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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): December 23, 2002
SECURITY NATIONAL FINANCIAL CORPORATION
(Exact name of registrant as specified in this Charter)
Utah 0-9341 87-0345941
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
5300 South 360 West, Salt Lake City, Utah 84123
(Address of principal executive offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: (801) 264-1060
Does Not Apply
(Former name or former address, if changed since last report)
ITEM 2. Asset Purchase Transaction with Acadian Life Insurance Company
On December 23, 2002, Security National Financial Corporation, a Utah
corporation (the 'Company') completed an asset purchase transaction with Acadian
Life Insurance Company, a Louisiana domiciled life insurance company
('Acadian'), in which it acquired from Acadian $75,000,000 in assets and
$75,000,000 in insurance reserves through its wholly owned subsidiary, Security
National Life Insurance Company, a Utah domiciled life insurance company
("Security National Life"). The acquired assets consist primarily of funeral
insurance policies in force from over 275,000 policyholders in the state of
Mississippi.
As part of the transaction, Security National Life entered into a
Coinsurance Agreement with Acadian, in which Security National Life agreed to
reinsure all the liabilities related to the policies held by the Mississippi
policyholders, including the payment of all legal liabilities, obligations,
claims and commissions of the acquired policies. The effective date of the
Coinsurance Agreement was September 30, 2002, at 11:59:59 p.m. (Central Daylight
Time) subsequent to Acadian's recapture of the insurance in force from Scottish
Re (U.S.) Inc. on September 30, 2002, at 11:59 p.m. (Central Daylight Time).
Under the terms of the Coinsurance Agreement, Security National Life agreed
to assume all of the risks (including deaths, surrenders, disability, accidental
deaths and dismemberment) on the reinsurance policies as of the effective date
of the Agreement. Acadian represented and warranted that each of the reinsured
policies was in force as of the effective date (including policies which may be
lapsed subject to the right of reinstatement, policies not lapsed but in
arrears, and policies in force and in effect as paid up and extended term
policies) with premiums paid and its face amount, insured, and all other
characteristics accurately reflected. Security National Life accepted liability
for all the risks under the reinsured policies on eligible lives for all
benefits occurring on or after the effective date of the agreement. The
liability of Security National Life began as of September 30, 2002.
The Coinsurance Agreement also provides that Security National Life
reserves the right to assume all right, title and interest to the reinsured
policies, as well as other similar policies written by Acadian under similar
terms and conditions in the state of Mississippi from September 30, 2002,
through termination of the Coinsurance Agreement, with an assumption agreement,
at any time but in any event not later than nine months subsequent to December
16, 2002, subject to all regulatory approvals as required by law. In the event
Acadian shall come under any supervision by a state regulator or in the event
Acadian shall apply for or consent in the appointment of, or the taking of
possession by, a receiver, custodian, regulator, trustee or liquidator of itself
or of all or a substantial part of its assets, make a general assignment for the
benefit of its creditors, commence a voluntary case under the Federal Bankruptcy
Code, file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization or winding up, Security National Life and
Acadian shall be deemed to have converted the Coinsurance Agreement to an
assumption agreement one day prior to such insolvency or other actions and
Security National Life shall be deemed to have assumed the reinsurance policies
as of one day prior to the date thereof.
The Coinsurance Agreement further provides that Acadian is required to pay
Security National Life an initial coinsurance premium in cash or assets
acceptable to Security National Life in an amount equal to the full coinsurance
reserves, including the Incurred But Not Reported (IBNR) reserve as of the
effective date. The ceding commission to be paid by Security National Life to
Acadian for the reinsured policies is to be the recapture amount to be paid by
Acadian to Scottish Re (U.S.), Inc., which is $10,254,083 pursuant to the
Automatic Coinsurance Agreement dated June 1, 2001, between Acadian and Scottish
Re (U.S.), Inc. The coinsurance premiums payable by Acadian to Security National
Life are to be equal to all of the premiums collected by Acadian on the
reinsurance policies subsequent to December 31, 2002.
Security National Life also entered into an Assumption Agreement effective
January 1, 2003, with Acadian, in which Security National Life agreed to assume
all of the liabilities related to the reinsurance policies. Under the terms of
the Assumption Agreement, Acadian agreed to cede to Security National Life, and
Security National Life agreed to assume, reinsure and guaranty all of the
insurance risks and contractual obligations of Acadian relating to the reinsured
business, including the reinsured policies. Security National Life agreed to pay
all legal liabilities and obligations, including claims and commissions, of
Acadian with respect to the reinsured business arising on or after January 1,
2002, in accordance with the terms and conditions of the reinsured policies. In
addition, Security National Life agreed to assume and carry out the obligations
of Acadian contained in the reinsured policies.
The Assumption Agreement also requires Security National Life to issue a
certificate of assumption for each policy in force included in the reinsured
business, reinsuring such policies according to the terms thereof, provided that
Security National Life may be subrogated to and substituted for all rights,
privileges and interests accruing under such policies, and provided further that
all obligations and liabilities assumed by Security National Life are assumed
subject to the terms, limitations and conditions of the insurance policies
included in the reinsured business and all defenses, counterclaims and off-sets
that are or might thereafter become available to Security National Life.
Under the Assumption Agreement Security National Life agreed to assume only
those insurance risks in contractual obligations included within the reinsured
business of Acadian. Security National Life did not agree to assume any extra
contractual or other liability or obligations of Acadian. In addition, Security
National Life did not agree to assume any policy issued to an insured whose
death occurred prior to January 1, 2003, and for which a death claim had been
received by Acadian prior to that date. However, Security National Life did
agree to assume any valid claim of an insured whose death occurred prior to
January 1, 2003, and for which a death claim was not received by Acadian prior
to that date.
The Assumption Agreement also provides that as of January 1, 2003, Acadian
agreed to transfer and assign to Security National Life all of its right, title
and interest in the reinsured policies, including policies which may be lapsed
subject to the right of reinstatement and policies in force and in effect as
paid up and extended term policies. Acadian agreed to turn over to Security
National Life, as of January 1, 2003, all policy owner service, underwriting and
other files on hand that may be needed by Security National Life in the
continuation of the reinsured business, and Acadian further agreed to turn over
all such records and record books as may be necessary for carrying on the
reinsured business, including all such permanent records of Acadian necessary
for Security National Life to continue in force in effect the reinsured
policies.
On December 23, 2002, Security National Life also entered into an Asset
Purchase Agreement with Acadian, in which Acadian agreed to transfer and convey
to Security National Life, and Security National Life agreed to purchase from
Acadian, all of Acadian's right, title and interest in and to the certain assets
of Acadian. The assets included the following: (i) computer hardware; (ii)
licensed software from International Business Machines, Inc. ('IBM') for certain
software utilized in the maintenance of Acadian's general ledger accounting
records, for use on Acadian's AS400 computer; (iii) owned software developed by
employees or contractors of Acadian or Gulf National Life Insurance Company and
utilized by Acadian in accounting for premiums received, reserve computations,
and for other purposes; (iv) certain furniture and equipment; (v) the use of the
name 'Gulf National Life Insurance Company' alone or as part of any other
tradename, as well as the logo 'GNL'; (vi) the sublease of certain real property
located at 6522 Dogwood View Parkway in Jackson, Mississippi; and (vii) the
assignment and assumption of certain agreements and arrangements. Following the
closing of the asset purchase transaction with Acadian, Security National Life
intends to continue to operate the business it acquired from Acadian in the
state of Mississippi.
ITEM 7. Financial Statements
(a) It is impractical for the Company to provide audited financial
statements of the assets acquired from Acadian at the time this report is
required to be filed. The Company intends to file the required audited financial
statements as soon as practicable but not later than 60 days after this report
must be filed.
(b) The Company intends to file the pro forma financial information as soon
as practicable but not later than 60 days after this report has been filed.
(c) Exhibits
10.1 Coinsurance Agreement between Security National Life and Acadian.
10.2 Assumption Agreement among Acadian, Acadian Financial Group, Inc.,
Security National Life and the Company.
10.3 Asset Purchase Agreement among Acadian, Acadian Financial Group, Inc.,
Security National Life and the Company.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SECURITY NATIONAL FINANCIAL CORPORATION
(Registrant)
Date: January 8, 2003 By:
Scott M. Quist, President
ASSUMPTION REINSURANCE AGREEMENT
BETWEEN
ACADIAN LIFE INSURANCE COMPANY
AND
SECURITY NATIONAL LIFE INSURANCE COMPANY
THIS ASSUMPTION REINSURANCE AGREEMENT (this "Agreement") is made and entered
into effective as of the 1st day of January, 2003 (the "Effective Date"), by and
among ACADIAN LIFE INSURANCE COMPANY, a Louisiana insurance company ("Acadian"),
ACADIAN FINANCIAL GROUP, INC., a Louisiana corporation ("AFG"), SECURITY
NATIONAL LIFE INSURANCE COMPANY, a Utah insurance company ("Security National
Life") and SECURITY NATIONAL FINANCIAL CORPORATION, a Utah corporation
("Security National Financial").
WITNESSETH:
WHEREAS, Acadian desires to reinsure with Security National Life all of
Acadian's insurance policies listed and described in that certain coinsurance
agreement (the "Coinsurance Agreement") dated December 17, 2002 (the "Execution
Date"), between Acadian and Security National Life acquired from Gulf National
Life Insurance in force and effect (including policies which may be lapsed
subject to the right of reinstatement, policies not lapsed but in arrears, and
policies in force and in effect as paid up and extended term policies) as of the
Effective Date (hereinafter the "Reinsured Business"), subject to approval by
the commissioner of insurance of the state of Louisiana (the "Commissioner"),
upon the following terms and of conditions; and
WHEREAS, Acadian constitutes the sole operating subsidiary of AFG, and AFG
desires to join in this Agreement to ratify and confirm the sale and reinsurance
of Acadian's insurance business; and
WHEREAS, Security National Life is a wholly-owned subsidiary of Security
National Financial, and Security National Financial desires to join in this
Agreement to ratify and confirm the assumption of the Reinsured Business by
Security National Life;
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements herein contained, the parties hereby agree as follows:
1. Reinsurance Obligations of Security National Life. Subject to approval
by the Commissioner, as provided for in Section 9 below, Acadian does
hereby cede to Security National Life, and Security National Life does
hereby assume, reinsure, and guarantee all of the insurance risks and
contractual obligations of Acadian relating only to the Reinsured
Business and included within the Master Policy List of Acadian as
listed and described on the compact disk (CD) attached hereto as
Schedule A, dated as of the Effective Date, which Schedule shall be
attached to this Agreement on the Effective Date. Security National
Life hereby agrees to pay all legal liabilities and obligations,
including claims and commissions, of Acadian under or with respect to
the Reinsured Business, arising on or after the Effective Date, in
accordance with the terms and conditions of the policies included
within the Reinsured Business. Security National Life hereby further
covenants and agrees with Acadian and with each of the holders of
policies included in the Reinsured Business, and with the
beneficiaries thereof and/or their legal representatives and assigns,
that effective as of the Effective Date, Security National Life will
assume and carry out the several obligations of Acadian contained in
the policies included in the Reinsured Business.
