STOCK PURCHASE AGREEMENT
dated as of September 26, 2005
by and among
SECURITY NATIONAL LIFE INSURANCE COMPANY,
SOUTHERN SECURITY LIFE INSURANCE COMPANY,
MEMORIAL INSURANCE COMPANY OF AMERICA
and
THE SHAREHOLDERS THAT HAVE EXECUTED
AGREEMENT BY SHAREHOLDERS OF
MEMORIAL INSURANCE COMPANY OF AMERICA
TO SELL SHARES IN STOCK PURCHASE TRANSACTION
IN THE FORM ATTACHED AS ANNEX I
TABLE OF CONTENTS
Page
ARTICLE I - PURCHASE AND SALE OF SHARES
AND COINSURANCE AGREEMENT..........................................1
1.1 Sale and Purchase of the Shares.........................1
1.2 Purchase Consideration..................................1
1.3 Delivery of Shares......................................2
1.4 Coinsurance Agreement ................................. 2
ARTICLE II - THE CLOSING..................................................2
2.1 Closing.................................................2
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
MEMORIAL AND SHAREHOLDERS.............................................2
3.1 Organization, Good Standing and Power...................3
3.2 Capital Structure ......................................3
3.3 Authority ..............................................4
3.4 Dividends, Stock Purchases, Etc.........................4
3.5 Financial Statements ...................................5
3.6 Annual Insurance Statements ............................5
3.7 Insurance Business .....................................6
3.8 Compliance With Law ....................................7
3.9 No Defaults ............................................7
3.10 Litigation .............................................7
3.11 No Material Adverse Change .............................7
3.12 Absence of Undisclosed Liabilities......................9
3.13 Information Supplied....................................9
3.14 Certain Agreements .....................................9
3.15 Plans; Benefits; Employment Claims......................9
3.16 Major Contracts .......................................10
3.17 Taxes .................................................12
3.18 Interests of Officers and Directors ...................14
3.19 Intellectual Property .................................14
3.20 Restrictions on Business Activities ...................14
3.21 Title to Properties; Absence of Liens and
Encumbrances; Conditions of Equipment............15
3.22 Governmental Authorization and Licenses................15
3.23 Environmental Matters .................................16
3.24 Insurance .............................................16
3.25 Labor Matters .........................................16
3.26 Agents; Customers and Agent Complaints ................17
3.27 Questionable Payments .................................17
Page
ARTICLE IV - COVENANTS OF SHAREHOLDERS ..................................17
4.1 Shareholders to Sell Shares in Transaction.............17
4.2 Shareholders to Maintain Memorial Policies.............18
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF
SECURITY NATIONAL AND SOUTHERN SECURITY.........................18
5.1 Organization, Good Standing and Power .................18
5.2 Authority .............................................18
5.3 Board Authorization....................................19
5.4 Maintain Office; Retention of Agents...................19
ARTICLE VI - CONDUCT AND TRANSACTIONS PRIOR TO
CLOSING DATE; ADDITIONAL AGREEMENT.............................19
6.1 Conduct of Business of Memorial........................19
ARTICLE VII - CONDITIONS PRECEDENT ......................................23
7.1 Conditions to Each Party's Obligation to
Effect This Transaction ...........................23
7.2 Conditions to Obligations of Security National and
Southern Security..................................23
7.3 Conditions to Obligations of Memorial and Shareholders.25
ARTICLE VIII - TERMINATION ..............................................26
8.1 Termination ...........................................26
ARTICLE IX - INDEMNIFICATION ............................................27
9.1 Obligation to Indemnify ...............................27
9.2 Notice and Opportunity to Defend ......................28
ARTICLE X - GENERAL PROVISIONS ..........................................29
10.1 Survival of Representations, Warranties,
Covenants and Agreements............................29
10.2 Amendment .............................................29
10.3 Extension; Waiver .....................................29
10.4 Notices ...............................................29
10.5 Interpretation ........................................31
10.6 Counterparts...........................................31
Page
10.7 Entire Agreement ......................................31
10.8 No Transfer ...........................................31
10.9 Severability ..........................................32
10.10 Other Remedies ........................................32
10.11 Further Assurances ....................................32
10.12 No Third Party Beneficiary Rights .....................32
10.13 Mutual Drafting .......................................32
10.14 Governing Law .........................................32
10.15 Jurisdiction and Venue.................................32
10.16 Expenses ..............................................32
10.17 Brokers or Finders ....................................33
10.18 Public Announcements ..................................33
10.19 Confidentiality .......................................33
10.20 Attorney's Fees........................................34
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is dated effective as of
September __, 2005, and entered into by and among SECURITY NATIONAL LIFE
INSURANCE COMPANY, a Utah corporation ("Security National"), SOUTHERN SECURITY
LIFE INSURANCE COMPANY, a Florida corporation and a wholly-owned subsidiary of
Security National ("Southern Security"), MEMORIAL INSURANCE COMPANY OF AMERICA,
a Arkansas corporation ("Memorial"), and the shareholders of Memorial that have
executed the AGREEMENT BY SHAREHOLDERS OF MEMORIAL INSURANCE COMPANY OF AMERICA
TO SELL SHARES IN STOCK PURCHASE TRANSACTION in the form attached as Annex I
(the "Shareholders").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, Security National, Southern Security, Memorial and the
Shareholders hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
AND COINSURANCE AGREEMENT
1.1 Sale and Purchase of the Shares. At the Closing, as hereinafter
defined, upon and subject to the terms and conditions set forth in this
Agreement, the Shareholders shall sell, transfer, assign and deliver to Security
National and Southern Security, and Southern Security shall purchase from the
Shareholders, a total of 4,681 shares of common stock of Memorial (the "Memorial
Common Stock"), representing all of the issued and outstanding stock and
securities of Memorial owned by the Shareholders, free and clear of all liens,
claims, options, proxies, voting agreements, charges and encumbrances. Following
the completion of the purchase of the Memorial Common Stock by Security National
and Southern Security pursuant to the terms and conditions of the Agreement,
Memorial will become a wholly owned subsidiary of Southern Security. Security
National, Southern Security, Memorial and the Shareholders hereby acknowledge
and agree that regulatory approval, if required, from the Arkansas, Florida and
Utah insurance departments for the transaction described in this Section 1.1
must be obtained prior to Closing.
1.2 Purchase Consideration. Subject to the terms and conditions of this
Agreement, in reliance upon Memorial's representations, warranties, agreements
and covenants contained herein, and in consideration of the sale, transfer,
assignment and delivery of the Memorial Common Stock as herein provided, the
Shareholders shall receive, on a pro rata basis to the number of shares of
Memorial common stock held by such Shareholders, purchase consideration (the
"Purchase Consideration") in the aggregate amount of Thirteen Million Five
Hundred Thousand Dollars ($13,500,000) to be distributed as follows:
(a) Cash in U.S. dollars by certified funds or wire transfer in the
form of a dividend to the Shareholders equal to the amount of the maximum
dividend allowed and approved by the Arkansas Insurance Department; and
(b) Cash in U.S. dollars by certified funds or wire transfer to the
Shareholders equal to the amount of $13,500,000 reduced by the amount of the
maximum dividend received by the Shareholders pursuant to Section 1.2(a) above.
1.3 Delivery of Shares. At the Closing Date, the Shareholders shall deliver
to Security National and Southern Security certificates with stock power
executed in blank representing the outstanding shares of Memorial Common Stock
required by Section 1.2 hereof. The certificates are to be transferred to and
held by Southern Security.
1.4 Coinsurance Agreement. At the Closing Date, Security National, Southern
Security and Memorial each agree to enter into a coinsurance agreement (the
"Coinsurance Agreement") in substantially the form attached hereto as Exhibit 1,
pursuant to which Security National, Southern Security and Memorial will each
agree to reinsure all of the assumed liabilities of Memorial, to the extent
permitted by the Arkansas Insurance Department, except for certain policies not
included within the reinsured policies. Upon approval of the Coinsurance
Agreement by the Arkansas Insurance Department, certain insurance business and
operations of Memorial, as set forth therein, will be transferred to Security
National.
ARTICLE II
THE CLOSING
2.1 Closing. The closing of the transaction (the "Closing") will take place
at the offices of Memorial Insurance Company of America, ▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, unless a different date or place is agreed to in writing
by the parties hereto. Each party hereto shall use its reasonable best efforts
to cause the Closing to occur on or before October 30, 2005, unless this date is
extended as provided herein (the "Closing Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
MEMORIAL AND SHAREHOLDERS
Except as disclosed in a document to be prepared by Memorial and delivered
to Security National and Southern Security prior to the Closing Date (the
"Memorial Disclosure Schedule") referring specifically to the applicable
representation and warranty in this Agreement that identifies the basis for an
exception to a representation and warranty in this Agreement and that is
delivered by Memorial to Security National and Southern Security and approved by
Security National and Southern Security by execution of this Agreement, Memorial
and the Shareholders represent and warrant to Security National and Southern
Security as set forth below, and such representations and warranties shall be
true and correct as of the date hereof and at all times thereafter including,
without limitation, the Closing Date, as if made at all such times. As used in
this Agreement (i) "Business Condition" with respect to any corporate entity or
group of corporate entities shall mean the business and financial condition and
prospects of such entity or entities taken as a whole and (ii) "material adverse
effect" on the Business Condition shall be deemed to include, without
limitation, (x) any inaccuracy in the capitalization representation set forth in
Section 3.2 below and (y) any material liability not reflected on the Memorial
Financial Statements (as defined in Section 3.5 below) or Annual Insurance
Statements (defined in Section 3.6 below).
3.1 Organization, Good Standing and Power. Memorial is a corporation, duly
organized, validly existing and in good standing under the laws of its state of
Arkansas and has all requisite power and authority to own, operate and lease its
properties and to carry on its businesses as now being conducted. Schedule 3.1
of the Memorial Disclosure Schedule contains a true and correct listing of all
states in which Memorial is registered, licensed and authorized to engage in the
insurance business. Memorial is not aware of any threatened or pending action or
inaction that could result in the loss of or an adverse change in any such
registration or license. Memorial is in good standing under all such
registrations and licenses. Memorial is duly qualified as foreign corporations
and is in good standing in each jurisdiction in which the failure to so qualify
would have a material adverse effect on its individual Business Condition. The
Memorial Disclosure Schedule also sets forth a true and complete list of the
states where Memorial is qualified as a foreign corporation. Memorial has no
subsidiaries. Memorial has no other direct or indirect equity interest in or
loans to any partnership, corporation, joint venture, business association or
other entity. Memorial has delivered to Security National and Southern Security
complete and correct copies of its Articles of Incorporation and Bylaws, in each
case as amended to the date hereof, and has delivered or made available minutes
of all of Memorial's directors' and stockholders' meetings, and stock
certificate books correctly setting forth the record ownership of all
outstanding shares of Memorial Common Stock.
