SECURITY NATIONAL FINANCIAL CORPORATION
5300 South 360 West, Suite 250
Salt Lake City, Utah 84123
June 11, 2004
Dear Stockholder:
On behalf of the Board of Directors, it is my pleasure to invite you to
attend the Annual Meeting of Stockholders of Security National Financial
Corporation (the "Company") to be held on July 16, 2004, at 10:00 a.m., Mountain
Daylight Time, at 5300 South 360 West, Suite 250, Salt Lake City, Utah.
The formal notice of the Annual Meeting and the Proxy Statement have been
made a part of this invitation. A copy of the Company's Annual Report to
Stockholders is also enclosed.
The matters to be addressed at the meeting will include the election of
seven directors and the ratification of the appointment of Tanner + Co. as the
Company's independent accountants for the fiscal year ending December 31, 2004.
I will also report on the Company's business activities and answer any
stockholder questions.
Your vote is very important. We hope you will take a few minutes to review
the Proxy Statement and complete, sign, and return your Proxy Card in the
envelope provided, even if you plan to attend the meeting. Please note that
sending us your Proxy will not prevent you from voting in person at the meeting,
should you wish to do so.
Thank you for your support of Security National Financial Corporation. We
look forward to seeing you at the Annual Meeting.
Sincerely yours,
SECURITY NATIONAL FINANCIAL CORPORATION
George R. Quist
Chairman of the Board and Chief
Executive Officer
SECURITY NATIONAL FINANCIAL CORPORATION
5300 South 360 West, Suite 250
Salt Lake City, Utah 84123
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Security
National Financial Corporation (the "Company"), a Utah corporation, will be held
on July 16, 2004, at 5300 South 360 West, Suite 250, Salt Lake City, Utah, at
10:00 a.m., Mountain Daylight Time, to consider and act upon the following:
1. To elect a Board of Directors consisting of seven directors (two directors
to be elected exclusively by the Class A common stockholders voting
separately as a class and the remaining five directors to be elected by the
Class A and Class C common stockholders voting together) to serve until the
next Annual Meeting of Stockholders and until their successors are elected
and qualified;
2. To ratify the appointment of Tanner + Co. as the Company's independent
accountants for the fiscal year ending December 31, 2004;
3. To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on May 28, 2004, as
the record date for determining stockholders entitled to notice of and to vote
at the Annual Meeting and any adjournment thereof.
STOCKHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING. A PROXY STATEMENT
AND PROXY CARD ARE ENCLOSED HEREWITH. WHETHER OR NOT YOU PLAN TO ATTEND THE
MEETING, PLEASE SIGN, DATE AND RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE
PAID ENVELOPE SO THAT YOUR SHARES MAY BE VOTED AT THE MEETING. THE GIVING OF A
PROXY WILL NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
By order of the Board of Directors,
G. Robert Quist
First Vice President and Secretary
June 11, 2004
Salt Lake City, Utah
SECURITY NATIONAL FINANCIAL CORPORATION
5300 South 360 West, Suite 250
Salt Lake City, Utah 84123
PROXY STATEMENT
Annual Meeting of Stockholders
To Be Held on July 16, 2004
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Security National Financial Corporation
(the "Company") for use at the Annual Meeting of Stockholders to be held on July
16, 2004, at 5300 South 360 West, Suite 250, Salt Lake City, Utah, at 10:00
a.m., Mountain Daylight Time, or at any adjournment or postponements thereof
(the "Annual Meeting"). The shares covered by the enclosed Proxy, if such is
properly executed and received by the Board of Directors prior to the meeting,
will be voted in favor of the proposals to be considered at the Annual Meeting,
and in favor of the election of the nominees to the Board of Directors (two
nominees to be elected by the Class A common stockholders voting separately as a
class and five nominees to be elected by the Class A and Class C common
stockholders voting together) as listed unless such Proxy specifies otherwise,
or the authority to vote in the election of directors is withheld. A Proxy may
be revoked at any time before it is exercised by giving written notice to the
Secretary of the Company at the above address. Stockholders may vote their
shares in person if they attend the Annual Meeting, even if they have executed
and returned a Proxy. This Proxy Statement and accompanying Proxy Card are being
mailed to stockholders on or about June 11, 2004.
Your vote is important. Please complete and return the Proxy Card so your
shares can be represented at the Annual Meeting, even if you plan to attend in
person.
If a shareholder wishes to assign a proxy to someone other than the
Directors' Proxy Committee, all three names appearing on the Proxy Card must be
crossed out and the name(s) of another person or persons (not more than three)
inserted. The signed card must be presented at the meeting by the person(s)
representing the shareholder.
The cost of this solicitation will be borne by the Company. The Company may
reimburse brokerage firms and other persons representing beneficial owners of
shares for their expenses in forwarding solicitation materials to such
beneficial owners. Proxies may also be solicited by certain of the Company's
directors, officers, and regular employees, without additional compensation.
The matters to be brought before the Annual Meeting are (1) to elect
directors to serve for the ensuing year; (2) to ratify the appointment of Tanner
+ Co. as the Company's independent accountants for the fiscal year ending
December 31, 2004; and (3) to transact such other business as may properly come
before the Annual Meeting.
VOTING SECURITIES
Only holders of record of Common Stock at the close of business on May 28,
2004, will be entitled to vote at the Annual Meeting. As of March 31, 2004,
there were issued and outstanding 5,054,906 shares of Class A Common Stock,
$2.00 par value per share, and 6,260,793 shares of Class C Common Stock $.20 par
value per share, resulting in a total of 11,315,699 shares of both Class A and
Class C Common Stock outstanding. A majority of the outstanding shares (or
5,657,850 shares) of Class A and Class C Common Stock will constitute a quorum
for the transaction of business at the meeting.
The holders of each class of Common Stock of the Company are entitled to
one vote per share. Cumulative voting is not permitted in the election of
directors.
The Company's Articles of Incorporation provide that the Class A common
stockholders and Class C common stockholders have different voting rights in the
election of directors. The Class A common stockholders voting separately as a
class will be entitled to vote for two of the seven directors to be elected (the
nominees to be voted upon by the Class A stockholders separately consist of
Messrs. Charles L. Crittenden and J. Lynn Beckstead, Jr.).
The remaining five directors will be elected by the Class A and Class C
common stockholders voting together (the nominees to be so voted upon consist of
Messrs. Robert G. Hunter, M.D, H. Craig Moody, George R. Quist, Scott M. Quist,
and Norman G. Wilbur). For the other business to be conducted at the Annual
Meeting, the Class A and Class C common stockholders will vote together, one
vote per share. Class A common stockholders will receive a different form of
Proxy than the Class C common stockholders.
ELECTION OF DIRECTORS
PROPOSAL 1
There are three committees of the Board of Directors, which meet
periodically during the year: the Audit Committee, the Compensation Committee,
and the Executive Committee. The Board of Directors does not have a Nominating
Committee.
The Compensation Committee is responsible for recommending to the Board of
Directors for approval the annual compensation of each executive officer of the
Company and the executive officers of the Company's subsidiaries, developing
policy in the areas of compensation and fringe benefits, contributions under the
Employee Stock Ownership Plan, contribution under the 401(k) Retirement Savings
Plan, Deferred Compensation Plan, granting of options under the stock option
plans, and creating other employee compensation plans. The Compensation
Committee consists of Messrs. Charles L. Crittenden, Norman G. Wilbur, and
George R. Quist. During 2003, the Compensation Committee met on two occasions.