Security National Life covenants and agrees to issue a certificate of assumption
for each policy in force included in the Reinsured Business, reinsuring the same
according and subject to the terms and conditions thereof; provided, however,
that Security National Life may be subrogated to and substituted for all rights,
privileges and interests accruing under said policies included in the Reinsured
Business, to the extent of the reinsurance agreed upon hereunder, and provided
further that all obligations and liabilities hereby assumed by Security National
Life are assumed subject to the terms, limitations and conditions of the
insurance policies included in the Reinsured Business and all defenses,
counter-claims and off-sets which are or might hereafter become available to
Security National Life subsequent to the Effective Date. Security National Life
is assuming only those insurance risks and contractual obligations included
within the Reinsured Business of Acadian provided for hereunder, and Security
National Life is not assuming hereunder any extra-contractual or other
liabilities or obligations of Acadian. Security National Life is not assuming
and Acadian is not ceding any policy issued to an insured whose death occurred
prior to the Effective Date and for which a death claim has been received by
Acadian prior to the Effective Date. Security National Life does hereby assume
any valid claim of an insured whose death occurred prior to the Effective Date
:and for which a death claim was not received by Acadian prior to the Effective
Date.
2. Assignment by Acadian of Policy Contracts
(a) Acadian does hereby, upon the Effective Date of this Agreement,
transfer, assign and convey unto Security National Life all of its
right, title and interest, as of the Effective Date, in and to the
Reinsured Business, including policies which may be lapsed subject to
the right of reinstatement and policies in force and in effect as paid
up and extended term policies. Such policies have been issued or
assumed by Acadian only in the forms set forth on all policy forms on
Schedule B, attached hereto.
(b) On the Effective Date, Acadian agrees to turn over to Security
National Life all policy owner service, underwriting and other files
now on hand which may be needed by Security National Life in the
continuation of the Reinsured Business, and Acadian further agrees to
turn over such records and record books as may be necessary for
carrying on the Reinsured Business including all such permanent
records of Acadian necessary to Security National Life to continue in
force and effect the Reinsured Business. It is understood that Acadian
is to turn over to Security National Life all life applications in
Acadian's possession on risks covered by policies in full force and
effect and on which premiums are currently being collected, and all of
such other forms which Acadian has been using in the conduct of its
insurance business, including life registers, lapse registers,
reinsurance reserve sheets and tabulations on the Reinsured Business.
(c) Effective as of the Effective Date, all premiums on policies of
insurance covered by this contract shall be and become the property of
Security National Life subject to the restrictions and limitations
herein provided and shall be accounted for to Security National Life.
(d) It is understood and agreed that Acadian is ceding all of the
Reinsured Business to Security National Life as of the Effective Date.
From the date of this Agreement until the Effective Date, Acadian shall operate
in the ordinary course of business. Notwithstanding the foregoing, Security
National Life shall be wholly responsible for any and all risks related to the
Reinsured Business following the Effective Date, including any potential or
actual decline in the level of or number of insurance policies included within
the Reinsured Business.
3. Treatment of Claims. Subject to the provisions of Section 1, above, all
claims of every nature and description originating and arising prior to the
last day of the month in which the Execution Date occurs of the Coinsurance
Agreement under policies included in the Reinsured Business shall be paid
and discharged by Acadian. All claims originating and arising on or after
the last day of the month in which the Execution Date occurs and relating
to the Reinsured Business shall be paid by Security National Life.
4. Transfer of Assets.
(a) The Reinsured Business shall be transferred as of the Effective Date
to Security National Life, and Acadian shall deliver these assets,
which will include the Incurred But Not Reported (IBNR) reserve to
cover the liabilities assumed by Security National Life in paragraph
#1 above, to Security National Life pursuant to the Coinsurance
Agreement and the assets shall become the sole and exclusive property
of Security National Life. The reserves applicable to the Reinsured
Business and other similar amounts with respect to losses, benefits,
claims, and expenses in respect of the Reinsured Business are to be
(i) determined in accordance with the accounting practices required
or permitted by the insurance regulatory authority in the State
of Mississippi, consistently applied throughout the specified
period and in the comparable period in the immediately preceding
year, and generally accepted actuarial assumptions consistently
applied,
(ii) determined in accordance with the benefits specified in the
related insurance policies,
(iii)calculated, established and reflected on a basis consistent with
those reserves and other similar amounts and reserving methods
followed by Acadian at December 31, 2001, and
(iv) determined in conformity with the requirements of the insurance
laws of the State of Mississippi. The reserves for the Reinsured
Business as of the end of the quarter immediately preceding the
date of Closing are set forth on Schedule C.
(b) The assets subject to this Agreement will be such assets as may be
identified by Security National Life, all of which shall be admissible
assets under statutory accounting principles as applicable in the
states of Mississippi and Utah. The assets that are designated to be
transferred at statutory values as of the last day-of the quarter
immediately preceding Closing date to support the reserves for the
Reinsured Business, are set forth on Schedule D. All of the assets
shall be transferred to Security National Life free and clear of all
liens and encumbrances of any nature, whatsoever.
(c) On or before the expiration of sixty (60) days following the Effective
Date, Acadian shall deliver or cause to be delivered to Security
National Life any additional assets as may be necessary to result in
final delivery to Security National Life of assets equal to the total
reserves applicable to the Reinsured Business as of the Effective
Date. Conversely, if the assets delivered by Acadian to Security
National Life at Closing exceed the total reserves applicable to the
Reinsured Business as of the Effective Date, Security National Life
shall return to Acadian assets having a statutory value equal to such
excess, on or before the expiration of sixty (60) days following the
Effective Date.
5. Consideration for Reinsurance. The consideration for this Agreement on the
part of Security National Life is hereby declared to be the assumption by
Security National Life of all liabilities and obligations of Acadian
pursuant to Section 1 hereof and the administration thereof, and the
payment by Security National Life to Acadian of the sum of ten dollars
($10.00), the receipt and sufficiency of which are hereby acknowledged.
6. Closing. The closing of this transaction (the "Closing") shall occur at a
time and place specified by Security National Life anytime but not later
than nine (9) months subsequent to the Execution Date of the Coinsurance
Agreement. In the event Acadian comes under any supervision of a state
regulator, applies for or consent in the appointment of, or the taking of
possession by, a receiver, custodian, regulator, trustee or liquidator of
itself or of all or a substantial part of its assets, makes a general
assignment for the benefit of its creditors, commences a voluntary case
under the Federal Bankruptcy Code, or files a petition seeking to take
advantage of any other law relating to bankruptcy, insolvency,
reorganization or winding up, Acadian shall be deemed to have converted the
Coinsurance Agreement to this Agreement one day prior to such insolvency or
other actions described in this Section 6.
7. Indemnity.
(a) Acadian agrees to hold harmless Security National Life from (i) any
claims by any third parties to the ownership or options to acquire the
ownership of any of the assets, tangible, intangible, movable or
immovable, covered by this Agreement, (ii) any claims to be paid or
discharged by Acadian pursuant to Section 3 and (iii) any and all
monetary damages, liabilities, fines, fees, penalties, interest
obligations, deficiencies, losses, costs, and expenses (including
reasonable fees and expenses of attorneys, accountants, actuaries, and
other experts) solely related to the Reinsured Business resulting from
any breach of Acadian of any representation, warranty, covenant or
agreement made by Acadian in this Agreement. The indemnity provisions
provided in subsection (iii) of the preceding sentence shall only
apply to such claims presented in writing to Acadian on or before one
year from the Effective Date. 30.
(b) Security National Life agrees to hold harmless Acadian from (i) any
and all liabilities and obligations with respect to the Reinsured
Business which Security National Life has agreed to pay pursuant to
this Agreement, provided that Security National Life shall be entitled
to assert any defenses at law or in equity that could have been
asserted by Acadian, and (ii) any and all monetary damages,
liabilities, fines, fees, penalties, interest obligations,
deficiencies, losses, costs, and expenses (including reasonable fees
and expenses of attorneys, accountants, actuaries, and other experts)
solely related to the Reinsured Business resulting from any breach by
Security National Life of any representation, warranty, covenant or
agreement made by Security National Life in this Agreement. The
indemnity provisions provided in subsection (ii) of the preceding
sentence shall only apply to such claims presented in writing to
Security National Life on or before one year from the Effective Date.
8. Certificates of Assumption. Security National Life agrees to issue to each
policyholder reinsured hereunder a Certificate of Assumption in the form
attached hereto as Schedule E.
9. Approval by Louisiana Department of Insurance. This Agreement shall be
binding on the parties hereto from the date of its execution, and neither
party shall have the right to void this Agreement, but it shall not become
effective unless and until it has been approved in writing by the
commissioner of insurance of the state of Louisiana and the transfer of
assets and payment of consideration described in Sections 4 and 5 have
occurred.
10. Other Reinsurance Agreements. Acadian hereby represents to Security
National Life that there is not presently in force any other reinsurance or
coinsurance agreement between Acadian and any other company, except for
those reinsurance agreements listed and described on Schedule F attached
hereto, nor has Acadian ceded any business to any company through any means
whatsoever, except as set forth on Schedule F.
11. Coinsurance Agreement. The parties acknowledge that all of the obligations
of Acadian and Security National Life hereunder shall be conditioned upon
Regulatory Approval (as defined below) of an automatic Coinsurance
Agreement between Security National Life and Acadian. For purposes of this
Agreement, the term Regulatory Approval shall mean formal, written approval
of such automatic Coinsurance Agreement by the Louisiana Department of
Insurance, as well as any other regulatory department, agency or authority
having jurisdiction over such transaction, or in lieu of such approval,
written confirmation from any such department or agency that no such
approval is required.
12. Arbitration.
(a) It is the intention of both Security National Life and Acadian that
the normal business practices of the insurance industry applicable to
reinsurance be used to interpret this Agreement. The companies will
act in all things with the highest good faith. All disputes and
differences with respect to either party's rights or obligations under
this Agreement, on which an amicable understanding cannot be reached
are to be decided by arbitration. The arbitrators are empowered to
interpret this Agreement and are free to reach their decision from the
standpoint of equity and customary reinsurance practices rather than
from the strict law.
(b) Three arbitrators shall be appointed who must be current or former
executive officers of life insurance or life reinsurance companies,
other than the two parties to this Agreement or their affiliates or
subsidiaries, Security National Life will appoint one arbitrator and
Acadian the second. These two arbitrators will select a third before
arbitration begins. If one of the parties declines to appoint an
arbitrator or if the two arbitrators are unable to agree upon the
choice of a third, the appointment will be left to the president of
the American Council of Life Insurance or its successor organization.