3.2 Capital Structure
(a) The authorized capital structure of Memorial consists of 27,000
shares of Common Stock, with a par value of $50.00 per share. There are
4,681 shares of Common Stock issued and outstanding, all of which are owned
by the Shareholders. Except as disclosed on Schedule 3.2 of the Memorial
Disclosure Schedule, there are no other debt, equity or hybrid debt or
equity interests or securities of Memorial issued and outstanding.
(b) All outstanding shares of Memorial Common Stock and other Memorial
securities, if any, are validly issued, fully paid and non-assessable and,
except as disclosed on the Memorial Disclosure Schedule, are not subject to
any liens, claims, encumbrances or charges of any kind or nature or any
preemptive rights created by statute, Memorial's Articles of Incorporation
or Bylaws or any agreement to which Memorial is a party or by which
Memorial may be bound. There are no options, warrants, calls, conversion
rights, commitments or agreements of any character to which Memorial is a
party or by which Memorial may be bound that do or may obligate Memorial to
issue securities of any kind or nature or to grant, extend or enter into
any such option, warrant, call, conversion right, commitment or agreement
or which relate to the voting of the Memorial Common Stock or other
Memorial securities, if any.
3.3 Authority
(a) Memorial has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement, the performance by
Memorial of its obligations hereunder and thereunder and the consummation
of the transactions contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action on the part of
Memorial, including approval by its Boards of Directors and the
Shareholders. This Agreement shall constitute legal, valid and binding
obligations of Memorial enforceable against Memorial in accordance with
their respective terms, except as enforcement may be limited by bankruptcy,
insolvency or other similar laws affecting the enforcement of creditors'
rights generally and except that the availability of equitable remedies is
subject to the discretion of the court before which any proceeding
therefore may be brought.
(b) To the best knowledge of Memorial and the Shareholders, the
execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby and thereby, will not, conflict with
or result in any violation of any material statute, law, rule, regulation,
judgment, order, decree or ordinance applicable to Memorial or its
properties or assets, nor will it conflict with or result in any breach or
default (with or without the giving of notice or the lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any material obligation or to the loss of any material
benefit under, or result in the creation of a material lien, charge or
encumbrance on any of the properties or assets of Memorial pursuant to (i)
any provision of the Articles of Incorporation or Bylaws of Memorial or
(ii) any material agreement, contract, note, mortgage, indenture, lease
instrument, permit, concession, franchise, registration or license to which
Memorial is a party or by which Memorial or any of its properties or assets
may be bound or affected.
(c) To the best knowledge of Memorial and the Shareholders, no
consent, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency, commission, regulatory
authority or other governmental authority or instrumentality, whether
domestic or foreign (collectively, a "Governmental Entity"), is required by
or with respect to Memorial in connection with the execution and delivery
of this Agreement and by Memorial or the consummation by Memorial of the
transactions contemplated hereby or thereby, except for (i) filing required
documents with the relevant authorities of states in which Memorial is
qualified to do business, (ii) such consents, approvals, authorizations,
registrations or qualifications as may be required under state insurance
laws as identified in the Memorial Disclosure Schedule and (iii) such
consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under the laws of any foreign country,
which, if not obtained or made, would not have a material adverse effect on
the Business Condition of Memorial. All approvals of Memorial's Board of
Directors and Shareholders as required by applicable law have been obtained
and are in force and effect and no dissenters' rights have been exercised
under applicable law.
3.4 Dividends, Stock Purchases, Etc. Since June 30, 2005, Memorial has not
(i) declared or paid any dividends (either in cash, property or its stock of any
class) upon, or made or become committed to make any other distribution with
respect to, or purchased, redeemed or otherwise beneficially acquired any of its
outstanding capital stock of any class, or become committed so to do; (ii)
split up, combined or reclassified any of its outstanding capital stock of any
class, or become committed so to do; or (iii) issued or become committed to
issue any additional capital stock of any class (whether or not from treasury
stock, heretofore authorized but unissued stock, or newly authorized stock) or
any options, rights or warrants to acquire, or securities convertible into or
exchangeable for, or which otherwise confer upon the holder or holders thereof
any right to acquire, any shares of capital stock of any class or any other
security or debt of Memorial.
3.5 Financial Statements. Memorial has furnished or made available to
Security National and Southern Security or will furnish or make available to
Security National and Southern Security within ten days from the date of this
Agreement Memorial's audited financial statements for the fiscal years ended
December 31, 2000, 2001, 2002, 2003 and 2004, including balance sheets and the
related audited statements of income, cash flow and stockholders' equity, and
the related management letters (collectively, the "Audited Financial
Statements"), and Memorial's unaudited financial statements as of and for the
quarters ended March 31, 2005 and June 30, 2005, including unaudited balance
sheets of Memorial as at March 31, 2005 and June 30, 2005, and the related
unaudited statements of income, cash flow and stockholders' equity
(collectively, the "Unaudited Financial Statements"). The Audit Financial
Statements and Unaudited Financial Statements are, collectively, referred to as
the "Memorial Financial Statements." Except as disclosed on Schedule 3.5 of the
Memorial Disclosure Schedule, the Memorial Financial Statements have been
prepared in accordance with statutory accounting principles consistently applied
and fairly present the financial position of Memorial as at the dates thereof
and the results of its operations and cash flows for the periods then ended.
There has been no change in Memorial's accounting policies, except as described
in notes to the Memorial Financial Statements.
3.6 Annual Insurance Statements.
(a) Memorial has provided Security National and Southern Security with
(i) all annual statements, certificates and applications to the Arkansas or
any other insurance commissioner or other Governmental Entity, which
Memorial has filed with or submitted with respect to years ending on or
after December 31, 2000, and such documentation provided previously is
listed in Schedule 3.6 of the Memorial Disclosure Schedule, and (ii) all
reports of examination issued by such insurance commissioners, regulatory
authorities or other Governmental Entity regarding Memorial on or after
December 31, 2000, and such documentation provided previously is listed
also in Schedule 3.6.
(b) Such filings or submissions were in substantial compliance with
applicable law when filed and, as of their respective dates, did not
contain any materially false statements of fact or omit to state any
material fact necessary to make the statements set forth therein not
misleading in light of the circumstances under which such statements were
made; no material deficiencies have been asserted by any insurance
commissioner, insurance department or other Governmental Entity with
respect to such statements; Memorial has provided Security National and
Southern Security with copies of all material written responses with
respect to comments from any Governmental Entity concerning such filings,
submissions or reports of examination since December 31, 2000 and such
written responses are described in Schedule 3.6 of the Memorial Disclosure
Schedule, and prior to the date of this Agreement, no fines or penalties
have been imposed on Memorial by any Governmental Entity; and no deposits
(other than in the ordinary course of business) have been made by Memorial
with any Governmental Entity.
(c) Except as disclosed in Schedule 3.6 of the Memorial Disclosure
Schedule, the statutory financial statements for Memorial as of and for the
years ended December 31, 2003 and 2004 (i) fairly present the statutory
financial condition of Memorial at such dates and (ii) have been prepared
in accordance with the required or permitted statutory insurance accounting
requirements or practices under the insurance laws of Arkansas, except as
expressly set forth or disclosed in the notes, exhibits or schedules
thereto. The amounts shown in such statements of account on aggregate
reserves for life or annuity policies and contracts, aggregate reserves for
accident and health policies, net deferred and uncollected premiums and all
policy and contract claims liability as of the end of each such year, are
computed in accordance with accepted actuarial and industry practices, are
fairly stated in accordance with those called for in applicable insurance
policy provisions, meet the requirements of the insurance laws of Arkansas,
make a sufficient provision for all unmatured obligations of Memorial
provided for under the terms of its policies and are consistent with the
assumptions previously employed. Adequate provision has been made for all
actuarial reserves and related statement items which ought to be
established.
3.7 Insurance Business.
(a) Security National and Southern Security has been provided true and
complete copies of all contracts, arrangements, treaties, understandings
and agreements of (or related to) Memorial with any party with respect to
reinsurance currently in force and such documents and information are
listed in Schedule 3.7 of the Memorial Disclosure Schedule attached hereto.
All policies assumed by Memorial were assumed under agreements submitted to
and approved by all relevant regulatory authorities and are valid, in
force, and not subject to recapture (except at Memorial's option), and are
fairly reflected on the Memorial Financial Statements. No party thereto is
in material default with respect to any provision thereof and no such
agreement contains any provision providing that the other party thereto may
terminate same by reason of the transactions contemplated by this Agreement
or any other provisions which would be altered or otherwise become
applicable by reason of such transactions.
(b) All policies of insurance issued or assumed by Memorial as now in
force are, to the extent required under applicable law, on forms submitted
to and approved by the applicable jurisdiction's insurance commissioner. No
policy holder or related group of policy holders which, singularly or in
the aggregate, accounted for 5% of the gross revenues of Memorial
considered as a whole for the year ended December 31, 2004 has, after
December 31, 2004, terminated or, to the best knowledge of the Memorial,
threatened to terminate its relationship with Memorial. The contracts
between Memorial and its agents, managers or brokers are valid, binding and
in full force and effect in accordance with their terms. Memorial is not in
material default with respect thereto and no such contract contains any
provision providing that the other party thereto may terminate the same by
reason of the transactions contemplated by this Agreement or any other
provision which would be altered or otherwise become applicable by reason
of such transactions.
3.8 Compliance With Law. To the best knowledge of Memorial and the
Shareholders, Memorial is in compliance with and have conducted its business so
as to comply with all laws, rules, regulations, judgments, decrees or orders of
any Governmental Entity applicable to their operations or with respect to which
compliance is a condition of engaging in the business thereof, except to the
extent that failure to comply could, individually or in the aggregate, not have
had and is not reasonably expected to have, a material adverse effect on the
Business Condition of Memorial. There are no material judgments, orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration) against Memorial or against any of its
properties or businesses. Schedule 3.8 of the Memorial Disclosure Schedule
contains a summary of all material violations of, or conflicts with, any
applicable statute, law, rule, regulation, ruling, order, judgment or decree,
listed by each such Governmental Entity, including any of the foregoing relating
to any environmental or health laws.
3.9 No Defaults. To the best knowledge of Memorial and the Shareholders,
Memorial is not, nor has it received notice that it is or would be with the
passage of time or the giving of notice, or both, (a) in violation of any
provision of its Articles of Incorporation or Bylaws or (b) in default or
violation of any term, condition or provision of (i) any judgment, decree,
order, injunction or stipulation applicable to Memorial or (ii) any agreement,
note, mortgage, indenture, contract, lease, instrument, permit, registration,
concession, franchise or license to which Memorial is a party or by which
Memorial or any of its properties or assets may be bound, which violation or
default could, individually or in the aggregate, have a material adverse effect
on the Business Condition of Memorial.