The Audit Committee directs the auditing activities of the Company's
internal auditors and outside public accounting firm and approves the services
of the outside public accounting firm. The Audit Committee consists of Messrs.
Charles L. Crittenden, H. Craig Moody, and Norman G. Wilbur. During 2003, the
Audit Committee met on two occasions.
The Executive Committee reviews Company policy, major investment activities
and other pertinent transactions of the Company. The Executive Committee
consists of Messrs. George R. Quist, Scott M. Quist, and H. Craig Moody. During
2003, the Executive Committee met on two occasions. During 2003, there were five
meetings of the Company's Board of Directors.
The Company's Bylaws provide that the Board of Directors shall consist of
not less than three nor more than eleven members. The term of office of each
director is for a period of one year or until the election and qualification of
his successor. A director is not required to be a resident of the State of Utah
but must be a stockholder of the Company.
The size of the Board of Directors of the Company for the coming year is
seven members. Unless authority is withheld by your Proxy, it is intended that
the Common Stock represented by your Proxy will be voted for the respective
nominees listed below. If any nominee should not serve for any reason, the Proxy
will be voted for such person as shall be designated by the Board of Directors
to replace such nominee. The Board of Directors has no reason to expect that any
nominee will be unable to serve. There is no arrangement between any of the
nominees and any other person or persons pursuant to which he was or is to be
selected as a director. There is no family relationship between or among any of
the nominees, except that Scott M. Quist is the son of George R. Quist.
The Nominees
The nominees to be elected by the holders of Class A Common Stock are as
follows:
Name Age Director Since Position(s) with the Company
------------ --- ---------------- ----------------------------
J. Lynn Beckstead, Jr. 50 March 2002 Vice President and Director
Charles L. Crittenden 84 October 1979 Director
The nominees for election by the holders of Class A and Class C Common
Stock, voting together, are as follows:
Name Age Director Since Position(s) with the Company
------------ --- ---------------- ----------------------------
Robert G. Hunter, M.D. 44 October 1998 Director
H. Craig Moody 52 September 1995 Director
George R. Quist 83 October 1979 Chairman of the Board and
Chief Executive Officer
Scott M. Quist 51 May 1986 President, General Counsel,
Chief Operating Officer and
Director
Norman G. Wilbur 65 October 1998 Director
The following is a description of the business experience of each of the
nominees and directors.
George R. Quist has been Chairman of the Board and Chief Executive Officer
of the Company since October 1979. In addition, he served as President of the
Company from October 1979 until July 2002. Mr. Quist has also served as Chairman
of the Board and Chief Executive Officer of Southern Security Life Insurance
Company since December 1998, and as its President from December 1998 to July
2002. From 1960 to 1964, he was Executive Vice President and Treasurer of
Pacific Guardian Life Insurance Company. From 1946 to 1960, he was an agent,
District Manager and Associate General Agent for various insurance companies.
Mr. Quist also served from 1981 to 1982 as President of The National Association
of Life Companies, a trade association of 642 life insurance companies, and from
1982 to 1983 as its Chairman of the Board.
Scott M. Quist has been President of the Company since July 2002, its Chief
Operating Officer since October 2001, and its General Counsel and a director
since May 1986. Mr. Quist served as First Vice President of the Company from May
1986 to July 2002. Mr. Quist has also served as President of Southern Security
Life Insurance Company since July 2002, its Chief Operating Officer since
October 2001, and its General Counsel and a director since December 1998. Mr.
Quist also served as First Vice President of Southern Security Life Insurance
Company from December 1998 to July 2002. From 1980 to 1982, Mr. Quist was a tax
specialist with Peat, Marwick, Mitchell, & Co., in Dallas, Texas. From 1986 to
1991, he was Treasurer and a director of The National Association of Life
Companies, a trade association of 642 insurance companies until its merger with
the American Council of Life Companies. Mr. Quist has been a member of the Board
of Governors of the Forum 500 Section (representing small insurance companies)
of the American Council of Life Insurance. Mr. Quist has also served as a
regional director of Key Bank of Utah since November 1993. Mr. Quist is
currently a director and past president of the National Alliance of Life
Companies, a trade association of over 200 life companies.
J. Lynn Beckstead, Jr. has been a Vice President and a director of the
Company since March 2002. Mr. Beckstead has also served as Vice President and a
director of Southern Security Life Insurance Company since March 2002. In
addition, he is President of Security National Mortgage Company, an affiliate of
the Company, having served in this position since July 1993. From 1980 to 1993,
Mr. Beckstead was Vice President and a director of Republic Mortgage
Corporation. From 1983 to 1990, Mr. Beckstead was Vice President and a director
of Richards Woodbury Mortgage Corporation. From 1980 to 1983, he was a principal
broker for Boardwalk Properties. From 1978 to 1980, Mr. Beckstead was a
residential loan officer for Medallion Mortgage Company. From 1977 to 1978, he
was a residential construction loan manager of Citizens Bank.
Charles L. Crittenden has been a director of the Company since October
1979. Mr. Crittenden is also a director of Southern Security Life Insurance
Company and has served in this position since December 1998. Mr. Crittenden has
been sole stockholder of Crittenden Paint & Glass Company since 1958. He is also
an owner of Crittenden Enterprises, a real estate development company, and
Chairman of the Board of Linco, Inc.
Robert G. Hunter, M.D. has been a director of the Company since October
1998. Dr. Hunter is also a director of Southern Security Life Insurance Company
and has served in this position since December 1998. Dr. Hunter is currently a
practicing physician in private practice. Dr. Hunter created the statewide
E.N.T. Organization (Rocky Mountain E.N.T., Inc.) where he is currently a member
of the Executive Committee. He is also Chairman of Surgery at Cottonwood
Hospital, a delegate to the Utah Medical Association and a delegate representing
the State of Utah to the American Medical Association, and a member of several
medical advisory boards.
H. Craig Moody has been a director of the Company since September 1995. Mr.
Moody is also a director of Southern Security Life Insurance Company and has
served in this position since December 1998. Mr. Moody is owner of Moody &
Associates, a political consulting and real estate company. He is a former
Speaker and House Majority Leader of the House of Representatives of the State
of Utah.
Norman G. Wilbur has been a director of the Company since October 1998. Mr.
Wilbur is also a director of Southern Security Life Insurance Company and has
served in this position since December 1998. Mr. Wilbur worked for J.C. Penney's
regional offices in budget and analysis. His final position was Manager of
Planning and Reporting for J.C. Penney's stores. After 36 years with J.C.
Penney's, he took an option of an early retirement in 1997. Mr. Wilbur is a past
board member of a homeless organization in Plano, Texas.
Executive Officers
The following table sets forth certain information with respect to the
executive officers of the Company (the business biographies for George R. Quist,
Scott M. Quist and J. Lynn Beckstead are set forth above):
Name Age Title
George R. Quist1 83 Chairman of the Board and Chief Executive
Officer
Scott M. Quist1 51 President, General Counsel and Chief
Operating Officer
G. Robert Quist1 52 First Vice President and Secretary
Stephen M. Sill 58 Vice President, Treasurer and Chief Financial
Officer
J. Lynn Beckstead, Jr. 50 Vice President and President of Security
National Mortgage Company
1George R. Quist is the father of Scott M. Quist and G. Robert Quist.