(c) The arbitration will be held in Jackson, Mississippi. The arbitrators
will decide by a majority of votes and from their written decision
there shall be no appeal. Each party will pay the fees of its own
attorneys and all other expenses connected with the presentation of
its case. The other costs of arbitration, including the fees of the
arbitrators, will be borne by the losing party unless the arbitrators
decide otherwise.
13. Insolvency. In the event of Acadian's insolvency, the reinsurance afforded
by this Agreement will be payable by Security National Life on the basis of
Acadian's liability under the policies reinsured without diminution because
of Acadian's insolvency or because its liquidator, receiver, conservator,
or statutory successor has failed to pay all or a portion of any claims,
subject, however, to the right of Security National Life to offset against
such funds due hereunder, any sums that may be payable by Security National
Life to said insolvent Acadian, which right of offset is hereby expressly
granted by Acadian, in accordance with applicable law. The reinsurance will
be payable by Security National Life directly to Acadian, its liquidator,
receiver, conservator, or statutory successor except (a) where this
Agreement specifically provides another payee of such reinsurance in the
event of Acadian's insolvency or (b) where Security National Life, with the
consent of the direct insured or insureds, has assumed such policy
obligations of Acadian as direct obligations of itself to the payees under
such policies in substitution for Acadian's obligation to such payees.
Acadian's liquidator, receiver, conservator, or statutory successor will give
written notice of the pendency of a claim against Acadian under the policies
reinsured within a reasonable time after such claim is filed in the insolvency
Proceeding. During the pendency of such claim, Security National Life may
investigate said claim and interpose in the proceeding where the claim is to be
adjudicated, at its own expense, any defense that they may deem available to
Acadian, its liquidator, receiver, conservator, or statutory successor. The
expense thus incurred by Security National Life will be chargeable against
Acadian, subject to court approval, as part of the expense of conservation or
liquidation to the extent that such proportionate share of the benefit will
accrue to Acadian solely as a result of the defense undertaken by Security
National Life.
In the event of the insolvency of Security National Life, the liquidator,
receiver, or statutory successor of Security National Life will be entitled to a
lien against all assets of Security National Life in an amount equal to the
reserves and other liabilities of Security National Life applicable to the
Reinsured Business, and all reinsurance will be payable directly to the
liquidator, receiver, or statutory successor of Security National Life without
diminution because of the insolvency of Security National Life.
14. General Provisions.
(a) Notices. Any notice or other communication given pursuant to this
Agreement must be in writing and (i) delivered personally, (ii) sent
by facsimile or other similar facsimile transmission, (iii) delivered
by overnight express, or (iv) sent by registered or certified mail,
postage prepaid, as follows:
(A) If to Acadian:
Acadian Life Insurance Company
236 Third Street
Baton Rouge, Louisiana 70801
Attn: Robert E. Dolese, Chairman
Facsimile: (225) 7863-6540
(B) If to AFG:
Acadian Financial Group, Inc.
236 Third Street
Baton Rouge, Louisiana 70801
Attn: Robert E. Dolese, Chairman
Facsimile: (225) 7863-6540
(C) If to Security National Life:
Security National Life Insurance Company
5300 South 360 West, Suite 250
Salt Lake City, UT 84123
Attn: Scott M. Quist, President
Facsimile: (801) 265-9882
(D) If to Security National Financial:
Security National Financial Corporation
5300 South 360 West, Suite 250
Salt Lake City, UT 84123
Attn: Scott M. Quist, President
Facsimile: (801) 265-9882
All notices and other communications required or permitted under this Agreement
that are addressed as provided in Section 14(a) will
(a) if delivered personally or by overnight express, be deemed
given upon delivery;
(b) if delivered by facsimile or similar facsimile transmission,
be deemed given when electronically confirmed; and
(c) if sent by registered or certified mail, be deemed given
when received. Any party from time to time may change its
address for the purpose of notices to that party by giving a
similar notice specifying a new address, but no such notice
will be deemed to have been given until it is actually
received by the party sought to be charged with the contents
thereof.
(b) Entire Agreement. This Agreement supersedes all prior discussions and
agreements between the parties with respect to the subject matters of
this Agreement, and this Agreement, including the schedule attached
hereto, contains the sole and entire agreement between the parties
hereto with respect to the subject matter hereof.
(c) Expenses. Except as otherwise expressly provided in this Agreement,
each party hereto will pay its own costs and expenses in connection
with this Agreement and the transactions contemplated hereby.
(d) Confidentiality.
(i) From the date hereof until the fifth anniversary of the Effective
Date, each of Acadian and Security National Life will refrain,
and will cause its respective affiliates, officers, directors,
employees, agents, and other representatives to refrain, from
disclosing to any other person or entity any documents or
information concerning the other party hereto acquired by it in
connection with this Agreement or the transactions contemplated
hereby unless (A) such disclosure is compelled by judicial or
administrative process or by other requirements of law (including
in connection with obtaining necessary insurance regulatory
approvals) and notice of such disclosure is furnished to such
other party hereto as promptly as possible so that they may take
action to avoid such disclosure; (B) either party hereto deems it
necessary (upon advice of such party's legalcounsel) to disclose
any such documents or information in connection with the
requirements of law; or (C) such documents or information can be
shown to have been (1) previously known by the party hereto
receiving such documents or information, (2) in the public domain
through no fault of such receiving party, or (3) later acquired
by such receiving party from other public sources.
(ii) If this Agreement is terminated and does not become effective,
then, for a period of five years after such termination, Security
National Life will refrain, and will cause its respective
officers, directors, employees, agents, and other representatives
to refrain, from disclosing to any other person or entity any
documents or information concerning Acadian or the Reinsured
Business acquired by Security National Life in connection with
this Agreement or the transactions contemplated hereby unless (A)
such disclosure is compelled by judicial or administrative
process or by other requirements of law and notice of such
disclosure is furnished to Acadian as promptly as possible so
that they may take action to avoid such disclosure; (B) Security
National Life deems it necessary (upon advice of legal counsel to
Security National Life) to disclose any such documents or
information in connection with the requirements of law; or (C)
such documents or information can be shown to have been (1)
previously known by Security National Life, (2) in the public
domain through no fault of Security National Life, or (3) later
acquired by Security National Life from other public sources.
(iii)If this Agreement is not terminated and does become effective,
then for a period of five (5) years following the Effective Date,
Acadian will refrain, and will cause its affiliates, officers,
directors, employees, agents, and other representatives to
refrain, from disclosing, to any person or entity any information
regarding the Reinsured Business or the transactions contemplated
hereby unless (A) such disclosure is compelled by judicial or
administrative process or by other requirements of law and notice
of such disclosure is furnished to Security National Life as
promptly as possible so that it may take action to avoid such
disclosure; (B) Acadian deems it necessary (upon advice of legal
counsel to Acadian) to disclose any such documents or information
in connection with the requirements of law; or (C) such documents
or information can be shown to have been (1) in the public domain
through no fault of Acadian Seller, or (2) later acquired by
Acadian from other public sources.
(iv) Acadian and Security National Life hereto acknowledge and agree
that (A) a breach of any of the terms or provisions of this
Section would cause irreparable damage to the non-breaching party
for which adequate remedy at law is not available; and (B) the
non-breaching party will be entitled as a matter of right to
obtain, without posting any bond whatsoever, an injunction,
restraining order, or other equitable relief or restrain any
threatened or further breach of this Section, which right will
not be exclusive but will be cumulative and in addition to any
other rights and remedies available at law or in equity.
(v) Nothing in this subsection (d) shall prevent any party to this
Agreement from cooperating fully with insurance regulatory
officials in conducting examinations or otherwise carrying out
their regulatory responsibilities as authorized by applicable
law.
(e) Further Assurances. Acadian and Security National Life agree that,
from time to time after the Closing, upon the reasonable request of
the other, they will cooperate and will cause their respective
affiliates to cooperate with each other to effect the orderly
transition of the Reinsured Business from Acadian to Security National
Life.
(f) Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to benefit thereof. Such waiver
must be in writing and must be executed by an executive officer of
such party. A waiver on one occasion will not be deemed to be a waiver
of the same or any other breach or nonfulfillment on a future
occasion. All remedies, either under this Agreement, or by law or,
otherwise afforded, will be cumulative and not alternative.
(g) Amendment. This Agreement may be modified or amended only in writing
duly executed by all parties.
(h) Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which will be deemed an original, but
all of which, when taken together, will constitute one and the same
instrument.
(i) Governing Law. This Agreement will be governed by and construed and
enforced in accordance with the laws of the State of Mississippi
(without regard to the principles of conflicts of law) applicable to a
contract executed and performable in such state.
(j) Binding Effect. This Agreement is binding upon and will inure to the
benefit of the parties and their respective successors and permitted
assigns.
(k) No Assignment. Neither this Agreement nor any right or obligation
hereunder or part hereof may be assigned by any party hereto without
(i) the prior written consent of the other parties hereto (and any
attempt to do so will be void), and (ii) the prior approval of the
Mississippi Department of Insurance. This paragraph shall not be
deemed to prohibit a merger or dissolution of Acadian.
(l) Due Diligence. All parties to this Agreement hereby acknowledge that
they have received from the others all information requested and have
had an adequate opportunity to investigate all aspects of this
transaction. Each party has done its own due diligence with respect to
this transaction, and each has hired and relied upon the advice of its
own attorneys, financial advisors, and such other advisors as such
party has deemed necessary to evaluate properly all aspects of this
transaction. Each party further acknowledges that no representations
have been made by any party concerning this transaction, except as
specifically set forth herein or in one or more written agreements
between the parties.
(m) Ratification by Holding Companies. AFG and Security National Financial
hereby execute this Agreement solely for the purpose of ratifying the
actions of their respective subsidiary companies, described herein.
(n) Invalid Provisions. If any provision of this Agreement is held to be
illegal; invalid, or unenforceable under any present or future law,
and if the rights or obligations under this Agreement of Acadian and
Security National Life will not be materially and adversely affected
thereby, (i) such provision will be fully severable; (ii) this
Agreement will be construed and enforced as if such illegal, invalid,
or unenforceable provision had never comprised a part hereof; and
(iii) the remaining provisions of this Agreement will remain in full
force and effect and will not be affected by the illegal, invalid, or
unenforceable provision or by its severance from this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Assumption
Reinsurance Agreement to be executed by the respective officers authorized
to act in the premises, effective on the Effective Date.
ACADIAN LIFE INSURANCE COMPANY
By:_________________________________
Its: _______________________
SECURITY NATIONAL LIFE INSURANCE COMPANY
By:_________________________________
Its: _______________________
JOINING IN AGREEMENT FOR RATIFICATION
PURPOSES ONLY:
ACADIAN FINANCIAL GROUP, INC.
By:_________________________________
Its: _______________________
SECURITY NATIONAL FINANCIAL CORPORATION
By:_________________________________
Its: _______________________
STATE OF LOUISIANA )
)ss:
PARISH OF __________ )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this ____ day of ______________, 2003, within my
jurisdiction, the within named ___________ _____________________, who
acknowledged that he is the ___________ of Acadian Life Insurance Company, a
Louisiana insurance company, and that for and on behalf of said company and as
its act and deed he executed the above and foregoing instrument, after first
having been duly authorized by said corporation so to do.