3.10 Litigation. There is no action, suit, proceeding, claim, arbitration
or investigation pending or, to the best knowledge of Memorial, threatened,
against Memorial that, individually or in the aggregate, could be reasonably
expected to have a material adverse effect on the Business Condition of
Memorial, or which in any manner challenges or seeks to prevent, enjoin, alter
or materially delay any of the transactions contemplated hereby. Schedule 3.10
of the Memorial Disclosure Schedule sets forth with respect to each pending
action, suit, proceeding, claim, arbitration or investigation to which Memorial
is a party, the forum, the parties thereto, a brief description of the subject
matter thereof and the amount of damages claimed. Memorial is not aware of any
reasonable basis for any other such action, suit, proceeding, claim, arbitration
or investigation. Memorial has delivered or made available to Security National
and Southern Security correct and complete copies of all correspondence prepared
by its counsel for Memorial's independent public accountants in connection with
any audits or reviews completed by Memorial's independent public accountants.
3.11 No Material Adverse Change. Since June 30, 2005, Memorial has
conducted its business in the ordinary course and there has not occurred:
(a) Any material adverse change in the Business Condition of Memorial;
(b) Any amendments or changes in the Articles of Incorporation or
Bylaws of Memorial;
(c) Any damage, destruction or loss, whether covered by insurance or
not, materially and adversely affecting any of the properties or businesses
of Memorial;
(d) Any issuance, redemption, repurchase or other acquisition of the
shares of capital stock of Memorial or any declaration, setting aside
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to the capital stock of Memorial;
(e) Any increase in or modification of the compensation or benefits
payable or to become payable by Memorial to any of its directors, officers
or employees, except in the ordinary course of business consistent with
past practice;
(f) Any material increase in or modification of any bonus, pension,
insurance or other employee benefit plan, payment or arrangement,
including, but not limited to, the granting of stock options, restricted
stock awards or stock appreciation rights made to, for or with any of its
employees, except in the ordinary course of business consistent with past
practice;
(g) Any sale of the property or assets of Memorial individually in
excess of $1,000 or in the aggregate in excess of $2,500;
(h) Any alteration in any term of any outstanding security of
Memorial;
(i) Any (a) incurrence, assumption or guarantee by Memorial of any
debt for borrowed money; (b) issuance or sale of any securities convertible
into or exchangeable for debt securities of Memorial; (c) issuance or sale
of options or other rights to acquire from Memorial, directly or
indirectly, debt securities or any securities convertible into or
exchangeable for any such debt securities; or (d) any material premium
refunds;
(j) Any creation or assumption by Memorial of any mortgage, pledge,
security interest, lien or other encumbrance on any of its assets or
properties;
(k) Any making of any loan, advance or capital contribution to, or
investment in, any person other than (a) travel loans or advances made in
the ordinary course of business of Memorial and (b) other loans and
advances in an aggregate amount that does not exceed $1,000 outstanding at
any time;
(l) Any entry into or any amendment or relinquishment of or any
termination or renewal by Memorial of any contract, lease transaction,
commitment or other right or obligation, except in the ordinary course of
business consistent with past practice;
(m) Any transfer or grant of a right under the Memorial Intellectual
Property Rights (as defined in Section 3.19 below) other than those
transferred or granted in the ordinary course of business consistent with
past practice;
(n) Any labor dispute, other than routine individual grievances, or
any activity or proceeding by a labor union or representative thereof to
organize any employees of Memorial;
(o) Any violation of or conflict with any applicable laws, statutes,
orders, rules or regulations promulgated, or judgment entered by any
Governmental Entity, that, individually or in the aggregate, materially and
adversely affects (or, insofar as Memorial knows, might reasonably be
expected to materially and adversely affect) the Business Condition of
Memorial;
(p) Any agreement or arrangement made by Memorial to take any action
that, if taken prior to the date hereof, would have made any representation
or warranty set forth in this Section 3 untrue or incorrect as of the date
when made; or
(q) Any payment of amounts owing under Memorial issued insurance
policies materially at variance with the Company's policy provisions and
policy payment history.
3.12 Absence of Undisclosed Liabilities. Except as disclosed in Schedule
3.12 of the Memorial Disclosure Schedule or as reflected in the Memorial
Financial Statements and except for liabilities and obligations arising after
June 30, 2005, in the ordinary course of business consistent with past practices
that could not reasonably be expected to have a material adverse effect on the
Business Condition of Memorial, Memorial has no liabilities or obligations
(whether absolute, accrued or contingent, and whether or not determined or
determinable) of a character that, under statutory accounting principles, should
be accrued, shown or disclosed on an audited balance sheet of Memorial
(including the footnotes thereto) or should be described on an Annual Insurance
Statement filed with any state insurance commissioner having jurisdiction over
Memorial or its business.
3.13 Information Supplied. None of the information supplied or to be
supplied by Memorial pursuant to this Agreement and no representation or
warranty made herein or in any exhibit hereto or in any financial statement or
schedule attached hereto contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
3.14 Certain Agreements. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or
thereby will (a) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any director or employee of Memorial under any Plan (as defined
in Section 3.15 below) or otherwise, (b) materially increase any benefits
otherwise payable under any Plan or (c) result in the acceleration of the time
of payment or vesting of any such benefit.
3.15 Plans; Benefits; Employment Claims.
(a) All employee benefit plans, programs, policies, commitments or
other arrangements (whether or not set forth in a written document)
covering any active, former or retired employee or consultant of Memorial
are listed in Schedule 3.15 of the Memorial Disclosure Schedule
(individually, a "Plan" and, collectively, the "Plans"). To the extent
applicable, the Plans comply with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code,
and any Plan intended to be qualified under Section 401(a) of the Code has
either obtained a favorable determination letter as to its qualified status
from the Internal Revenue Service (the "IRS") or
still has a remaining period of time under applicable Treasury Regulations
or IRS pronouncements in which to apply for such a determination letter and
to make any amendments necessary to obtain a favorable determination. To
the extent any Plan with an existing determination letter from the IRS must
be amended to comply with the applicable requirement of the Tax Reform Act
of 1986, as amended, and subsequent legislation, the time period for
effecting such amendments will not expire prior to this transaction.
Memorial has furnished or made available to Memorial copies of the most
recent IRS letters and IRS Form 5500 with respect to any such Plan. No Plan
is covered by Title IV of ERISA or Section 412 of the Code. Neither
Memorial nor any officer or director of Memorial has incurred any liability
or penalty under Section 4975 through Section 4980 of the Code or Title I
of ERISA. Each Plan has been maintained and administered in all material
respects in compliance with its terms and with the requirements prescribed
by and all applicable statutes, laws, rules, orders, rules and regulations,
including, but not limited to, ERISA and the Code, that are applicable to
such Plans. No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Plan activities) has been
brought, or, to the best knowledge of Memorial, is threatened, against or
with respect to any such Plan. All contributions, reserves and premium
payments required to be made or accrued as of the date hereof to the Plans
have been made or accrued.
(b) Except as disclosed in Schedule 3.15 of the Memorial Disclosure
Schedule, no present or former employee of Memorial has any claim against
Memorial (whether under federal or state law, under any employment
agreement, or otherwise) on account of or for (i) overtime pay, other than
overtime pay for work done in current payroll period; (ii) wages or salary
for any period other than the current payroll period; (iii) vacation time
off or pay in lieu of vacation time off, other than (x) accumulated
vacation pay as show in the schedule referred to above, and (y) vacation
time off (or pay in lieu thereof) earned in or in respect of the current
fiscal year; or (iv) any material violation of any statute, ordinance or
regulation relating to minimum wages or maximum hours of work.
(c) No person or party (including, but not limited to governmental
agencies of any kind) has filed, or to the knowledge of Memorial has
threatened to file, any claim against Memorial under or rising out of any
statute, ordinance or regulation relating to discrimination in employment
or employment practices. No person has any material claim under which
Memorial has any material liability under any health, sickness, disability,
medical, surgical, hospital, or surgical, hospital, or similar benefit plan
or arrangement, or by virtue of his or her employment maintained by
Memorial, or to or by which Memorial is a party or is bound, or under any
workmen's compensation or similar law, which is not fully covered, subject
only to standard deductibles, by insurance maintained with reputable,
financially responsible insurers. No person has any claim or has filed any
action or has threatened to file any action or bring a claim by virtue of
his or her employment by Memorial including, without limiting the
generality of the foregoing, sexual harassment, wrongful termination, or
other actions.
3.16 Major Contracts. Except as disclosed in Schedule 3.16 of the Memorial
Disclosure Schedule, Memorial is not a party to or subject to:
(a) Any union contract or any employment or consulting contract,
agreement or arrangement providing for future compensation, whether written
or oral, with any officer, consultant, director or employee that is not
terminable by Memorial on thirty (30) days' or less notice without penalty
or obligation to make payments related to such termination;
(b) Any plan, contract or arrangement, whether written or oral,
providing for bonuses, pensions, deferred compensation, severance pay or
severance benefits, retirement payments, profit-sharing payments or similar
such payments;
(c) Any joint venture contract, agreement or arrangement or any other
agreement that has involved or is expected to involve a sharing of profits
with another person or entity;
(d) Any existing marketing, distribution, agency or brokerage
agreement in which the annual amount involved in fiscal 2004 exceeded
$5,000 in aggregate amount or pursuant to which Memorial has granted or
received most favored nation pricing provisions or exclusive marketing
rights related to any product, group of products or territory;
(e) Any lease for realty or personal property in which the amount of
payments that Memorial is required to make on an annual basis exceeds
$1,500;
(f) Any instrument evidencing or related in any way to indebtedness
incurred in the acquisition of companies or other entities or indebtedness
for borrowed money by way of direct loan, sale of debt securities, purchase
money obligation, conditional sale, guarantee, leasehold obligations or
otherwise;
(g) Any material license agreement, either as licensor or licensee;
(h) Any contract containing covenants purporting to limit the freedom
of Memorial to compete in any line of business in any geographic area;
(i) Any insurance policy or fidelity or surety bond;
(j) Any agreement of indemnification relating to Memorial or any of
its officers, directors or employees;
(k) Any agreement, contract or commitment relating to capital
expenditures that involves future payments individually in excess of $1,500
or in the aggregate in excess of $5,000 by Memorial;
(l) Any agreement, contract or commitment relating to personal
services to be rendered by any person to Memorial requiring the payment of
more than $1,000 per month or the disposition or acquisition of any assets
by Memorial; or
(m) Any other agreement, contract or commitment that is material to
Memorial's business.