G. Robert Quist has been First Vice President and Secretary of the Company
since March 2002. Mr. Quist also served as a director of Southern Security Life
Insurance Company since April 1999 and as its First Vice President and Secretary
since March 2002. He has also served as First Vice President of Singing Hills
Memorial Park since 1996. Mr. Quist has served as Vice President of Memorial
Estates since 1982; he began working for Memorial Estates in 1978. Also, since
1987, Mr. Quist has served as President and a director of Big Willow Water
Company and as Secretary-Treasurer and a director of the Utah Cemetery
Association. From 1987 to 1988, he was a director of Investors Equity Life
Insurance Company of Hawaii.
Stephen M. Sill has been Vice President, Treasurer and Chief Financial
Officer of the Company since March 2002. From 1997 to March 2002, Mr. Sill was
Vice President and Controller of the Company. He has also served as Vice
President, Treasurer and Chief Financial Officer of Southern Security Life
Insurance Company since March 2002. From 1998 to March 2002, Mr. Sill also
served as Vice President and Controller of Southern Security Life Insurance
Company. From 1994 to 1997, Mr. Sill was Vice President and Controller of
Security National Life Insurance Company. From 1989 to 1993, he was Controller
of Flying J. Inc. From 1978 to 1989, Mr. Sill was Senior Vice President and
Controller of Surety Life Insurance Company. From 1975 to 1978, he was Vice
President and Controller of Sambo's Restaurant, Inc. From 1974 to 1975, Mr. Sill
was Director of Reporting for Northwest Pipeline Corporation. From 1970 to 1974,
he was an auditor with Arthur Andersen & Co. Mr. Sill is the immediate past
President and a director of the Insurance Accounting and Systems Association
(IASA), a national association of over 1,300 insurance companies and associate
members.
The Board of Directors of the Company has a written procedure, which
requires disclosure to the board of any material interest or any affiliation on
the part of any of its officers, directors or employees that is in conflict or
may be in conflict with the interests of the Company.
No director, officer or 5% stockholder of the Company or its subsidiaries,
or any affiliate thereof has had any transactions with the Company or its
subsidiaries during 2003 or 2002.
Each of the directors of the Company are directors of Southern Security
Life Insurance Company, which has a class of equity securities registered under
the Securities Exchange Act of 1934, as amended. In addition, Scott M. Quist is
a regional director of Key Bank of Utah.
All directors of the Company hold office until the next Annual Meeting
of Stockholders and until their successors have been elected and qualified.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Executive Officer Compensation
The following table sets forth, for each of the last three fiscal years,
the compensation received by George R. Quist, the Company's Chairman of the
Board and Chief Executive Officer, and all other executive officers
(collectively, the "Named Executive Officers") at December 31, 2003, whose
salary and bonus for all services in all capacities exceed $100,000 for the
fiscal year ended December 31, 2003.
Summary Compensation Table
Annual Compensation Long-Term Compensation
Other
Annual Restricted Securities Long-Term All Other
Name and Compen- Stock Underlying Incentive Compen-
Principal Position Year Salary($) Bonus($) sation($)(2) Awards($) Options/SARs(#) Payout($) sation($)(3)
- ------------------ ---- --------- -------- ------------ --------- --------------- --------- ------------
George R. Quist (1) 2003 $165,600 $50,000 $2,400 0 100,000 0 $23,273
Chairman of the 2002 165,600 25,000 2,400 0 80,000 0 31,186
Board and Chief 2001 148,737 20,200 2,400 0 40,000 0 37,358
Executive Officer
Scott M. Quist (1) 2003 $205,400 $60,000 $7,200 0 70,000 0 $29,531
President, Chief 2002 179,400 35,000 7,200 0 40,000 0 24,066
Operating Officer 2001 148,737 20,200 2,400 0 40,000 0 34,739
and Director
J. Lynn Beckstead Jr 2003 $158,500 $255,675 $0 0 15,000 0 $16,104
Vice President and 2002 150,000 120,401 0 0 10,000 0 15,101
Director 2001 140,580 71,929 0 0 10,000 0 11,527
G. Robert Quist (1) 2003 $ 87,175 $ 16,599 $2,400 0 35,000 0 $ 9,748
First Vice President
and Secretary
(1) George R. Quist is the father of Scott M. Quist and G. Robert Quist.
(2) The amounts indicated under "Other Annual Compensation" consist of payments
related to the operation of automobiles by the Named Executive Officers.
However, such payments do not include the furnishing of an automobile by
the Company to George R. Quist, Scott M. Quist, J. Lynn Beckstead and G.
Robert Quist, nor the payment of insurance and property taxes with respect
to the automobiles operated by the Named Executive Officers.
(3) The amounts indicated under "All Other Compensation" consist of (a) amounts
contributed by the Company into a trust for the benefit of the Named
Executive Officers under the Security National Financial Corporation
Deferred Compensation Plan (for the years 2003, 2002, and 2001, such
amounts were George R. Quist, $18,590, $16,207, and $32,077, respectively;
Scott M. Quist, $23,000, $19,219, and $34,102, respectively; J. Lynn
Beckstead $12,750, $0, and $0, respectively; and G. Robert Quist, $9,394
for 2003); (b) insurance premiums paid by the Company with respect to a
group life insurance plan for the benefit of the Named Executive Officers
(for the years 2003, 2002 and 2001, such amounts were George R. Quist, $39,
$125, and $637, respectively; and Scott M. Quist, G. Robert Quist and J.
Lynn Beckstead Jr., $354, $642, and $637 each, respectively); (c) life
insurance premiums paid by the Company for the benefit of the family of
George R. Quist ($4,644 for each of the years 2003, 2002 and 2001); Scott
M. Quist ($6,177 for the year 2003, $4,205 for 2002, and $0 for 2001); (d)
compensation paid for the cashless exercise of 50,000 shares of Company
stock exercised by George R. Quist ($10,210) for the year 2002; (e) amounts
contributed by the Company into a trust for the benefit of the Named
Executive Officers under the Security National Financial Corporation's
Employer Stock Ownership Plan (ESOP) (for the years 2003, 2002 and 2001,
such amounts were J. Lynn Beckstead Jr., $3,000, $2,754 and $4,912,
respectively; and (f) amounts contributed by the Company into a trust for
the benefit of the Named Executive Officers under the Security National
Financial Corporation Tax-Favored Retirement Savings Plan (401(k) Plan)
(for the years 2003, 2002, and 2001, such amounts were J. Lynn Beckstead,
Jr., $0, $11,705, and $5,978, respectively; ) The amounts under "All Other
Compensation" do not include the no interest loan in the amount of $172,000
that the Company made to George R. Quist on April 29, 1998 to exercise
stock options. See Certain Transactions.
The following table sets forth information concerning the exercise of
options to acquire shares of the Company's Common Stock by the Named Executive
Officers during the fiscal year ended December 31, 2003, as well as the
aggregate number and value of unexercised options held by the Named Executive
Officers on December 31, 2003.
