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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): August 25, 2004
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. Agreement and Plan of Reorganization with Southern Security Life
Insurance Company
On August 25, 2004, Security National Financial Corporation (the "Company")
through its wholly owned subsidiaries, Security National Life Insurance Company
and SSLIC Holding Company, entered into an Agreement and Plan of Reorganization
with Southern Security Life Insurance Company, a Florida corporation. Security
National Life Insurance Company and SSLIC Holding Company currently own 76.7% of
the outstanding common shares of Southern Security Life Insurance Company. Upon
completion of the Agreement and Plan of Reorganization, SSLIC Holding Company
will be merged with and into Southern Security Life Insurance Company, which
merger, if consummated, would result in (i) Southern Security Life Insurance
Company becoming a wholly-owned subsidiary of Security National Life Insurance
Company and (ii) the stockholders of Southern Security Life Insurance Company
(except for Security National Life Insurance Company and SSLIC Holding Company)
becoming entitled to receive cash for their shares of common stock of Southern
Security Life Insurance Company.
If the proposed merger is completed, the separate existence of SSLIC
Holding Company will cease as Southern Security Life Insurance Company will be
the surviving corporation in the merger and will continue to be governed by the
laws of the State of Florida, and the separate corporate existence of Southern
Security Life Insurance Company, will continue unaffected by the merger. The
shares of common stock owned by the stockholders of Southern Security Life
Insurance Company (except for the shares of common stock owned by Security
National Life Insurance Company and SSLIC Holding Company) immediately prior to
the effective time of the merger will be exchanged for cash.
The total amount of cash to be paid by Security National Life Insurance
Company to the holders of common stock of Southern Security Life Insurance
Company (except for Security National Life Insurance Company and SSLIC Holding
Company), holding an aggregate of 490,816 shares of the common stock of Southern
Security Life Insurance Company, pro rata to the respective share ownership,
will be $3.84 per share of common stock, or an aggregate of $1,884,733.44. The
490,816 shares of the common stock that Security National Life Insurance Company
has agreed to purchase from stockholders of Southern Security Life Insurance
Company represent 23.3% of the outstanding shares of Southern Security Life
Insurance Company, or all of the outstanding shares of Southern Security Life
Insurance Company, except for the shares of common stock held by Security
National Life Insurance Company and SSLIC Holding Company.
If the proposed merger is completed, each share of the common stock of
Southern Security Life Insurance Company issued and outstanding immediately
prior to the effective time of the merger (except for shares of common stock
held by Security National Life Insurance Company and SSLIC Holding Company)
will, by virtue of the merger and without any action on the part of the
stockholder thereof, automatically be canceled and converted into the right to
receive cash in the amount equal to $3.84 per share. In addition, each holder of
common shares of Southern Security Life Insurance Company immediately prior to
the effective time of the merger (except for shares of common stock held by
Security National Life Insurance Company and SSLIC Holding Company) will, by
virtue of the merger and without any action on the part of such stockholder,
cease being a stockholder of Southern Security Life Insurance Company and
automatically receive cash in an amount equal to the number of shares of common
stock held of record by such stockholder at such time multiplied by $3.84 per
share.
Southern Security Life Insurance Company has scheduled an Annual Meeting of
Stockholders to be held on October 8, 2004, in which its stockholders will be
asked to vote on the approval and adoption of the Agreement and Plan of
Reorganization. In order to complete the proposed merger, a majority of all of
the common shares entitled to vote on the proposal by the stockholders of
Southern Security Life Insurance Company must vote to approve and adopt the
Agreement and Plan of Reorganization.
The obligations of Security National Life Insurance Company, SSLIC Holding
Company and Southern Security Life Insurance Company to complete the proposed
merger are subject to the satisfaction of the following conditions:
o The approval and adoption of the Agreement and Plan of Reorganization by
the stockholders of Southern Security Life Insurance Company;
o The termination or expiration of applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or such
compliance shall have been waived by the governmental agencies having
authority to give such waiver;
o All authorizations, consents, orders or approvals of any governmental
entity (including the insurance departments of the states of Florida and
Utah) necessary for the transactions contemplated by the Agreement and Plan
of Reorganization shall have been obtained;
o On the closing date the dissenting shares of the common stock of Southern
Security Life Insurance Company must not exceed 10% of its outstanding
common shares;
o There shall not be instituted any action or proceeding before any court or
governmental agency or other regulatory administrative agency or commission
challenging the transactions contemplated by the Agreement and Plan of
Reorganization.
o Each officer and director of Southern Security Life Insurance Company shall
have executed a letter containing the resignation of such person as such
officer and/or director effective as of the effective time of the merger or
such date as Security National Life Insurance Company shall request;
Security National Life Insurance Company and Southern Security Life
Insurance Company can jointly agree to terminate the proposed Agreement and Plan
of Reorganization at any given time. Either company may also terminate the
agreement under other circumstances described in the Agreement and Plan of
Reorganization.
The Company and Southern Security Life Insurance Company have retained the
firm of Houlihan Valuation Advisors to provide a valuation report to estimate
the fair market value of the 490,816 shares of the common stock of Southern
Security Life Insurance Company to be purchased in the transaction from the
minority stockholders as of June 30, 2004, and to express an opinion as to the
fairness to the minority stockholders of Southern Security Life Insurance
Company of the proposed purchase by Security National Life Insurance Company of
the 490,816 common shares, assuming the transaction is consummated as proposed.
Houlihan Valuation Advisors have provided a fairness opinion to the Company and
Southern Security Life Insurance Company dated August 25, 2004. In the fairness
opinion, Houlihan Valuation Advisors state that it is their opinion that the
transaction as proposed in the Agreement and Plan of Reorganization is fair to
the minority shareholders of Southern Security Life Insurance Company from a
financial point of view, assuming that the transaction is consummated as
proposed at a common share price of $3.84 per share, and that the minority
shareholders are receiving adequate consideration in the transaction in exchange
for the sale of their common stock.
Stockholders of Southern Security Life Insurance Company who do not vote in
favor of the Agreement and Plan of Reorganization and who follow certain
procedures have the right to dissent from, and obtain payment for, their shares
in the event of the consummation of the proposed merger. Any stockholder who
wishes to dissent and demand payment for his shares in the event of consummation
of the Agreement and Plan of Reorganization must comply with the requirements
and procedures under the Florida Business Corporation Act regarding rights of
dissenting stockholders.
ITEM 7. Financial Statements and Exhibits
(c) Exhibits
10.1 Agreement and Plan of Reorganization among Security National Life
Insurance Company, SSLIC Holding Company and Southern Security Life
Insurance Company.
AGREEMENT AND PLAN OF REORGANIZATION
By and among
SECURITY NATIONAL LIFE INSURANCE COMPANY,
SSLIC HOLDING COMPANY
and
SOUTHERN SECURITY LIFE INSURANCE COMPANY
August 25, 2004
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS 1
1.1 Certain Terms Defined 1
ARTICLE 2 AGREEMENT TO MERGE, ETC 3
2.1 Agreement to Merge 3
2.2 Payment to Holders of SSLIC Common 3
2.3 Delivery of Cash for Certificates of SSLIC Common 4
2.4 The Closing 4
2.5 Dissenting Shareholders 5
2.6 Surviving Corporation 5
2.7 Covenants, Agreements, Etc. as Conditions 5
2.8 Effectiveness of Merger 5
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SSLIC 5
3.1 Subsidiaries, Joint Ventures, Etc 5
3.2 Organization and Qualification, Etc 6
3.3 Articles of Incorporation and Bylaws 6
3.4 Capital Stock 6
3.5 Officers and Directors; Financial Institution
Accounts, Etc 6
3.6 Litigation 6
3.7 Minute Books, Etc 7
3.8 Authorization of Agreement 7
3.9 No Conflict with Other Interests 7
3.10 Tax Returns 7
3.11 Software Programs, Patents, Trademarks, Service
marks, and Copyrights 8
3.12 Compliance with Law 8
3.13 Employee Benefit Plans 8
3.14 Labor 9
3.15 State Admissions 9
3.16 Financial Statements 9
3.17 Absence of Contracts, Agreements, and Plans 9
3.18 No Adverse Change 10
3.19 Casualties 10
3.20 Limitations on SSLIC 10
3.21 Accounts, Notes, and Advances Receivable 11
3.22 No Undisclosed Liabilities or Agreements 11
3.23 Disclosure 12
3.24 Title to Properties; Liens; Conditions of Properties 12
3.25 No Liability for Finders' or Financial Advisory Fees 12
3.26 Environmental Matters 12
3.27 Information Set Forth in Any Schedule 13
3.28 SEC Documents 13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SECURITY NATIONAL LIFE 13
4.1 Organization and Qualification, Etc 13
4.2 Authority 14
4.3 Valid and Binding Obligations 14
4.4 No Violation of Articles of Incorporation, Etc 14
4.5 Authorization of Agreement 14
4.6. No Conflict with Other Interests 14
4.7. Financial Statements 14
4.8 Disclosure 15
4.9 SEC Documents 15
4.10 SSLIC Holding 15
ARTICLE 5 CONDUCT OF THE BUSINESS OF SSLIC PENDING THE MERGER 15
5.1 Conduct Business in Ordinary Course 15
5.2 No Change in Articles or Bylaws 15
5.3 No Change in Capitalization 15
5.4 No Dividends 15
5.5 No Change in Compensation 15
5.6 No Contract Not in Ordinary Course 16
5.7 No Changes in Personnel or Financial Institutions 16
5.8 Maintenance of Property 16
5.9 Insurance 16
5.10 Business Intact 16
5.11 No Capital Contributions 16
5.12 Representations and Warranties 16
5.13 Necessary Action 16
5.14 Best Efforts to Satisfy Conditions 16
5.15 Inconsistent Activities 16
5.16 Access to Properties, Files, Etc 17
5.17 Correspondence with Regulators 17
5.18 Hart-Scott-Rodino Filing 17
ARTICLE 6 APPROVALS NEEDED FOR MERGER 17
6.1 Hart-Scott-Rodino Antitrust Improvements Act of 1976 17
ARTICLE 7 CONDITIONS 18
7.1 Conditions Precedent to Obligations of
Security National Life 18
7.2 Conditions Precedent to Obligations of SSLIC 19
ARTICLE 8 ACCESS TO INFORMATION 21
8.1 Pre-Closing Access by SSLIC 21
8.2 Access to Accountant's Records by SSLIC 21
8.3 Post-Merger Access by SSLIC 21
ARTICLE 9 INDEMNIFICATION 21
9.1 Indemnification by SSLIC 21
9.2 Indemnification by Security National Life 21
9.3 Survival of Obligation to Indemnify 21
9.4 Notice and Procedure 22
9.5 Third Party Claims 22
9.6 Limitation on Indemnification Obligations 22
9.7 Indemnification as Exclusive Remedy 23
9.8 No Consequential Damages 23
ARTICLE 10 MISCELLANEOUS 23
10.1 Termination; Expenses 23
10.2 Rights of Third Parties 23
10.3 Survival of Representations and Warranties; Indemnities 23
10.4 Prior Agreements; Modifications 24
10.5 Captions and Table of Contents 24
10.6 Governing Law 24
10.7 Counterparts 24
10.8 Severability 24
10.9 Notices 24
10.10 Waiver 25
10.11 Definition of SSLIC's Knowledge 25
10.12 Definition of Security National Life's Knowledge 25
10.13 Attorney's Fees 25
10.14 Consent to Jurisdiction 25
10.15 Cross References 25
ANNEXES
Annex I Agreement of Merger
Annex II Escrow Agreement
SCHEDULES
(with page number where first mentioned in text)
Page
Schedule 2.6 Surviving Corporation 5
Schedule 3.4 SSLIC Shareholders 6
Schedule 3.5 SSLIC Officers, Directors, Employees, Financial
Institution Accounts, Safety Deposit Boxes,
Powers of Attorney, and Shareholders 6
Schedule 3.6 SSLIC Litigation 6
Schedule 3.10A SSLIC Tax Returns 7
Schedule 3.10B Taxes Not Reflected on SSLIC's Balance Sheet 8
Schedule 3.11 SSLIC Patents, Trademarks, Servicemarks, and
Copyrights 8
Schedule 3.13 SSLIC Employee Benefit Plans; Employment
Contracts 8
Schedule 3.15 States Where SSLIC Admitted or Qualified 9
Schedule 3.16 SSLIC Financial Statements 9
Schedule 3.17 SSLIC Contracts, Agreements, and Plans 9
Schedule 3.20 Certain Occurrences Since June 30, 2004 10
Schedule 3.24A SSLIC Real Estate Owned and Leased 12
Schedule 3.24B SSLIC Fixed Assets 12
Schedule 4.7 Security National Life Financial Statements 14
Schedule 5.11 SSLIC Indebtedness 16
Schedule 10.11 List of SSLIC Individuals for "Knowledge"
Purposes 25
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into this 25th day of August, 2004, by and among SECURITY NATIONAL LIFE
INSURANCE COMPANY, a Utah corporation and wholly owned subsidiary of Security
National Financial Corporation ("Security National Life"), SSLIC HOLDING
COMPANY, a Utah corporation and wholly owned subsidiary of Security National
Life (" SSLIC Holding") and SOUTHERN SECURITY LIFE INSURANCE COMPANY, a Florida
corporation ("SSLIC") (Security National Life, SSLIC Holding, and SSLIC
collectively, the "Parties").