Each agreement, contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license, regulations and commitment
listed on the Memorial Disclosure Schedule pursuant to this Section 3.16 is
valid and binding on Memorial, and is in full force and effect, and neither
Memorial nor to the best knowledge of Memorial, any other party thereto has
breached or is aware of any facts that would lead it to believe that it has
breached, any provision of, or is in default
under the terms of any such agreement, contract, mortgage, indenture, plan,
lease, instrument, permit, concession, franchise, arrangement, license,
regulation or commitment. To the best knowledge of Memorial, no such agreement,
contract, mortgage, indenture, plan, lease, instrument, permit, concession,
franchise, arrangement, license or commitment contains any material liquidated
damages, penalty or similar provision. To the best knowledge of Memorial, no
party to any such agreement contract, mortgage, indenture, plan, lease,
instrument, permit, registration, concession, franchise, arrangement, license or
commitment intends to cancel, withdraw, modify or amend the same.
3.17 Taxes
(a) All tax returns, statements, reports and forms (including, but not
limited to, estimated Tax returns and reports and information returns and
reports) required to be filed with any Taxing Authority (as defined in
Section 3.17(h) below) with respect to any Taxable period ending on or
before the Closing Date, by or on behalf of Memorial (collectively, the
"Memorial Returns"), have been or will be filed when due (including any
extensions of such due date), and all amounts shown due thereon on or
before the Closing Date have been or will be paid on or before such date.
The balance sheets included in the Memorial Financial Statements (i) fully
accrue all actual and contingent liabilities for Taxes with respect to all
periods through June 30, 2005 and Memorial has not and will not incur any
Tax liability in excess of the amount reflected on the Memorial Financial
Statements with respect to such periods and (ii) properly accrues in
accordance with statutory accounting principles all liabilities for Taxes
payable after June 30, 2005 with respect to all transactions and events
occurring on or prior to such date. All information set forth in the
footnotes to the Memorial Financial Statements relating to Tax matters is
true, complete and accurate in all material respects.
(b) No material Tax Liability since June 30, 2005 has been incurred
other than in the ordinary course of business and adequate provision has
been or will be made for all Taxes since that date in accordance with
statutory accounting principles on at least a quarterly basis. Memorial has
withheld and paid to the applicable financial institution or Taxing
Authority all amounts required to be withheld. Neither Memorial nor any
member of any affiliated or combined group of which Memorial has been a
member has granted any extension or waiver of the limitation period
applicable to any of the Memorial Returns.
(c) The Shareholders shall be entitled to receive on a pro rata basis
any tax refund that Memorial shall receive from any Taxing Authority with
respect to any Taxable period ending on or before December 31, 2004.
(d) The Shareholders agree to be liable for paying any premium tax due
and owing with respect to Memorial's operations ending on or before October
31, 2005. Security National and Southern Security agree to be liable for
paying any premium tax due and owing with respect to Memorial's operations
beginning as of October 31, 2005.
(e) There is no material claim, audit, action, suit, proceeding or
investigation now pending or (to the best knowledge of Memorial) threatened
against or with respect to Memorial in respect of any Tax or assessment. No
notice of deficiency or similar document of any Tax Authority has been
received by Memorial, and there are no liabilities for Taxes (including
liabilities for interest
additions to tax and penalties thereof and related expenses) with respect
to the issues that have been raised (and are currently pending) by any Tax
Authority that could, if determined adversely to Memorial, materially and
adversely affect the liability of Memorial for Taxes. There are no liens
for Taxes against the assets of Memorial except liens for current Taxes not
yet due. Memorial has not been and will not be required to include any
material adjustment in its Taxable income for any Tax period (or portion
thereof) pursuant to the Code or any comparable provision under state or
foreign Tax laws as a result of transactions, events or accounting methods
employed prior to the Closing.
(f) There is no contract, agreement, plan or arrangement, including,
but not limited to, the provisions of this Agreement, covering any employee
or independent contractor or former employee or independent contract of
Memorial that, individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to the Code. Other than
pursuant to this Agreement, Memorial is not a party to or bound by (nor
will it, prior to the Closing Date, become a party to or become bound by)
any tax indemnity, tax sharing or tax allocation agreement (whether
written, oral or arising under operation of federal law as a result of
Memorial being a member of a group filing consolidated tax returns, under
operation of certain state law as a result of Memorial being a member of a
group filing consolidated tax returns, under operation of certain state
laws as a result of Memorial being a member of a unitary group or under
comparable laws of other states or foreign jurisdictions) that includes a
party other than Memorial. Memorial has listed in Schedule 3.17 of the
Memorial Disclosure Schedule all of Memorial's material federal and state
tax returns for years ending December 31, 2004 and 2003, information
statements, reports work papers, Tax opinions, Tax memoranda and other Tax
data and documents of Memorial that Memorial has furnished or made
available to Security National and Southern Security, or will furnish or
make available to Security National and Southern Security within ten (10)
days from the date of this Agreement.
(g) The federal income tax returns of Memorial have not been audited
by the Internal Revenue Service, (or a predecessor agency). Memorial has
not received any notice of assessment or proposed assessment of any United
States, State or other tax measured by its income, property or
transactions, and no issues have been raised by any taxing authority
providing a basis for any additional assessment of any such tax. Memorial
has not waived any law or regulation fixing, or consenting to the extension
of, any period of time for the assessment of any tax or other governmental
imposition, or become committed so to do, except as described in Schedule
3.17 which is true, complete and correct in all material respects. The
reserves for current taxes accrued on the books of Memorial are reasonable
and adequate in amount. Memorial agrees to indemnify Security National and
Southern Security for any and all tax assessments not accrued on the books
of Memorial and related to any income, events, transactions, or time
periods prior to the Closing, except for any tax which may become due on
income previously excluded from taxable income and accumulated in the
undistributed policyholders' surplus account ("Phase III Tax").
(h) For purposes of this Agreement, the following terms have the
following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
privilege, intangible, profits, license, withholding, payroll, employment,
excise, insurance, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax,
governmental fee or other like assessment or charge of any kind whatsoever,
together with any interest or any penalty, addition to or additional amount
imposed by any Governmental Entity (a
"Taxing Authority") responsible for the imposition of any such tax (whether
domestic or foreign), (ii) any liability for the payment of any amounts of
the type described in clause (i) above as a result of being a member of an
affiliated, consolidated, combined or unitary group for any Taxable period
and (iii) any liability for the payment of any amounts of the type
described in clause (i) or clause (ii) above as a result of any express or
implied obligation to indemnify any other person or entity.
3.18 Interests of Officers and Directors Except as described in Schedule
3.18 of the Memorial Disclosure Schedule, none of Memorial's officers or
directors (or relatives of such persons living in the same household) have any
material interest in any property, whether real or personal, tangible or
intangible, used in or pertaining to Memorial's business.
3.19 Intellectual Property
(a) Memorial owns or is licensed or otherwise entitled to exercise all
rights under or with respect to all intellectual property including without
limitation, patents, copyrights, trademarks or service marks owned or used
in connection with its business. Schedule 3.19 of the Memorial Disclosure
Schedule lists all patents, trademarks, works of authorship, registered and
unregistered copyrights, registered and unregistered trademarks, trade
names and service marks, and all applications therefore owned or licensed
by Memorial (the "Intellectual Property Rights"), and further specifies the
jurisdictions in which each such matter and registration has been filed,
including the respective registration or application numbers. Schedule 3.19
of the Memorial Disclosure Schedule also lists all material licenses,
sublicenses and other agreements (oral or written) as to which Memorial is
a party and pursuant to which Memorial or any other person or entity owns
or is licensed or otherwise authorized or obligated with respect to any
Intellectual Property Right and includes the identity of all parties
thereto. Memorial is not, nor as a result of the execution and delivery of
this Agreement or the performance of Memorial's obligations hereunder will
be, in violation of any license, sublicense or other agreement applicable
to it, whether or not described in the Memorial Disclosure Schedule. Except
to the extent clearly and conspicuously disclosed in Schedule 3.19 of the
Memorial Disclosure Schedule, Memorial is the sole and exclusive owner or
licensee of, with full right, title and interest in and to (free and clear
of any liens, claims or encumbrances), the Intellectual Property Rights,
and has the sole and exclusive right in respect thereof (and, except as set
forth in Schedule 3.19 of the Memorial Disclosure Schedule is not
contractually obligated to pay any compensation to any third party with
respect thereto).
3.20 Restrictions on Business Activities. There is no material agreement,
judgment, injunction, order or decree binding upon Memorial that has or could
reasonably be expected to have the effect of prohibiting or materially impairing
any business practice of Memorial, any acquisition of property by Memorial or
the conduct of business by Memorial as currently conducted or as currently
proposed to be conducted.
3.21 Title to Properties; Absence of Liens and Encumbrances; Condition of
Equipment.
(a) Schedule 3.21 of the Memorial Disclosure Schedule sets forth a
true, complete and accurate list of all real property owned or leased by
Memorial and summarizes all material lease terms, including the aggregate
annual rental or other fees payable, the length of all leases and the
number of extensions available.
(b) Memorial has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its tangible
properties and assets, whether real, personal or mixed, used in its
business, free and clear of any liens (other than liens for taxes that are
not yet delinquent), claims, charges, pledges, security interests or other
encumbrances, except as reflected in the Memorial Financial Statements and
except for such imperfections of title and encumbrances, if any, that are
not substantial or material in character, amount or extent, and that do not
materially detract from the value, or interfere with the present use, of
the property subject thereto or affected thereby.
(c) The machinery, equipment and other personal property
(collectively, the "Equipment") owned or leased by Memorial is, taken as a
whole (i) adequate for the conduct of the business of Memorial consistent
with its past practice, (ii) suitable for the uses to which it is currently
employed, (iii) in good operating condition, (iv) regularly and properly
maintained and (v) free from all defects, except, with respect to clauses
(ii) through (iv) of this Section 3.21(c), as would not have a material
adverse effect on the Business Condition of Memorial.
3.22 Governmental Authorizations and Licenses. Memorial is the holder of
all licenses, authorizations, permits, concessions, registrations, certificates
and other franchises of any Governmental Entity required to operate its business
(collectively, the "Licenses") and is in compliance with the terms, conditions,
limitations, restrictions, standards, prohibitions, requirements and obligations
of all of such Licenses, except where the failure to hold any such License or to
so comply would not have a material adverse effect on the Business Condition of
Memorial. The Licenses are in full force and effect on the date hereof and will
be in full force and effect on the Closing Date, except as disclosed in Section
3.22 of the Memorial Disclosure Schedule. There is not now pending, nor to the
best knowledge of Memorial is there threatened, any action, suit, investigation
or proceeding against Memorial before any Governmental Entity with respect to
the Licenses, nor is there any issued or outstanding notice, order or complaint
with respect to the violation by Memorial of the terms of any such License or
any rule or regulation applicable thereto.