Aggregated Option/SAR Exercised in Last Fiscal Year and Fiscal Year-End
Option/SAR Values:
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Shares Options/SARs Options/SARs at
Acquired on at December 31, December 31,
Exercise Value 2003(#) 2003
------- ------
Name (#) Realized Exercisable Unexercisable Exercisable Unexercisable
- ---- -------- -------- ----------- ------------- ----------- -------------
George R. Quist -0- $ -0- 239,505 -0- $521,582 $-0-
Scott M. Quist 48,099 336,174 73,500 -0- 134,575 -0-
J. Lynn Beckstead, Jr. 22,647 152,867 27,326 -0- 91,081 -0-
G. Robert Quist -0- -0- 48,050 -0- 118,177 -0-
Retirement Plans
On December 8, 1988, the Company entered into a deferred compensation plan
with George R. Quist, the Chairman and Chief Executive Officer of the Company.
The plan was later amended effective January 2, 2001. Under the terms of the
plan as amended, upon the retirement of Mr. Quist, the Company is required to
pay him ten annual installments in the amount of $60,000. Retirement is defined
in the plan as the earlier or later of age 70, as specified by the Board of
Directors. The $60,000 annual payments are to be adjusted for inflation in
accordance with the United States Consumer Price Index for each year after
January 1, 2002. If Mr. Quist's employment is terminated by reason of disability
or death before he reaches retirement age, the Company is to make the ten annual
payments to Mr. Quist, in the event of disability, or to his designated
beneficiary, in the event of death.
The plan also provides that the Board of Directors may, in its discretion,
pay the amounts due under the plan in a single, lump-sum payment. In the event
that Mr. Quist dies before the ten annual payments are made, the unpaid balance
will continue to be paid to his designated beneficiary. The plan further
requires the Company to furnish an automobile for Mr. Quist's use and to pay all
reasonable expenses incurred in connection with its use for a ten year period,
and to provide Mr. Quist with a hospitalization policy with similar benefits to
those provided to him the day before his retirement or disability. However, in
the event Mr. Quist's employment with the Company is terminated for any reason
other than retirement, death, or disability, the entire amount of deferred
compensation payments under the plan shall be forfeited by him. The Company has
accrued a liability for the deferred compensation plan at December 31, 2003 of
$319,000.
Employment Agreements
The Company maintains an employment agreement with Scott M. Quist. The
agreement, which has a five-year term, was entered into in 1996, and renewed in
1997 and 2002. Under the terms of the agreement, Mr. Quist is to devote his full
time to the Company serving as its President, General Counsel and Chief
Operating Officer at not less than his current salary and benefits, and to
include $500,000 of life insurance protection. In the event of disability, Mr.
Quist's salary would be continued for up to five years at 75% of its current
level. In the event of a sale or merger of the Company, and Mr. Quist were not
retained in his current position, the Company would be obligated to continue Mr.
Quist's current compensation and benefits for seven years following the merger
or sale.
On December 4, 2003, the Company, through its subsidiary Security National
Mortgage Company, entered into an employment agreement with J. Lynn Beckstead,
Jr., President of Security National Mortgage Company. The agreement has a
five-year term, but the Company has agreed to renew the agreement on December 4,
2008 and 2013 for additional five-year terms, provided Mr. Beckstead performs
his duties with usual and customary care and diligence. Under the terms of the
agreement, Mr. Beckstead is to devote his full time to the Company serving as
President of Security National Mortgage Company at not less than his current
salary and benefits, and to include $350,000 of life insurance protection. In
the event of disability, Mr. Beckstead's salary would be continued for up to
five years at 50% of its current level.
In the event of a sale or merger of the Company, and Mr. Beckstead were not
retained in his current position, the Company would be obligated to continue Mr.
Beckstead's current compensation and benefits for five years following the
merger or sale. The agreement further provides that Mr. Beckstead is entitled to
receive annual retirement benefits beginning one month from the date of his
retirement of his employment without cause. These retirement benefits are to be
paid for a period of ten years in annual installments in the amount equal to
one-half of his then current annual salary. However, in the event that Mr.
Beckstead dies prior to receiving all retirement benefits thereunder, the
remaining benefits are to be paid to his heirs.
Director Compensation
Directors of the Company (but not including directors who are employees)
are paid a director's fee of $12,000 per year by the Company for their services
and are reimbursed for their expenses in attending board and committee meetings.
No additional fees are paid by the Company for committee participation or
special assignments. However, each director is provided with an annual grant of
stock options to purchase 1,000 shares of Class A Common Stock under the 2000
Director Stock Option Plan.
Employee 401(k) Retirement Savings Plan
In 1995, the Company's Board of Directors adopted a 401(k) Retirement
Savings Plan. Under the terms of the 401(k) plan, effective as of January 1,
1995, the Company may make discretionary employer matching contributions to its
employees who choose to participate in the plan. The plan allows the board to
determine the amount of the contribution at the end of each year. The Board
adopted a contribution formula specifying that such discretionary employer
matching contributions would equal 50% of the participating employee's
contribution to the plan to purchase Company stock up to a maximum discretionary
employee contribution of 1/2% of a participating employee's compensation, as
defined by the plan.
All persons who have completed at least one year's service with the Company
and satisfy other plan requirements are eligible to participate in the 401(k)
plan. All Company matching contributions are invested in the Company's Class A
Common Stock. The Company's matching contributions for 2003, 2002, and 2001 were
approximately $4,493, $7,975 and $18,458, respectively. Also, the Company may
contribute at the discretion of the Company's Board of Directors an Employer
Profit Sharing Contribution to the 401(k) plan. The Employer Profit Sharing
Contribution shall be divided among three different classes of participants in
the plan based upon the participant's title in the Company. All amounts
contributed to the plan are deposited into a trust fund administered by an
independent trustee. The Company's contributions to the plan for 2003, 2002 and
2001, were $110,081, $142,218 and $260,350, respectively.
Employee Stock Ownership Plan
Effective January 1, 1980, the Company adopted an employee stock ownership
plan (the "Ownership Plan") for the benefit of career employees of the Company
and its subsidiaries. The following is a description of the Ownership Plan, and
is qualified in its entirety by the Ownership Plan, a copy of which is available
for inspection at the Company's offices.
Under the Ownership Plan, the Company has discretionary power to make
contributions on behalf of all eligible employees into a trust created under the
Ownership Plan. Employees become eligible to participate in the Ownership Plan
when they have attained the age of 19 and have completed one year of service (a
twelve-month period in which the Employee completes at least 1,040 hours of
service). The Company's contributions under the Ownership Plan are allocated to
eligible employees on the same ratio that each eligible employee's compensation
bears to total compensation for all eligible employees during each year. To
date, the Ownership Plan has approximately 235 participants and had $98,588
contributions payable to the Plan in 2003. Benefits under the Ownership Plan
vest as follows: 20% after the third year of eligible service by an employee, an
additional 20% in the fourth, fifth, sixth and seventh years of eligible service
by an employee.
Benefits under the Ownership Plan will be paid out in one lump sum or in
installments in the event the employee becomes disabled, reaches the age of 65,
or is terminated by the Company and demonstrates financial hardship. The
Ownership Plan Committee, however, retains discretion to determine the final
method of payment. Finally, the Company reserves the right to amend or terminate
the Ownership Plan at any time. The trustees of the trust fund under the
Ownership Plan are George R. Quist, Scott M. Quist and Robert G. Hunter, who
each serve as a director of the Company.