_______________________________
Notary Public
STATE OF UTAH )
)ss:
COUNTY OF SALT LAKE )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this ____ day of ______________, 2003, within my
jurisdiction, the within named ___________ _______________________, who
acknowledged that he is the ___________ of Security National Life Insurance
Company, a Utah insurance company, and that for and on behalf of said company
and as its act and deed he executed the above and foregoing instrument, after
first having been duly authorized by said corporation so to do.
_______________________________
Notary Public
STATE OF LOUISIANA )
)ss:
PARISH OF __________ )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this ____ day of ______________, 2003, within my
jurisdiction, the within named ___________ ___________________________, who
acknowledged that he is the ___________ of Acadian Financial Group, Inc., a
Louisiana corporation, and that for and on behalf of said corporation and as its
act and deed he executed the above and foregoing instrument, after first having
been duly authorized by said corporation so to do.
_______________________________
Notary Public
STATE OF UTAH )
)ss:
COUNTY OF SALT LAKE )
Personally appeared before me, the undersigned authority in and for the
said county and state, on this ____ day of ______________, 2003, within my
jurisdiction, the within named ___________ ______________________, who
acknowledged that he is the ___________ of Security National Financial
Corporation, a Utah corporation, and that for and on behalf of said corporation
and as its act and deed he executed the above and foregoing instrument, after
first having been duly authorized by said corporation so to do.
_______________________________
Notary Public
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Asset Purchase Agreement" or "Agreement") is
made and entered into effective this ___ day of December, 2002, by and among
Acadian Life Insurance Company, a Louisiana insurance corporation ("ALIC"), and
Acadian Financial Group, Inc., a Louisiana corporation ("AFG" and collectively
with ALIC referred to as "Seller") and Security National Life Insurance Company,
a Utah insurance corporation ("Security National Life") and Security National
Financial Corporation, a Utah corporation ("Security National" and collectively
with Security National Life referred to as "Buyer").
WITNESSETH:
WHEREAS, Buyer and Seller have entered into a Coinsurance Agreement (the
"Coinsurance Agreement"), pursuant to which Seller and Buyer will agree to
reinsure all of the assumed liabilities relating only to policies with certain
reinsured policies as defined in the Coinsurance Agreement; and
WHEREAS, upon approval of Coinsurance Agreement by the Louisiana and Mississippi
Insurance Departments, certain insurance business and operations of Seller as
set forth herein will be transferred to Buyer; and
WHEREAS, in connection with this Agreement, Seller desires to sell to Buyer, and
Buyer desires to purchase from Seller certain tangible and intangible assets as
described below (the "Assets") of Seller, as set forth in more detail below; and
WHEREAS, Buyer further agrees to assume certain obligations of Seller, as set
forth in more detail below;
NOW, THEREFORE, in consideration of the mutual and reciprocal covenants and
agreements hereinafter contained, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged by all parties,
Seller and Buyer hereby agree as follows:
1. Purchase of Computer Hardware. The parties acknowledge that Seller is
in the possession of computer hardware listed and described on
Schedule A attached hereto and incorporated herein by reference (the
"Computer Hardware"). For a period of sixty (60) days following
Closing, Buyer shall have the right to purchase all or part of the
Computer Hardware for a price not to exceed $13,000. If Buyer elects
to purchase all or part of the Computer Hardware, then at the
completion of said purchase, Seller shall transfer and convey to Buyer
all of Seller's right, title and interest in and to the Computer
Hardware purchased by Buyer. Buyer hereby acknowledges that all of the
Computer Hardware is purchase in "as is" condition and that none of
the Computer Hardware is under manufacturer or other warranty, except
as specifically described on Schedule A. At the Closing of any such
Computer Hardware purchase, Seller shall deliver to Buyer a Bill of
Sale, without warranty, and Buyer shall deliver to Seller the Purchase
price set forth in Section 5, below. 1.
2. Purchase of Computer Software.
2.1 Licensed Software. The parties acknowledge that Seller currently holds
a license from International Business Machines ("IBM") for certain
software utilized in the maintenance of Seller's general ledger
accounting records, for use on Seller's AS400 computer (the "Licensed
Software"). At Closing, Seller shall assign and transfer to Buyer and
Buyer shall assume from Seller, all of Seller's rights and obligations
in and to the Licensed Software.
2.2 Owned Software. The parties acknowledge that, in addition to the
Licensed Software, Seller is also in the possession of other software,
developed by employees or contractors of either Gulf National Life
Insurance Company or Seller and utilized by Seller in accounting for
premiums received, reserve computations, and for other purposes (the
"Owned Software"). For a period of sixty (60) days following Closing,
Buyer shall have the right to purchase all or part of the Owned
Software for a price not to exceed $75,000. If Buyer elects to
purchase all or part of the Owned Software, then at the completion of
said purchase, Seller shall transfer and assign to Buyer all of
Seller's right, title and interest in and to the Owned Software
purchased by Buyer. Buyer hereby acknowledges that such transfer shall
be without any warranty, including, but not limited to any warranty of
fitness for a particular purpose.
2.3 Transfer of Software Rights. At Closing, Seller shall deliver to Buyer
an Assignment of all rights of Seller in and to the Licensed Software
and the Owned Software, without warranty, and Buyer shall deliver to
Seller the purchase price set forth in Section 5, below.
3. Purchase of Furniture and Equipment. At Closing, Seller shall transfer
and convey to Buyer, and Buyer shall purchase from Seller, all
furniture, equipment and other personal property listed and described
on Schedule B attached hereto and incorporated herein by reference
(the "Furniture and Equipment"). At Closing, Seller shall deliver to
Buyer a Bill of Sale, without warranty, and Buyer shall deliver to
Seller the purchase price set forth in Section 5, below. Buyer
acknowledges that the Furniture and Equipment are purchased in "as is"
condition.
4. Purchase of Name. The parties acknowledge that Seller is an insurance
corporation organized and existing under the laws of the State of
Louisiana, and that Seller uses the name "Gulf National Life Insurance
Company." Except as set forth in Schedule C attached hereto, promptly
following Closing, Seller shall assign and transfer to Buyer, and
Buyer shall purchase and acquire from Seller, all of Seller's right,
title and interest in the name "Gulf National Life Insurance Company,"
including the right to use the words "Gulf National Life" alone or as
a part of any other trade name, as well as the logo "GNL." At Closing,
Seller shall deliver to Buyer an Assignment of Seller's rights in the
name "Gulf National Life Insurance Company," without warranty, and
Buyer shall deliver to Seller the purchase price set forth in Section
5, below. This paragraph shall not prevent the continued use by Seller
following the Closing of the name Gulf National Benefits Association
and its marketing and collection agent, Gulf National Mississippi
Benefits, LLC, which Seller represents and warrants will not be
offering any funeral insurance products. 1.
5. Purchase Price. The purchase price for the Computer Hardware, the
Licensed Software, the Owned Software, the Furniture and Equipment,
and the name, shall be as set forth below, and shall be payable in
cash at Closing:
Computer Hardware $13,000.00
Licensed Software $ 10.00
Owned Software $75,000.00
(Unamortized cost)
Furniture and Equipment $ 10.00
Name $ 100.00
6. Sublease of Real Property. At Closing Seller shall sublease to Buyer
or an affiliate of Buyer, and Buyer or an affiliate shall sublease
from Seller, that certain real property located at 6522 Dogwood View
Parkway, Jackson, Mississippi (the "Real Property"), currently
subleased by Seller from Underwood Investment Company, GP, for
Lakeover Partnership, LP pursuant to the terms of that certain Lease
entered into on or about August 26, 1998 (the "Lease"). The duration
of the term of the sublease to be entered into between Seller and
Buyer (or Buyer's affiliate) shall be identical to the remaining term
of the Lease, as amended by that certain letter agreement dated
April 2, 2001. Such sublease shall provide for the assumption by Buyer
of all obligations of Seller under the terms of the Lease, and shall
vest in Buyer all rights of Seller in and to the use and possession of
the Real Property.
7. Assignment and Assumption of Certain Agreements and Arrangements.
7.1 Mortimer Agency Agreement. The parties acknowledge that Gulf National
Life Insurance Company and Robert B. Mortimer entered into an Agency
Agreement on or about August 26, 1997 (the "Mortimer Agency
Agreement"), a true and correct copy of which is attached hereto as
Schedule D and incorporated herein by reference. On June 15, 2001,
Gulf National Life Insurance Company assigned all of its right, title
and interest in and to the Mortimer Agency Agreement to Seller. At
Closing, Seller shall assign and transfer to Buyer, and Buyer shall
assume from Seller, all of Seller's right, title and interest in and
to the Mortimer Agency Agreement, and Seller shall designate Buyer as
the successor to Seller pursuant to the terms of Paragraph 7 of the
Mortimer Agency Agreement.
7.2 Agreements with Willis N. Puckett, II.
(a) Puckett Non-Compete Agreement. The parties acknowledge that Gulf
National Life Insurance Company and Willis N. Puckett, II entered
into an Agreement Not to Compete on or about January 30, 1998
(the "Puckett Non-Compete Agreement"), a true and correct copy of
which is attached hereto as Schedule E and incorporated herein by
reference. On June 15, 2001, Gulf National Life Insurance Company
assigned all of its rights and obligations under the Puckett
Non-Compete Agreement to Seller. At Closing, Seller shall assign
to Security National Life, and Security National Life shall
assume from Seller, all of Seller's rights and obligations under
the Puckett Non-Compete Agreement. Pursuant to the provisions of
Paragraph 6(d) of the Puckett Non-Compete Agreement, Buyer hereby
specifically agrees to be bound by all of the terms of the
Puckett Non-Compete Agreement, from and after the date of
Closing.
(b) Puckett Stock Purchase Agreement. The parties acknowledge that
Gulf National Life Insurance Company and Willis N. Puckett, II
entered into an Agreement to Purchase Corporate Stock on or about
January 30, 1998 (the "Puckett Stock Purchase Agreement"), a true
and correct copy which is attached hereto as Schedule F and
incorporated herein by reference. At Closing, Seller shall assign
to Buyer, and Buyer shall assume Seller's rights and obligations
pursuant to the Puckett Stock Purchase Agreement, including, but
not limited to, Seller's obligations to maintain an office in
Columbus, Mississippi on the terms and conditions and for the
period of time set forth in the Puckett Stock Purchase Agreement.
7.3 Pearce Agreements.
(a) Pearce Agency Agreement. The parties acknowledge that Gulf
National Life Insurance Company and Charlotte Pearce, et al.
entered into an Agency Agreement on or about November 5, 1998
(the "Pearce Agency Agreement"), a true and correct copy of which
is attached hereto as Schedule G and incorporated herein by
reference. At Closing, Seller shall assign and transfer to Buyer,
and Buyer shall assume from Seller, all of Seller's right, title
and interest in and to the Pearce Agency Agreement, and Seller
shall designate Buyer as the successor to Seller pursuant to the
terms of Paragraph 7 of the Pearce Agency Agreement.
