described in paragraph 18 hereof), a reorganization of

Producers Life and the issuance of shares of Producers

Life in exchange for outstanding shares of National Life,

the change of

the name of Producers Life to National

— . N .

' 8 0

A 0 Qo: 5

— 7 3 : ＋ 8

Priore’ Life. diana Conipany. e Produc: 3

erg), and an undertaking by Producers Life and National,

Life that National Producers will reimburse National

Securities for all sums expended by National Securities

0 account of its ations (a] pursuant to the non-

— — compete” agreements jexecuted in favor of the selling di-

. . lbrey as described in paragraph 7

baeroebf, and (b) pursuant to its assumption of the obliga -

tions of Producers Life under the “non-compete” agree-

‘ments in favor of Messrs. Pound, Lovelace, Heeder and

3 Oe tp as described in paragraph 6 hereof. In addition,

ent to consolidate and reo nize provides for

on to the ‘stockholders of Producers Life and

8 6 15 National ‘Life for. their approval. A true and complete

copy of said agreement to consolidate and reorganize is

included in Exhibit 9 (2) hereto attached and incorpo-

rctted hereitt by reference

21. On or about November 27, 1964; in e s of

. said scheme and plan, the National Group caused to be

thailed to the stockholders. of Producers Life throughout

eae this United States copies of thé consolidation agreement

an — ‘of speci:

27, 1964, together with copies of the

meeting of stockholders to be held on

81, 1964, and other material soliciting proxies

doo dhe defendants Saffert and Wallace to be voted in favor

of the consolidation. agreement. The said p ony solicita-

oo tion material consisted of a Notice ‘of Spécial Meeting of

1985 Stockholders to be held on December 31, 1964, and a co . -

Ne ok the consolidation a agreement, true sopies of which are.

attached héreto as Exhibit 9{1) and 9(2), respectively,

A a letter to stockholders dated November 27, 1964 over

Teter brett Mp a etn

me signature of A. W. Saffert.and a form of proxy, true

ee copies of which are hereto. attached as: Exhibit 10(1) and

NSO dat 2 Erhibit9 (2) provides

24 that Producers Life (to be renamed Na-

12 mee

ic are attached to ‘the afdavit: of W. 8.

, san ath!

. 9 ; 5 >

8 9 g i

0 ee a co 3 5

‘ i 8

and Davis which

ing corporation upon consummation o

é 2

224 ꝗhat the surviving corporation will reimburse National

Securities for (and charge to-expense) any sums paid

‘out by National Securities by reason of its assumption .

on April 27, 1964, of the obligations of Producers Life

to Messrs, Pound, Lovelace, Heeder and Davis for their

agreements not to compete in the insurance. business, but

the National Group has failed to disclose to stockholders

of Producers Life in such proxy solicitation material or

otherwise (1) that the amount so to be paid is approxi-

mately $511,695; and (2) that the effect of the provision.

of the consolidation agreement would be to relieve Na-

‘tional Securities from, and transfer to the. survivor of

the proposed consolidation of Producers Life and National

Life; the obligations to Messrs: Pound, Lovelace, Heeder

purchase: price of $742,850.63 which it paid on April 27,

1964, for the 50,203 shares of stock of Producers’ Life

bought from Producers Life as described in paragraphs _

5 and 6 of Part III hereof. 2 ie

24. The Notice of Special Meeting of Stockholders,

Exhibit 9 (1), mailed as alleged in paragraph 19 hereof

provides that at the special meeting convened for Decem-

ber 31, 1964, there would be a vote of stockholders upon!

ational Securities had: assumed and .

for which it received a credit of $627,891.76 on the stated

to reimburse National Securities (and charge { expense)

any sums paid by National Securities ah Hagel gt 3

4. The approval of a resolution adopted by the 2

Board of Directors amending the Bylaws by increas-

ing its size to nine members and providing in part

that the terms of Directors shall be three years with

the terms of three Directors expiring each year.“

As part of said scheme and plan, the National Group

failed to disclose in the proxy solicitation material (Ex-

hibits 9 and 10) or elsewhere that (1) it was the inten-

tion of the National Group to cause the adoption of a

resolution which not only contained the foregoing provi-

sions. also would amend the by-laws so that, with re-

-spect to the removal of directors, a two-thirds majority

vote by all*stockholders entitled to vote on such removal

quid ‘be degutved: tn. Gellie’"4e, rémeve the -board:an 2

whole and no director could be removed if the votes cast

‘against his removal would be sufficient to elect him if

then cumulatively voted at an election of the entire board

of directors; (2) including the proxies acquired from! the

selling directors, the National Group then had sufficient

proxies to pass the resolution described in clause (1) ;

(3) National Securities then owned and controlled’ suffi-

cient voting shares to effectively block the removal of any.