Deferred Compensation Plan
In 2001, the Company's Board of Directors adopted a Deferred Compensation
Plan. Under the terms of the Deferred Compensation Plan, the Company will
provide deferred compensation for a select group of management or highly
compensated employees, within the meaning of Sections 201(2), 301(a)(3) and
401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.
The board has appointed a committee of the Company to be the plan administrator
and to determine the employees who are eligible to participate in the plan. The
employees who participate may elect to defer a portion of their compensation
into the plan. The Company may contribute into the plan at the discretion of the
Company's Board of Directors. The Company's contribution for 2003, 2002 and 2001
was $95,485, $100,577 and $220,038, respectively.
1987 Incentive Stock Option Plan
In 1987, the Company adopted the 1987 Incentive Stock Option Plan (the
"1987 Plan"). The 1987 Plan provides that shares of the Class A Common Stock of
the Company may be optioned to certain officers and key employees of the
Company. The Plan establishes a Stock Option Plan Committee, which selects the
employees to whom the options will be granted, and determines the price of the
stock. The Plan establishes the minimum purchase price of the stock at an amount
that is not less than 100% of the fair market value of the stock (110% for
employees owning more than 10% of the total combined voting power of all classes
of stock).
The Plan provides that if additional shares of Class A Common Stock are
issued pursuant to a stock split or a stock dividend, the number of shares of
Class A Common Stock then covered by each outstanding option granted hereunder
shall be increased proportionately with no increase in the total purchase price
of the shares then so covered, and the number of shares of Class A Common Stock
reserved for the purpose of the Plan shall be increased by the same proportion.
In the event that the shares of Class A Common Stock of the Company from time to
time issued and outstanding are reduced by a combination of shares, the number
of shares of Class A Common Stock then covered by each outstanding option
granted hereunder shall be reduced proportionately with no reduction in the
total price of the shares then so covered, and the number of shares of Class A
Common Stock reserved for the purposes of the Plan shall be reduced by the same
proportion.
The Plan terminated in 1997 and options granted are non-transferable. The
Plan permits the holder of the option to elect to receive cash, amounting to the
difference between the option price and the fair market value of the stock at
the time of the exercise, or a lesser amount of stock without payment, upon
exercise of the option.
1993 Stock Option Plan
On June 21, 1993, the Company adopted the Security National Financial
Corporation 1993 Stock Incentive Plan (the "1993 Plan"), which reserves shares
of Class A Common Stock for issuance thereunder. The 1993 Plan was approved at
the annual meeting of the stockholders held on June 21, 1993. The 1993 Plan
allows the Company to grant options and issue shares as a means of providing
equity incentives to key personnel, giving them a proprietary interest in the
Company and its success and progress.
The 1993 Plan provides for the grant of options and the award or sale of
stock to officers, directors, and employees of the Company. Both "incentive
stock options," as defined under Section 422A of the Internal Revenue Code of
1986 (the "Code"), and "non-qualified options" may be granted pursuant to the
1993 Plan. The exercise prices for the options granted are equal to or greater
than the fair market value of the stock subject to such options as of the date
of grant, as determined by the Company's Board of Directors. The options granted
under the 1993 Plan, were to reward certain officers and key employees who have
been employed by the Company for a number of years and to help the Company
retain these officers by providing them with an additional incentive to
contribute to the success of the Company.
The 1993 Plan is to be administered by the Board of Directors or by a
committee designated by the board. The terms of options granted or stock awards
or sales affected under the 1993 Plan are to be determined by the Board of
Directors or its committee. The Plan provides that if the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend. In addition, the number of
shares of Common Stock reserved for purposes of the Plan shall be adjusted by
the same proportion. No options may be exercised for a term of more than ten
years from the date of grant.
Options intended as incentive stock options may be issued only to
employees, and must meet certain conditions imposed by the code, including a
requirement that the option exercise price be no less than the fair market value
of the option shares on the date of grant. The 1993 Plan provides that the
exercise price for non-qualified options will be not less than at least 50% of
the fair market value of the stock subject to such option as of the date of
grant of such options, as determined by the Company's Board of Directors.
The 1993 Plan has a term of ten years. The Board of Directors may amend or
terminate the 1993 Plan at any time, subject to approval of certain
modifications to the 1993 Plan by the shareholders of the Company as may be
required by law or the 1993 Plan. On November 7, 1996, the Company amended the
1993 Plan as follows: (i) to increase the number of shares of Class A Common
Stock reserved for issuance under the 1993 Plan from 300,000 Class A shares to
600,000 Class A shares; and (ii) to provide that the stock subject to options,
awards and purchases may include Class C common stock. On October 14, 1999, the
Company amended the 1993 Plan to increase the number of shares of Class A Common
Stock reserved for issuance under the plan from 746,126 Class A shares to
1,046,126 Class A shares. The Plan terminated on June 21, 2003.
2000 Director Stock Option Plan
On October 16, 2000, the Company adopted the 2000 Directors Stock Option
Plan (the "Director Plan") effective November 1, 2000. The Director Plan
provides for the grant by the Company of options to purchase up to an aggregate
of 50,000 shares of Class A Common Stock for issuance thereunder. The Director
Plan provides that each member of the Company's Board of Directors who is not an
employee or paid consultant of the Company automatically is eligible to receive
options to purchase the Company's Class A Common Stock under the Director Plan.
Effective as of November 1, 2000, and on each anniversary date thereof
during the term of the Director Plan, each outside director shall automatically
receive an option to purchase 1,000 shares of Class A Common Stock. In addition,
each new outside director who shall first join the Board after the effective
date shall be granted an option to purchase 1,000 shares upon the date which
such person first becomes an outside director and an annual grant of an option
to purchase 1,000 shares on each anniversary date thereof during the term of the
Director Plan. The options granted to outside directors shall vest in their
entirety on the first anniversary date of the grant. The primary purposes of the
Director Plan are to enhance the Company's ability to attract and retain
well-qualified persons for service as directors and to provide incentives to
such directors to continue their association with the Company.
In the event of a merger of the Company with or into another company, or a
consolidation, acquisition of stock or assets or other change in control
transaction involving the Company, each option becomes exercisable in full,
unless such option is assumed by the successor corporation. In the event the
transaction is not approved by a majority of the "Continuing Directors" (as
defined in the Director Plan), each option becomes fully vested and exercisable
in full immediately prior to the consummation of such transaction, whether or
not assumed by the successor corporation.
2003 Stock Option Plan
On July 11, 2003, the Company adopted the Security National Financial
Corporation 2003 Stock Incentive Plan (the "2003 Plan"), which reserves shares
of Class A and Class C Common Stock for issuance thereunder. The 2003 Plan was
approved by the Board of Directors on May 9, 2003 and by the stockholders at the
annual meeting of the stockholders held on July 11, 2003. The 2003 Plan allows
the Company to grant options and issue shares as a means of providing equity
incentives to key personnel, giving them a proprietary interest in the Company
and its success and progress.
The 2003 Plan provides for the grant of options and the award or sale of
stock to officers, directors, and employees of the Company. Both "incentive
stock options," as defined under Section 422A of the Internal Revenue Code of
1986 (the "Code"), and "non-qualified options" may be granted pursuant to the
2003 Plan. The exercise prices for the options granted are equal to or greater
than the fair market value of the stock subject to such options as of the date
of grant, as determined by the Company's Board of Directors. The options granted
under the 2003 Plan are to reward certain officers and key employees who have
been employed by the Company for a number of years and to help the Company
retain these officers by providing them with an additional incentive to
contribute to the success of the Company.