WITNESSETH:
WHEREAS, the Parties desire upon the terms and subject to the conditions
herein set forth to enter into an agreement and plan of reorganization providing
for the merger of SSLIC Holding with and into SSLIC which merger, if
consummated, would result in (i) SSLIC becoming a wholly-owned subsidiary of
Security National Life and (ii) the shareholders of SSLIC (except for Security
National Life and SSLIC Holding) becoming entitled to receive cash for their
shares of SSLIC Common; and
WHEREAS, the Parties desire to enter into such an agreement and plan of
reorganization, and each of the Parties is prepared to make the representations,
warranties, and agreements set forth below.
NOW, THEREFORE, in order to consummate the transactions set forth above and
in consideration of the mutual covenants, agreements, representations, and
warranties herein contained, the Parties, intending to be legally bound, agree
as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Terms Defined. The terms defined in this Section 1.1 shall for all
purposes of this Agreement have the meanings herein specified, unless the
context expressly or by necessary implication otherwise requires:
(a) "Agreement" shall mean this Agreement by and among Security National
Life, SSLIC Holding and SSLIC as originally executed and delivered or, if
amended or supplemented, as so amended or supplemented;
(b) "Closing" shall have the meaning specified in Section 2.4;
(c) "Closing Date" shall have the meaning specified in Section 2.4;
(d) "Disbursing Agent" shall mean the law firm of Mackey Price Thompson &
Ostler;
(e) "Effective Time of the Merger" shall mean the date for the
effectiveness of the Merger as specified in the Articles of Merger filed with
the Department of State of the State of Florida and the Articles of Merger filed
with the Division of Corporations and Commercial Code of the State of Utah or if
no date is specified therein, the later of the time (i} at which Articles of
Merger are filed with the Division of Corporations and Commercial Code of the
State of Utah and (ii) at which Articles of Merger are filed with the Department
of State of the State of Florida;
(f) "Employee Benefit Plans" shall have the meaning specified in Section
3.13;
(g) "Escrow Account" shall mean the account maintained at the Disbursing
Agent pursuant to the Escrow Agreement into which Security National Life shall
deposit the Merger Consideration as provided in Section 2.2(c);
(h) "Escrow Agreement" shall mean the Agreement referenced in Section
2.2(b);
(i) "GAAP" shall mean accounting principles generally accepted in the
United States of America;
(j) "IRC" means the Internal Revenue Code of 1986, as amended (including
any subsequent statute);
(k) "Material" when used in "materially adverse" or "material adverse
change", shall be deemed to mean an effect or variance with respect to SSLIC, or
Security National Life, as appropriate, the magnitude of which would result in
an after tax net effect or variance of Twenty-Five Thousand Dollars ($25,000) or
more, whether individually or in the aggregate;
(l) "Merger" shall mean the merger of SSLIC Holding into SSLIC contemplated
by this Agreement and the Plan of Merger;
(m) "Merger Consideration" shall have the meaning specified in Section
2.2(a);
(n) "Parties" shall have the meaning specified in the first paragraph of
this Agreement;
(o) "Per Share Amount" shall have the meaning specified in Section 2.2(a);
(p) "Permitted Liens" shall mean as of any given time:
(i) liens and charges for then current state, county, city, school,
water, public utility, district, or other municipal taxes, levies, or
assessments not then due and payable or which remain payable without loss
of discount, interest, or penalty or which are being contested in good
faith by appropriate proceedings diligently conducted and with respect to
which adequate reserves have been set aside on the books of SSLIC; and
(ii) easements, rights of way, rights of lessees under leases,
installations of public utilities, title exceptions and reservations,
reservations in land patents, access and other restrictions, zoning
ordinances, and other encumbrances, none of which individually or in the
aggregate materially interferes with SSLIC's use of the properties subject
thereto in the ordinary course of its businesses;
(q) "Plan of Merger" shall mean the Agreement of Merger between Security
National Life, SSLIC Holding and SSLIC pursuant to which SSLIC Holding will be
merged into SSLIC, which Agreement of Merger shall be substantially in the form
attached hereto as Annex I;
(r) "SSLIC" shall have the meaning specified in the first paragraph of this
Agreement;
(s) "SSLIC Unaudited Balance Sheet" shall have the meaning specified in
Section 3.16;
(t) "SSLIC Common" shall mean the shares of Common Stock, par value $1.00
per share, of SSLIC, and any reference to a share thereof shall include a
fractional share thereof on a proportionate basis;
(u) "SSLIC Financial Statements" shall have the meaning specified in
Section 3.16;
(v) "SSLIC Fixed Assets" shall have the meaning specified in clause (a) of
Section 3.24;
(w) "SSLIC Holding" shall have the meaning specified in the first paragraph
of this Agreement;
(x) "SSLIC June 30, 2004, Unaudited Financial Statements" shall have the
meaning specified in Section 3.16;
(y) "Schedule" shall mean any one of the schedules delivered by the Parties
pursuant to this Agreement Articles 3, 4, 5 or 10 and identified and initialed
as such by an officer of the Party delivering such Schedule;
(z) "Security National Life" shall have the meaning specified in the first
paragraph of this Agreement;
(aa) "Security National Life Unaudited Balance Sheet" shall have the
meaning specified in Section 4.9;
(bb) "Security National Life Financial Statements" shall have the meaning
specified in Section 4.7;
(cc) "Security National Life June 30, 2004, Unaudited Financial Statements"
shall have the meaning specified in Section 4.7;
(dd) "Surviving Corporation" shall mean SSLIC, with and into which SSLIC
Holding shall have been merged in accordance with the Plan of Merger and
applicable law.
ARTICLE 2
AGREEMENT TO MERGE, ETC.
2.1 Agreement to Merge. In accordance with the provisions of Section 16-10a-I
101 et seq. of the Utah Revised Business Corporation Act and Section 607.0101 et
seq. of the Florida Business Corporation Act, at the Effective Time of the
Merger, SSLIC Holding shall be merged with and into SSLIC upon the terms set
forth in the Plan of Merger. Pursuant to such Merger:
(a) The separate existence of SSLIC Holding shall cease in accordance with
the provisions of Section 16-10a-1106 of the Utah Revised Business Corporation
Act and Section 607.1106 et seq. of the Florida Business Corporation Act.
(b) SSLIC will be the Surviving Corporation in the Merger and will continue
to be governed by the laws of the State of Florida, and the separate corporate
existence of SSLIC and all of its rights, privileges, immunities, and
franchises, public or private, and all of its duties and liabilities as a
corporation organized under the laws of the State of Florida, will continue
unaffected by the Merger.
(c) The shares of SSLIC Common owned by SSLIC's shareholders (except for
the shares of SSLIC Common owned by Security National Life and SSLIC)
immediately prior to the Effective Time of the Merger shall be exchanged for
cash in accordance with the terms and provisions of this Agreement and the Plan
of Merger and Section 2.2(a) hereof.
(d) The shares of SSLIC Holding Company owned by Security National Life
immediately prior to the Effective Time of the Merger shall, by virtue of the
Merger and without any action on the part of Security National Life,
automatically be converted into SSLIC Common so that, following such conversion,
SSLIC shall be a wholly owned subsidiary of Security National Life.
2.2 Payment to Holders of SSLIC Common.
(a) The total amount of cash to be paid by Security National Life to the
holders of SSLIC Common (except for Security National Life and SSLIC Holding),
holding an aggregate of 490,816 shares of SSLIC Common, pro rata to their
respective share ownership, shall be $3.84 per share of SSLIC Common (the "Per
Share Amount"), or an aggregate amount of One Million Eight Hundred Eighty-four
Thousand Seven Hundred Thirty-three and 44/100 Dollars ($1,884,733.44), subject
to adjustment as described below (such amount as adjusted, the "Merger
Consideration"). The 490,816 shares of SSLIC Common that Security National Life
has agreed to purchase from the holders of SSLIC Common represent 23.3% of the
outstanding shares of SSLIC Common, or all of the outstanding shares of SSLIC
Common, except for the shares of SSLIC Common held by Security National Life and
SSLIC Holding. The Merger Consideration shall be provided by Security National
Life through SSLIC Holding and by virtue of SSLIC Holding's merger with and into
SSLIC. Each share of SSLIC Common issued and outstanding immediately prior to
the Effective Time of the Merger (except for the shares of SSLIC Common held by
Security National Life and SSLIC Holding) shall, by virtue of the Merger and
without any action on the part of the holder thereof, automatically be canceled
and converted into the right to receive cash in an amount equal to the Per Share
Amount. Each holder of a share or shares of SSLIC Common immediately prior to
the Effective Time of the Merger (except for the shares of SSLIC Common held by
Security National Life and SSLIC Holding) shall by virtue of the Merger and
without any action on the part of such holder cease being a shareholder of SSLIC
and automatically receive cash in an amount equal to the number of shares of
SSLIC Common held of record by such holder at such time multiplied by the Per
Share Amount. Rights of dissenting shareholders are described in Section 2.5.
(b) Upon the execution and delivery of this Agreement, (i) Security
National Life, SSLIC Holding, SSLIC, and the Disbursing Agent shall execute and
deliver the Escrow Agreement in the form attached hereto as Annex II.
(c) The Merger Consideration shall be delivered to the Disbursing Agent as
follows:
(i) No later than 10:00 a.m. (Mountain Standard Time) on the Closing
Date, Security National Life and SSLIC Holding shall deliver the Merger
Consideration to the Disbursing Agent.