3.23 Environmental Matters.
(a) To the best knowledge of Memorial, no substance that is regulated
by any Governmental Entity or that has been designated by any Governmental
Entity to be radioactive, toxic, hazardous or otherwise a danger to health
or the environment (a "Hazardous Material") is present in, on or under any
property that Memorial has at any time owned, operated, occupied or leased.
(b) To the best knowledge of Memorial, Memorial has not transported,
stored, used, manufactured, released or exposed its employees or any other
person to any Hazardous Material in violation of any applicable statute,
rule, regulation, order or law, except where such violation would not have
a material adverse effect on the Business Condition of Memorial.
(c) To the best knowledge of Memorial, Memorial has obtained all
permits, consents, waivers, exemptions, licenses, approvals and other
authorizations (collectively, "Environmental Permits") required to be
obtained under the applicable statutes, rules, regulations, orders or laws
of any Governmental Entity relating to land use, public and employee health
and safety, pollution or protection
of the environment (collectively, "Environmental Laws"), except where the
failure to obtain such an Environmental Permit would not have a material
adverse effect on the Business Condition of Memorial. Schedule 3.23 of the
Memorial Disclosure Schedule sets forth a true, complete and accurate list
of all such Environmental Permits, each of which is in full force and
effect on the date hereof and will be in full force and effect on the
Closing Date. Memorial (i) is in full compliance in all of the material
respects with all of the terms and conditions of the Environmental Permits
and (ii) is in compliance in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in the
Environmental Laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered into, promulgated
by or approved thereunder. Memorial has not received any notice nor is
Memorial aware of any past or present condition or practice of the business
conducted by Memorial that forms or that could be reasonably expected to
form the basis of any material claim, action, suit, proceeding, hearing or
investigation against Memorial, arising out of the manufacture, processing,
distribution, use, treatment, storage, spill, disposal, transport or
handling, or the emission, discharge, release or threatened release into
the environment, of any Hazardous Material by Memorial.
3.24 Insurance. Schedule 3.24 of the Memorial Disclosure Schedule lists and
summarizes all insurance policies and fidelity or surety bonds covering the
assets, Inventories, business, equipment, properties, operations, employees,
officers and directors of Memorial, the amounts of coverage under each such
policy and bond of Memorial. Within the last four years, Memorial has not been
refused any requested insurance or bond coverage. Except as disclosed on the
Memorial Disclosure Schedule, all premiums payable under all of such policies
and bonds have been paid and Memorial is otherwise in full compliance with the
terms of all of such policies and bonds (or other policies and bonds providing
substantially similar insurance coverage). Such policies of insurance and bonds
are of the type and in amounts customarily carried by persons and entities
conducting businesses similar to that of Memorial. Memorial does not know of any
threatened termination of or material premium increase with respect to, any of
such insurance policies or bonds.
3.25 Labor Matters. To the best knowledge of Memorial and the Shareholders,
Memorial is in compliance in all material respects with all currently applicable
laws, rules and regulations respecting employment, discrimination in employment,
terms and conditions of employment, wages and hours and occupational safety and
health and employment practices, and has not and currently is not engaged in any
unfair labor practice. Memorial has not received any notice from any
Governmental Entity, and there has not been asserted before any Governmental
Entity, any claim, action or proceeding to which Memorial is a party or
involving Memorial, and there is neither pending nor, to Memorial's best
knowledge, threatened, any investigation or hearing concerning Memorial arising
out of or based upon any such law, regulation or practice.
3.26 Agents; Customers and Complaints. Schedule 3.26 of the Memorial
Disclosure Schedule sets forth the names and addresses of the sales agents or
brokers of Memorial as of June 30, 2005. Except as disclosed in Schedule 3.26 of
the Memorial Disclosure Schedule, as of the date hereof, Memorial has no
unresolved customer or agent complaints filed with a Governmental Entity
concerning its products and/or services.
3.27 Questionable Payments. Neither Memorial nor, to Memorial's best
knowledge, any director, officer or other employee of Memorial has: (i) made any
payments or provided services or other favors in the United States or in any
foreign country in order to obtain preferential treatment or consideration by
any Governmental Entity with respect to any aspect of the business of Memorial
or any of its Subsidiaries or (ii) made any political contributions that would
not be lawful under the laws of the United States and the foreign country in
which such payments were made. Neither Memorial nor, to Memorial's best
knowledge, any director, officer or other employee of Memorial nor, to
Memorial's best knowledge, any customer or supplier of any of them, has been the
subject of any inquiry or investigation by any Governmental Entity in connection
with payments or benefits or other favors to or for the benefit of any
governmental or armed services official, agent, representative or employee with
respect to any aspect of the business of Memorial or with respect to any
political contribution.
ARTICLE IV
COVENANTS OF SHAREHOLDERS
4.1 Shareholders to Sell Shares in Transaction. The Shareholders hereby
irrevocably agree to sell Shareholders' shares of common stock in the
transaction. The Shareholders represent and warrant that such agreement set
forth in this Section 4.1 constitutes a valid and legally binding obligation of
the Shareholders, enforceable against the Shareholders in accordance with its
terms and that such agreement has been duly authorized and approved and adopted
by or on behalf of each Shareholder that is not a natural person by all
requisite corporate equivalent action.
4.2 Shareholders to Maintain Memorial Policies. Following the Closing, the
Shareholders agree, where applicable, to maintain any existing policies from
Memorial that were previously sold through such Shareholders' funeral and
mortuary businesses and to avoid replacing any of such policies with the
policies of other insurance companies. In addition, the Shareholders agree to
use their best efforts to support the business and operations of Memorial,
including, where applicable, to maintain a business relationship with Memorial
to the extent such a business relationship existed prior to the Closing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SECURITY NATIONAL AND SOUTHERN SECURITY
Except as noted on the Security National/Southern Security Disclosure
Schedule, Security National and Southern Security represent and warrant as
follows:
5.1 Organization, Good Standing and Power. Security National is a
corporation validly existing and in good standing under the laws of the state of
Utah and Southern Security is a corporation validly existing and in good
standing under the laws of the state of Florida, and each company has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as it is now being conducted. Security National and
Southern Security have each delivered to the Shareholders complete and correct
copies of their respective Articles of Incorporation and Bylaws, as amended to
the date hereof.
5.2 Authority
(a) Security National and Southern Security each have all requisite
corporate power and authority to enter into and execute and deliver this
Agreement and to consummate the transactions contemplated hereby and
thereby, subject to approval of the transactions by applicable state
insurance commissioners and other relevant Governmental Entities having
jurisdiction over its business. This Agreement, when executed and delivered
by Security National and Southern Security, will constitute the valid and
binding obligation of Security National and Southern Security, enforceable
in accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any
proceeding therefore may be brought.
(b) To the best knowledge of Security National and Southern Security,
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and thereby, will not conflict with or
result in any violation of any material statute, law, rule, regulation,
judgment, order, decree or ordinance applicable to Security National,
Southern Security, or any of their Subsidiaries or their respective
properties or assets, nor will it conflict with or result in any breach or
default (with or without the giving of notice or the lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to the loss of any material benefit under
(i) any provision of the Articles of Incorporation or Bylaws of Security
National, Southern Security, or of any of their Subsidiaries or (ii) any
material agreement, contract, note, mortgage, indenture, lease, instrument,
permit, concession, franchise or license to which Security National,
Southern Security, or any of their Subsidiaries is a party or by which
Security National, Southern Security, or any of their Subsidiaries or their
respective properties or assets may be bound or affected.
5.3 Board Authorization. Prior to the Closing, the Board of Directors of
Security National and Southern Security will have authorized the execution and
delivery of this Agreement and the performance by Security National and Southern
Security of their respective obligations under the Agreement.
5.4 Maintain Office; Retention of Agents. Security National and Southern
Security represent and warrant that following the Closing, Memorial will
maintain an office in Blytheville, Arkansas. In addition, Security National and
Southern Security agree to use their best efforts, following the Closing, to
assist Memorial in retaining its sales agents or brokers in its business and
operations.
ARTICLE VI
CONDUCT AND TRANSACTIONS PRIOR TO CLOSING
DATE; ADDITIONAL AGREEMENT
6.1 Conduct of Business of Memorial.
(a) During the period form the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the Closing Date,
Memorial shall carry on its business in the usual, regular and ordinary
course in substantially the same manner as conducted prior to the date of
this Agreement and, to the extent consistent with such businesses, use all
commercially reasonable efforts consistent with past practice and policies
to preserve intact its present business organizations, keep available the
services of its present officers and key employees and preserve its
relationships with customers, suppliers, distributors, agents, brokers,
licensors, licensees, Governmental Entities, and others having business
dealings with them, to the end that its good will and ongoing businesses
shall be unimpaired at the Closing Date. Memorial shall promptly notify
Security National and Southern Security of any event or occurrence not in
the ordinary course of business of Memorial, and any event which could have
a material and adverse effect on the Business Condition of Memorial. Except
as expressly contemplated by this Agreement or disclosed in the Memorial
Disclosure Schedule, Memorial shall not, without the prior written consent
of Security National and Southern Security:
(i) Grant any options, warrants, or stock purchase rights;
(ii) Enter into any commitment or transaction not in the ordinary
course of business to be performed over a period longer than six
months in duration, or to purchase fixed assets with an aggregate
purchase price exceeding $5,000, or (ii) sell or commit to sell any
products with an aggregate purchase price greater than $5,000 in any
single month if the expected profit margins are lower than those
customarily obtained for sales of similar products by Memorial in the
past.