(b) Pearce Non-Compete Agreement. The parties acknowledge that Seller
and John E. Pearce and Charlotte Pearce entered into an Agreement
Not to Compete on or about November 5, 1998 (the "Pearce
Non-Compete Agreement"), a true and correct copy of which is
attached hereto as Schedule H and incorporated herein by
reference. On June 15, 2001, Gulf National Life Insurance Company
assigned all of its rights and obligations under the Pearce
Non-Compete Agreement to Seller. At Closing, Seller shall assign
to Buyer, and Buyer shall assume from Seller, all of Seller's
rights and obligations under the Pearce Non-Compete Agreement.
Pursuant to the provisions of Paragraph 6(d) of the Pearce
Non-Compete Agreement, Buyer hereby specifically agrees to be
bound by all of the terms of the Pearce Non-Compete Agreement,
from and after the date of Closing.
(c) Pearce Trust Rollover Agreement. The parties acknowledge that
Seller and John E. Pearce, Colonial Chapel, Inc. and Brookhaven
Funeral Home, Inc. entered into an Agreement to Purchase Group
Master Insurance Policies and to Establish Agency Relationship on
or about October 26, 1998 (the "Pearce Trust Rollover
Agreement"). On June 15, 2001, Gulf National Life Insurance
Company assigned all of its rights and obligations under the
Pearce Trust Rollover Agreement to Seller. At Closing, Seller
shall assign to Buyer, and Buyer shall assume from Seller all of
Seller's rights and obligations under the Pearce Trust Rollover
Agreement, including, but not limited to, Seller's obligations to
maintain trust funds in a banking institution selected by John E.
Pearce or his corporate affiliates, pursuant to Paragraph 2 of
the Pearce Trust Rollover Agreement.
7.4 Billing Arrangements with Certain Funeral Homes. The parties acknowledge
that Seller currently performs certain billing functions for and on behalf
of Hulett-Winstead Funeral Home, in Hattiesburg, Mississippi, Memory Chapel
Funeral Home in Laurel, Mississippi and Randy Rowell Agency in Columbia,
Mississippi, on a monthly basis, at no charge. The parties further
acknowledge that no written agreements are in existence with respect to
these billing services performed by Seller. Buyer agrees, from and after
the date of Closing, to continue performing such services for and on behalf
of Hulett-Winstead Funeral Home, Memory Chapel Funeral Home and Randy
Rowell Agency, for so long as each such entity remains an agent of Buyer,
with respect to the sales of any insurance product.
7.5 Funeral Home Trust Agency Agreement. The parties acknowledge that Gulf
National Life Insurance Company has entered into Agency Agreements with (a)
Deposit Guaranty National Bank, now known as AmSouth Bank, on or about July
23, 1991; (b) Peoples Bank of Biloxi, on or about January 29, 1990; (c)
Trustmark National Bank, on or about November 27, 1989; and The Peoples
Bank of Biloxi, on or about December 21, 1998 (collectively the "Funeral
Home Trust Fund Agency Agreements"), as amended by certain Addenda to
Agency Agreements entered into or to be entered into between Seller and
each such bank, true and correct copies of all of which are attached hereto
as composite Schedule I and incorporated herein by reference. On June 15,
2001, Gulf National Life Insurance Company transferred all of its interest
in the Funeral Home Trust Fund Agency Agreements to Seller. Among other
provisions, each Agency Agreement provides that the respective bank will
invest certain trust assets received from funeral homes in policies of
insurance issued by Seller; that Seller will issue policies and/or
annuities to such bank; and that all policies issued by Seller shall earn
at least a guaranteed rate of interest of at least 4%. At Closing, Seller
shall assign and transfer to Buyer, and Buyer shall assume from Seller, all
of Seller's right, title and interest in and to the Funeral Home Trust Fund
Agency Agreement, and Buyer shall assume from Seller all of Seller's
obligations thereunder.
7.6 Capital Mutual Insurance Company ("CMIC"). Buyer acknowledges that Gulf
National Life Insurance Company consummated an assumption reinsurance
transaction with CMIC, effective January 1, 2001, pursuant to which
transaction Gulf National Life Insurance Company paid to CMIC a ceding fee
of $143,500 (the "CMIC Ceding Fee"). Seller represents that the insurance
business of CMIC is included within the insurance business of Seller
transferred to Buyer under the Coinsurance Agreement.
7.7 Indemnification. Seller shall indemnify and hold Buyer harmless from and
against any and all claims, liabilities, damages and demands (including
expenses and reasonably attorney's fees) resulting from any breach by
Seller of any of its obligations under any of the agreements referenced to
in this Section 7, occurring or arising prior to Closing. Buyer shall
likewise indemnify and hold Seller harmless from and against any and all
claims, liabilities, damages and demands (including expenses and reasonable
attorney's fees) resulting from any breach by Buyer of any of its
obligations under any of the agreements referred to in this Section 7,
occurring or arising from and after the Closing, all of which agreements
are hereby specifically assumed by Buyer.
8. Agreement Not to Compete. For a period of five (5) years from and after the
date of Closing, Seller agrees that it shall not, within the State of
Mississippi, (i) engage, either directly or indirectly, in the sale of
industrial life insurance, other funeral insurance, pre-need contracts,
ordinary life insurance, life insurance trusts, credit life and credit
accident and health insurance, property and casualty insurance, annuities,
or any similar or related products or services for or on behalf of any
company or other entity, other than Buyer, without the prior written
consent of Buyer; or (ii) own or otherwise participate financially in any
business, firm, partnership, corporation or other entity, whether as an
employee, officer, director, agent, security holder, creditor, consultant,
or otherwise, that sells or underwrites, or issues any policies of
industrial life insurance, other funeral insurance, pre-need contracts,
ordinary life insurance, life insurance trusts, credit life and credit
accident and health insurance, property and casualty insurance, annuities,
or any other similar or related products or services, or engages in any
activity relating in any way to the issuance, sales or servicing of
insurance policies, without the prior written consent of Buyer. This
Agreement shall not be deemed to prohibit Seller from investing in any
entity in which Seller holds less than 5% of the equity ownership thereof.
Additionally, at Closing, Seller agrees to deliver to Buyer separate
covenants not to compete, on the same terms as set forth hereinabove,
executed by Jeremiah J. O'Keef, Sr., Susan O'Keefe Snyder, Jeffrey H.
O'Keefe, Kathryn O'Keefe Kaye, and Virginia O'Keefe. This paragraph shall
not prevent Seller from continuing its "Funds in a Flash" insurance
factoring program in the state of Mississippi.
9. Representations. Warranties and Agreements of Seller and Shareholder.
Seller represents, warrants and agrees, as of the date hereof, that:
9.1 Organization and Good Standing. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Louisiana, with full corporate power and authority to conduct its business
as such business is now being conducted, and has all requisite corporate
power and authority to execute and perform this Agreement and the
transactions contemplated hereby. Seller is qualified to do business in all
states where the failure to be so qualified would have a material adverse
effect on the Assets.
9.2 No Violation: No Consents. Seller has taken or will take prior to Closing
all necessary or appropriate action to enable it to enter into, execute,
deliver and perform this Agreement and the transactions contemplated
hereby. The execution and the performance of this Agreement, and the
consummation of the transactions contemplated hereby, will not violate any
provision of the Articles of Incorporation or Bylaws of Seller, or, to the
best knowledge of Seller, violate or result in the breach of any term or
provision of or constitute a default or accelerate maturities under any
loan or any other similar agreement, instrument, indenture, mortgage, deed
of trust, or other restriction to which Seller is a party or by which any
of Seller's property is bound.
9.3 Validity of Agreement. This Agreement and the transactions contemplated
hereby have been, or shall have been prior to Closing, duly authorized and
approved by the Board of Directors and the shareholders of Seller, and this
Agreement has been duly executed and delivered by Seller and is the legal,
valid and binding obligation, enforceable in accordance with its terms, of
Seller. No other proceedings are necessary to authorize this Agreement and
the transactions contemplated hereby, or the performance or compliance by
Seller with any of the terms, provisions or conditions hereof.
9.4 Assets. (a) Seller has good and marketable title to all the Assets,
including the Computer Hardware, Licensed Software, Owned Software, and
Furniture and Equipment. All personal property is in good working order and
operating condition and is free and clear of all liens, security interests,
mortgages, deeds of trust, pledges, conditional sales contracts, charges,
leases, claims, administrative orders or decrees or encumbrances whatsoever
(except as disclosed in Schedule 9.4(A)). To the best knowledge of Seller,
all the Assets are in compliance with all applicable laws and governmental
regulations. All of the Assets are in the possession of Seller or its
customers and, if in the possession of customers, are held pursuant to
binding agreements (whether written or oral) obligating the customer to
return or reimburse Seller for such property.
(b) All real property owned by, leased to or otherwise occupied by
Seller for use in the conduct of the business (the "Real
Property") is listed on Schedule 9.4(B). To the best knowledge of
Seller, the present use of each parcel of Real Property is in
compliance with all applicable zoning ordinances (or variances
therefrom) and other applicable government regulations, and there
does not exist any notice of any uncorrected violation of any
housing, building, safety, fire or other ordinance or applicable
governmental regulation. Except for assessments not yet due and
payable, Seller is not liable for any unpaid assessments for any
public improvements, whether as owner or lessee of any Real
Property, nor has Seller received any notice from any appropriate
governmental authority of intention to make any public
improvement for which Seller may be assessed directly or by
reason of a leasehold interest or otherwise. The Real Property is
free and clear of all liens and free and clear of all easements,
restrictions, building encroachments and other matters disclosed
by an accurate survey of the premises, which would have a
material adverse effect on the value of any of such properties or
the use of any such property in the manner that it is currently
being used. All leases for any of the Real Property subject to a
lease (the "Real Property Leases") are listed in Schedule 9.4(C).
No underground tanks currently or formerly used for the storage
of any gas or petroleum products are present at the Real Property
and if any such tanks previously existed and were removed, they
were removed in accordance with applicable law.
9.5 Inventories. All inventories of Seller are useable in the ordinary course,
have been recorded in amounts not in excess of the lower of cost paid by
Seller for such items or the market value thereof, and are good and
merchantable and readily saleable in the ordinary course of Seller's
business.
9.6 Taxes. Within the times and in the manner prescribed by law, Seller has
filed all federal, state and local tax returns and reports required by law
to have been filed by it, and has paid all taxes, assessments, and
penalties due and payable by it. There are no federal, state or local tax
liens (other than a lien for property taxes not delinquent) against any of
the Assets, nor are there any overdue federal, state or local taxes with
respect to any of the Assets. At Closing, all taxes and other assessments
and levies which Seller is required by law to withhold or collect, shall
have been duly withheld and collected, and if due, shall be paid over to or
deposited with the proper governmental authorities.