The 2003 Plan is to be administered by the Board of Directors or by a
committee designated by the board. The terms of options granted or stock awards
or sales affected under the 2003 Plan are to be determined by the Board of
Directors or its committee. The Plan provides that if the shares of Common Stock
shall be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable upon
the exercise of Options shall be increased or decreased proportionately, and
appropriate adjustments shall be made in the purchase price per share to reflect
such subdivision, combination or stock dividend. In addition, the number of
shares of Common Stock reserved for purposes of the Plan shall be adjusted by
the same proportion. No options may be exercised for a term of more than ten
years from the date of grant.
Options intended as incentive stock options may be issued only to
employees, and must meet certain conditions imposed by the code, including a
requirement that the option exercise price be no less than the fair market value
of the option shares on the date of grant. The 2003 Plan provides that the
exercise price for non-qualified options will be not less than at least 50% of
the fair market value of the stock subject to such option as of the date of
grant of such options, as determined by the Company's Board of Directors.
The 2003 Plan has a term of ten years. The Board of Directors may amend or
terminate the 2003 Plan at any time, subject to approval of certain
modifications to the 2003 Plan by the shareholders of the Company as may be
required by law or the 2003 Plan.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who own more than 10% of any class of
the Company's common stock to file reports of ownership and periodic changes in
ownership of the Company's common stock with the Securities and Exchange
Commission. Such persons are also required to furnish the Company with copies of
all Section 16(a) reports they file.
Based solely on its review of the copies of stock reports received by it
with respect to fiscal 2003, or written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
directors, officers and greater than 10% beneficial owners were compiled with,
except that G. Robert Quist, First Vice President and Secretary of the Company,
through an oversight, filed one late Form 4 report reporting sales of shares of
Class A Common Stock in 11 transactions.
Certain Transactions
The Company has made a loan in the amount of $172,000 to George R. Quist,
the Company's Chief Executive Officer, without requiring the payment of any
interest. The loan was made under a promissory note dated April 29, 1998 in
order for Mr. Quist to exercise stock options, which were granted to him under
the 1993 Stock Option Plan. No installment payments are required under the terms
of the note, but the note must be paid in full as of December 31, 2007. Mr.
Quist has the right to make prepayments on the note at any time. As of March 31,
2004, the outstanding balance of the note was $28,000. The loan was approved by
the Company's directors on March 12, 1999, with Mr. Quist abstaining, at a
special meeting of the Board of Directors.
On December 19, 2001, the Company entered into an option agreement with
Monument Title, LLC, a Utah limited liability company ("Monument Title") in
which the Company made available a $100,000 line of credit to Monument Title at
an interest rate of 8% per annum. The line of credit is secured by the assets of
Monument Title. From December 28, 2001 to June 14, 2002, the Company advanced
Monument Title a total of $77,953 under the line of credit. The amount advanced
under the line of credit plus accrued interest are payable upon demand. This
receivable was fully allowed for in 2003. Ron Motzkus and Troy Lashley, who own
90% and 10% of the outstanding shares of Monument Title, respectively, are
brothers-in-law of Scott M. Quist, President and Chief Operating Officer of the
Company. The Company has the right under the option agreement for a period of
five years from the date thereof to acquire 100% of the outstanding common
shares of Monument Title for the sum of $10. The purpose of the transaction,
which was approved by the Company's Board of Directors, is to insure that the
title and escrow work performed for Security National Mortgage Company in
connection with its mortgage loans are completed as accurately as possible by
Monument Title to avoid any economic losses to the Company.
The Company's Board of Directors has a written procedure that requires
disclosure to the board of any material interest or any affiliation on the part
of its officers, directors or employees that is in conflict or may be in
conflict with the interests of the Company.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth security ownership information of the
Company's Class A and Class C Common Stock as of March 31, 2004, (i) for persons
who own beneficially more than 5% of the Company's outstanding Class A or Class
C Common Stock, (ii) each director of the Company, and (iii) for all executive
officers and directors of the Company as a group.
Class A and
Class A Class C Class C
Common Stock Common Stock Common Stock
------------ ------------ ------------
Amount Amount Amount
Beneficially Percent Beneficially Percent Beneficially Percent
Name and Address (1) Owned of Class Owned of Class Owned of Class
- ---------------- ------- -------- ----- -------- ----- --------
George R. and Shirley C. Quist
Family Partnership, Ltd.(2) 400,263 7.1% 3,195,860 51.0% 3,596,123 30.3%
Employee Stock
Ownership Plan (3) 546,344 9.7% 1,479,087 23.6% 2,025,431 17.0%
George R. Quist (4)(5)(7)(8) 452,819 8.1% 448,015 7.2% 900,834 7.6%
Scott M. Quist (4)(7)(9) 322,982 5.7% 321,505 5.1% 644,487 5.4%
Associated Investors (10) 88,379 1.6% 624,391 10.0% 712,770 6.0%
G. Robert Quist (6)(11) 93,521 1.7% 233,056 3.7% 326,577 2.7%
J. Lynn Beckstead, Jr. (6) (12) 85,988 1.5% -- * 85,988 *
Stephen M. Sill (6)(13) 53,163 * -- * 53,163 *
Robert G. Hunter, M.D (4)(14) 5,899 * -- * 5,899 *
Norman G. Wilbur (15) 4,628 * -- * 4,628 *
Charles L. Crittenden 4,589 * -- * 4,589 *
H. Craig Moody(16) 4,358 * -- * 4,358 *
All directors and executive officers
(9 persons) (4)(5)(6)(7) 1,428,210 25.4% 4,198,436 67.1% 5,626,646 47.3%
- ---------------
* Less than 1%
(1) Unless otherwise indicated, the address of each listed stockholder is c/o
Security National Financial Corporation, 5300 South 360 West, Suite 250, Salt
Lake City 84123.
(2) This stock is owned by the George R. and Shirley C. Quist Family
Partnership, Ltd., of which George R. Quist is the general partner.
(3) The trustees of the Employee Stock Ownership Plan (ESOP) are George R.
Quist, Scott M. Quist, and Robert G. Hunter, who exercise shared voting and
investment powers.
(4) Does not include 546,344 shares of Class A Common Stock and 1,479,087 shares
of Class C Common Stock owned by the Company's Employee Stock Ownership Plan
(ESOP), of which George R. Quist, Scott M. Quist, and Robert G. Hunter are the
trustees and accordingly, exercise shared voting and investment powers with
respect to such shares.
(5) Does not include 88,379 shares of Class A Common Stock and 624,391 shares of
Class C Common Stock owned by Associated Investors, a Utah general partnership,
of which George R. Quist is the managing partner and, accordingly, exercises
sole voting and investment powers with respect to such shares.
(6) Does not include 200,031 shares of Class A Common Stock owned by the
Company's 401(k) Retirement Savings Plan, of which G. Robert Quist, J. Lynn
Beckstead and Stephen M. Sill are members of the Investment Committee and,
accordingly, exercise shared voting and investment powers with respect to such
shares.
(7) Does not include 98,765 shares of Class A Common Stock owned by the
Company's Deferred Compensation Plan, of which George R. Quist and Scott M.