(iii) Grant any severance or termination pay to any director,
officer, employee or consultant, except mandatory payments made
pursuant to standard written agreements outstanding on the date hereof
(any such agreement or arrangement to be disclosed in Schedule 6.1 of
the Memorial Disclosure Schedule);
(iv) Transfer to any person title to any rights to Memorial
Intellectual Property Rights except in the ordinary course of
business;
(v) Enter into or amend any agreements pursuant to which any
other party is granted marketing, agency or other similar rights of
any type or scope with respect to any products of Memorial;
(vi) Except in the ordinary course of business with prior notice
of Security National and Southern Security, violate, amend or
otherwise modify the terms of any of their material contracts binding
on Memorial set forth on the Memorial Disclosure Schedule;
(vii) Commence a lawsuit other than for the routine collection of
bills or for a breach of this Agreement;
(viii) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any
of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other
securities in respect of, lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or
indirectly, any shares of its capital stock except from former
employees, directors and consultants in accordance with agreements
providing for the repurchase of shares in connection with any
termination of service to Memorial;
(ix) Issue, deliver or sell, authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of, any
shares of its capital stock or securities convertible into, or
subscriptions rights, warrants, or options to acquire, or other
agreements or commitments of any character obligating it to issue any
such shares or other convertible securities;
(x) Solicit approval for and effect any amendments to Memorial's
of Incorporation or Bylaws (other than as contemplated by this
Agreement);
(xi) Acquire or agree to acquire by merging or consolidating
with, or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to the Business Condition of
Memorial;
(xii) Sell, lease, license or otherwise dispose of any of its
properties or assets except in the ordinary course of business and
consistent with past practice;
(xiii) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities or guarantee
any debt securities of others or loan money to others; (xiv) Adopt or
amend any Plan, or enter into any employment contract, pay any special
bonus or special remuneration to any director, employee or consultant,
or increase the salaries or wage rates of its employees other than
pursuant to scheduled employee reviews under Memorial's normal
employee review cycle, as the case may be, or in connection with the
hiring of employees other than officers in the ordinary course of
business, in all cases consistent with past practice;
(xv) Revalue any of its assets, including without limitation,
writing down the value of inventory or writing off notes or accounts
receivable other than in the ordinary course of business and
consistent with past practice;
(xvi) Pay, discharge or satisfy in an amount in excess of $25,000
in any one case any claim, liability or obligation (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction in the ordinary course of business
of liabilities reflected or reserved against Memorial's Financial
Statements or those incurred after the date of the June 30, 2005
Unaudited Balance Sheet in the ordinary course of business;
(xvii) Make any material tax election other than in the ordinary
course of business and consistent with past practice, change any
material tax election, adopt any material tax accounting method
practice, change any material tax accounting method, file any material
tax return (other than any estimate tax returns, payroll tax returns
or sale tax returns) or any amendment to a material tax return, enter
into any closing agreement, settle any tax claim or assessment, or
consent to any tax claim or assessment, without the prior written or
unwritten consent of Security National and Southern Security, which
consents will not be reasonably withheld; and
(xviii) Engage in any activities or transactions that are outside
the ordinary course of its business consistent with past practice.
(b) Unless and until this Agreement shall have been terminated by
either party pursuant to Article VIII, Memorial shall not, directly or
indirectly, through any officer, director, agent or otherwise, (i) solicit,
initiate or encourage submission or proposals or offers from any person
relating to any acquisition or purchase of all or substantially all of the
assets of, or any equity interest in, Memorial or any merger,
consolidation, business combination or similar transaction with Memorial,
or (ii) participate in any discussions or negotiations regarding, furnish
to any other person any confidential information with respect to, or
otherwise cooperate with any way with, or participate in, facilitate or
encourage, any effort or attempt by any other person to do or seek any of
the foregoing.
(c) Memorial shall not take, or fail to take, any action which from
the date hereof through the Closing would cause or constitute a breach of
any of its representations, warranties and covenants set forth in this
Agreement or which would from the date hereof through the Closing cause any
of such representations or warranties to be inaccurate. In the event of,
and promptly after becoming aware of, the occurrence of or the pending or
threatened occurrence of any event which would cause or constitute such a
breach of inaccuracy, Memorial shall give detailed notice thereof to the
other parties and shall use its best efforts to prevent or promptly remedy
such breach or inaccuracy.
(d) Memorial shall promptly apply for or otherwise seek, and use its
commercially reasonable efforts to obtain all consents and approvals
required to be obtained by it for the consummation of this transaction, and
Memorial shall use its best efforts to obtain all necessary consents,
waivers and approvals under any of Memorial's material agreements,
contracts licenses or leases in connection with this transaction, except
such consents and approvals which Security National, Southern Security and
Memorial agree, Memorial shall not seek to obtain, as contemplated by the
Memorial Disclosure Schedule.
(e) Memorial shall each use its best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled
the conditions to closing under this Agreement.
(f) Memorial shall take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on Memorial with
respect to this transaction and will promptly cooperate with and furnish
information to Security National and Southern Security in connection with
any such requirements imposed upon Memorial, Security National, Southern
Security or any other party in connection with this transaction. Memorial
shall take all reasonable actions to obtain (and to cooperate with Security
National, Southern Security and their respective subsidiaries in obtaining)
a consent, authorization, order or approval of, or any exception by, any
Governmental Entity, required to be obtained or made by Memorial (or by
Security National, Southern Security or their respective subsidiaries) in
connection with this transaction or the taking of any action contemplated,
by this Agreement, and to defend all lawsuits or other legal proceedings
challenging this Agreement or the consummation of the transactions
contemplated by this Agreement and to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, to lift or rescind any injunction or
restraining order or other order adversely affecting the ability or the
parties to consummate the transactions contemplated hereby, and to effect
all necessary registrations and filings and submissions or information
required by any Governmental Entity, and to fulfill all conditions to this
Agreement.
(g) Memorial shall take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on it with
respect to this transaction and will promptly cooperate with and furnish
information to Security National and Southern Security in connection with
this transaction. Memorial shall take all reasonable actions to obtain (and
to cooperate with Security National and Southern Security in obtaining) and
consent, authorization, order or approval of, or exemption by, and
Governmental Entity required to be obtained or made by Memorial action
contemplated by this Agreement, and to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby to lift or rescind any injunction or
restraining order or other order adversely affecting the ability of the
parties to consummate the transaction contemplated hereby, and to effect
all necessary registrations and filings and submissions of information
required by any Governmental Entity, and to fulfill all conditions to this
Agreement.
(h) Memorial shall give Security National and Southern Security and
their respective agents, full and complete access to all books, records,
personnel, properties, assets and facilities of Memorial for Security
National's and Southern Security's inspection and due diligence, in its
discretion and Security National and Southern Security may make copies of
documents and information subject to Section 10.19 below.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect This Transaction. The
respective obligation of each party to effect this transaction shall be subject
to the satisfaction prior to the Closing of the following conditions:
(a) Legal Action. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the
consummation of this transaction shall have been issued by any Governmental
Entity and remain in effect, and no litigation seeking the issuance of such
and order or injunction, or seeking relief against Memorial, or Security
National and Southern Security if this transaction is consummated, shall be
pending which, in the good faith judgment of Memorial's, Security
National's or Southern Security's Board of Directors (acting upon the
written opinion of their respective outside counsel) has a reasonable
probability of resulting in such order, injunction or relief and such
relief would have a material adverse effect on the Business Condition of
such party. In the event any such order or injunction shall have been
issued, each party agrees to use commercially reasonable efforts to have an
such injunction lifted.
(b) Statutes. No action shall have been taken, and no statute, rule,
regulation or order shall have been enacted, promulgated or issued or
deemed applicable to this transaction by any Governmental Entity which
would (i) make the consummation of this transaction illegal, (ii) prohibit
Security National's, Southern Security's or Memorial's ownership or
operation of all or a material portion of the business or assets of
Memorial, Southern Security or Security National and its subsidiaries taken
as a whole, or compel Security National, Southern Security or Memorial to
dispose of or hold separate all or a material portion of the business or
assets of Memorial, or Security National and Southern Security and their
respective subsidiaries taken as a whole, as a result of this transaction
or (iii) render Security National, Southern Security or Memorial unable to
consummate this transaction, except for any waiting period provisions.
7.2 Conditions to Obligations of Security National and Southern Security.
The obligations of Security National and Southern Security to effect this
transaction are subject to the satisfaction of the following conditions, unless
waived by Security National and Southern Security:
(a) Representations and Warranties. The representations and warranties
of Memorial set forth in this Agreement (determined without regard to any
materiality qualifiers, including without limitation "material adverse
effect") shall be true and correct in all respects as of the date of this
Agreement and as of the Closing Date, unless any failures to be true and
correct, individually or in the aggregate, do not have and could not
reasonably be expected to have a material adverse effect on the Business
Condition of Memorial; and there shall have been no willful breach by
Memorial of any of its representations or warranties made in this
Agreement. Security National and Southern Security shall have received a
certificate signed by the Chief Executive Officer and the Chief Financial
Officer of Memorial to such effect on the Closing Date.
(b) No Material Adverse Change. There shall have been no material
adverse change in the Business Condition of Memorial from the date of this
Agreement through the Closing Date and Security National and Southern
Security shall have each received a certificate signed by the Chief
Executive Officer and the Chief Financial Officer of Memorial to such
effect on the Closing Date.
(c) Performance of Obligations of Memorial and Shareholders. Memorial
and the Shareholders shall have performed all obligations and covenants
required to be performed by it under this Agreement prior to the Closing
Date, and Security National and Southern Security shall have each received
a certificate signed by the Chief Executive Officer and the Chief Financial
Officer of Memorial to such effect on the Closing Date.
(d) Regulatory Approvals. All authorizations, consents, orders or
approvals of, or declarations of, or declarations or filing with, or
expiration of waiting periods imposed by, any Governmental Entity
(including, without limitation, the states of Utah, Florida and Arkansas)
necessary for the consummation of the transactions contemplated by this
Agreement shall have been obtained.
(e) Consents. Security National and Southern Security shall have
received duly executed copies of all material third-party non-regulatory
consents and approvals contemplated by this Agreement or the Memorial
Disclosure Schedule in form and substance reasonably satisfactory to
Security National and Southern Security. Security National and Southern
Security shall be entitled to receive any earnings from the operations of
Memorial beginning as of the Closing Date.
(f) Resignation of Directors. The directors of Memorial in office
immediately prior to the Closing Date shall have resigned as directors of
the Surviving Corporation effective as of the Closing Date.
(g) Legal Opinion. Security National and Southern Security shall have
received an opinion of Memorial's legal counsel, in form and substance
acceptable to Security National and Southern Security, to the effect that:
(i) this Agreement has been duly authorized, executed and
delivered by Memorial and constitutes the valid and binding
obligations of Memorial and the Shareholders and all corporate action
required by Memorial in order to effect the transactions contemplated
hereby has been taken;
(ii) Memorial is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Arkansas and
is duly authorized to conduct its business as presently conducted;
(iii) Memorial is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Arkansas and
is duly licensed to conduct the insurance business that it presently
conducts under the Arkansas insurance law;
(iv) the authorized capital structure of Memorial consists of
27,000 shares of Common Stock and there are 4,681 shares of Common
Shares issued and outstanding, all of which are owned by the
Shareholders. All issued and outstanding shares of Common Stock have
been duly authorized, validly issued and are fully-paid and
nonassessable and were not issued in violation of the pre-emptive
rights of any Shareholder;
(v)upon delivery to Security National and Southern Security of
the stock certificates evidencing all of the issued and outstanding
shares of Common Stock said Common Stock will be free and clear of all
liens, claims, encumbrances or other adverse interests; and
(vi) neither the execution and delivery by Memorial of this
Agreement, nor the compliance by Memorial with the terms and
provisions hereof, will conflict with or result in a breach of (A) any
of the terms, conditions or provisions of the Articles of
Incorporation, the Bylaws or any other governing instrument with
respect to Memorial, or (B) with any judgment, order, injunction,
decree, law, statute, regulation or ruling with or of any court or
Governmental Entity known to such counsel to which Memorial is
subject, or will constitute a default thereunder.