(ii) Promptly after the Effective Time of the Merger, and in
accordance with Section 2.3 hereof, the Disbursing Agent shall deliver to
the holders of SSLIC Common at the Effective Time of the Merger, the Merger
Consideration in the proportion set forth in Section 2.2(a) hereof.
2.3 Delivery of Cash for Certificates of SSLIC Common. All deliveries of Merger
Consideration to be made to the shareholders of SSLIC Common shall be made by
delivery of cash by the Disbursing Agent to each holder of SSLIC Common or its
designated agent or transferee. After the Effective Time of the Merger, there
shall be no further registry of
transfers in respect of SSLIC Common. Promptly after the Effective Time of the
Merger, Security National Life will cause the Disbursing Agent to send a notice
and a transmittal form to each holder of record of SSLIC Common immediately
prior to the Effective Time of the Merger advising such holders of the terms of
the Merger Consideration to be effected in connection with the Merger, the
procedure for surrendering certificates for SSLIC Common to the Disbursing
Agent, and the procedure for delivery to such shareholders of the amount of cash
to which such holder is entitled pursuant to the terms hereof and the Plan of
Merger. If any such cash is to be delivered to a name other than that in which
the stock certificate is registered, the certificate so surrendered shall be
properly endorsed and otherwise in proper form for transfer, and the person
requesting such cash shall pay to the Disbursing Agent any transfer or other
fees required by reason of the delivery to any name other than that of the
registered holder of the certificate surrendered, or establish to the
satisfaction of the Disbursing Agent that such fee has been paid or is not
applicable.
2.4 The Closing. The execution and delivery by Security National Life, SSLIC
Holding and SSLIC of the various instruments and documents which this Agreement
contemplates, all of which shall take place prior to the Effective Time of the
Merger, shall constitute the "Closing". The Closing shall take place, at the
offices of Security National Life, 5300 South 360 West, Suite 250, Salt Lake
City, Utah 84123, or at such other place as Security National Life, SSLIC
Holding and SSLIC shall otherwise agree in writing, at 10:00 a.m. (Mountain
Standard Time), on a day (the "Closing Date") within five business days after
the last to occur of either (i) approval of the Merger by the SSLIC shareholders
or (ii) the obtaining of the last of the approvals referred to in Article 7,
provided that all other conditions to closing have been met or waived. If SSLIC,
SSLIC Holding and Security National Life cannot agree on the Closing Date, it
shall take place on the fifth such business day. In the event that any condition
precedent to a party's obligation to close hereunder and under the Plan of
Merger is not satisfied or fulfilled at or as of the Closing, and the party with
the right to do so has not waived compliance therewith, the Closing shall be
postponed until such later time as such condition precedent shall have been
satisfied or such waiver shall have been given, or the parties shall otherwise
mutually agree.
As promptly as possible following the Closing, a fully-executed and verified
Articles of Merger meeting the requirements of Section 16-10a-1105 of the Utah
Revised Business Corporation Act and a fully-executed and verified Certificate
of Merger meeting the requirements of Section 607.1109 of the Florida Business
Corporation Act shall be delivered for filing to the Office of the Division of
Corporations and Commercial Code of the State of Utah and the Department of
State of the State of Florida, respectively.
2.5 Dissenting Shareholders. The duties and rights of a dissenting shareholder
of SSLIC Common, as well as the duties and rights of the Surviving Corporation
shall be as provided in the Utah Revised Business Corporation Act and the
Florida Business Corporation Act. If any such shareholder shall not perfect his
rights as a dissenting shareholder under Section 607.1302 et seq. of the Florida
Business Corporation Act, or such shareholder shall thereafter withdraw such
election or otherwise become bound by the provisions of this Agreement and the
Plan of Merger pursuant to the Florida Business Corporation Act, the amount of
cash delivered to the Disbursing Agent with respect to such shareholder shall be
delivered by the Disbursing Agent to such shareholder in exchange for the
certificates representing such shareholder's shares of SSLIC Common. If any such
shareholder thereafter receives payment for such shareholder's shares as
provided in the Florida Business Corporation Act, the Disbursing Agent shall
return to the Surviving Corporation cash which the Disbursing Agent had been
holding as due to such shareholder pursuant to this Agreement and the Plan of
Merger.
2.6 Surviving Corporation. Except as provided otherwise in Schedule 2.6:
- ---------------------
(a) The Articles of Incorporation of SSLIC as in effect immediately prior
to the Effective Time of the Merger shall be the Articles of Incorporation of
the Surviving Corporation after the Effective Time.
(b) The Bylaws of SSLIC as in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation after the Effective Time.
(c) From and after the Effective Time, the Board of Directors and officers
of Security National Life shall be the Board of Directors and officers of the
Surviving Corporation.
2.7 Covenants, Agreements, Etc. as Conditions. The material performance of all
covenants and agreements, and the material accuracy of all representations and
warranties made herein by Security National Life, SSLIC Holding and SSLIC are
conditions to the obligations of Security National Life, SSLIC Holding and
SSLIC, respectively, and it shall be the obligation of each party, prior to or
at the time of Closing, to show to the reasonable satisfaction of the other
parties that all such covenants and agreements have been complied with, and that
the representations and warranties contained herein comply with Sections 8.1 and
8.2, and the failure of a party to do so shall be a breach of and a failure to
meet such conditions to the performance hereof by the other parties.
2.8 Effectiveness of Merger. The Merger shall become effective at the Effective
Time of the Merger.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SSLIC
SSLIC represents and warrants to Security National Life and SSLIC Holding
that, subject to such exceptions as are disclosed in the Annexes and Schedules:
3.1 Subsidiaries. Joint Ventures, Etc. SSLIC has no subsidiaries. SSLIC does not
own, directly or indirectly, any of the outstanding capital stock of any
corporation or an interest in any partnership, joint venture, or other
enterprise, other than any securities held for investment purposes in the
ordinary course of business.
3.2 Organization and Qualification, Etc. SSLIC:
------------------------------------------
(i) is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Florida, with full corporate power
and corporate authority to own or hold under lease its properties and
assets and to carry on its business as presently conducted under the laws
of such state and under its articles of incorporation;
(ii) is duly qualified and in good standing as a foreign corporation
in each jurisdiction where such qualification is necessary for the conduct
of its business and failure to qualify would have a material adverse effect
on its business or financial condition; and
(iii) has all licenses, permits, authorizations, and approvals
necessary to own or lease its properties and assets and to carry on its
business as presently conducted where the failure to secure such licenses,
permits, authorizations and approvals would have a material adverse effect
on its business or financial condition;
3.3 Articles of Incorporation and Bylaws. The copies of SSLIC's Articles of
Incorporation (certified by the Department of State of Florida) and Bylaws
(certified by the secretary or an assistant secretary of SSLIC), both as amended
to date, which have been furnished to Security National Life are true, correct,
and complete and are in full force and effect on the date hereof.
3.4 Capital Stock. The authorized capital stock of SSLIC consists of 3,000,000
shares of SSLIC Common, par value $1.00 per share, of which as of the date
hereof, 2,105,235 shares are validly issued and outstanding, fully paid and
non-assessable. The current shareholders of SSLIC and the number of shares held
by each such shareholder are set forth in Schedule 3.4. SSLIC has not entered
into or is bound by any agreement to issue or sell additional shares of its
capital stock or securities convertible into or exchangeable for such capital
stock, nor has it granted or is there outstanding any other option, warrant,
right, call, or commitment of any character relating to its authorized and
unissued capital stock, and there are no outstanding securities or other
instruments convertible into or exchangeable for shares of such capital stock.
3.5 Officers and Directors; Financial Institution Accounts, Etc. Schedule 3.5
delivered to Security National Life contains true, correct, and complete lists
of:
(a) the names of all of SSLIC's officers and directors;
(b) the names and job descriptions of the three highest paid employees of
SSLIC for the fiscal year ended December 31, 2003, together with a statement of
the full amount of compensation accrued for each such person in respect of such
year and a summary of the basis on which each such person is compensated, if
such basis is other than a fixed salary rate;
(c) the name of each financial institution in which SSLIC has an account or
safety deposit box, the name in which the account or box is held and the names
of all persons authorized to draw checks thereon or to have access thereto; and
(d) the names of all persons holding powers of attorney from SSLIC and a
summary statement of the terms thereof.
3.6 Litigation. Except as disclosed in Schedule 3.6, there is no action, suit,
proceeding, or claim and no investigation by any governmental agency pending, or
to the knowledge of SSLIC threatened, against SSLIC, or the assets or business
of SSLIC, which if determined adversely would require payment by SSLIC of
damages greater than $25,000 or which has or may reasonably be expected in the
future to have a material adverse effect on the assets, liabilities, financial
condition, or results of operations of SSLIC. There is no action, suit,
proceeding, claim, or investigation pending or, to the knowledge of SSLIC,
threatened against or affecting the transactions contemplated by this Agreement
and the Plan of Merger. There is no outstanding, and to the best of the
knowledge of SSLIC, any threatened, order, writ, injunction, or decree of any
court, government, or governmental agency against SSLIC, which has or may have a
material adverse effect on the assets, liabilities, financial condition, or
results of operations of SSLIC.
3.7 Minute Books, Etc. The minute books of SSLIC contain full and complete
minutes of all annual, special, and other meetings (or written consents in lieu
thereof) of the directors and committees of directors and shareholders of SSLIC;
to SSLIC's knowledge, the signatures thereon are the true signatures of the
persons purporting to have signed them; the stock ledgers of SSLIC are complete
and all documentary stamp taxes, if any, required in connection with the
issuance or transfer of the outstanding shares of SSLIC Common have been paid.
3.8 Authorization of Agreement. The Board of Directors of SSLIC has duly
approved this Agreement and the Plan of Merger and the transactions contemplated
hereby and thereby and has duly authorized the execution and delivery by SSLIC
of this Agreement, the Plan of Merger and the Escrow Agreement, subject to the
requisite approval by the holders of SSLIC Common. Subject to the requisite
approval of the holders of SSLIC Common, and subject to any requisite approval
of regulatory authorities having jurisdiction with respect to the transactions
contemplated by this Agreement, SSLIC has full power and authority to enter into
this Agreement and perform its obligations hereunder and to enter into the Plan
of Merger and the Escrow Agreement and perform its obligations thereunder. This
Agreement constitutes, and the Plan of Merger and the Escrow Agreement will
constitute, valid, and legally binding obligations of SSLIC enforceable against
SSLIC in accordance with their respective terms subject to laws of general
application relating to bankruptcy, insolvency and the relief of debtors and to
roles of law governing specific performance, injunctive relief or other
equitable remedies; and this Agreement and the Plan of Merger and the Escrow
Agreement and the consummation of the transactions contemplated hereby and
thereby have, or will have prior to the Closing Date, been duly authorized and
approved and adopted by or on behalf of SSLIC by all requisite corporate action.