director under the terms of the amended by-law; (4) the

true purpose of the resolution as a whole was to make

absolute the control and domination of Producers Life

(also National Producers Life) by National Securities

through its nominees acting as directors and officers there-

of, and to prevent any effective interference with such

domination and control by or on behalf of any of the

‘public: stockholders of Producers Life (also National Pro-

ducers Life). :

25. Nowhere in the’ cimmutifcations (Exhibits 9 and

10) or elsewhere did the National Group disclose to stock-

holders of Producers Life that (1) under Arizona law

stockholders who voted to reject the consolidation agree-

ment, and who did not consent to the agreed mariner of

the shares of stock, had the right to be paid

in cash the fair value of their stock provided that they

gave written notice of dissent to Producers Life not later

than two days after the meeting ‘to-voté upon the con-

80 agreement; or that (2) in order to secure dis-

senters rights under the laws of Arizona it was necessary

chat a st affirmatively vote against the proposed

Nr or e of e 1185 and Producers oi

7 2

26. The form- r proxy provided by the National Group .

. or the use of stockholders, Exhibit 10 (2), purports to ap-

Point A. W. Saffert and R. H. Wallace, or either of them,

With power of substitution, as proxies to vote the solicited

stockholders’ shares in Producers Life or National Pro-

ducers: ie 5 2. .

“1, At the special meeting of stockliolders or ad.

journments or recesses thereof held for the approval

.of a Consolidation Agreement between Producers

Life Insurance Company and National Life & Casu-

alty Company providing for the merger of National

into Producers witch would be thenceforth known as

National Producers Life Insurance Company’ ; and

“9, At any. other meeting of the stockholders of

Producers or National Producers, and at all adjourn-

ments or recesses thereof.” aes

The communications to stockholders did not disclose the

rights of dissenters under Arizona law, and the form of

proxy (1) afforded no means whereby the stockholders

*. who were so solicited. could vote against the proposed

merger or consolidation and thereby secure their rights

as dissenters. in accordance with Arizona law; and (2)

afforded the stockholders so solicited no means whereby .

they could vote separately on any of the several matters

presented for action at the proposed special meeting of

stockholders. — 3

27. In furtherance of said scheme and plan, the bal-

ance sheet of National- Life included in the solicitation

material (Exhibit 10(1)) includes 130,506 shares. of the

stock of Producers Life shown .as an asset in the sum of

$1,174,556, equivalent to 89 per share. The consolidation

agreement (Exhibit 9 (2)) provides in paragraph 8 that—

On the final,effective date, but nevertheless for all

purposes whatsoever as of December. 31, 1964, re-

gardless of the actual date, Producers, the surviving

oration; shall become the owner of all.of the as-

sets and assume all liabilities of National Life, in-

cluding policy liabilities, all as of Decgmber 81, 1961.

and National Life shall cease to exist as a corporate

; entity.” ‘ : a 250 = 8

„ @

O. ° .

— 2 .

* 7 ‘ — ° 5 4

94 7

. J ‘. * 8 -

Exhibit 10 (1) also contains a pro forma balance sheet of

Nationa] Producers: Life, giving effect to the consolida-

tion, as of June 80, 1964. The pro forma balance sheet

includes treasury stock in the amount of $1,174,556, as

an investment asset, reflecting the conversion of the shares

of Producers Life held by National Life at June 30, 1964,

into shares of Nationa] Producers Life. Nowhere in these :

. balance sheets (Exhibit 10(1)) or elsewhere has the Na-

tional Group disclosed to stockholders of Producers Life

that the market value of the stock of Producers Life on

and about June 80, 1964, was less than $6.75 per share

or that on and about November 27, 1964, said market

value .was less than. $6.75 per share. The inelusion of

stock as an investment asset at a valuation of

treasury

$1,174,556 or any other sum in said pro forma balance

sheet was per se misleading in that ok treasury stock

constituted a fictitious and illusory. asset, and was no dif-

ferent from authorized but unissued stock except that it

could be sold my less than par (in this case fifty cents

per share)

28. As part of said scheme and plan the National

Group caused to be included. within the solicitation mate-

_rial-(Exhibits 9 and 10) and also those alleged below in

paragraphs 31 and 32 positive f that the net in-

5 2 before taxes for the reo National Producers

Life for the calendar year 1965 would be $460,000. These

representations are per se misleading in that there can

be no assurance that such net income or any a thereot

will be realized.

29. The meeting noticed as provided in Exhibit 9(1)- *

was convened on December 31, 1964. Action was then

taken to elect Joseph C. Shorrock as a director as alleged

in paragraph 16 above and to adopt the amendment to

the eg referred to in paragraph 24. The meeting

4 . recessed sine die without a vote on the proposed

? — 26 to be reconvened on March 26, 1965, at Phoenix,

or consolidation.