In rendering such opinion, such counsel may rely, to the extent such
counsel deems such reliance necessary or appropriate, upon certificates of
public officials or of any officer or officers of Memorial, provided the extent
of such reliance is specified in such opinion and executed copies of such
opinions and certificates are furnished to Security National and Southern
Security.
7.3 Conditions to Obligations of Memorial and Shareholders. The obligation
of Memorial and the Shareholders to effect this transaction is subject to the
satisfaction of the following conditions unless waived by Memorial and the
Shareholders.
(a) Representations and Warranties. The representations and warranties
of Security National and Southern Security set forth in this Agreement
shall be true and correct in all material respects (except for such
representations and warranties which are qualified by their terms by a
reference to materiality, which representations and warranties as so
qualified shall be true in all aspects) (i) as of the date of this
Agreement, and (ii) as of the Closing Date as though made on and as of each
such date, except as otherwise contemplated by this Agreement, and Memorial
shall have received a certificates signed by the Chief Executive Officer
and the Chief Financial Officer of Security National and Southern Security
to such effect.
(b) Performance of Obligations of Security National and Southern
Security. Security National and Southern Security shall have performed all
obligations and covenants required to be performed by them under this
Agreement prior to the Closing Date, and Memorial shall have received
certificates signed by the Chief Executive Officer and the Chief Financial
Officer of both Security National and Southern Security to such effect.
(c) Legal Opinion. Memorial and the Shareholders shall have received
an opinion of Security National's and Southern Security's legal counsel, in
form and substance satisfactory to the Memorial, to the effect that:
(i) Security National and Southern Security are each a
corporation duly organized, validly existing and in good standing
under the laws of their respective states of incorporation with all
requisite corporate power and corporate authority to execute, deliver
and perform this Agreement;
(ii) the execution, delivery and performance of this Agreement by
Security National and Southern Security will not conflict with any of
the terms, provisions or conditions of the Articles of Incorporation
or the Bylaws of Security National or Southern Security, respectively;
(iii) the execution, delivery and performance of this Agreement
has been duly authorized by all necessary corporate action on the part
of both Security National and Southern Security and is enforceable
against both Security National and Southern Security in accordance
with its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or limiting creditor's rights generally.
In rendering such opinion such counsel may rely, to the extent such counsel
deems such reliance necessary or appropriate, upon certificates of public
officials or of any officer or officers of Security National and Southern
Security, provided the extent of such reliance is specified in such opinion and
executed copies of such certificates are furnished to Memorial.
(f) Payment of Purchase Consideration. Security National and Southern
Security shall pay the Purchase Consideration as required in Section 1.2 of
this Agreement.
ARTICLE VIII
TERMINATION
8.1 Termination.
(a) This Agreement may be terminated at any time prior to the Closing
Date:
(i) by mutual written agreement of Security National, Southern
Security, Memorial, and the Shareholders;
(ii) by Security National or Southern Security, if there has been
a breach by Memorial, or the Shareholders of any representation,
warranty, covenant or agreement set forth in this Agreement on the
part of Memorial, or the Shareholders which is material and which
Memorial, or the Shareholders fails to cure within five (5) business
days after notice thereof is given by Security National or Southern
Security (except that no cure period shall be provided for a breach by
Memorial or the Shareholders which by its nature cannot be cured);
(iii) by Memorial, or the Shareholders, if there has been a
breach by Security National or Southern Security of any
representation, warranty, covenant or agreement set forth in this
Agreement on the part of Security National or Southern Security which
is material and which Security National or Southern Security fails to
cure within five (5) business days after notice thereof is given by
Memorial (except that no cure period shall be provided for a breach by
Security National or Southern Security which by its nature cannot be
cured);
(iv) by Security National, Southern Security, Memorial or the
Shareholders, if this transaction shall not have been consummated on
or before October 30, 2005; provided, however, that if the sole reason
this transaction has not been completed by such date results from
delays in the regulatory approval process, this Agreement may not be
terminated but rather shall remain in full force and effect for an
additional ninety (90) days beyond October 30, 2005.
(v) by Security National, Southern Security, Memorial or the
Shareholders if any permanent injunction or other order of a court or
other competent authority preventing this transaction shall have
become final and nonappealable.
(b) Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall be sufficient for such action to be authorized by the
Board of Directors of the party taking such action.
(c) In the event of termination of this Agreement as provided in this
Section, the provisions of this Agreement shall forthwith become void,
except that the agreements contained or referred to in Sections 10.16
(expenses), 10.17 (brokers, finders), 10.18 (public announcements) and
10.19 (confidentiality) shall survive. Notwithstanding the foregoing, in
the event of a breach of this Agreement by any party hereto, nothing herein
shall limit the remedies at law or in equity of the other party with
respect thereto.
ARTICLE IX
INDEMNIFICATION
9.1 Obligation to Indemnify.
(a) Indemnification by the Shareholders Subject to the time
limitations set forth in Section 10.1 below, the Shareholders agree to
indemnify, defend and hold harmless Security National and Southern
Security and their respective directors, officers, employees, agents,
subsidiaries, affiliates, successors and assigns, from and against all
losses, liabilities, claims, damages, deficiencies, costs and
expenses, including without limitation interest, penalties and
attorney's fees and disbursements (collectively, the "Losses" and
singularly, a "Loss"), based upon, arising out of or otherwise related
to any inaccuracy in or any breach of any representation, warranty,
covenant or agreement of the
Shareholders contained in this Agreement or in any document or other
papers delivered pursuant to this Agreement, including the Memorial
Financial Statements, and in respect of any third party claim based
upon facts alleged which, if true, would have constituted any such
inaccuracy or breach. For purposes of this Agreement, Security
National shall be deemed to have suffered a Loss if and to the extent
that such Loss has been suffered by Memorial.
9.2 Notice and Opportunity to Defend.
(a) Notice of Asserted Liability. Promptly after receipt by any
person entitled to indemnity under this Agreement (the "Indemnitee")
of notice of any demand, claim or circumstances which, with the lapse
of time, would or might give rise to a claim or the commencement or
threatened commencement of any action, proceeding or investigation (an
"Asserted Liability") that may result in a Loss, the Indemnitee may,
at its option, give notice thereof (the "Claims Notice") to the
Shareholders (the "Indemnifying Party"). The Claims Notice shall
describe the Asserted Liability in reasonable detail, and shall
indicate the amount (estimate, if necessary and to the extent
feasible) of the Loss that has been or may be suffered by the
Indemnitee.
(b) Opportunity To Defend. The Indemnifying Party may elect to
compromise or defend, at its own expense and by its own counsel, any
Asserted Liability. If the Indemnifying Party elects to compromise or
defend such Asserted Liability, it shall within thirty (30) days after
the Claims Notice is given or sooner, if the nature of the Asserted
Liability so requires, notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying
Party, in the compromise of, or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or
defend the Asserted Liability, fails to notify the Indemnitee of its
election as herein provided or contests its obligation to indemnify
under this Agreement, the Indemnitee may pay, compromise or defend
such Asserted Liability. Notwithstanding the foregoing, neither the
Indemnifying Party nor the Indemnitee may settle or compromise any
claim over the objection of the other, provided, however, that consent
to settlement or compromise shall not be unreasonably withheld. In any
event, the Indemnitee and the Indemnifying Party may participate, at
their own expense, in the defense of such Asserted Liability. If the
Indemnifying Party chooses to defend any claim, the Indemnitee shall
make available to the Indemnifying Party any books, records or other
documents within its control that are necessary or appropriate for
such defense.
(c) Disputes with Third Parties. Anything in this Section 9.2(c)
to the contrary notwithstanding, in the case of any Asserted Liability
by any supplier, distributor, agent, broker, shareholder, franchisee,
customer or other third party doing business with Memorial prior to
the Closing in connection with which Security National and Southern
Security may make a claim against the Shareholders for indemnification
pursuant to this Section 9.2(c), Security National and Southern
Security may, at their option, give a Claims Notice with respect
thereto but, unless Security National, Southern Security and the
Indemnifying Party otherwise agree, Security National and Southern
Security shall have the exclusive right at its option to defend any
such matter, subject to the duty of Security National and Southern
Security to consult with the Indemnifying Party and its attorneys in
connection with such defense and provided that no such matter shall be
compromised or settled by Security National and Southern Security
without the prior consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. The Indemnifying Party shall have
the right to recommend in good faith
Security National's and Southern Security's proposals to compromise or
settle claims brought by a supplier, agent, or customer, and Security
National and Southern Security agree to present such proposed
compromises or settlements to such supplier, distributor, shareholder,
franchisee or customer. All amounts required to be paid in connection
with any such Asserted Liability pursuant to the determination of any
court, governmental or regulatory body or arbitrator, and all amounts
required to be paid in connection with any such compromise or
settlement consented to by the Indemnifying Party, shall be borne and
paid by the Indemnifying Party. The parties agree to cooperate fully
with one another in the defense, compromise or settlement of any
Asserted Liability. In the event any compromise, settlement or
judgment amount includes amounts resulting from frivolous or
groundless claims or defenses made by Indemnitee, the Indemnifying
Party shall not bear the portion of the amount to be paid relating to
such frivolous or groundless claims.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival of Representations, Warranties, Covenants and Agreements.
Except as provided below with regard to Section 3.17, all representations,
warranties, covenants and agreements in this Agreement or in any document or
instrument delivered pursuant to this Agreement shall be deemed to be conditions
to this transaction and shall survive the consummation of this transaction for a
period of twenty-four (24) months after the Closing Date. Notwithstanding the
foregoing, except as provided below with regard to Section 3.17, all
representations, warranties, covenants and agreements shall survive the Closing
Date for forty-eight (48) months following the Closing Date if such
representations, warranties, covenants and agreements are breached due to fraud
or gross negligence. Notwithstanding the foregoing, the tax obligations set
forth in Section 3.17 above shall survive the consummation of this transaction
and the Closing Date for an indefinite period of time.
10.2 Amendment. This Agreement may be amended by the parties hereto at any
time before or after approval of this transaction by the Shareholders; provided,
however, that following approval of this transaction by the Shareholders, no
amendment hereto shall be made that by law requires the further approval of the
Shareholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of both of the
parties hereto.