9.7 Litigation. Except as disclosed in Schedule 9.7, neither Seller nor any
employees or officers of Seller is a party to any pending or threatened
litigation or administrative investigation or proceedings which would
materially and adversely affect the Assets, nor, to the best knowledge of
Seller, is there any basis therefor. To the best knowledge of Seller, no
complaints or charges of unlawful conduct have been made against Seller or
any employees or officers of Seller that relate in any way to the Assets.
Buyer is not assuming any liability with respect to any pending or
threatened litigation or administrative investigation or proceeding or with
respect to any such complaints or charges of unlawful conduct.
9.8 Compliance with Laws. To the best knowledge of Seller, the Assets are in
compliance in all material respects with all judgments, decrees,
injunctions, orders, writs, rulings, laws, ordinances, statutes, rules,
regulations and other requirements of all federal, state and local
governmental, administrative and judicial bodies and authorities (the
"Legal Requirements"). Seller has not received any notice of any
uncorrected violation of any such Legal Requirements. All Real Property,
and the use and occupancy thereof, are, to the best knowledge of Seller, in
compliance with all Legal Requirements and all applicable leases and
insurance requirements. The Real Property has not been used by Seller, any
third party acting at the request or direction of Seller (a "Directed Third
Party") nor, to the best knowledge of Seller, any other third party, for
the generation, manufacture, storage or disposal of, and there has not been
transported to or from the Real Property by Seller, any Directed Third
Party or, to the best knowledge of Seller, any other third party, any
Hazardous Substances or Wastes (as those terms are hereinafter defined) in
violation of any Legal Requirements; there are no Hazardous Substances or
Wastes present on the Real Property except in compliance with all Legal
Requirements; there has been no use of the Real Property by Seller, any
Directed Third Party or, to the best knowledge of Seller, any other third
party, that may, under any federal, state or local law or regulation,
require any closure or cessation of the use of the Real Property or impose
upon Seller, its successors or assigns any monetary obligations; Seller has
not been identified by any governmental agency or individual in any pending
or threatened action, litigation, proceeding or investigation as a
responsible party or potentially responsible party for any liability for
disposal or releases of any Hazardous Substances or Wastes, no lien or
superlien has been recorded, asserted or , to the best knowledge of Seller,
threatened against the Real Property for any liability in connection with
any environmental contamination; the Real Property has not been listed on
either the National Priorities List, as defined in CERCLA, or any state
listing of hazardous sites; and the Real Property is in compliance with all
environmental laws. For the purposes hereof, "Hazardous Substances" shall
mean any flammables, explosives, radioactive materials, asbestos,
ureaformaldehyde, hazardous wastes, toxic substances or any other elements
or compounds designated as a "hazardous substance", "pollutant" or
"contaminant" in the environmental laws or any other Legal Requirements;
and "Wastes" shall mean any hazardous wastes, residual wastes, solid wastes
or other wastes as those terms are defined in the environmental laws or any
other Legal Requirements.
9.9 Absence of Undisclosed Liabilities. There are no liabilities of Seller that
have not been disclosed to Buyer which could materially and adversely
affect the Assets.
9.10 Knowledge. For purposes of this Agreement, the term "to the best knowledge
of Seller" or similar knowledge or awareness qualifiers shall be understood
to refer to all matters that are known or, in the exercise of reasonable
business judgment, should be known to Seller. For purposes hereof, Seller
shall be deemed to have knowledge of all acts and circumstances regarding
Seller, the Assets and the Real Property that are known or, in the exercise
of reasonable conduct, should be known by Seller's officers, directors, or
senior level management.
10. Representations, Warranties and Agreements of Buyer. Buyer hereby
represents, warrants and agrees, as of the date hereof, that:
10.1 Organization and Good Standing. Buyer is a corporation duly organized,
validly existing and in good standing under the laws of Utah, with full
corporate power and authority to conduct its business as such business is
now being conducted, and has requisite corporate power and authority to
execute and perform this Agreement and the transactions contemplated
hereby.
10.2 No Violation: No Consents. Buyer has taken or will take prior to Closing
all necessary or appropriate action to enable Buyer to enter into, execute,
deliver and perform this Agreement. The execution and the performance of
this Agreement, and the consummation of the transactions contemplated
hereby, will not violate any provision of the Articles of Incorporation or
Bylaws of Buyer, or, to the best knowledge of Buyer, violate or result in
the breach of any term or provision of, or constitute a default or
accelerate maturities under any loan or other similar agreement,
instrument, indenture, mortgage, deed of trust, or other restriction to
which Buyer is a party or by which any of Buyer's property is bound.
10.3 Validity of Agreement. This Agreement and the transactions contemplated
hereby have been, or shall have been prior to Closing, duly authorized and
approved by the Board of Directors of Buyer, and this Agreement has been
duly executed and delivered by Buyer and is the legal, valid and binding
obligation, enforceable in accordance with its terms, of Buyer. No other
proceedings are necessary to authorize this Agreement and the transactions
contemplated hereby, or the performance or compliance by Buyer with any of
the terms, provisions or conditions hereof.
10.4 Absence of Undisclosed Liabilities. There are no liabilities of Buyer that
have not been disclosed to Seller which could materially and adversely
affect the business of Buyer.
10.5 Disclosure. No representation or warranty by Buyer herein or in any
statement, certificate, schedule or document furnished or to be furnished
by Buyer to Seller pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements contained herein or therein not misleading.
10.6 Knowledge. For purposes of this Agreement, the term "to the best knowledge
of Buyer" or similar knowledge or awareness qualifiers shall be understood
to refer to all matters that are known or, in the exercise of reasonable
business judgment, should be known to Buyer. For purposes hereof, Buyer
shall be deemed to have knowledge of all acts and circumstances regarding
Buyer that are known or, in the exercise of reasonable conduct, should be
known by Buyer's officers, directors, or senior level management.
11. Conditions Precedent. Each parties obligations hereunder are subject to the
following conditions precedent, each of which conditions must be satisfied
prior to Closing:
11.1 Regulatory Approvals. Each party's obligations to close and to perform
pursuant to this Agreement shall be subject to prior approval by any
applicable regulatory agencies, of the Reinsurance Agreement.
11.2 Closing of Reinsurance Agreement. The Closing of the transactions
contemplated by this Agreement shall occur simultaneously with the Closing
of the Coinsurance Agreement, as set forth therein, and neither party shall
have any obligations to close hereunder until the occurrence of the Closing
of the transactions contemplated by the Coinsurance Agreement.
12. Notices. Any notice or other communications required or permitted hereunder
shall be sufficiently given if delivered in person or sent by registered or
certified mail, postage prepaid, addressed as follows to the following
addresses, or such other address as shall be furnished in writing by any
such party, and such notice or communications shall be deemed to have been
given as of the date so delivered and mailed:
If to Seller:
Acadian Life Insurance Company
236 Third Street
Baton Rouge, Louisiana 70801
Attn: Robert Edward Dolese, Chairman
And also to:
Acadian Financial Group, Inc.
236 Third Street
Baton Rouge, Louisiana 70801
Attn: Robert Edward Dolese, Chairman
If to Buyer:
Security National Life Insurance Company
5300 South 360 West, Suite 250
Salt Lake City, UT 84123
Attn: Scott M. Quist, President
And also to:
Security National Financial Corporation
5300 South 360 West, Suite 250
Salt Lake City, UT 84123
Attn: Scott M. Quist, President
13. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Utah.
14. Binding Agreement. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and assigns.
15. Public Announcements. All parties hereby agree that no party shall make any
public announcement of this transaction, prior to Closing, except with the
prior consent of the other parties.
1
SELLER:
ACADIAN LIFE INSURANCE COMPANY
By:________________________________________
Its:________________________
ACADIAN FINANCIAL GROUP, INC.
By:________________________________________
Its:________________________
BUYER:
SECURITY NATIONAL LIFE INSURANCE COMPANY
By:________________________________________
Its:________________________
SECURITY NATIONAL FINANCIAL CORPORATION
By:________________________________________
Its:________________________
2
COINSURANCE AGREEMENT
THIS COINSURANCE AGREEMENT (the "Agreement") is made and entered into effective
as of the ___ day of December, 2002 (the "Execution Date"), by and between
SECURITY NATIONAL LIFE INSURANCE COMPANY, a corporation organized under the laws
of the state of Utah (hereinafter referred to as "Coinsurer") and ACADIAN LIFE
INSURANCE COMPANY, a corporation organized under the laws of the state of
Louisiana (hereinafter referred to as "Ceding") (Coinsurer and Ceding
collectively, the "Parties").
WITNESSETH:
WHEREAS, Ceding and Coinsurer desire to enter into a Coinsurance Agreement
pursuant to which Ceding and Coinsurer will agree to reinsure all of the assumed
liabilities relating only to Policies included within the Reinsured Policies as
defined in Section 1.1(d) below;
NOW, THEREFORE, in consideration and mutual promises and covenants contained
herein, and in reliance upon representations, warranties, conditions and
covenants contained herein, and intending to be legally bound, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Certain Terms Defined.
When used in this Agreement, the following terms shall have the
meanings set forth below:
(a) "Extra-Contractual Obligations" shall mean any amount awarded
against Ceding or for which Ceding is in any way liable that
exceeds the amount that Ceding is contractually obligated to pay.
The foregoing includes, without limitation, damages awarded in
addition to policy benefits, as well as tort damages, awarded as
a result of conduct by Ceding or its agents or employees. The
foregoing includes, without limitation, any amounts paid by
Ceding over and above the contract liability as part of a
settlement. Without limitation of the foregoing,
"Extra-Contractual Obligations" include punitive damages (as
commonly understood and which in any event are damages awarded as
a penalty or as damage for certain conduct) and compensatory
damages (amounts awarded to compensate for the actual damages
sustained). Nothing in this paragraph is intended to include the
trust agreements as described in the Asset Purchase Agreement
dated June 15, 2001, among Gulf National Life Insurance Company,
Gulf Holdings, Inc., the Gulf Group, Inc., Acadian Life Insurance
Company and Acadian Financial Group, Inc. (the "Trust
Agreements") that, while not part of the policy language, do
constitute an obligation requiring additional reserves. Said
Trust Agreements are being assigned by Ceding to, and accepted
by, Coinsurer.
(b) "Policies" shall mean the contracts of insurance issued or
assumed by Ceding in respect of which reinsurance is applied for
and/or placed pursuant to this agreement in whole or in part.
(c) "Coinsurance Cession" shall mean the insurance transferred to
Coinsurer by Ceding on a policy.
(d) "Reinsured Policies" shall mean all the insurance policies in
force to be transferred to Coinsurer that are listed and
described on the compact disk (CD) attached hereto as Exhibit I.