3.9 No Conflict with Other Interests. Neither the execution and delivery of this
Agreement or the Plan of Merger nor the consummation of the transactions
contemplated hereby or thereby will conflict with, violate, or constitute a
material default under or accelerate or permit the acceleration of the
performance required by, any provision of the Articles of Incorporation or
Bylaws of SSLIC or any agreement or instrument to which SSLIC is a party or by
which SSLIC or its properties may be bound or affected or any order, judicial or
administrative award, judgment, or decree, or to SSLIC's knowledge, any law, to
which SSLIC is a party or by which SSLIC's properties may be bound or affected
or result in the creation or imposition of any lien, charge, pledge, security
interest, or other encumbrance upon any of its properties. To SSLIC's knowledge,
no consents, waivers, approvals, authorizations, or orders other than the
approval of the shareholders of SSLIC and the regulatory authorities listed in
Section 7.1 are necessary for the authorization, execution, and delivery of this
Agreement and the Plan of Merger by SSLIC and the consummation of the
transactions contemplated herein and therein except for (i) such consents,
approvals or filings as may be required under applicable securities laws and
(ii) the filing of Articles of Merger and a Certificate of Merger with the
Division of Corporations and Commercial Code of Utah and the Department of State
of Florida.
3.10 Tax Returns. Except as disclosed on Schedule 3.10A, SSLIC has filed all
necessary Federal, state, and local income, premium, property, sales and use,
capital stock, and franchise tax returns, and all necessary reports and returns
for all other taxes due to the Federal, state, and local governments, and
complete and correct copies thereof have been furnished (with respect to the
Federal returns) or made available (with respect to the other returns) to
Security National Life for the three years ended December 31, 2003. SSLIC has
paid all taxes (whether or not shown to be owing on said returns), and all
assessments of taxes received by each of them have been paid in full. All such
tax returns were correct and complete in all respects. To the best of its
knowledge after due inquiry, SSLIC has disclosed on its federal income tax
returns all positions taken therein that could give rise to a substantial
understatement of federal income tax within the meaning of IRC ss.6662. The
Federal income tax returns of SSLIC for the three years ended December 31, 2003
have never been audited by the Internal Revenue Service. There are no other
pending tax examinations or tax claims, nor any basis for any tax claim against
SSLIC. There are no waivers of statutes of limitation in effect in respect of
any taxes for SSLIC. Except as disclosed in Schedule 3.10A, no claim has ever
been made by an authority in a jurisdiction where SSLIC does not file returns
that it is or may be subject to taxation by that jurisdiction. There are no
security interests on any of the assets of SSLIC that arose in connection with
any failure (or alleged failure) to pay any tax. All taxes not yet due but which
are accruable have been fully accrued on the books of SSLIC (in accordance with
sound accounting practice) or full reserves have been established therefore (in
accordance with sound accounting practice) and are reflected in SSLIC's balance
sheets as of June 30, 2004, delivered to Security National Life pursuant to
Section 3.16 (except as set forth in Schedule 3.10B delivered or to be delivered
to Security National Life hereto). The unpaid taxes of SSLIC do not exceed those
reserves as adjusted for the passage of time through the Effective Time of the
Merger in accordance with the past custom and practice of SSLIC in filing its
tax returns. SSLIC has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other third party.
SSLIC has never filed a consent under IRC Section 341(f) (relating to
collapsible corporations). SSLIC is not a party to any tax allocation or sharing
agreement. SSLIC has not been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent of
which was SSLIC) or does not have any liability for the taxes of any person
(other than any of SSLIC) under Treas. Reg. ss. 1.1502-6 (or any similar
provision of state, local, or foreign law), as a transferee or successor, by
contract or otherwise.
3.11 Software Programs, Patents, Trademarks, Servicemarks, and Copyrights.
Except as indicated on Schedule 3.11 delivered to Security National Life, all
software programs, patents, trade names, trademarks or servicemarks, or service
names (whether registered or unregistered) and copyrights or applications for
any thereof owned by, licensed to, or used by SSLIC are valid and subsisting and
are listed in Schedule 3.11. SSLIC has not licensed any third party to use any
software program, patent, trademark, servicemark, know-how, or copyright. Except
as set forth in Schedule 3.11, to SSLIC's knowledge, there are no claims or
demands of any person pertaining to any software programs, patents, know-how,
patent applications, trademarks, trademark applications, servicemark or service
name applications, or copyrights owned by or licensed to SSLIC; no proceedings
have been instituted or are pending or to SSLIC's knowledge, threatened which
challenge the rights of SSLIC in respect thereto; and to SSLIC's knowledge, the
practice or use by SSLIC of any software program, patent, trademark,
servicemark, or copyright, or any process utilized by or any product produced by
SSLIC, does not infringe (nor is it infringed by) any software program, patent,
trademark, servicemark, or copyright owned by a third party (nor is it subject
to any outstanding order, decree, judgment or stipulation). There are no
pending, nor to SSLIC's knowledge any threatened, claims, demands, or
proceedings charging SSLIC with infringement of or making any other claim with
respect to any software program, patent, trademark, trade name, servicemark or
service name, copyright, or license. There is no (a) unexpired, valid patent on
products or processes of SSLIC in creating such products and which SSLIC not
entitled to use or (b) patent or application therefore or invention which would
adversely affect any product, apparatus, method, process, or design of SSLIC. No
officer, director, or employee of SSLIC has an interest in any software program,
patent, patent application, trademark, trademark application, servicemark,
servicemark application, trade name, or copyright of SSLIC.
3.12 Compliance with Law. SSLIC in the conduct of its business is in compliance
with all laws, regulations, and orders of any governmental entity affecting the
business of SSLIC presently enacted and in force with respect to which the
failure to comply would have a material adverse effect on SSLIC. To SSLIC's
knowledge, there is no pending or threatened change of any such law, regulation,
or order which might materially adversely affect the assets, liabilities,
financial condition, or results of operations of SSLIC taken as a whole. SSLIC
has not been charged with violating, nor to SSLIC's knowledge, threatened with a
charge of violating, nor to SSLIC's knowledge is it under investigation with
respect to a possible violation of, any provision of any Federal, state, or
local law or administrative ruling or regulation relating to any aspect of its
business.
3.13 Employee Benefit Plans. Except as shown in Schedule 3.13 delivered to
Security National Life, SSLIC is not a party to any pension, retirement, stock
purchase, savings, profit-sharing, deferred compensation, or collective
bargaining agreement, group insurance contracts, or any other incentive,
welfare, or employee benefit plans (collectively the "Employee Benefit Plans")
under which employees of SSLIC participate or have the right to receive
benefits. SSLIC is not, nor will it from the date hereof through the Effective
Time of the Merger be, in (a) violation of any applicable Federal, state, or
local laws or regulations relating to the Employee Benefit Plans or (b) default
of any of its obligations with respect to the Employee Benefit Plans with
respect to which such violation or default would have a material adverse effect
on SSLIC. SSLIC shall not amend or terminate any of the Employee Benefit Plans
without the prior written consent of Security National Life. Furthermore, SSLIC
shall not make any contributions under the Employee Benefit Plans other than
those required by the terms of the Employee Benefit Plans without the prior
written consent of Security National Life. Each Employee Benefit Plan has been
consistently maintained and administered in accordance with its terms and
provisions and the requirements, including those relating to reporting and
disclosure, of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All information necessary to make all required or necessary filings
with the Internal Revenue Service, the Department of Labor, the Pension Benefit
Guaranty Corporation, and any other governmental agencies with respect to any of
the Employee Benefit Plans after the Effective Time of the Merger will be made
available to Security National Life in a manner that will permit Security
National Life to make such filings in a timely manner. Except as set forth in
Schedule 3.13 delivered to Security National Life, SSLIC is not a party to any
employment contract or agreement. The employee census for SSLIC as of July 31,
2004, as disclosed in Schedule 3.13, is true, correct, and complete as of that
date and has not materially changed. SSLIC is not nor ever been a member of a
"multi employer plan" as defined in ERISA.
3.14 Labor. SSLIC is not in violation of any applicable Federal, state, or local
law relating to the employment of labor (including, without limitation, the
provisions thereof relating to wages and hours, the payment of Social Security
taxes, and equal employment opportunity) nor is SSLIC liable for any tax or
penalty for failure to comply with any of the foregoing, with respect to which
any violation or liability would have a material adverse effect on SSLIC. There
are no suits pending or, to SSLIC's knowledge, threatened between SSLIC and any
of its employees. SSLIC is not currently, nor to its knowledge since its
formation has it been, involved in any labor discussions with any unit or group
seeking to become the bargaining unit for any of its employees. SSLIC' s
employees are not a member of any union or collective bargaining group.
3.15 State Admissions. SSLIC is duly qualified to do business and is in good
standing in the states listed in Schedule 3.15. Except as set forth on Schedule
3.15, there are no proceedings pending or, to the knowledge of SSLIC threatened,
which could materially adversely affect any such licenses or qualifications, nor
are there any facts known to SSLIC which could result in any such material
adverse effect.
3.16 Financial Statements. SSLIC has furnished to Security National Life copies
of SSLIC's year-end financial statements for the years 2001 through 2003, all
accompanied by reports thereon containing opinions without qualification, except
as therein noted, by Tanner + Co. (collectively, the "SSLIC Financial
Statements"), and unaudited balance sheets of SSLIC as of June 30, 2004, and the
related unaudited statements of income and shareholders' equity for the period
ended on June 30, 2004 (the "SSLIC June 30, 2004, Unaudited Financial
Statements"). The SSLIC Financial Statements (including the notes thereto)
present the financial condition of SSLIC, at December 31 in each of the years
2001 through 2003 and the results of its operations and other data contained
therein for each of the three years then ended and have been prepared in
accordance with GAAP, applied on a consistent basis (except as expressly set
forth or disclosed in the notes, exhibits, or schedules thereto). The exhibits
and schedules included in such SSLIC Financial Statements present the data
purported to be shown thereby. The SSLIC June 30, 2004, Unaudited Financial
Statements have been prepared in accordance with GAAP and present the financial
position of SSLIC as of such date and the results of its operations for such
period. The unaudited balance sheet of SSLIC as at June 30, 2004, included in
the SSLIC June 30, 2004, Unaudited Financial Statements, is hereinafter referred
to as the "SSLIC Unaudited Balance Sheet".
3.17 Absence of Contracts, Agreements, and Plans. Except for this Agreement and
the Plan of Merger and the contracts, agreements, plans, and commitments
specifically referred to herein, or listed in Schedule 3.17 delivered to
Security National Life, SSLIC is not presently a party to or subject to any of
the following, whether written or oral:
(a) any management, consulting, or employment contract or contract for
personal services which extends beyond June 30, 2004;
(b) any plan, contract, or arrangement providing for bonuses, pensions,
deferred compensation, retirement payments, profit sharing, incentive pay, stock
purchase, hospitalization, medical expenses, or similar employee benefits;
(c) any collective bargaining contract, agreement, commitment, or similar
arrangement with any labor union or other similar organization;
(d) any contracts, commitments, or agreements for capital expenditures
which will involve expenditure after the date hereof of more than $5,000 in the
aggregate for items of like kind;
(e) any contract or agreement not made in the ordinary course of business
except as permitted by Section 3.20(j);
(f) any contract extending beyond June 30, 2004, except as permitted by
Section 3.20(j);
(g) any contract or agreement containing covenants not to compete in any
line of business;
(h) any contract, agreement, arrangement, or understanding upon which any
part of the business of SSLIC is materially dependent or which materially
affects the assets, liabilities, financial condition, or results of operations
of SSLIC; or
(i) any license, franchise, distributorship, dealer, manufacturer's
representative, sales agency, or advertising agreement.