30. In furtherance of said scheme ‘and: plan the 1

tional Group acting through defendants Saffert and Large i

arranged for the recessed meeting referred to in para-

or April 26, 1965, or on both such dé * 42 N

91. On or about March 2, 1965, in furtherance of said

copy :

News Letter and Special Repo | |

The “Spécial Report” although purporting to be an analy-

sis by an independent investment advisory service of the

financial affairs of National Securities and its subsidi-

aries, including National Life and Producers Life, and

of the effect of the proposed merger‘ and consolidation, in

fact represented nothing more than an assemblage of sta-

tistics, projections, formulas and conclusions which were

provided by the management of National Securities and

were based on the information contained in Exhibits 9

and 10. The “Special Report” did not, in any true sense,

represent an independent analysis of National Securities

* the advisory service.

32. On March 18, 1965, the defendants caused a notice

of the reconvéning on March 26, 1965, of. the recessed -

stockholders’ meeting to be mailed. (over the signature of

the defendant Large) to stockholders of Producers Life,

‘together with a communication (over the signature of the

defendant Saffert) soliciting proxies in favor of the exist-

ing management to be voted in favor of the consolidation. .

t and plan of reorganization described in para-

ph 20 hereof. TV

33. In furtherance of said scheme and plan, none of

the communications mailed to stockholders of Producers

Life as described herein disclosed the following material

facts necessary in order to make the statements made

therein not misleading:

(a) during the fiscal year ended December 31, 1964,

a net operating loss of 335,657 had been sustained.

by National Life and a net operating loss of $69,- -

716 had been sustained by Producers Life; .

S4. On or abou N nit ‘Group

NAX et pe tockholders of Producers

, my 0 9 on

* Er afd fe over the signature of

We Safes, whieh e the folowing Haben

ihe merger of National Life and Casualty 1

ance into Producers Life — Com

ae dus approved ders of both com

. Pani inde now #1 Ha Age submission to the- Ar.

. ‘of Insurance for final approval. His

. —- @ectaton is expected soon, ed ;

Daten of Produ ite e voi

in favor a meet--

This was 75% of the outataudlag chares and

‘vacate an order previously obtained. the BEC which

be had barred voting on the monger’ —— i

» and Interests of the stockholders of Producers Life and:

In contravention of the fiductary 7 of tho defend-

Prod

the Commission remained for determination by the Court

after tela : 3 ä

88. Slightly over 15% of the 75% (and 78%) of the

of referred to in the

_ essential element of an unlawful scheme eme and device to

|", defraud, and (2) it has never been giventvatid

the holders of the requisite two-thirds majority of the

outstanding stock of Producers aes

187, The Consolidation Agreement of November’ 27,

1964, and the provision for a one-for-five stock dividend

cers Life were „endet to the

Insurance of the State * Aritona on May 7,

‘On July 9, 1965, the Director

sl of the stock dividend and of the

defendants then announced that they

— all cond acts required to consummate

* ithe National Group is proceeding to combine and

intermingle the business, insurance, records, assets, lia -

dDilittes and all affairs of National Life and se pag

Ute into a single integrated operation, and is ceasin

maintain the separate n and nn iden 4

* the two mani 3

The defendants, unless restrained ae enjoined, will

— to. engage in the 4 and ee specified

ve, 3

| WHEREFORE, the Securities and Exchange Commis-

Pa demands: the

é . That the Court determine ana adjudicate thet the

4 described in Section III above constituted a

device, scheme and artifice to defraud and a series of acts,

_" practices and a course of business, in connection with the

and sale of securities, which were accofnplished

the ‘defendants in violation of Section 10(b) ‘of the

Securities | Act of 1984, 15 U.S.C. 5.783 (b), and

Rule 17. CFR 240. 105-5.

2 That a preliminary injunction and 4 permanent in-

junction be entered restraining and enjoining the defend-

‘ants and each of them, their officers, agente, employees,

Rule 17 CFR 240,10b-6, in connection n with the purchase

or sale of any securities, a) by making any untrue state.

, ‘not misleading; or b) by engaging in any act, practice

or course of business which operates or would-operate as

a fraud or deceit upon any person, whether through

(1) the device of à plan of reorganization, consolida-

- thon, merger, management contract or otherwise;

(2) the solicitation of voting proxies or votes of stoek-

_ holders to be used to accomplish any such’ plan of

reorgunizatlon, consolidation or merger ;

or engaging in any act, practice or eourte of business of.

similar object or purport, 5

, That the Court enter a decree requlring and com-

pelling the defendants and each of them to take all aetions

and measures which are necessary to rectify and correct

of defendants as specified above and to restore Producers

Life; National Life, their stockholders and the defendants

to the status and economic condition which they occupied

prior to April 27, 1964. ! oe ie

4. That the Court enter a decree requiring and com-

pelling the defendants and each of them to make an ace

counting of the extent to which their actions and the

aatlons of the selling: directors in violation of Section -

10 (b) of the Act, 15 U.S. C. § 78j(b), and Rule 17 CFR

240.10b-5, and in derogation of rights and interests

ak the stockholders of Producers Life, have resulted in

damage to such stockholder#, and the extent to which, the

9 0

Court, the respeetive equities of the defendants and the

E stockholders of Producers Life be arranged

ona fair and equitable basis, ineluding, if arrantetl on

. the basis of the accountings made by the defendants, the

_ Subordination of the stock interests and other equities of

1 National Securities in National Producers to the interests

Peed 6 shies?