Quist are members of the Investment Committee and, accordingly, exercise shared
voting and investment powers with respect to such shares.
(8) Includes options to purchase 239,505 shares of Class A Common Stock granted
to George R. Quist, that are currently exercisable or will become exercisable
within 60 days of March 31, 2004.
(9) Includes options to purchase 73,500 shares of Class A Common Stock granted
to Scott M. Quist that are currently exercisable or will become exercisable
within 60 days of March 31, 2004.
(10) The managing partner of Associated Investors is George R. Quist, who
exercises voting and investment powers.
(11) Includes options to purchase 36,750 shares of Class A Common Stock granted
to G. Robert Quist, that are currently exercisable or will become exercisable
within 60 days of March 31, 2004.
(12) Includes options to purchase 15,750 shares of Class A Common Stock granted
to Mr. Beckstead, which are currently exercisable or will become exercisable
within 60 days of March 31, 2004.
(13) Includes options to purchase 10,500 shares of Class A Common Stock granted
to Mr. Sill, which are currently exercisable or will become exercisable within
60 days of March 31, 2004.
(14) Includes options to purchase 3,477 shares of Class A Common Stock granted
to Mr. Hunter, which are currently exercisable or will become exercisable within
60 days of March 31, 2004.
(15) Includes options to purchase 3,477 shares of Class A Common Stock granted
to Mr. Wilbur, which are currently exercisable or will become exercisable within
60 days of March 31, 2004.
(16) Includes options to purchase 3,477 shares of Class A Common Stock granted
to Mr. Moody, which are currently exercisable or will become exercisable within
60 days of March 31, 2004.
The Company's officers and directors, as a group, own beneficially
approximately 47.3% of the outstanding shares of the Company's Class A and Class
C Common Stock.
REPORT OF THE COMPENSATION COMMITTEE
Under rules established by the Securities and Exchange Commission (the
"Commission"), the Company is required to provide certain data and information
in regard to the compensation and benefits provided to the Company's Chairman of
the Board of Directors and Chief Executive Officer and the four other most
highly compensated executive officers. In fulfillment of this requirement, the
Compensation Committee, at the direction of the Board of Directors, has prepared
the following report for inclusion in this Proxy Statement.
Executive Compensation Philosophy. The Compensation Committee of the Board
of Directors is composed of three directors, two of whom are independent,
outside directors. The Compensation Committee is responsible for setting and
administering the policies and programs that govern both annual compensation and
stock ownership programs for the executive officers of the Company. The
Company's executive compensation policy is based on principles designed to
ensure that an appropriate relationship exists between executive pay and
corporate performance, while at the same time motivating and retaining executive
officers.
Executive Compensation Components. The key components of the Company's
compensation program are base salary, an annual incentive award, and equity
participation. These components are administered with the goal of providing
total compensation that is competitive in the marketplace, rewards successful
financial performance and aligns executive officers' interests with those of
stockholders. The Compensation Committee reviews each component of executive
compensation on an annual basis.
Base Salary. Base salaries for executive officers are set at levels
believed by the Compensation Committee to be sufficient to attract and retain
qualified executive officers. Base pay increases are provided to executive
officers based on an evaluation of each executive's performance, as well as the
performance of the Company as a whole. In establishing base salaries, the
Compensation Committee not only considers the financial performance of the
Company, but also the success of the executive officers in developing and
executing the Company's strategic plans, developing management employees and
exercising leadership. The Compensation Committee believes that executive
officer base salaries for 2003 were reasonable as compared to amounts paid by
companies of similar size.
Annual Incentive. The Compensation Committee believes that a significant
proportion of total cash compensation for executive officers should be subject
to attainment of specific Company financial performance. This approach creates a
direct incentive for executive officers to achieve desired performance goals and
places a significant percentage of each executive officer's compensation at
risk. Consequently, each year the Compensation Committee establishes potential
bonuses for executive officers based on the Company's achievement of certain
financial performance. The Compensation Committee believes that executive
officer annual bonuses for 2003 were reasonable as compared to amounts paid by
companies of similar size.
Stock Options. The Compensation Committee believes that equity
participation is a key component of its executive compensation program. Stock
options are granted to executive officers primarily based on the officer's
actual and potential contribution to the Company's growth and profitability and
competitive marketplace practices. Option grants are designed to retain
executive officers and motivate them to enhance stockholder value by aligning
the financial interests of executive officers with those of stockholders. Stock
options also provide an effective incentive for management to create stockholder
value over the long term since the full benefit of the compensation package
cannot be realized unless an appreciation in the price of the Company's Class A
Common Stock occurs over a number of years.
Compensation of Chief Executive Officer. Consistent with the executive
compensation policy and components described above, the Compensation Committee
determined the salary, bonus and stock options received by George R. Quist, the
Chairman of the Board and Chief Executive Officer of the Company, for services
rendered in 2003. Mr. Quist received a base salary of $165,600 for 2003. He also
received an annual bonus of $50,000 and stock options to purchase 100,000 shares
of the Company's Class A Common Stock at an exercise price of $6.50 per share.
COMPENSATION COMMITTEE
George R. Quist, Chairman
Charles L. Crittenden
Norman G. Wilbur
REPORT OF THE AUDIT COMMITTEE
The Company has an Audit Committee consisting of three non-management
directors, Charles L. Crittenden, H. Craig Moody, and Norman G. Wilbur. Each
member of the Audit Committee is considered independent and qualified in
accordance with applicable independent director and audit committee listing
standards. The Company's Board of Directors has adopted a written charter for
the Audit Committee.
During the year 2003, the Audit Committee met two times. The Audit
Committee has met with management and discussed the Company's internal controls,
the quality of the Company's financial reporting, the results of internal and
external audit examinations, and the audited financial statements. In addition,
the Audit Committee has met with the Company's independent auditors, Tanner +
Co., and discussed all matters required to be discussed by the auditors with the
Audit Committee under Statement on Auditing Standards No. 61 (communication with
audit committees). The Audit Committee reviewed and discussed with the auditors
their annual written report on their independence from the Company and its
management, which is made under Independence Standards Board Standard No. 1
(independence discussions with audit committees), and considered with the
auditors whether the provision of financial information systems design and
implementation and other non-audit services provided by them to the Company
during 2003 was compatible with the auditors' independence.
In performing these functions, the Audit Committee acts only in an
oversight capacity. In its oversight role, the Audit Committee relies on the
work and assurances of the Company's management, which is responsible for the
integrity of the Company's internal controls and its financial statements and
reports, and the Company's independent auditors, who are responsible for
performing an independent audit of the Company's financial statements in
accordance with generally accepted auditing standards and for issuing a report
on these financial statements.
Pursuant to the reviews and discussions described above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2003, for filing with the Securities and Exchange
Commission.
AUDIT COMMITTEE
Norman G. Wilbur, Chairman
Charles L. Crittenden
H. Craig Moody
COMPANY STOCK PRICE PERFORMANCE
The table below compares the cumulative total stockholder return of the
Company's Class A Common Stock with the cumulative total return on the Standard
& Poor's 500 Stock Index and the Standard & Poor's Insurance Index for the
period from December 31, 1998 through December 31, 2003. The table assumes that
the value of the investment in the Company's Class A Common Stock and in each of
the indexes was $100 at December 31, 1998, and that all dividends were
reinvested.