3.18 No Adverse Change. Since June 30, 2004, there has been no change in the
assets, liabilities, financial condition, or results of operations of SSLIC
except changes in the ordinary course of business, none of which individually or
in the aggregate has been materially adverse. Since June 30, 2004, SSLIC has not
experienced any labor trouble, strike, stoppage, or any other occurrence which
would materially adversely affect its assets, liabilities, financial condition,
or results of operations.
3.19 Casualties. Since June 30, 2004, the assets, liabilities, financial
condition, and results of operations of SSLIC has not been materially adversely
affected in any way (whether or not covered by insurance) as the result of fire,
explosion, earthquake, hurricane, accident, labor trouble, requisition, or
taking of property by any government or any agency of any government, flood,
windstorm, embargo, riot, or act of God or the public enemy or any other
casualty or similar event.
3.20 Limitations on SSLIC. Except for the matters listed on Schedule 3.20, since
June 30, 2004, there has not been:
(a) material change in the business or operations of SSLIC or the manner of
conduct of its business or operations other than changes in the ordinary course
of business, none of which has had a material adverse effect on its businesses
or operations considered as a whole;
(b) Any change in the Articles of Incorporation or Bylaws of SSLIC, or any
amendment to any material agreement, contract, or license to which SSLIC is a
party or by which it is bound;
(c) Any issuance by SSLIC of any capital stock, bonds, debentures, notes,
or other corporate securities or any option, warrant, or right to purchase any
thereof;
(d) Any declaration, setting aside, or payment of any dividend or any other
distribution on or in respect of any shares of capital stock, or any direct or
indirect redemption, retirement, purchase, or other acquisition by SSLIC of any
shares of capital stock or convertible securities of any of them;
(e) Any waiver by SSLIC of any right or rights of material value or any
payment, direct or indirect, of any material debt, liability, or other
obligation of it before the same shall become due in accordance with its terms;
(f) Any material change in the accounting methods, practices, or policies
followed by SSLIC, including but not limited to any change in depreciation or
amortization policies or rates of depreciation or amortization theretofore
adopted by it;
(g) Any increase in the compensation payable or to become payable by SSLIC
to any officer, director, employee, consultant or any shareholder of SSLIC or
members of any of their families or any material increase in the rate of
commission or other variable compensation to be paid to any person, other than
increases in accordance with past practice;
(h) Any payment of any pension, retirement, profit-sharing, or bonus
payment, or other employee welfare or benefit payment, other than those required
by any contract listed in Schedule 3.13 or Schedule 3.17;
(i) Any incurring or guaranteeing of any debt, obligation, or liability for
borrowed money (whether absolute or contingent and whether or not currently due
and payable), except for endorsement of negotiable instruments for collection or
deposit;
(j) Entering into of any contract, agreement, arrangement, lease (as lessor
or lessee), or license, whether written or oral, entered into or assumed by or
on behalf of SSLIC, for more than one year or involving more than $5,000 in any
single case or $25,000 in the aggregate for like items, except in accordance
with past practice in the ordinary course of business;
(k) Any merger or consolidation of or by SSLIC with any other corporation
or any acquisition by SSLIC of all or any part of the stock or the business or
assets of any other person, firm, association, corporation, business, or
organization;
(l) Except in accordance with past practice in the ordinary course of
business, any change affecting the banking and safe deposit arrangements or
powers of attorney in effect for SSLIC, any new financial institution accounts
or safe deposit boxes opened for it or any new powers of attorney executed or
made by it;
(m) Any purchase or lease for a valuable consideration of any property from
any officer, director, or employee of SSLIC or any member of his or her family
or any entity affiliated with or controlled by any of the above;
(n) Any sale, lease, disposition, or mortgage, pledge, or subjection to any
lien or encumbrance (other than Permitted Liens) of, or any waiver of any
substantial rights relating to, any material property or assets, tangible or
intangible, of SSLIC other than the purchase and sale of investment securities;
(o) Any failure by SSLIC to perform any of its obligations in any material
respect or suffering or permitting any default to exist under any material
contract, lease, or other arrangement to which it is a party or by which it may
be bound which may result in the termination of such material contract, lease,
or agreement or the imposition of material damages or penalties; or
(p) Any occurrence of any material transaction or entry into any material
agreement other than in the ordinary course of business or as specifically
provided herein.
3.21 Accounts, Notes, and Advances Receivable. All accounts, notes and advances
receivable of SSLIC reflected on the SSLIC Balance Sheet were at the date of the
SSLIC Balance Sheet valid obligations and collectible in the ordinary course of
business subject to the reserve therefore shown on the SSLIC Balance Sheet, and
SSLIC has not, since June 30, 2004, changed its normal credit and collection
practices.
3.22 No Undisclosed Liabilities or Agreements. Except as disclosed in the
Balance Sheet or in any of the Schedules, SSLIC has not had, as of June 30,
2004, any material debts, liabilities, or obligations, whether accrued,
absolute, or contingent and whether due or to become due, except to the extent
set forth in or provided for on the SSLIC Balance Sheet.
3.23 Disclosure. Neither this Agreement nor any document furnished or to be
furnished in connection herewith, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary to
make the statements contained therein, or herein, in the light of the
circumstances under which they are made, not misleading.
3.24 Title to Properties; Liens; Conditions of Properties.
(a) Schedule 3.24A sets forth (i) all of the land owned by, or under an
agreement of sale or option to, SSLIC at the date hereof and (ii) each of the
leases as to which the annualized rental obligation exceeds $5,000 per year or
as to which the unexpired term exceeds one year (unless cancelable without
penalty on thirty days' notice) pursuant to which SSLIC leases (as lessor or
lessee) real or personal property at the date hereof. Schedule 3.24A delivered
to Security National Life sets forth all the buildings, machinery, vehicles and
equipment having an initial unit value of $3,000 or more ("SSLIC Fixed Assets")
of SSLIC, other than real property owned or leased. Except for Permitted Liens
and except for mortgages noted in the SSLIC Financial Statements or in the
Schedules, SSLIC has good and marketable title in fee simple to all such real
property and all such leases are valid and subsisting and it is not in default
such as to give rise to cancellation, termination or a penalty thereunder. None
of such SSLIC Fixed Assets, or real, leased, or other property is subject to any
mortgage, pledge, lien, encumbrance, conditional sale agreement, security
interest, title retention agreement, or other charge except for Permitted Liens
and except as noted in the SSLIC Financial Statements or in the Schedules. There
are no outstanding options or rights in any third person to acquire any of such
real estate, leasehold interests, SSLIC Fixed Assets, or other property or any
interest therein.
(b) Except as otherwise specified in Schedule 3.24B:
(i) all SSLIC Fixed Assets, taken as a whole, are in a good state of
repair and operating condition (reasonable wear and tear and normal usage
excepted);
(ii) to SSLIC's knowledge, SSLIC's office building conforms in all
material respects with all applicable zoning and land use laws, ordinances,
and regulations and applicable deed restrictions and other applicable laws
relating to health and safety, other than the Americans with Disabilities
Act of 1990, and does not encroach on property of others; and
(iii) to the knowledge of SSLIC, there is no pending or threatened
change of any such zoning or land use law, ordinance, or regulation, nor
any pending or threatened condemnation of any such property.
3.25 No Liability for Finders' or Financial Advisory Fees. SSLIC has not
incurred any liability for brokerage fees, finders' fees, agents' commissions,
financial advisory fees, or other similar forms of compensation in connection
with this Agreement or any transaction contemplated hereby.
3.26 Environmental Matters.
(a) To the knowledge of SSLIC, no Hazardous Substance (as hereinafter
defined) has been released, discharged, deposited, emitted, leaked, spilled,
poured, emptied, injected, dumped, disposed of, or otherwise placed or located
on, in or under the real property and improvements described in Schedule 3.24A
(the "Real Property") or any part thereof in a manner that would result in an
obligation on the part of the Companies for the clean-up or removal thereof. For
purposes of this Agreement, "Hazardous Substance" means any "hazardous
substance" as that term is now defined in 42 U.S.C. 9601, any "extremely
hazardous substance" as that term is now defined in 42 U.S.C. 11049(3), any
"regulated substance" as that term is
now defined in 42 U.S.C. 6991(2), or any other material now regulated under any
environmental law, statute, regulation, rule, ordinance, code, license, permit,
or order of the United States, or any state, or any other governing body,
authority, or agency (collectively, ' "Environmental Laws"). The foregoing
representation specifically excludes and is not applicable to the use, storage,
and handling within the Real Property of substances customarily used in
connection with normal office use provided (a) such substances are used and
maintained in such quantities as are reasonably necessary for the permitted use
of the Real Property in compliance with all Environmental Laws; and (b) such
substances are not disposed of, released, or discharged on the Real Property,
and shall be transported to and from the Real Property in compliance with all
Environmental Laws.
(b) The Real Property and its present and prior uses during SSLIC's
ownership and/or occupancy comply with, and SSLIC is are not in violation of,
and have not violated in connection with the conduct of its businesses, any
Environmental Law. Any Hazardous Substances that have been removed by SSLIC from
and disposed of off the Real Property have been handled, transported, stored,
treated, and disposed of in compliance with all Environmental Laws.
(c) Neither SSLIC nor the Real Property is subject to any obligations,
liabilities, claims, judgments, orders, settlements, permits, licenses,
authorizations, resolutions of disputes, writs, injunctions or decrees relating
to the use, generation, treatment, storage, disposal, transportation, presence,
release, discharge or emission of any Hazardous Substance at or affecting the
Real Property. In addition, there are no pending, or, to the knowledge of SSLIC,
threatened investigations, citations, suits, actions or other legal proceedings,
or notices of violation resulting from or connected with the Real Property or
SSLIC relating to the use, generation, treatment, storage, disposal,
transportation, presence, release, discharge, or emission of any Hazardous
Substance at or affecting the Real Property.
(d) There are no facts or circumstances in existence known to SSLIC which
may give rise to any litigation, proceedings, investigations, orders, citations,
violations, notices, or liability resulting from or connected with the Real
Property or SSLIC relating to the use, generation, treatment, storage, disposal,
transportation, presence, release, discharge, or emission of any Hazardous
Substance.
(e) All permits, licenses, consents and authorizations necessary for full
compliance with all Environmental Laws applicable to the Real Property have been
obtained and are valid and in full force and effect. No such application,
report, or other document or information filed with or furnished to any federal,
state or local governmental body, authority or agency contains any untrue
statement of material fact or omits any statement of material fact necessary to
make the statement therein not misleading.
3.27 Information Set Forth in Any Schedule. Any information set forth in any
Schedule, in any of the SSLIC Financial Statements or in any of the SSLIC June
30, 2004 Financial Statements shall be deemed set forth in each such Schedule.
3.28 SEC Documents. SSLIC has furnished Security National Life with a true and
complete copy of the following filings with the Securities and Exchange
Commission (the "SEC"): (i) its annual report on Form 10-K for the year ended
December 31, 2003; and (ii) its quarterly reports on Form lO-Q for the quarters
ended March 31, and June 30, 2004. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, as applicable, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SECURITY NATIONAL LIFE
Security National Life represents and warrants to SSLIC that, subject to
such exceptions as are disclosed in the Annexes and Schedules:
4.1 Organization and Qualification, Etc. Security National Life is duly
organized, validly existing, and in good standing as a Utah corporation with
corporate power and authority under the laws of the State of Utah and under its
Articles of Incorporation to enter into this Agreement and perform its
obligations hereunder, and to carry on its business as presently conducted.