;

ti ha 1

rech a re mt r

5 a =

| "That the Commission. may have all further relief

that the Court may deem just, sy suse re mel

70 W. Stevens N

W. STEVENS TUCKER |

_ Assistant Regional Administrator

/s/ F. E. Kenhamer, Jr.

F. E. KENNAMER, JR.

bot 5 Assistant General Counsel

/s/ James G. ‘Newby ae

| JAMES G. NEWBY e

i - Attorney — 8

7 Securities and Exchange Commission

‘ a * * 7 7 n 5

5 7 1 ° j

— a A uv *

i Y 1 0 1 ’ “ ,

1 — * — . 4 4 *

— 1 - r *

J } 5 1

5 5

— — 4 4

Oe 4 2

i . 7

1 , ad ‘

3 | [Filed September 1, 1. 1966) -

fr RD STATES DISTRICT COURT

hes | DISTRICT. OF ARIZONA «+

ee Civil Action No. Civ. 5466 Oe

Srcbnrrhs AND EXCHANGE Commission, PLAINTIFF

NATIONAL Secure, INC., ET Al., a

ANSWER OF. DEFENDANTS TO AMENDED .

AND SUPPLEMENTAL COMPLAINT 25

For lis answer t th complaint in ui cause, the de-

fendants answer as ‘follows:

were Phils Putt Sine 80 icrledtetlon ‘ot Chia itte, the ..

matter complained of not being within any jurisdiction

given to the Court under the Securities Act of 1934.

3 This Court further has no jurisdiction because the

matters complained of re entirely within state jurisdic-

1013 (b). provided by the McCarran Act, 15 U.S. C. Sec. 8

10 f

3. There is an absence of Apso e

4. The complaint fails to te a claim for relief. 1

In addition, the defendantg gor further answer, follow-

| ‘as fol written numbers of the complaint herein, answer

as follows: a :

2. a. 2 3 I

1. The silegatiotis of paragraph 1 are denied.

3 2. The allegations of paragraph 2 are denied.

. 3. The ee of paragraph 3 arę denied.

* , * 5 * — 5 5

*, 27 II

„ 1 The eee bee l ere del td. 4

fendant National Life having merged into another com-

Company .

—

104

2. The uses of parsigreph 2 are denied. 2

3. The all ap ations of paragraph 3 are denied as to Na-

tional Life, at company having. been merged as is set

“forth in paragraph 1 hereof. The allegations as to direc- |

tien · and control are denied. The allegations as to the

ae employment of Wilkins are depied..

4. The allegations of paragraph 4 are admitted.

5. The allegations of paragraph 5 as to the composition

of the. Board of Préducers are admitted and the defend- N a

ants, not having süffeient. informatiôn to form. a belief,

deny the allegations gs to control and management.

6. The allegations as to paragraph 6 are admitted. a

7. The allegations of paragraph 7 are admitted insofar

Nee \as the number of shares owned by the named persons. As

8 és v aes erg III

to the “control” of the shares of Producers Thrift, this

relates to the internal management of this corporation

and these defendants have not sufficient information or

belief to plead théreto. However, it is believed that the

number of shares to which the plaintiff meant to make ;

reference was 38,984 instead of 38,904 as pleaded. -

8. LL allegations of e 8 r 8

ee = The lewations ¢ of. paragraph * are denied in such

and every particular.

2. The allegations of paragraph 2 are 80 multifarious \

that. defendsints are compelled to plead in respect fo'lines

or parts thereof, The portions in lines 1-13 are denied,

and otherwise the defendants respond ‘as follows:

(la) The defendants admit that the stock identified in

paragraph 2(a) was sdld to these purchasers and’ other-

Wise deny the allegations of the paragraph. . ~

(b) The allegations of this subparagraph are denied.

lie) The allegations. of this subparagraph are admitted

_. insofar as it alleges that the person or persons referred

. , to purchased the stock in question.» ee get

(d) The allegations of this subparagraph are admitted

insofar as it is descriptive of the transaction:

(e) The allegations of this subpara aph a are admitted

——

do the period prior to the merger andyby the merger, Naz. oO

tional Life was merged into Producers Life... ahs.” =

(g) Defendants admit that Producers re Life and Nation-

al Life have been merged ü rt Sea

: (kh) The allegations of this subparagraph are denied. :

3. The allegations of this paragraph are denied. Lo ace

4. Defendants admit that gn April 27, 1964, a transae.

tion was entered into but de ‘that this ¥ for or ‘accom- ’~

plished the purposes attributed erste pee

5. The allegations of paragraph 5 are denied, apart

from all other inaccuracies National Se ities having in

fact paid $127,559.70 without. reimbursement from any- .