The comparisons in the table below are based on historical data and are not
intended to forecast the possible future performance of the Company's Class A
Common Stock.
December 31, December 31, December 31, December 31, December 31, December 31,
1998 1999 2000 2001 2002 2003
---- ---- ---- ---- ---- ----
Security National
Financial Corporation 100 124 87 100 268 326
S&P 500 100 120 107 93 72 90
S&P Insurance Index 100 106 104 123 96 115
The table set forth above is required by the Securities and Exchange
Commission and shall not be deemed to be incorporated by reference by any
general statement incorporating by reference this proxy statement into any
filing under the Securities Act of 1933, as amended, or under the Securities
Exchange Act of 1934, as amended, except to the extent that the Company
specifically incorporates this information by reference, and shall not otherwise
be deemed soliciting material or filed under such acts.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
PROPOSAL 2
The independent public accounting firm of Tanner + Co. has been the
Company's independent accountants since December 31, 1999. The Audit Committee
has recommended and the Board of Directors has appointed Tanner + Co. for
purposes of auditing the consolidated financial statements of the Company for
the fiscal year ending December 31, 2004. It is anticipated that representatives
of Tanner + Co. will be present at the Annual Meeting and will be provided an
opportunity to make a statement if they desire, and to be available to respond
to appropriate questions.
The Board of Directors recommends that stockholders vote "FOR" ratification
of the appointment of Tanner + Co. as the Company's independent accountants for
fiscal year ending December 31, 2004.
AUDIT FEES, FINANCIAL INFORMATION SYSTEMS DESIGN
AND IMPLEMENTATION FEES AND ALL OTHER FEES
Fees paid during the year 2003 for the annual audit of the financial
statements and employee benefit plans and related quarterly reviews were
approximately $224,000. There were approximately $15,000 in other fees paid
during 2003.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting, but if other matters properly come before the meeting, it is the
intention of the persons named in the enclosed form of Proxy to vote the shares
they represent in accordance with their judgment.
ANNUAL REPORT AND FINANCIAL STATEMENTS
You are referred to the Company's annual report, including financial
statements, for the fiscal year ended December 31, 2003. The annual report is
incorporated in this Proxy Statement and is not to be considered part of the
soliciting material. The Company will provide, without charge to each
stockholder upon written request, a copy of the Company's Annual Report Form
10-K as filed with the Securities and Exchange Commission for the fiscal year
ended December 31, 2003. Such requests should be directed to Mr. G. Robert
Quist, First Vice President and Secretary, at P.O. Box 57250, Salt Lake City,
Utah 84157-0250.
DEADLINE FOR RECEIPT OF STOCKHOLDER'S PROPOSALS
FOR ANNUAL MEETING TO BE HELD IN JULY 2005
Any proposal by a stockholder to be presented at the Company's next Annual
Meeting of Stockholders expected to be held in July 2005 must be received at the
offices of the Company, P.O. Box 57250, Salt Lake City, Utah 84157-0250, no
later than March 31, 2005.
By order of the Board of Directors,
G. Robert Quist
First Vice President and Secretary
June 11, 2004
Salt Lake City, Utah
PROXY - SECURITY NATIONAL FINANCIAL CORPORATION - PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
CLASS C COMMON STOCK
The undersigned Class C common stockholder of Security National Financial
Corporation (the "Company") acknowledges receipt of the Notice of Annual Meeting
of the Stockholders to be held on July 16, 2004, at 5300 South 360 West, Suite
250, Salt Lake City, Utah, at 10:00 a.m. Mountain Daylight Time, and hereby
appoints Messrs. George R. Quist, Scott M. Quist and G. Robert Quist, or any of
them, each with full power of substitution, as attorneys and proxies to vote all
the shares of the undersigned at said Annual Meeting of Stockholders and at all
adjournments or postponements thereof, hereby ratify and confirm all that said
attorneys and proxies may do or cause to be done by virtue hereof. The
above-named attorneys and proxies are instructed to vote all of the
undersigned's shares as follows:
1. To elect five of the seven directors to be voted upon by Class A and Class C
common stockholders together:
[ ] FOR all nominees listed below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below.
(INSTRUCTION: to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.)
Robert G. Hunter, M.D., H. Craig Moody, Scott M. Quist
George R. Quist and Norman G. Wilbur
2. To ratify the appointment of Tanner + Co. as the Company's independent
accountants for the fiscal year ending December 31, 2004;
[ ] FOR [ ] AGAINST
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE NOMINEES LISTED IN PROPOSAL 1 ABOVE AND FOR PROPOSALS 2 and 3.
Dated ----------------------------------------------------------------, 2004
- -----------------------------------------
Signature of Stockholder
- ------------------------------------------
Signature of Stockholder
Please sign your name exactly as it appears on your share certificate. If
shares are held jointly, each holder should sign. Executors, trustees, and other
fiduciaries should so indicate when signing. Please sign, date, and return this
Proxy Card immediately.
NOTE: Securities dealers or other representatives please state the number of
shares voted by this Proxy.
PROXY - SECURITY NATIONAL FINANCIAL CORPORATION - PROXY
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
CLASS A COMMON STOCK
The undersigned Class A common stockholder of Security National Financial
Corporation (the "Company") acknowledges receipt of the Notice of Annual Meeting
of the Stockholders to be held on July 16, 2004, at 5300 South 360 West, Suite
250, Salt Lake City, Utah, at 10:00 a.m., Mountain Daylight Time, and hereby
appoints Messrs. George R. Quist, Scott M. Quist and G. Robert Quist, or any of
them, each with full power of substitution, as attorneys and proxies to vote all
the shares of the undersigned at said Annual Meeting of Stockholders and at all
adjournments or postponements thereof, hereby ratify and confirming all that
said attorneys and proxies may do or cause to be done by virtue hereof. The
above-named attorneys and proxies are instructed to vote all of the
undersigned's shares as follows:
1. To elect two directors to be voted upon by Class A common stockholders voting
separately as a class:
[ ] FOR all nominees listed below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.)
Charles L. Crittenden and J. Lynn Beckstead, Jr.
To elect the remaining five directors to be voted upon by Class A and Class
C common stockholders together:
[ ] FOR all nominees listed below (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
(INSTRUCTION: to withhold authority to vote for any individual nominee, strike a
line through that nominee's name in the list below.)
Robert G. Hunter, M.D., H. Craig Moody, George R. Quist
Scott M. Quist, and Norman G. Wilbur
2. To ratify the appointment of Tanner + Co. as the Company's independent
accountants for the fiscal year ending December 31, 2004;
[ ] FOR [ ] AGAINST
3. To transact such other business as may properly come before the meeting or
any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED HEREIN BY THE
UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR
THE NOMINEES LISTED IN PROPOSAL 1 ABOVE AND FOR PROPOSALS 2 AND 3.
Dated ----------------------------------------------------------------, 2004
- -----------------------------------------
Signature of Stockholder
- -----------------------------------------
Signature of Stockholder
Please sign your name exactly as it appears on your share certificate. If
shares are held jointly, each holder should sign. Executors, trustees, and other
fiduciaries should so indicate when signing. Please sign, date, and return this
Proxy Card immediately.
NOTE: Securities dealers or other representatives please state the number of
shares voted by this Proxy.