4.2 Authority. The Board of Directors of Security National Life has duly
authorized the execution and delivery by Security National Life of this
Agreement, the Plan of Merger, and the Escrow Agreement (as defined below) and
the transactions contemplated hereby and thereby.
4.3 Valid and Binding Obligations. Each of this Agreement, the Plan of Merger,
and the Escrow Agreement has been duly authorized by Security National Life by
all necessary corporate action and constitutes a valid and legally binding
obligation of Security National Life in accordance with its respective terms.
4.4 No Violation of Articles of Incorporation, Etc. The execution and delivery
of this Agreement, the Plan of Merger and the Escrow Agreement (as defined
below) by Security National Life and the consummation of the transactions
contemplated hereby and thereby are not prohibited by and will not violate any
provision of, or result in a default under, the Articles of Incorporation or
Bylaws of Security National Life, any contract, agreement, or other instrument
to which Security National Life is a party or by which its property is bound or
any regulation, order, decree, or judgment of any court or governmental agency
or any law applicable to it.
4.5 Authorization of Agreement. The Board of Directors of Security National Life
has duly approved this Agreement, the Plan of Merger and the Escrow Agreement,
and the transactions contemplated hereby and thereby and has duly authorized the
execution and delivery, by Security National Life of this Agreement, the Plan of
Merger and the Escrow Agreement. No approval of this Agreement, the Plan of
Merger and the Escrow Agreement is required by holders of Security National Life
Common. Subject to any requisite approval of regulatory authorities having
jurisdiction with respect to the transactions contemplated by this Agreement,
Security National Life has full power and authority to enter into this Agreement
and perform its obligations hereunder and to enter into the Plan of Merger and
the Escrow Agreement.
4.6 No Conflict with Other Interests. Neither the execution and delivery of this
Agreement or the Plan of Merger nor the consummation of the transactions
contemplated hereby or thereby will conflict with, violate, or constitute a
default under or accelerate or permit the acceleration of the performance
required by, any provision of the Articles of Incorporation or Bylaws of
Security National Life or any agreement or instrument to which it is a party or
by which it or its properties may be bound or affected or any order, judicial or
administrative award, judgment, or decree, or to Security National Life's
knowledge, any law, to which it is a party or by which any of its properties may
be bound or affected or result in the creation or imposition of any lien,
charge, pledge, security interest, or other encumbrance upon any of its
properties. To Security National Life's knowledge, no consents, waivers,
approvals, authorizations, or orders other than the approval of the regulatory
authorities listed in Section 7.1 are necessary for the authorization,
execution, and delivery of this Agreement and the Plan of Merger by Security
National Life and the consummation of the transactions contemplated herein and
therein.
4.7 Financial Statements. Security National Life has furnished to SSLIC copies
of the audited consolidated year-end financial statements of Security National
Financial Corporation for the years 2001 through 2003, all accompanied by
reports thereon containing opinions without qualification, except as therein
noted, by Tanner + Co., of which the financial statements of Security National
Life are part of such consolidated financial statements (the "Security National
Life Financial Statements"), and unaudited consolidated balance sheets of
Security National Financial Corporation as of June 30, 2004, and the related
unaudited statements of income and shareholders' equity for the period ended on
June 30, 2004 of which the financial statements of Security National Life are
part of such financial statements (the "Security National Life June 30, 2004,
Unaudited Financial Statements"). The Security National Life Financial
Statements (including the notes thereto) present the financial condition of
Security National Life, at December 31 in each of the years 2001 through 2003
and the results of its operations and other data contained therein for each of
the three years then ended and have been prepared in accordance with GAAP,
applied on a consistent basis (except as expressly set forth or disclosed in the
notes, exhibits, or schedules thereto). The exhibits and schedules included in
such Security National Life Financial Statements fairly present the data
purported to be shown thereby. The Security National Life June 30, 2004,
Unaudited Financial Statements have been prepared in accordance with GAAP and
present the financial position of Security National Life as of such date and the
results of its operations for such period. The unaudited balance sheet of
Security National Life as at June 30, 2004, included in the Security National
Life June 30, 2004, Unaudited Financial Statements are collectively hereinafter
referred to as the "Security National Life Unaudited Balance Sheet".
4.8 Disclosure. Neither this Agreement nor any document furnished or to be
furnished in connection herewith contains or will contain any untrue statement
of material fact or omits or will omit to state any material fact necessary to
make the statements contained therein, or herein, in the light of the
circumstances under which they are made, not misleading.
4.9 SEC Documents. Security National Life has furnished SSLIC with a true and
complete copy of the following filings with the Securities and Exchange
Commission: (i) the annual report on Form 10-K for the year ended December 31,
2003 of Security National Financial Corporation; and (ii) the quarterly reports
on Form 10-Q for the quarters ended March 31 and June 30, 2004 of Security
National Financial Corporation. As of their respective filing dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, as applicable, and none of the SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
4.10 SSLIC Holding. SSLIC Holding was incorporated on December 16, 1998, is a
wholly owned subsidiary of Security National Life, and it has no assets other
than 1,207,784 shares of SSLIC Common and the Merger Consideration provided to
it for purposes of completing the Merger and has no liabilities.
ARTICLE 5
CONDUCT OF THE BUSINESS OF SSLIC PENDING THE MERGER
Except as otherwise first approved in writing by Security National Life, or
as otherwise set forth in this Agreement, SSLIC covenants that from the date
hereof until the Effective Time of the Merger or until this Agreement is
terminated in accordance with its terms:
5.1 Conduct Business in Ordinary Course. The business of SSLIC shall be
conducted only in the ordinary course, and none of the properties or assets of
it shall be sold or otherwise disposed of, mortgaged, pledged, or otherwise
hypothecated, except in the ordinary course of business or as otherwise
contemplated by this Agreement.
5.2 No Change in Articles or Bylaws. No change shall be made in the Articles of
Incorporation or Bylaws of SSLIC.
5.3 No Change in Capitalization. No change shall be made (by reclassification,
subdivision, reorganization, or otherwise) in the authorized or issued capital
stock of SSLIC, and no options, warrants, or rights to acquire, or securities
convertible into or exchangeable for, any shares of capital stock of SSLIC shall
be issued or granted.
5.4 No Dividends. No dividend or other distribution or payment shall be declared
or made in respect of the outstanding shares of capital stock of SSLIC. SSLIC
shall not purchase or redeem or otherwise acquire any of its shares in exchange
for cash or other property or prepay any notes or other debt.
5.5 No Change in Compensation. Except for regular and customary increases in the
compensation of salaried and hourly employees of SSLIC made in accordance with
past practice (provided that notice of raises in excess of 5% per annum shall be
given to Security National Life at least five business days prior to their
effective date), no increase shall be made in the compensation payable or to
become payable by SSLIC to any of its officers, employees, or agents, nor shall
any bonus, pension, retirement, profit-sharing, or stock option payment, agency
agreement, or other agreement or arrangement be made by any of them to or with
any such person or persons, nor shall any change be made in any existing
Employee Benefit Plan covering such person or persons.
5.6 No Contract Not in Ordinary Course. No contract, obligation, or commitment
(excepting there from insurance policies and annuities issued by SSLIC in the
ordinary course of business) shall be entered into or assumed by or on behalf of
SSLIC, except normal commitments incurred in the ordinary course of business;
nor any indebtedness incurred representing borrowed money or the deferred
purchase price of goods or services; nor shall any material contract,
obligation, or commitment be modified or amended in any material respect or
terminated. The foregoing shall not prohibit the purchase or sale of investment
securities in the ordinary course of business in accordance with past practice.
5.7 No Changes in Personnel or Financial Institutions. Except as provided in
Section 5.5, no change (other than as required in the ordinary course of
business) shall be made affecting the personnel, agents, or attorneys-in-fact of
SSLIC other than the resignations or terminations of any such persons in the
ordinary course of business, and no change shall be made in the banking or safe
deposit arrangements of SSLIC.
5.8 Maintenance of Property. SSLIC shall maintain its properties, taken as a
whole, in good operating condition and repair.
5.9 Insurance. SSLIC shall continue in full force and effect, at its expense,
(i) all present policies of casualty, property, fidelity, errors and omissions,
directors' and officers', and workers' compensation insurance which have been
issued to it and (ii) all bonds and/or deposits in respect of any casualty,
fidelity, property, or workers' compensation risks which are self-insured.
5.10 Business Intact. SSLIC shall use its best efforts to preserve its business
organization intact, to retain the services of its key officers, and of its
employees, agents and consultants, and to preserve for Security National Life
the good will of its agents, customers, and others having business relations
with it.
5.11 No Capital Contributions. No affiliate or non-affiliate person shall make
any contributions to the capital of SSLIC or repay any indebtedness owed to it
other than in cash, and Schedule 5.11 sets forth all indebtedness owed to it by
any of the foregoing persons which was paid since June 30, 2004. The term
"affiliate" shall mean any person controlling, controlled by, or under common
control with SSLIC.
5.12 Representations and Warranties. SSLIC hereby agrees that, from the date of
this Agreement to the Closing Date, except as otherwise expressly permitted by
this Agreement or as Security National Life may otherwise consent to in writing
from time to time, SSLIC shall not engage in any activity or enter into any
transaction which would be inconsistent in any material respect with any of the
representations and warranties set forth in Article 3 as if such representations
and warranties were made at a time subsequent to such activity or transaction
and all references to the date of this Agreement were deemed to be as of such
later date.
5.13 Necessary Action. As soon as practicable after the execution of this
Agreement, SSLIC shall take all necessary corporate and other action and shall
use its best efforts to obtain, or where appropriate assist Security National
Life in obtaining, all material consents, orders, and approvals required for
consummation of the transactions contemplated by this Agreement.
5.14 Best Efforts to Satisfy Conditions. SSLIC shall use its best efforts to
cause all conditions in this Article 5 to be satisfied on or prior to the second
business day prior to the Closing Date.
5.15 Inconsistent Activities. From the date of this Agreement, unless and until
this Agreement has been terminated in accordance with Section 10.1, SSLIC shall
not (i) solicit, directly or indirectly, any offer to acquire any of the SSLIC
Common, or all or substantially all of the assets of any of SSLIC, whether by
merger, purchase of assets, tender offer, or otherwise; or (ii) enter into any
negotiations or agreements which contemplate the merger of SSLIC or the sale of
any of the SSLIC Common, or all or substantially all of the assets of SSLIC to
any person other than Security National Life. Nothing contained in this Section
shall prohibit the management of SSLIC from advising its shareholders of any
bona fide offer communicated to such management.
5.16 Access to Properties, Files, Etc. SSLIC shall from time to time or at any
time from the date hereof to the Effective Time of the Merger, give or cause to
be given to Security National Life, its officers, employees, agents,
representatives, consultants, accountants, public accountants, and general or
special counsel:
(i) full access during normal business hours to all SSLIC's
properties, accounts, books, minute books, deeds, title papers, insurance
policies, licenses, agreements, contracts, commitments, tax returns,
records and files of every character, equipment, machinery, fixtures,
furniture, vehicles, notes and accounts payable and receivable, and data
processing programs;
(ii) the name of each financial institution in which SSLIC or the
trustee or agent of any retirement, pension, or similar plan to which SSLIC
is a party has an account or safe deposit box and the names of all persons
authorized to draw thereon or to have access thereto and the name of each
person holding a power of attorney from SSLIC;
(iii) promptly upon their becoming available, one copy of each
financial statement, report, notice, or proxy statement sent by SSLIC to
its shareholders generally, and of each regular or periodic report and any
periodic statement or written communication, other than transmittal letters
(all such material being collectively referred to as "SSLIC Reports"), in
respect of SSLIC Reports filed by SSLIC with, or received by any of them in
connection with, SSLIC Reports from any .securities commission or
department; and
(iv) all such other information concerning the affairs of SSLIC as
Security National Life may reasonably request.