one on the obligations alluded to in this paragraph in the

—

that a matlagement agreement Was. entered into N

moved: to a building in which National Life and several

top - 13. The allegations of paragra h.13 are denied except:

8 104:

. ae

— have offices, and in Which ofits havi been)”

maintained for Producers; and the. allegations. are other-

5 Wise denied.

15. The allegations of paragraph 15 are admitted,-

16. In regard to the allegations in tinal 125 the

8 defendants allege’ as follows:

td resignation of J. Grant Iverson was accepted by the

Board of. Directors of Produces Life on June 5, 1964;

. the resignations of John J. Falconer and Jess Hunter were

accepted by that Board on May 28, 1964; the defendant

Ted Wilkins was appointed to the Board of Directors en

June 5, 1964; defendant Robert H. Wallace and Ron Lar-

son were elected to the Board of Directors on November

27, 1964; Mr. Robert Sampley was appointed to the Board.

of Direetbrs on October’ 15, 1964. The allegations of para-

| 2 16 in conflict with the allegations herein are denied.

17. The allegations of paragraph 17 are admitted.

18. The allegations of paragraph 18 are denied.

19. The defendants admit that from the period of ap-

proximately August 1964 to approximately March 1965,

there was a vigorous shareholders fight within Producers

and that those favorable to and those. opposed to manage

ment did wage an intensive campaign among the stock-

holders. Proxies were solicited on all sides and this in-

cluded solicitation of proxies to be given to the defendants

Wallace and Saffert. \Defendants.deny that any such

communications issued by them contained any re.

_. sentations of material facts or omissions of matters n :

sary’ to be stated in order to avoid misleading / and instead

allege, that, considering

‘battle under way, the various statements issued by these

defendant? or persone inr concert with them were er

larly

trustworthy.

20. The defendants admit that: a 3 plan to con-

r e and reorganize by a statutory merger was entered

by National and Producers. As to the various terms

hey ese compendious agreements, defendants decline to

admit or deny, the documents being the best évidence of

* their terms. ‘They admit chat the agreement provided for

submission to the stockholders of the two companies and

: ee ee

a tie allegations of this 58 ee „„

Face im 2 t Seca he allegations

0 paragraph, the allegations being simply a purporte

sutntaory of the terms of an i attached b>. es

amended complaint. The allegations ag a summary are,

partial only; the Commission omitting to state ma 1

facts necessary to be stated in order to make ita own,

oe statements madep. in the light of the circumstances under “tet

which they were made, not misleading, in that the Com- nde

mission fails expressly to note the various contingencies.

and reservations as to the commitment here beldly alleged.

The dollarfigure is correct. —

23. Defendants make the same answer to this para-

graph as to paragraph 22.

24. The allegations of paragraph 24 are d inso-

far as they. purport to quote the poties of

of ‘stockholders and the paragraph is e deniec.

‘25. The allegations of paragraph 26 Aamied the de-.

fendants having expressly referred to the applicable stat ;

‘utes. If the substance of the allegation is that the

fendants did not attempt to interpret the various po

cable Arizona merger statutes, the allegation is admitted

and defendants further allege rye this i is both the general |

and the better practice. |

26. Defendants admit that it solicited general proxies 5

and allege further that the solicitations were made in the

context of the general proxy fight in u 2

grou ups. Were seeking negative vo

27. The allegations of paragraph 27 are . cand ijt

is. affirmatively alleged that the figure used was substan- re,

tially. similar to that authorized. expressly by the Insur-

ance‘ Commissioner of Arizona in writing for "his general

purpose. The inclusion of Treasury stock as an invest-

ment asset was not per se misleading and was here per- ,

missible.under generally accepted accounting practices.

228. The allegations of o — =

allege misleading statements are denied. N 5

29. The allegations of paragraph 29 are admitted, “the

_ defendants ee alleging that the ane. of an ad-

106 =) 8 5 f :

_ ditional lawsuit shortly before the December 31 meeting )

made it appear unwise to vote on the merger matter at .

that time without obtaining advice of edunsel. 5

fore 80. The defendants admit the series of meetings re- ‘

_ ferred to in paragraph 30 and otherwise deny the allega-

tions of this: h. ö

31. The de dente achat that a. document stich as that ee 8

_| identified in paragraph 31 was distributed and otherwise

deny the allegations. The report on its face made. com-

pletely clear‘ that the undeflying information was pbtained

From these defendants, -expressly stating that the “infor-

mation contained in this report was obtained primarily

from the company and ‘sources close to the company and

haas not been otherwise verified although believed to be

- authentic.” The statement as published contained a sec-

ond express blaek-bordered announcement by Producers

putting the proper limitations sgn any assurances made 5

“ ag to the North Report.