10.3 Extension; Waiver. At any time prior to the Closing Date, Memorial,
Security National and Southern Security, by action taken by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other, (ii) waive
any inaccuracies in the representations and warranties made to it contained
herein or in any document or instrument delivered pursuant hereto and (iii)
waive compliance with any of the agreements or conditions for the benefit of it
contained herein. Any agreement on the part of either party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by such party.
10.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) or if sent by facsimile,
confirmation received, to the respective party at the following addresses and/or
facsimile numbers, with the original thereof being mailed by registered or
certified mail, return receipt requested (or at such other address or facsimile
number for the parties hereto as shall be specified by like notice):
(a) If to Security National, to:
Security National Life Insurance Company
▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President and
Chief Operating Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Mackey Price ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ II
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to Southern Security, to:
Southern Security Life Insurance Company
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇, President and
Chief Operating Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Mackey Price ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ II
▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to Memorial, to:
Memorial Insurance Company of America
▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇., President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Friday ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
2000 Regions Center
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
10.5 Interpretation. When a reference is made in this Agreement to Sections
or Exhibits, such references shall be deemed to be to a Section or Exhibit to
this Agreement, unless otherwise indicated. The words "include", "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation". The Table of Contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
10.6 Counterparts. This Agreement may be executed in one or more
counterparts, all of which, when taken together, shall be considered one and the
same agreement, and this Agreement shall become effective when one or more
counterparts have been signed by each of the parties hereto and delivered to the
other parties hereto.
10.7 Entire Agreement. This Agreement and the documents and instruments
attached hereto as Exhibits and all other agreements between the parties hereto
delivered pursuant to this Agreement constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, between the parties hereto
with respect to the subject matter hereof (including specifically the Stock
Purchase Agreement dated as of September __, 2005, among Security National,
Southern Security, Memorial and the Shareholders) and are not intended to confer
upon any other person or entity any rights or remedies hereunder except as
otherwise expressly provided herein.
10.8 No Transfer. This Agreement and the rights and obligations set forth
herein may not be transferred or assigned by operation of law or otherwise
without the consent of both parties hereto. This Agreement is binding upon and
will inure to the benefit of each party hereto and their respective successors
and permitted assigns.
10.9 Severability. If any provision of this Agreement, or the application
thereof, is for any reason whatsoever and to any extent deemed to be invalid or
unenforceable, the remainder of this Agreement and the application thereof to
other persons, entities or circumstances will be interpreted so as reasonably to
effect the intent of the parties hereto. The parties hereto further agree to
replace any such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of the void or unenforceable provision
hereof.
10.10 Other. Remedies Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party hereto will be deemed
cumulative with, and not exclusive of, any other remedy conferred hereby or by
law or equity on such party; and the exercise of any one remedy will not
preclude the exercise of any other remedy otherwise available at law or in
equity.
10.11 Further Assurances. The parties hereto agree to cooperate fully with
other parties hereto and to execute such further instruments, documents and
agreements and to give such further written assurances as may be reasonably
requested by the other party hereto in order to evidence and reflect the
transactions described herein and contemplated hereby and to carry into effect
the intents and purposes of this Agreement.
10.12 No Third Party Beneficiary Rights. No provision of this Agreement is
intended, nor will any provision hereof be interpreted, to provide or create any
third party beneficiary rights or any other rights of any kind whatsoever in any
client, customer, supplier affiliate, stockholder, employee, distributor,
partner of either party hereto or any other person or entity, and all of the
provisions hereof shall be deemed to be personal in nature and between the
parties to this Agreement.
10.13 Mutual Drafting. This Agreement is material mutual product of
Security National, Southern Security and Memorial, and each provision hereof has
been subject to the mutual consultation, negotiation and agreement of Security
National, Southern Security and Memorial, and shall not be construed for or
against either party hereto.
10.14 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the State of
Arkansas, without giving effect to its choice of law principles.
10.15 Jurisdiction and Venue. The federal and state courts within the State
of Utah shall have exclusive jurisdiction to adjudicate any dispute arising
under or out of this Agreement. The parties hereto expressly consent to (i) the
personal jurisdiction of the federal and state courts within the State of Utah
and (ii) service of process being effected upon them by registered or certified
mail. Venue shall be deemed to be with the state and federal courts sitting in
Salt Lake County, State of Utah.
10.16 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby and thereby shall be paid by
the party incurring such costs and expenses. Those costs and expenses of
Memorial will be paid immediately following this transaction by the
Shareholders.
10.17 Brokers or Finders. Security National, Memorial, Southern Security
and the Shareholders each represent, as to itself and, to the extent applicable,
its subsidiaries, that no agent, broker, investment banker or other firm or
person is, or will be, entitled to any broker's or finder's fee or any other
commission or similar fee in connection with any of the transactions
contemplated by this Agreement.
10.18 Public Announcements. Each party hereto will consult in advance with
the other concerning the timing and content of any announcements, press releases
and public statements concerning this transaction and will not make any such
announcement, press release or public statement without the other's prior
consent; provided, however, that Security National and Southern Security may
make any public statement or announcement concerning this transaction without
Memorial's or the Shareholders' prior consent if, in the opinion of counsel for
Security National or Southern Security, such public statement or announcement is
required or advisable to comply with applicable law.
10.19 Confidentiality . No party hereto shall release, publish, reveal or
disclose, directly or indirectly, any business or technical information of the
other party hereto or any of its Subsidiaries considered by the other party as
"confidential", "secret" or "proprietary" (or words of similar meaning)
including, but not limited to, systems, processes, formulas, recipes, data,
functional specifications, computer programs, blue prints, know-how,
improvements, discoveries, developments, designs, inventions, techniques, new
products, marketing and advertising methods, distribution methods and programs,
supplier agreements, customer or distributor lists, pricing policies, financial
information, projections, forecasts, strategies, budgets or other information
related to its business or its distributors, suppliers or customers
(collectively, "Confidential Material"), except to the party's directors,
officers, employees, financial advisors, legal counsel, independent public
accountants or other agents, advisors or representatives who shall require
access thereto on a "need-to-know" basis for the purpose of the transactions
contemplated by this Agreement and who shall agree in writing to be bound by the
terms of this Section 10.19. The parties hereto agree to take all reasonable
precautions to safeguard the confidentiality of the other party's Confidential
Material and to exercise the same degree of care with respect to such other
party's Confidential Material that the party in possession of such Confidential
Material exercises with respect to its own confidential information. Neither
party hereto shall make or permit to be made, except in furtherance of the
transactions contemplated by this Agreement, any copies, abstracts or summaries
of the other party's Confidential Material. In addition, all Confidential
Material belonging to the other party hereto shall be used solely for the
purpose of the investigation and evaluation contemplated by this Section 10.19,
and shall not be used for any other purpose, including any use that would be to
the detriment of the other party hereto or its Subsidiaries, nor shall such
Confidential Material be used in competition with the other party hereto or its
Subsidiaries. The restrictions on disclosure of information contained in this
Section 10.19 do not extend to any information that (a) is already known to the
receiving party; (b) was or is independently developed by the receiving party;
(c) is now or hereafter becomes available to the public other than as a
consequence of a breach of obligations under this Section 10.19 or (d) is
disclosed to third parties hereto outside of the receiving party in accordance
with terms approved by the disclosing party. Upon written request, the
parties hereto shall return all writings, documents and materials containing
Confidential Material with a letter confirming that all copies, abstracts and
summaries of the Confidential Material have been returned or destroyed. In the
event that either party hereto becomes legally required to disclose the other
party's Confidential Material, it shall provide such other party with prompt
written notice of such requirement prior to such disclosure. In the event that a
protective order or other remedy is not obtained, or such other party waives
compliance with the provisions of this Section 10.19 with respect to the
Confidential Material subject to such requirement, such party agrees to furnish
only that portion of the Confidential Material that it is legally required to
furnish and, where appropriate, agrees to use its best efforts to obtain
assurances that such Confidential Material will be accorded confidential
treatment.
10.20 Attorney's Fees. In the event any legal action or arbitration or
other proceeding is brought for the enforcement of this Agreement or in
connection with any other provisions of this Agreement, the successful and
prevailing party or parties shall be entitled to reasonable attorney's fees and
other costs incurred in such action or proceeding.
(signature page to follow)
IN WITNESS WHEREOF, Security National, Southern Security, Memorial and the
Shareholders have each caused this Agreement to be signed effective as of the
date first written above.
SECURITY NATIONAL LIFE
INSURANCE COMPANY
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Operating Officer
SOUTHERN SECURITY LIFE INSURANCE COMPANY
By: ▇▇▇▇▇ ▇. ▇▇▇▇▇
President and Chief Operating Officer
MEMORIAL INSURANCE COMPANY OF AMERICA
By:
Its: ____________________________
ANNEX I
AGREEMENT BY SHAREHOLDERS
OF MEMORIAL INSURANCE COMPANY OF AMERICA
TO SELL SHARES IN STOCK PURCHASE TRANSACTION
Pursuant in the Stock Purchase Agreement by and among Security National
Life Insurance Company, Southern Security Life Insurance Company, Memorial
Insurance Company of America ("Memorial") and the undersigned shareholders of
Memorial dated September __, 2005, the undersigned shareholders of Memorial
hereby joins in said Stock Purchase Agreement for the sole and limited purpose
of agreeing to exchange its, his or her shares of Memorial stock for the cash
described in Section 1.2 of said Stock Purchase Agreement.
This respective number of shares of Memorial owned by the undersigned are
shown in parenthesis.
This instrument may be executed in any number of counterparts, each of
which shall be deemed an original, provided that all shareholders sign at least
one such counterpart. All such counterparts shall be attached to the Stock
Purchase Agreement.
Executed as of September __, 2005.
_____________________________________ __________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇ Funeral Home
_____________________________________ __________________________________
▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
_____________________________________ __________________________________
▇▇▇▇▇▇ Funeral Home ▇▇▇▇▇▇ ▇▇▇▇▇▇ Living Trust Rev.
_____________________________________ ___________________________________
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇.
_____________________________________ ___________________________________
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇
_____________________________________ ___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
_____________________________________ ___________________________________
▇▇▇▇▇▇▇▇ Funeral Home ▇▇▇▇▇▇ Funeral Home
_____________________________________ ___________________________________
▇▇▇▇▇ ▇▇▇▇▇▇ Living Trust ▇▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust
_____________________________________ ___________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Trust
_____________________________________ ___________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ Trust ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
_____________________________________ ___________________________________
▇▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇. ▇. ▇▇▇▇▇▇▇ III
_____________________________________ ___________________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇.
_____________________________________ ___________________________________
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ Living Trust Rev.
_____________________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
EXHIBIT INDEX
Exhibit 1 Coinsurance Agreement
Exhibit 2 Memorial Securities Schedule
Exhibit 3 Memorial Disclosure Schedule
Exhibit 4 Security National/Southern Security Disclosure Schedule