SSLIC agrees that any investigation or inquiry made by Security National Life
pursuant to this Section 5.16 shall not in any way affect or diminish the
representations and warranties made by SSLIC in this Agreement. Security
National Life agrees that any such investigation or inquiry made by it after the
date hereof shall be conducted at Security National Life's sole expense and in
such manner as not to interfere unreasonably in any material way with the
operation of the business of SSLIC. SSLIC further agrees that from the date of
this Agreement until the Effective Time of the Merger or the termination of this
Agreement, Security National Life shall have the right, at Security National
Life's expense, at any time during normal business hours, to locate employees,
agents, representatives and/or consultants at the premises of SSLIC.
5.17 Correspondence with Regulators. SSLIC shall promptly provide Security
National Life with copies of all correspondence to and from all regulatory
authorities having jurisdiction with respect to SSLIC.
5.18 Hart-Scott-Rodino Filing. As soon as practicable after the execution of
this Agreement, SSLIC will effect all filings required, if any, by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 by reason of the
transactions contemplated by this Agreement.
ARTICLE 6
APPROVALS NEEDED FOR MERGER
The consummation of the Merger shall be subject to the condition that the
following approvals orders and regulatory requirements shall have been obtained
or complied with prior to the Closing Date:
6.1 Hart-Scott-Rodino Antitrust Improvements Act of 1976. In the event that the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 is deemed applicable at any
time prior to the Closing Date, said act and the rules and regulations
thereunder shall have been fully complied with by Security National Life and
SSLIC (including, without limitation, compliance with the information furnishing
and waiting period requirements thereof) prior to the Closing Date or such
compliance shall have been waived by the governmental agencies having authority
to give such waiver prior to the Closing Date.
6.2 Regulatory Approvals. All authorization, consents, orders or approvals of,
or declarations of, or declarations or filings with, or expiration of waiting
periods imposed by, any governmental entity (including, without limitation, the
insurance departments of the states of Florida and Utah) necessary for the
consummation of transactions contemplated by the agreement and Plan of
Reorganization shall have been obtained.
ARTICLE 7
CONDITIONS
7.1 Conditions Precedent to Obligations of Security National Life. The
obligation of Security National Life to proceed with the transactions
contemplated hereby is subject to satisfaction of the following conditions
unless waived in writing by SSLIC:
(a) Receipt of Approvals. The approval and action required by Article 6
shall, if necessary, have been obtained.
(b) Completion of Valuation Report. A valuation report on the fair market
value of the minority interests in the SSLIC Common shall be completed by
Houlihan Valuation Advisors and delivered to Security National Life and SSLIC.
(c) Dissenting SSLIC Shares; Stockholder Approval. On the Closing Date the
dissenting SSLIC shares shall not exceed ten percent (10 %) of the shares of
SSLIC Common then outstanding. Dissenting SSLIC shares shall mean, for the
purpose of this Section 7.1(c), shares of SSLIC Common the holders of which
shall have perfected their rights as dissenting shareholders under Section
607.1302 et seq. of the Florida Business Corporation Act.
(d) Approval by SSLIC Shareholders. This Agreement and the Plan of Merger
and the transactions contemplated thereby, shall have been approved and adopted
by the affirmative vote or written consent of the holders of a majority of the
outstanding shares of SSLIC Common.
(e) Compliance. All of the covenants and obligations contained in this
Agreement to be complied with and performed by SSLIC at or before the Closing
Date shall have been complied with and performed.
(f) Representations and Warranties True and Correct. The representations
and warranties made by SSLIC in this Agreement shall be true and correct in all
material aspects, at and as of the Closing Date, with the same force and effect
as though such representations and warranties had been made at and as of the
Closing Date, except for changes contemplated by this Agreement; provided,
however, that the foregoing condition shall be deemed to be satisfied except
where any failure or failures to be true and correct shall reasonably be
expected to result, in the aggregate, in an adverse change, after tax effect, in
the financial condition or results of operations of SSLIC or, following the
Effective Time of the Merger, of Security National Life, in excess of the amount
of $25,000. SSLIC shall have delivered to Security National Life a certificate,
dated the Closing Date, signed by an executive officer of SSLIC evidencing
compliance with the provisions of paragraphs (g) and (h) of this Section 7.1.
(g) Litigation. There shall not have been instituted any action or
proceeding before any court or governmental agency or other regulatory or
administrative agency or commission, by any governmental or other regulatory or
administrative agency or commission or any private person, challenging the
transactions contemplated hereby or otherwise relating to the transactions
contemplated hereby or pursuant to the terms of the Plan of Merger.
(h) Governmental Action. There shall not have been any action taken by any
court, government, or governmental agency, domestic or foreign, rendering any
party to this Agreement or the Plan of Merger unable to consummate the
transactions contemplated hereby or thereby, otherwise making such transactions
illegal.
(i) Material Adverse Changes. Security National Life shall not have become
aware after the date hereof of any facts which have a material adverse effect
with respect to the assets, liabilities, financial condition, or results of
operations of SSLIC, subject to the provisions of Section 8.1(i) above.
(j) Resignation of Officers and Directors. Each officer and director of
SSLIC as requested by Security National Life shall have executed a letter
containing the resignation of such person as such officer and/or director
effective as of the Effective Time of the Merger or at such date as Security
National Life shall request.
(k) Legal Matters. All actions, proceedings, instruments, and documents
required to carry out this Agreement and the Plan of Merger and to consummate
the transactions contemplated hereby and all other related legal matters shall
be in all material respects to the reasonable satisfaction of counsel for
Security National Life.
(l) Receipt of Certain Documents. SSLIC shall have made available to
Security National Life on or before the Closing Date the following items:
(i) A copy of the resolution of the Board of Directors and
shareholders of SSLIC adopting and approving this Agreement and the Plan of
Merger and authorizing the transactions contemplated hereby and thereby,
certified by the secretary or an assistant secretary of SSLIC;
(ii) One or more certificates of the appropriate secretary of state
(or other government official) as of a recent date showing SSLIC to be
validly existing and in good standing;
(iii) One or more certificates of the Franchise Tax Board of the state
of Florida showing that all income tax and premium tax returns required to
be filed as of such date by and all reports required to be filed by them
through seven business days prior to the Closing Date have been duly filed
and that the taxes reflected in such returns and reports have been duly
paid;
(iv) The resignations of all of the officers and directors of SSLIC as
shall have been requested by Security National Life;
(v) The minute books of SSLIC, and its stock register;
(vi) All leases, contracts, insurance records, policies, and other
documents affecting the assets and operations and systems of SSLIC wherever
performed, including, but not limited to, all electronic data processing
master files and programs in machine readable format and any documentation
and procedures needed for their maintenance not previously delivered; and
(vii) Such other documents as shall be reasonably requested by
Security National Life.
7.2 Conditions Precedent to Obligations of SSLIC. The obligations of SSLIC to
proceed with the transactions contemplated hereby are subject to satisfaction of
the following conditions unless waived by Security National Life:
(a) Receipt of Approvals. The approval and action required by Article 6
shall, if necessary, have been obtained.
(b) Opinion of Counsel for Security National Life. SSLIC shall have
received from Mackey Price Thompson & Ostler, counsel for Security National
Life, an opinion, dated the Closing Date, to the effect that in such counsel's
opinion:
(i) Security National Life has been duly incorporated and is validly
existing in good standing under the laws of its state of incorporation;
(ii) each of this Agreement, the Plan of Merger and the Escrow
Agreement has been duly authorized, executed, and delivered by Security
National Life by all necessary corporate action and constitutes the valid
and binding obligation of Security National Life in accordance with its
respective terms, subject to or limited by bankruptcy, insolvency,
reorganization, moratorium, or other similar laws, in each case relating to
or affecting the enforcement of creditor's rights generally and general
principles of equity (regardless of whether enforcement of such obligations
is considered in proceeding in equity or at law);
(iii) the execution, delivery, and performance of this Agreement, the
Plan of Merger and the Escrow Agreement and the consummation of the
transactions contemplated thereby will not result in any violation of any
of the terms or provisions of the Articles of Incorporation or Bylaws of
Security National Life or, to our knowledge, any loan or credit agreement,
indenture, mortgage, note, or other agreement due to Security National Life
or to which Security National Life is a party or by which it or any of its
properties or assets is or may be bound;
(iv) no authorization, consent, or approval of, or registration or
filing with, any governmental or public body or authority of the United
States, or of any jurisdiction thereof or therein, is required on the part
of Security National Life for the performance of this Agreement, the Plan
of Merger and the Escrow Agreement and the consummation of the transaction
contemplated thereby, except such as have been obtained;
(v) there are no actions or proceedings seeking to prevent or enjoin
the transactions contemplated by this Agreement, the Plan of Merger and the
Escrow Agreement known to such counsel to be pending or threatened. In
giving such opinion, such counsel may rely upon opinions of other counsel
satisfactory to it and, as to matters of fact, upon certificates of
officers of Security National Life, provided that such counsel shall state
that it believes it is justified in relying upon such certificates and
shall deliver copies thereof to SSLIC contemporaneously with its opinion.
(c) Compliance and Representations Correct. All of the covenants and
obligations contained in this Agreement to be complied with and performed by
Security National Life at or before the Closing Date shall have been complied
with and performed in all respects, and the representations and warranties made
by Security National Life in this Agreement shall be correct in all material
respects, at and as of the Closing Date, with the same force and effect as
though such representations and warranties had been made at and as of the
Closing Date, except for changes contemplated by this Agreement. Security
National Life shall have delivered to SSLIC a certificate, dated the Closing
Date and signed by an officer of Security National Life, evidencing compliance
with the provisions of this Section 8.2.
(d) Governmental Action. There shall not have been any action taken by any
court, government, or governmental agency, domestic or foreign, rendering any
party to this Agreement or the Plan of Merger unable to consummate the
transactions contemplated hereby or thereby or otherwise making such transaction
illegal.
(e) Terms of Merger. The terms and provisions of the Merger between
Security National Life and SSLIC shall be substantially in accordance with those
set forth in the Plan of Merger, which is attached hereto as Annex I and is
hereby made a part of this Agreement.
(f) Legal Matters. All actions, proceedings, instruments, and documents
required to carry out this Agreement and the Plan of Merger and to consummate
the transactions contemplated hereby and all other related legal matters shall
be in all material respects to the reasonable satisfaction of counsel for SSLIC.
(g) Receipt of Certain Documents. Security National Life shall have made
available to SSLIC on or before the Closing Date the following items:
(i) A copy of the resolutions of the Board of Directors of Security
National Life adopting and approving this Agreement and authorizing the
transactions contemplated hereby and thereby, certified by the secretary or
an assistant secretary of Security National Life;
(ii) One or more certificates of the appropriate secretary of state
(or other government official) as of a recent date showing Security
National Life to be validly existing and in good standing;
(iii) Such other documents as shall be reasonably requested by SSLIC.