32. The allegations of vartgraph: 31 are admitted,

33. Defendants deny that any of the matters referred

8 to needed to be disclosed in order te avoid having the

' °. gtatements in question materially misleading. They af-

firmatively allege that all treatments of the coking of

Ades for purposes of the merger were on tile-besis of book

rather than market. ;

— 34. For answer to this paragraph, the defendants allege

5 ‘that; the materials circulated over the signature of Mr.

Saffert was in all respects true and correct. The allega-

tions by the plaintiff herein are themselves seriously mis-

leading in that they fail to advise this Court that the

Court previously had vacated after argument all portions

viously obtained ex parte restraining order which

35. The defer ts deny the allegations of this para- |

: Ned ati allege that well over GOS of the stockholders”

, votes cast in favor of the merger agreement on the part

of Pro wih th ä 9 were N. chareholders uneon-

Seas tiff fails to allege that the plaintiff laid before

the plaintiff contains isrepreentation ot material facts 75

in that it omits to state material facts necessary to be

stated in order to make the statements made, in the light

of the circumstances. under which they were

misleading, including specifically. the fact 1

‘the basis of which’ it was simultaneously seeking an in:

junction in this Court.

38. The defendants viol that the two companies have

deny the allegations or 1 72

been merged and oth

paragraph.

“WHEREFORE, the defendants pray that the plaintiff

take nothing by its complaint, and that this action be dis-

missed and that judgment be given for the defendants

herein, and for such other relief as may be just and

proper.

_ Lewis Roca Sco MA BEAUCHAMP

& LINTON =

w / za Frank

1 FRANK 5 .

8 3 Butler

_ JEREMY E. BUTLER N 15

Attorneys for defendants ~~

9th Floor, Title & Trust Building

Phoenix, mineral

aa * Board 75 or PRODUCERS LIFE IN SUR.

° ae

„

ECC

at * 88. : eae AS

COUNTY OF MARICOPA: This attend sae of Doty

iat he makes, this Ha elt for’ and om behalf of” said

‘NATIONAL SECURITIES, INC. and PRODUCERS |

LIFE INSURANCE COMPANY, being duly authorized

ROBERT H. WALLACE,

oath, deposes

AL SECURITIES: 9. Lrper ade, and Chairman of

PANT, a corporation, defendants herein, and

thereunto: That he has read the foregoing and knows the

contents thereof, and that the matters and things therein

set forth are true of affiant’s own knowledge, except .as

to those matters therein stated on information and belief,

and as to those matters he believes it to be true.

2 5 Robert H. ‘Wallace

260 a _ ROBERT H. WALLACE |

. *

l and sworn to before 1 me this Ist day of Sep:

tember 1965. ö

/s/ [Illegible) . :

| : e; Public ‘

My commission expires 9-29-68 ae al 5 2 . i

@ * * „

Hst duly sworn on

Cry eyed resident of NATION-

[Filed babe 1, 1966

UNITED STATES DISTRICT cor

3 DISTRICT OF ARIZONA :

No. Cw-5466-Phx. 2 b

is S rob AND EXCHANGE Connon, ara i

" NaTionaL Séounrrnies, ING, ET. aL, DEFENDANTS _

is MOTION FOR JUDGEMENT ON THE PLEADINGS |

„R INSTHE ALTERNATIVE FOR.

SUMMARY JUDGMENT.

The defendants herein move for judgment on ‘the om

ings based upon the supplemental complaint and answer

_ “thereto; or in the alternative, for summary judgment 2

: based upon the record as made to this point and the afl. 2

davit of Wallace attached hereto. N

1. The grounds which we believe warrant telnet for

the defendants are apparent on the pleadings without ref-

erence to any other document. As we argue, the Court

is either without jurisdiction or the complaint fails to

* a cause of action.

2. Nonetheless, understanding is considerably ‘enriched

by the: previous filings on both sides and the Court may

care to take them into account.. We therefore put the

matter alternatively as à motion for summary judgment

based on the record. This motion is supported by the origi-

nal brief of the defendants as filed at the first hearing,

and by a supplemental: memorandum filed herewith.-

‘Dated this Ist day of September, 1965. i,

~ ‘Respectfully submitted,

„ Laws Roca commun BEAUCHAMP

& LINTON © ,

by /s/ John P. Frank

9. JoRN P. FRANK

3 75 Jeremy E. Butler

‘Attorneys for Defendants

* .

—

. * * *

i pele STATE OF ARIZONA ei

[ited September 1, 1965]

-) 88.

COUNTY. OF (MARICOPA )

AFFIDAVIT OF ROBERT H. WALLACE

ROBERT H. ‘WALLACE, being first duly sworn, upon

hid pid: dapoues Aad days that Le te the President of N

tional Producers Life Insurance Company and on May 4,

1964, was President of National Life and Casualty In-

surance Company. In that capacity, he knows of his ow n

knowledge that he did in fact present to the Arizona Di-

rector of Insurance, Mr. George Bushnell, the matter of

bow the stock of Producers should be carried on books

as an admitted asset, and the attached letter i fz true and

correct copy of the submission to Mr. Bushnell and of his

8 of he figure used.