The Policies in Exhibit I include in force policies (including
policies which may be lapsed subject to the right of
reinstatement, policies not lapsed but in arrears, and policies
in force and in effect as paid up and extended term policies)
with premiums paid and their face amounts, insured, and all other
characteristics are accurately reflected. Reinsured Policies
shall also include all policies written by Ceding under similar
terms and conditions, in the state of Mississippi from the
Effective Date through termination of this treaty.
ARTICLE II
REINSURANCE CEDED AND ACCEPTED
2.1. Effective Date
The Effective Date shall be September 30, 2002, at 11:59:59 p.m. (CDT)
subsequent to Ceding's recapture of the insurance in force from
Scottish Re (U.S.), Inc. on September 30, 2002, at 11:59 p.m. (CDT).
Notwithstanding anything in this agreement to the contrary, Coinsurer
shall incur no liability hereafter until the Initial Coinsurance
Premium has been paid. If any amounts due under this treaty, including
those due under paragraph 4.1, 5.3, and 2.7 are not paid, Coinsurer's
liability shall be reduced accordingly.
2.2. Reinsurance Ceded and Accepted
Subject to paragraph 2.1, Coinsurer hereby agrees to assume all of the
risks (including deaths, surrenders, disability, accidental deaths and
dismemberment) only on the Reinsured Policies listed and described in
Exhibit I as of the Effective Date of this Agreement. Ceding
represents and warrants that each of the Policies in Exhibit I are in
force (including policies which may be lapsed subject to the right of
reinstatement, policies not lapsed but in arrears, and policies in
force and in effect as paid up and extended term policies) with
premiums paid and its face amount, insured, and all other
characteristics is accurately reflected. The acceptance of risks under
this Agreement will create no right or legal relation between the
Coinsurer and the insured policy owner or beneficiary of any insurance
policy or other contract of Ceding.
2.3. Liability
Coinsurer accepts liability for all of the risks under the Reinsured
Policies on eligible lives for all benefits occurring on or after the
Effective Date of this Agreement. The liability of Coinsurer on any
policy shall commence on the Effective Date of this Agreement and end
simultaneously with that of Ceding. Notwithstanding anything which may
be to the contrary, Coinsurer shall not be liable at any time for
Extra-Contractual Obligations. It is understood and agreed that Ceding
is ceding all of the Reinsured Policies to Coinsurer as of the
Effective Date. Notwithstanding Coinsurer's obligations in the
Agreement, including the first sentence of this paragraph 2.3, from
the Effective Date of this Agreement until the last day of the month
in which the Execution Date occurs, Ceding will be wholly responsible
for any and all risks related to the Reinsured Policies and shall
operate in the ordinary course of business. Coinsurer shall be wholly
responsible for any and all risks related to the Reinsured Policies
following the last day of the month in which the Execution Date
occurs, including any potential or actual decline in the level or
number of insurance Policies included within the Reinsured Policies.
2.4. Errors and Omissions
It is expressly understood and agreed that if failure to comply with
any terms of this Agreement is shown to be unintentional and the
result of errors or omissions on the part of either Ceding or
Coinsurer, both Ceding and Coinsurer shall be restored to the position
they would have occupied had no such error or omission occurred. If it
is not possible to restore each party to the position that it would
have occupied, the parties will endeavor in good faith to resolve the
situation in a manner that is fair and reasonable and most closely
approximates the intent of this Agreement.
2.5. Currency
All figures and premiums in this Agreement are in U.S. dollars.
2.6. Right to Assume Reinsured Policies
Coinsurer reserves the right to assume all right, title and interest
to the Reinsured Policies listed and described on Exhibit I, as well
as all other similar policies written by Ceding under similar terms
and conditions, in the state of Mississippi from the Effective Date
through termination of this treaty, with an assumption reinsurance
agreement (the "Assumption Reinsurance Agreement") in the form
attached hereto as Exhibit II at any time but in any event not later
than nine (9) months subsequent to the Execution Date of this
Agreement, subject to all regulatory approvals as required by law of
the insurance department of the State of Louisiana. In the event (i)
Ceding comes under any supervision by a state regulator or in the
event Ceding shall (ii) apply for or consent in the appointment of, or
the taking of possession by, a receiver, custodian, regulator trustee
or liquidator of itself or of all or a substantial part of its assets,
(iii) make a general assignment for the benefit of its creditors, (iv)
commence a voluntary case under the Federal Bankruptcy Code, (v) file
a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization or winding up, or (vi) take any
action for the purpose of effecting any of the foregoing, or a
proceeding or case shall be commenced without the application or
consent of Ceding in any court or forum of competent jurisdiction
seeking (a) its liquidation, reorganization, dissolution or
winding-up, (b) the appointment of a trustee, receiver, custodian,
liquidator or the like of Ceding or of all or any substantial part of
its assets, or (c) similar relief in respect of Ceding under any law
relating to bankruptcy, insolvency, reorganization or winding up,
Coinsurer and Ceding shall be deemed to have converted this Agreement
to the Assumption Reinsurance Agreement one day prior to such
insolvency or other actions described in this Paragraph 2.6, and
Coinsurer shall be deemed to have assumed the Reinsured Policies as of
one day prior to the date thereof.
2.7. Transfer of Assets
On or before the expiration of ninety (90) days following the last day
of the month in which the Execution Date occurs, Ceding shall deliver
or cause to be delivered to Coinsurer any additional assets as may be
necessary to result in final delivery to Coinsurer of assets equal to
the total reserves applicable to the Reinsured Policies as of the last
day of the month in which the Execution Date occurs. Conversely, if
the assets delivered by Ceding to Coinsurer on the Execution Date
exceed the total reserves applicable to the Reinsured Policies as of
the last day of the month in which the Execution Date occurs,
Coinsurer shall return to Ceding assets having a statutory value equal
to such excess, on or before the expiration of ninety (90) days
following the last day of the month in which the Execution Date
occurs. Ceding shall be entitled to the income received from the
Reinsured Policies, including the net investment income, through the
last day of the month in which the Execution Date occurs.
ARTICLE III
ACTUARIAL RESERVES
3.1. Statutory Reserves Basis
On the Effective Date and throughout the duration of this Agreement,
the reserves (the "Coinsurance Reserves") shall be those used by
Ceding and approved by Coinsurer and the insurance departments of the
States of Louisiana and Utah in the calculation as of September 30,
2002, at 11:59p.m. (CDT)) as they appear in the NAIC Quarterly
Statement filed by Ceding. To the extent approval cannot be obtained
from any of such insurance departments, Ceding shall have presented
the methodology for the calculation of reserves to such insurance
departments and received no objection thereto.
ARTICLE IV
TRANSACTIONS
4.1. Initial Coinsurance Premium
On the last Execution Date, Ceding shall pay Coinsurer an initial
coinsurance premium in cash or assets acceptable to Coinsurer in an
amount equal to the full Coinsurance Reserves (as defined in Paragraph
3.1), including the Incurred But Not Reported (IBNR) reserve as of the
Effective Date.
4.2. Ceding Commission
The ceding commission to be paid by Coinsurer to Ceding for the
Reinsured Policies shall be the recapture amount to be paid by Ceding
to Scottish Re (U.S.), Inc. currently estimated to be $10,254,803
pursuant to the Automatic Coinsurance Agreement dated June 1, 2001
(Treaty No. 1001), between Ceding and Scottish Re (U.S.), Inc., but in
any event such commission shall not exceed $10,300,000.
ARTICLE V
ADMINISTRATION, PREMIUMS, ALLOWANCES AND BENEFITS
5.1. General
Coinsurer shall provide all of the administrative services and assumes
all liability for the payment of all legal obligations, including
claims, commissions, and expenses, not otherwise excluded herein, for
the Reinsured Policies following the last day of the month in which
the Execution Date occurs. Ceding agrees to provide any necessary
accommodations or assignments to effectuate the intent of this
Agreement, including premium collections, billings, and use of
licenses to insure that all premiums are paid to Coinsurer following
the last day of the month in which the Execution Date occurs.
Coinsurer agrees to perform the administrative services with a level
of skill, diligence, care and expertise that is consistent with
industry standards for an administrator of the types of policies
coinsured hereunder and shall also comply in all material respects
with all applicable laws and the terms of the Reinsured Policies.
Coinsurer hereby covenants that it will employ and retain staff with
the experience, skill and expertise to perform the administrative
services in a manner consistent with the standards set forth herein.
Unless specifically mutually agreed otherwise, Coinsurer shall follow
the standard industry practices with respect to premium collections,
changes, reductions, terminations, reinstatements, and the calculation
and payment of non-forfeiture benefits. Ceding shall deliver the
policy forms and policy jackets of the Reinsured Policies, and all
other procedures, documents and systems relating to the Reinsured
Policies. Coinsurer will be responsible for negligent acts or for
errors while providing administrative services during the term of the
Agreement.
5.2. Policy Loans
Coinsurer shall be responsible to calculate, dispense and account for
all policy loans, following the last day of the month in which the
Execution Date occurs.
5.3. Coinsurance Premiums
The Coinsurance premiums payable by Ceding to Coinsurer shall be equal
to all of the premiums collected by Ceding on the Reinsured Policies
following the last day of the month in which the Execution Date
occurs.
5.4. Allowances
Allowances to be paid to Ceding (which include reimbursement for state
premium tax) shall be equal to the gross premium taxes due on premiums
collected following the last day of the month in which the Execution
Date occurs. Reinsurer shall also reimburse Ceding for any actual
expenses incurred by Ceding in order to comply with this Agreement,
provided the Parties have agreed in writing in advance for such
reimbursements.
5.5. Claims and other Policy Benefits
Coinsurer will be liable for all of the policy benefits on Policies
ceded hereunder to the same extent as Ceding is liable for such
benefits toward the insured. Coinsurer is not liable for and Ceding is
not ceding any policy issued to an insured whose death occurred prior
to the Effective Date and for which a death claim has been received by
Ceding prior to the Effective Date. All claims of every nature and
description originating and arising prior and including the last day
of the month in which the Execution Date occurs under policies
included in the Reinsured Policies shall be paid and discharged by
Ceding. All claims originating and arising after the last day of the
month in which the Execution Date occurs and relating to the Reinsured
Policies shall be paid by Coinsurer. Coinsurer will receive the
Incurred But Not Reported (IBNR) reserve to cover its liability
following the last day of the month in which the Execution Date
occurs.
5.6. Dividends
For policyholders' dividends, Coinsurer shall be liable for all of
such dividends, provided such dividends have been declared by the
board of directors of Ceding on the basis of recommendations made by
Coinsurer, or are contractually guaranteed prior to Effective Date.
5.7. Authorization for Payment
Coinsurer will follow usual and customary procedures and decisions on
all claims and settlements, and it agrees to hold harmless Ceding for
any and all damages related to the payment of any such claims or
settlements. Ceding agrees to hold harmless Coinsurer from (i) any
claims by any third parties to the ownership or options to acquire the
ownership of any of the assets, tangible, intangible, movable or
immovable, covered by this Agreement, (ii) any claims to be paid or
discharged by Ceding and (iii) any and all monetary damages,
liabilities, fines, fees, penalties, interest obligations,
deficiencies, losses, costs, and expenses (including reasonable fees
and expenses of attorneys, accountants, actuaries, and other experts)
solely related to the Reinsured Policies resulting from any breach of
Ceding of any representation, warranty, covenant or agreement made by
Ceding in this Agreement. The indemnity provisions provided in
subsection (iii) of the preceding sentence shall only apply to such
claims presented in writing to Ceding on or after the Execution Date.