/s/ Robert E Wallace a

RogERr H. WALLACR

. ‘Subscribed and sworn to before me this Ist day of Sep 0

tember, 1965. .

_ /8/ Ullegible)

Notary Public

2 “My commission expires: e 29, 1968

-— ducers Life Insurance Company, an Arizona corporation,

| Casualty Insurance

By ie, „ u IO

! Ir dert K Pee Pe is: SSPE

Department of Insurance * ee gs ae

State of Arizona * a

Phoenix, Arizona

Dear Hr. Bushnell:

Tou say ad on e National Life and

—

any to invest 81, 114,964.87

reap in 125,979 shares of the common stock of Pro- a

and to carry said investments on its books as an admitted

asset of a value equal to the aforesaid cost. |

If this may be done, please indicate yor approval

signature at the foot of this letter.

‘ : Sincerely,

io , M. E. Wallace 2

Ot Lae! R. H. WALLACE

Approved this 18th day of Mey, 1964

wae A. Bushnell 5

GEORGE A, BUSHNELL, Director

92 * „

„„ wee

5 (Fitea September 14, 1965]

“UNITED STATES DISTRICT COURT |

„ DISTRICT- OF ARUKò, NA :

) „„ ‘ - {Phoenix Division} yee 5 ;

8 3 capita Civil Action ‘No. 5466. Phx

> 8 SECURITIES ‘AND EXcHANGE Commission, PLAINTIFF

Yee 5 A 1 e „ N

: Nana, Seounrrnia, 1 Nd. A CORPORATION, Naniona.

Lx & CASUALTY INSURANCE COMPANY, A CORPORA-

‘MON, ROBERT’ H. WALLACE, ROBERT C. BOHANNON, /.

IR.; ‘ARTHUR. W. SAFFERT, TED WILKINS, JOHN S. RAax-

rr, JOSEPH B. SeTTeR, BREEFERD W. LarGE, JR. AND

2 2 PRODUCERS LIFE INSURANCE’ COMPANY, A CORPQRATION —

(As KNOWN AS NATIONAL PRODUCERS LIFE INSUR-

. ANCE COMPANY), DEFENDANTS te 8 ‘ "

. MOTION OF SECURITIES AND EXCHANGE COM-

MISSION FOR PERMISSION TO AMEND ~—_

_ COMPLAINT. TO ADD P IES e

— The Securities and abhi: Commission moves for an

onder ‘permitting amendment of the Amended and Supple-.

mental Complaint filed August 12, 1965 to add as Ne-

_ . . fendants Richard G. Johnson, Ernest A. Richards, Wil-

lam A. Reedy, Bonnie B. Bilbrey and Producers Thrift &

Loan Company, an Arizona cOrporatign, by substituting”

revised pages 1, 2 and 3, in the form hereto attached, for

the corre.ponding pages ‘of the Amended and Supplemen-

tal Complaint on file. — | es

—

x Oa

* a ‘ 8 : 1

7 5 ‘ 1 a 8 N sf ; 2

4 * i 8

0 * * 4 * 2 . .

— * a ~ ; 4 * — 4 — 1

* 3 — - Bee .

° ° 8 — 5 ra .

0 2 1 3 5 ; * 6

= * 2. * 5 . ‘

* 5 : . we 4 a u * ‘ * 4 Bo

0 ie 3 Yas * * SNe — — :

es 3 : we

: 88 5 2 5 3

1 2 a ° 8 8 a f 4 . « 5 f

1 mis mend, k. sb üs G Wed Kees andy

aac ceedings herein, including the allegations contained in the

Commission’s Amended and Supplemental Complaint filed

August 12, 1965 and in proposed amended pages 1, 2 and

80 a attached, and . attached e N of W. S.

er ’

RE eat " Respectfully sabmitied, 4 0 ot

78 Arthur E. Pineta 5 2 aa a

1 * . AxrHUR E.-PENNEKAMP r .

„ Regional eee Cate

: Ls W. 8 Tucker e

— 3 . W. STEVENS TUCKER

a . eel: —

. 4 . “ E. Kermamer, Ir. wear.

ae ; ~KENNAMER, IX.

a lene General. Counsel

JAMES G. NEWBY oD ae

Attorney ö

Attorneys for |

-,._. Securities and Exchange Commission

a gi =]

% 7 2 3 . ‘

7 a 29 : ‘ *

8 —

7 A . a ö —

6 > a

° © * 8 i

’ Gk 1

A * * 2 * g 4 *

/ 7 1 8 n *

‘114 eo ae ot

[Filed September 14,1965].

_ UNITED STATES DISTRICT COURT

DistRICcT OF ARIZONA

(Phoenix Division) be 7 5

Civil Action No. 5466 Phx

1 1 AND EXCHANGE e PLAINTIFF.