5.8. Reporting
All the amounts referred to in Paragraphs 5.3, 5.4, 5.5 and 5.6 shall
be reported to Coinsurer by Ceding on a bulk basis at the end of each
quarter. When an amount is due to Coinsurer according to the quarterly
report, payment will accompany the report. When an amount is due to
Ceding, Coinsurer shall pay it within thirty (30) days of the receipt
of such report.
ARTICLE VI
REPORTING AND ACCOUNTING
6.1. Accounting Period
Each accounting period under this Agreement will be a calendar
quarter, except that: (a) the initial accounting period will run from
the Effective Date of this Agreement through the last day of the
calendar quarter during which the Effective Date of this Agreement
falls, and (b) the final accounting period will run from the end of
the preceding accounting period until the assumption date of this
Agreement as described in Paragraph 2.6, if any, or until the
termination of the last policy in force, whichever occurs first.
6.2. Quarterly Accounting Reports
Ceding and Coinsurer shall prepare quarterly accounting reports and
submit them to each other within thirty (30) days of the end of each
calendar quarter.
6.3. Inspection of Records
Ceding and Coinsurer shall each have the right to inspect at any
reasonable time, at the office of the other party, all files and
documents relating to the reinsurance under this Agreement.
ARTICLE VII
RECAPTURE
7.1. Recapture
Ceding shall not have the option to recapture the business reinsured
hereunder unless agreed to by Coinsurer in writing.
ARTICLE VIII
ARBITRATION
8.1. Principle
If Ceding and Coinsurer cannot mutually resolve a dispute that arises
out of, or relates to, this Agreement, the dispute will be decided
through binding arbitration. To initiate arbitration either Ceding or
Coinsurer will notify the other party in writing of its desire to
arbitrate stating generally the nature of the dispute and the relief
sought. The party to which the written notice is sent shall respond to
the notification in writing within fourteen (14) days of its receipt.
8.2. Arbitration.
Unless the parties otherwise agree in writing, there will be three
arbitrators. Each party will designate one arbitrator within thirty
(30) days after the first written notice is given of arbitration. If
either party refuses or neglects to appoint an arbitrator within the
original thirty (30) day period or within twenty (20) days after the
other party has given written notice to the other of its arbitrator
appointment, whichever later occurs, the party that has already
selected an arbitrator will appoint a second arbitrator. The two
arbitrators shall endeavor to select a third arbitrator. If the two
arbitrators cannot agree on the third arbitrator within twenty (20)
days of the appointment of the second arbitrator then Ceding and the
Coinsurer will each name three candidates to serve as the third
arbitrator. Beginning with the party that did not initiate
arbitration, each party will eliminate one candidate form the six
until one remains. If this candidate declines to serve as the
arbitrator, then the candidate last eliminated will be approached to
serve. This process will be repeated until a candidate has agree to
serve as the third arbitrator. The three arbitrators are to be
impartial regarding the dispute. Each of the arbitrators will be a
current of former executive officer of a life insurance or a life
reinsurance company other that the parties to this agreement, their
affiliates or subsidiaries or any other company which would have and
involvement with the parties to the extent that the arbitrate would
not be impartial.
8.3 Procedures
The arbitrators will base their decision on the terms and conditions
of this Agreement and the customers and practices of the insurance and
reinsurance industries along with statutory and decisional law of the
state of Utah, or if there is not applicable decisional law in the
state of Utah, then the arbitrators may refer to other decisional law
within the United States as the arbitrators deem appropriate. The
arbitration hearing will be held in Jackson, Mississippi. A hearing
will commence no later than one hundred eighty (180) days after the
appointment of the third arbitrator unless otherwise agreed to by the
parties in writing. As soon as reasonably possible the arbitrators
will establish arbitration procedures as warranted by the facts and
issues of the particular case. The arbitrators may utilize those
procedures which appear to be appropriate from the commercial rules of
the American Arbitration Association. A date will be established prior
to the arbitration hearing when each party is to provide the other
party and the arbitrators a statement of the facts and arguments to be
presented at the arbitration hearing. The arbitrators will have the
power to decide all substantive procedural rules of the arbitration,
including but not limited to inspection of documents, examination of
witnesses and any other matter relating the conduct of the
arbitration.
8.4 Decision
The decision of the arbitrators is to be made a majority rule and will
be submitted in the writing and will be final and binding on the
Parties, subject to any appeal or motion to vacate or modify. Any such
appeal or motion to vacate or modify must be filed with the United
States District Court for the District of Utah and the basis for any
such appeal of motions is limited to that set for the in Sections
78-31a-14,15 of the Utah Arbitration Act. The parties agree that the
determination of the arbitrators and award, if any, may be entered
with the federal court located in Salt Lake County, State of Utah and
the determination and award, if any, may then be enforced amount the
Parties, as if entered by a court at the conclusion of a judicial
proceeding at which no appeal was taken. When seeking to enter the
award with a court, the applicable Utah arbitration or statutory law
or Federal Arbitration Act, as appropriate, will govern as the
procedure and what may be brought to the attention of the court.
8.5. Costs
Unless the arbitrators decide otherwise, each party will bear the
expense of its own arbitration activities, including its appointed
arbitrator and witness fees. The parties will jointly bear the expense
of the third arbitrator. Each Party is to bear its own attorney's
fees.
8.6. Applicable Law
Should there be improprieties in the arbitration process or if one of
the Parties objects to the implementation of the arbitration process,
the laws of the State of Mississippi shall then apply.
ARTICLE IX
INSOLVENCY
9.1. Payment of Claims
In the event of insolvency of Ceding, any amounts owed by Coinsurer
under this Agreement shall be paid by Coinsurer directly to Ceding,
its liquidator, receiver or statutory successor, and Coinsurer shall
be deemed to have converted this Agreement to the Assumption
Reinsurance Agreement one day prior to such insolvency pursuant to
Paragraph 2.6.
9.2. Right to Offset
In the event of the insolvency of either Coinsurer or Ceding, any
amounts owed by Coinsurer to Ceding and by Ceding to Coinsurer with
respect to this and all other reinsurance agreements between Coinsurer
and Ceding, shall be offset against each other with the balance to be
paid by the appropriate party.
9.3. Insolvency Definition
For purposes of this Article IX, "insolvency" encompasses the items
set forth in Section 2.6(i), (ii), (iii), (iv), (v) and (vi) and
Section 2.6(a), (b) and (c).
ARTICLE X
DEFERRED ACQUISITION COST TAX
Coinsurer and Ceding mutually agree to the following pursuant to Section
1.848-2(g)(8) of the Income Tax Regulations issued on December 29, 1992 of the
Internal Revenue Code of 1986.
(a) The Party with net positive consideration for the Agreement(s)
for each taxable year shall compute specified policy acquisition
expenses without regard to the general deductions limitation of
Section 848(c)(1).
(b) Coinsurer and Ceding agree to exchange information pertaining to
the amount of net consideration as determined for all reinsurance
Agreements in force between them to ensure consistency or as may
otherwise be required by the Internal Revenue Service.
(c) Ceding will submit a schedule to Coinsurer by April 1st of its
calculation of the net consideration for the preceding calendar
year. This calculation shall be accompanied by a statement signed
by an officer of Ceding stating that it will report such net
consideration in its tax return for the preceding calendar year.
(d) Coinsurer shall advise Ceding if it disagrees with the amounts
provided and Ceding and Coinsurer agree to amicably resolve any
difference. The amounts provided by Ceding shall be presumed
correct if it does not receive a response from Coinsurer within
30 days after receipt by Coinsurer of these amounts or by May 30
of the current year.
ARTICLE XI
EXECUTION
11.1. Parties to the Agreement
This is an Agreement solely between Ceding and Coinsurer. There will be no
legal relationship between Coinsurer and any person having an interest of
any kind in any of Ceding's insurance, or between Coinsurer and any other
Coinsurer, or between Coinsurer and any other third party.
11.2. Waiver
Any term or condition of this Agreement may be waived at any time by the
party that is entitled to benefit thereof. Such waiver must be in writing
and must be executed by an executive officer of such party. A waiver on one
occasion will not be deemed to be a waiver of the same or any other breach
or nonfulfillment on a future occasion. All remedies, either under this
Agreement, or by law or, otherwise afforded, will be cumulative and not
alternative.
11.3. Amendment
This Agreement may be modified or amended only in writing duly executed by
each of the Parties.
11.4. Counterparts
This Agreement may be executed simultaneously in counterparts, each of
which will be deemed an original, but all of which, when taken together,
will constitute one and the same instrument.
11.5. Governing Law
This Agreement will be governed by and construed and enforced in accordance
with the laws of the State of Mississippi (without regard to the principles
of conflicts of law) applicable to a contract executed and performable in
such state.
11.6. Binding Effect
This Agreement is binding upon and will inure to the benefit of the Parties
and their respective successors and permitted assigns.
11.7. No Assignment
Neither this Agreement nor any right or obligation hereunder or part hereof
may be assigned by any party hereto without the prior written consent of
the other party hereto (and any attempt to do so will be void).
11.8. Entirety
This Agreement shall constitute the entire Agreement between Ceding and
Coinsurer with respect to the business reinsured hereunder. There are no
understandings between Ceding and Coinsurer other than as expressed in this
Agreement.
11.9. Due Diligence
Each party to this Agreement hereby acknowledges that it has received from
the other party all information requested and has had an adequate
opportunity to investigate all aspects of this transaction. Each party has
done its own due diligence with respect to this transaction, and each has
hired and relied upon the advice of its own attorneys, financial advisors,
and such other advisors as such party has deemed necessary to evaluate
properly all aspects of this transaction. Each party further acknowledges
that no representations have been made by any party concerning this
transaction, except as specifically set forth herein or in one or more
written agreements between the parties.
11.10. Invalid Provisions
If any provision of this Agreement is held to be illegal, invalid, or
unenforceable under any present or future law, and if the rights or
obligations under this Agreement will not be materially and adversely
affected thereby, (i) such provision will be fully severable; (ii) this
Agreement will be construed and enforced as if such illegal, invalid, or
unenforceable provision had never comprised a part hereof; and (iii) the
remaining provisions of this Agreement will remain in full force and effect
and will not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Agreement.
IN WITNESS WHEREOF, each of the Parties hereto, intending to be legally bound
hereby, have duly executed this Agreement as of the date first written.
ACADIAN LIFE INSURANCE COMPANY
By:____________________________________
Its:_____________________________
SECURITY NATIONAL LIFE INSURANCE COMPANY
By:______________________________________
Its: _____________________________