= :

V. g j . — 92

NATIONAL SECURITIES, INC., A CORPORATION, NATIONAL

LIFE & CASUALTY INSURANCE COMPANY, A CORPORA-

TION, ROBERT H. WALLACE, ROBERT O. BOHANNON, .

IR., “ARTHUR W. SAFFERT, TED WILKINS, JOHN S. BAR- ’

RETT, JOSEPH B. SETTER, BREEFERD W. LARGE, JR. AND

PRODUCERS LIFE INSURANCE COMPANY, A CORPCRATION

. (ALSO KNOWN AS. NATIONAL PRODUCERS LIFE INSUR-

_ ANCE n „DEFENDAN TS ä

N 5 ‘MEMORAND JM ON PLAINTIFF'S MOTION 10

AMEN 70 ADD PARTIES DEFENDANT

| ‘INTRODUCTORY. 8

The Securities and Exchange 3 moves to

amend its Amended and Supplemental Complaint filed Au-

gust 12, 1965 to add as defendants Richard G. Johnson,

Ernest A. Richards, William A. Reedy, Bonnie B. Bilbrey

and Producers Thrift & Loan Company (additional de-

fendants). The necessary changes would consist of:

I.8321 (1) Adding their names to the caption on page 1.

([. 2) Changing the title on page 1 to read “Second

: — and N Complaint for injunc- :

ion”, :

( 8) Adding their names,as defendants i in Part I, para-

graph 1 at the top of page 2.

(4) Adding a reference to Producers Thrift & Loan

eee as an Arizona corporation at the end of

ph 4 at the foot of page 2.

5 (5 eleting the words in concert with the selling di-

L rectors” from lines 21-23 on page 3.

IThese persons and their corporation were named as de-

fendants i in the. — e and were dismissed by.

| 15 5

„Oder entered April 16, 1965 e W or with- .

cut prejudice to plaintiffs to hereafter move to. add the |

„above named defendants as defendants herein.” - eet

8 These are the forme Airectors, and their corporation, |

5 who sold stock and control of Producers Life to National

Securities, Ine, about April 27, 1964 at a high premium-

price and who realized added personal benefits of almost

one million dollars in the form of non-compete agreements, :

in the transactions. N

The original complaint, which was considered by tle

court at the hearing on April 16, 1965, did not demand |

any relief against these defendants ther than the. general

pion of injunctipn and the general demand for. equitable

Demand 1 of the Amended and Supplemental Complaiy ;

filed August 12, 1965 (the August 12 complaint) asks that

the entire series of transactions and acts covering the pe-

riod from March 15, 1964 to the filing of the Amended

and Supplemental Complaint, [3] described. in Part III

thereof, be defermined to constitute a device, scheme and

artifice to defraud and acts, practices and a course of busi-

ness in connection: with the purchase and sale of securities,

mplished by the defendants in violation of Section 10

590 of the Securities Exchange Act and Rule 17 CFR

240.10b-5: The complaint alleges that the. additional de-

fendants participated in these transactions and acts.

Demand 3 of the August 12 complaint asks for a resto-

ration of the pre-April 27, 1964 status quo. If ee

this demand would require reversal cf the transaetio

and about April 27, 1964 by which the National ves :

bought control of Producers Life from and with the assist-

ance of the additional defendants. ‘This relief would in-

volve restoration of considerations received by the addi-

tional defendants in these transactions and other adjust- 6

ments. . °

Demand 4 of the August 12 complaint asks for an ac-

counting as to any damages to stockholders of Producers

Life and unjust enrichment of defendants by n of -

the acts of the presently named defendants and the addi- .

tional defendants and an adjustment of the equities of the - ~

defendants and of stockholders of Producers Life on a fair

and = basis. Inclusion of the additional n. re

complete equity.

“ants: as parties would 2 thie Court, in giving complete

equitable relief, to shape its decree to charge them with

any unjust enrichment’ Phave received and with any

. , damages they have caused and to adjust their interests as

need be with those of the — stockholders of Producers

Life.

Demand 5, the general demand for equitable relief,

would enable the Court in its decree to make any other

provisions or adjustments as to the additional defendants

found to be necessary [4] or advisable in order -to do

THE APPLICABLE RULES —

Rule 21 FRCP provides that Parties may be dropped

or added by order of the court on motion of any party or

of its own initiative at any stage of the action and on such

terms as are just.“

Rule 20 FRCP provides that “AN persons may be joined

in one action as defendants, if there is asserted against

them dointly, severally or in the alternative, any right to

relief in respect of or arising out of the same transaction,

‘ occurrence, or series of transactions or occurrences and

if any question. of law or fact common.to all of them will

Rule 15 FRCP py dment

el permits amen y teave of court

or by written-consefft of the a

This text is long and has been trimmed here. Open the source document for the complete record.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.