ARTICLE 8
ACCESS TO INFORMATION
8.1 Pre-Closing Access by SSLIC. SSLIC shall give Security National Life's
representatives, agents, consultants, accountants, and attorneys full access as
set forth in Section 5.16. Security National Life agrees that it will hold in
strict confidence all documents and information concerning SSLIC so furnished
(except that such documents and information may be disclosed to Security
National Life's independent accountants and counsel in like confidence and to
any governmental authority reviewing the transactions contemplated by this
Agreement), and, if the transactions contemplated by this Agreement shall not be
consummated, such confidence shall be maintained (except to the extent that such
information was previously known to Security National Life or any of its
affiliates, in the public domain or later acquired by Security National Life or
any of its affiliates from other legitimate sources or thereafter through no
fault of Security National Life becomes information generally available to the
public) and upon written request from SSLIC all such documents shall immediately
thereafter be returned to the party which furnished the particular document to
Security National Life.
8.2 Access to Accountant's Records by SSLIC. SSLIC shall direct its independent
accountants to grant access to all documents in their possession concerning
SSLIC, including its working papers, to representatives of Security National
Life, at the expense (if any) of Security National Life, and the confidentiality
provision set forth in Section 8.1 shall apply equally to all such documents.
8.3 Post-Merger Access by SSLIC. After the Effective Time of the Merger,
Security National Life agrees that it shall cause SSLIC to give those persons
who were SSLIC' s officers, directors, attorneys, and accountants immediately
prior to the Closing reasonable access to the records of SSLIC in connection
with any litigation that may arise under this Agreement or any requirements of
law or government regulations which may be applicable.
ARTICLE 9
INDEMNIFICATION
9.1 Indemnification by SSLIC. SSLIC hereby agrees to indemnify and hold harmless
Security National Life against and in respect of any direct out-of-pocket loss,
damage, or expense arising out of:
(a) Any claim, liability, or obligation suffered or incurred by Security
National Life resulting from or arising out of any misrepresentation, breach, or
non-fulfillment of any representation, warranty, covenant, or agreement on the
part of SSLIC contained in this Agreement; and
(b) All actions, suits, investigations, proceedings, demands, assessments,
judgments, reasonable attorney's fees, direct out-of-pocket costs and expenses
incident to the foregoing, including (but not limited to) any audit or
investigation by any governmental entity.
9.2 Indemnification by Security National Life. Security National Life hereby
agrees to indemnify and hold harmless SSLIC against and in respect of any direct
out-of-pocket loss, damage, or expense arising out of:
(a) Any claim, liability, or obligation suffered or incurred by SSLIC
resulting from or arising out of any misrepresentation, breach, or
non-fulfillment or any representation, warranty, covenant, or agreement on the
part of Security National Life contained in this Agreement; and
(b) All actions, suits, investigations, proceedings, demands, assessments,
judgments, reasonable attorney's fees, direct out-of-pocket costs, and expenses
incident to the foregoing, including (but not limited to) any audit or
investigation by any governmental entity.
9.3 Survival of Obligation to Indemnify. The mutual identification obligations
of Security National Life and SSLIC shall survive until twelve (12) months after
the Effective Time of the Merger (the "Indemnification Period"), and shall
continue thereafter only with respect to a claim, liability or obligation for
which the party seeking indemnity hereunder shall have given the other party an
Indemnification Notice as provided herein at least ten (10) days prior to the
expiration of the Indemnification Period. After the Effective Time of the
Merger, the holders of SSLIC Common, pro rata in accordance with their ownership
of SSLIC Common as of the Effective Time of the Merger, shall succeed to SSLIC's
indemnification rights
and obligations under this Article 9; provided, however, that the maximum
aggregate amount for which any shareholder of SSLIC Common is required to
indemnify Security National Life pursuant to this Article 9 shall not exceed
such shareholder's Pro Rata Indemnification Obligation (as defined below). A
shareholder's Pro Rata Indemnification Obligation shall be determined by
multiplying (x)the Indemnity Amount (as defined in Section 9.6) by (y) the
quotient of (A) the amount of cash paid to such shareholder hereunder, divided
by (B) the total amount of cash paid to shareholders of SSLIC Common hereunder
as part of the Merger Consideration.
9.4 Notice and Procedure. Either party claiming indemnity hereunder (hereinafter
referred to as the "Indemnified Party") shall give the party against whom
indemnity is sought (hereinafter referred to as the "Indemnifying Party") prompt
written notice (the "Indemnification Notice") after obtaining knowledge of any
claim or the existence of facts as to which recovery may be sought against the
Indemnifying Party because of the indemnity provisions set forth in this Article
9. The Indemnification Notice shall specify the basis for such indemnification
claim, shall include the amount of such claim if known, and shall be supported
by relevant information and documentation with respect thereto. If the
Indemnifying Party does not object in writing to such identification claim
within thirty (30) business days of receiving such Indemnification Notice, the
Indemnified Party shall be entitled to recover promptly from the Indemnifying
Party the amount of such claim and no later objection by the Indemnifying Party
shall be permitted. In the event that the Indemnifying Party shall have timely
objected in writing in whole or in part to any Indemnification Notice, the
Indemnifying Party and the Indemnified Party shall privately attempt to resolve
or compromise the claim. If the Indemnifying Party and the Indemnified Party
shall have failed to resolve or compromise or agree to postpone resolution of
the claim within a period of thirty (30) days from the date the Indemnifying
Party shall have objected in writing, the Indemnified Party shall be free to
seek a legal remedy.
9.5 Third Party Claims. If a claim for indemnity arises in connection with a
claim made by a third party (a "Third Party Claim"), the Indemnifying Party
shall have the right, at any time after receipt of an Indemnification Notice,
with respect to such Third Party Claim to assume the defense (which assumption
may be made under a reservation of rights) and to control the settlement and
compromise of such action or claim at its sole expense. The Indemnified Party
shall cooperate in such defense as reasonably necessary, to enable the
Indemnifying Party to conduct its defense, including providing the Indemnifying
Party with reasonable access to such records as may be relevant to its defense.
The Indemnifying Party shall be entitled to settle any such Third Party Claim
without the prior written consent of the Indemnified Party provided that the
Indemnifying Party provides the Indemnified Party with reasonable assurances
that the Indemnified Party will be fully indemnified by the Indemnifying Party
in connection with any such Third Party Claim. The Indemnified Party shall be
entitled to retain its own counsel at its own expense in connection with any
Third Party Claim that the Indemnifying Party has elected to defend. If the
Indemnifying Party elects not to conduct the defense of a Third Party Claim, the
Indemnified Party may defend and/or settle such Third Party Claim; provided,
however, that the Indemnifying Party shall not be liable for any costs, damages,
or expenses arising out of any settlement effected without its prior written
consent, which consent shall not be unreasonably withheld. The Indemnified Party
and the Indemnifying Party agree to keep each other reasonably informed as to
the progress of any matter that is the subject of a Third Party Claim. The
Indemnified Party further agrees to take any and all reasonable steps, including
(without limitation) those steps reasonably requested by the Indemnifying Party,
to mitigate any losses, damages, or expenses with respect to any Third Party
Claim under this Agreement and to cooperate with the defense thereof. In the
event it is ultimately determined that the Indemnified Party was not entitled to
indemnification for a Third Party Claim, and the Indemnifying Party has
nonetheless assumed the defense of such asserted liability, then the Indemnified
Party shall, at such time as it is ultimately determined that the Indemnified
Party was not entitled to indemnification, reimburse the Indemnifying Party for
the reasonable costs and expenses, including reasonable attorney's fees,
incurred by the Indemnified Party in connection with such assumption.
9.6 Limitation on Indemnification Obligations. Except as provided in the last
clause of this sentence, an Indemnified Party shall not be entitled to recover
any indemnification obligation pursuant to this Article 9 unless and until the
total indemnification obligations for which such Indemnified Party could seek
recovery hereunder exceeds the sum of Twenty-Five Thousand Dollars ($25,000) in
the aggregate (the "Threshold Amount"). In the event such aggregate
indemnification obligations exceed the Threshold Amount, such Indemnified Party
shall be entitled to recover only the amount by which such aggregate
indemnification obligations exceed the Threshold Amount. In no event may an
Indemnified Party be entitled to recover an identification obligation under this
Article 9 in excess of Five Hundred Thousand Dollars ($500,000) (the "Indemnity
Amount"). Notwithstanding anything to the contrary contained herein, any
indemnification payments made to Security National Life pursuant to this Article
9 shall be net of related tax effects and net of insurance proceeds received or
to be received by Security National Life on account of such indemnification
claim.
9.7 Indemnification as Exclusive Remedy. Indemnification pursuant to the
provisions of this Article 9 shall be the sole and exclusive remedy of the
parties hereto for any misrepresentation or breach of any warranty, covenant, or
agreement contained in this Agreement or in any closing document executed and
delivered pursuant to the provisions hereof, or any other claim arising out of
the transactions contemplated by this Agreement.
9.8 No Consequential Damages. With respect to any claim for indemnity under this
Agreement or any dispute among the Parties arising out of this Agreement, no
party shall be entitled to recover from any other party any consequential
damages, except that such limitation shall not apply in the case of intentional
misrepresentation or fraud on the part of a party.
ARTICLE 10 MISCELLANEOUS
10.1 Termination; Expenses. This Agreement, the Plan of Merger, and the
transactions contemplated by this Agreement and the Plan of Merger may be
terminated at any time, whether before or after action by the shareholders of
SSLIC as contemplated by Section 5.16:
(a) by action of the Board of Directors of Security National Life in the
event of a failure of a condition set forth in Section 7.1;
(b) by action of the Board of Directors of SSLIC in the event of a failure
of a condition set forth in Section 7.2;
(c) by mutual agreement of the Boards of Directors of Security National
Life and SSLIC;
If termination shall occur as permitted herein, each party will pay its own
expenses incurred in connection with the proposed merger at the time of
termination.
10.2 Rights of Third Parties. This Agreement has been negotiated by and among
the Parties, and no other person shall have any rights or obligations hereunder.
Neither SSLIC nor Security National Life may assign this Agreement or any
interest hereunder, and any such attempted assignment not in compliance herewith
shall be null and void, except that Security National Life may assign this
Agreement to a wholly owned SSLIC Holding, provided that any such assignment
shall not relieve Security National Life of its obligations hereunder. Except as
otherwise provided herein, this Agreement shall be binding and inure to the
benefit of the parties hereto and their respective successors and assigns.
10.3 Survival of Representations and Warranties; Indemnities. The
representations, warranties, covenants, and agreements of SSLIC and Security
National Life contained in this Agreement and in any instrument delivered
hereunder shall survive for the period of their obligation to indemnify, as set
forth in Section 9.3.
10.4 Prior Agreements; Modifications. This Agreement, the Plan of Merger and the
Escrow Agreement constitute the entire agreement between the parties with
respect to the subject matter hereof, and shall supersede all prior agreements,
documents, or other instruments with respect to the matters covered hereby. This
Agreement may be amended by an instrument in writing signed by each of SSLIC and
Security National Life; provided, however, that no such amendment entered into
without the written consent of the shareholders of SSLIC may decrease the Merger
Consideration.
10.5 Captions and Table of Contents. The captions and table of contents in this
Agreement are for convenience only and shall not be considered a part of or
affect the construction or interpretation of any provision of this Agreement.
10.6 Governing Law. The terms of this Agreement shall be governed by, and
interpreted and construed in accordance with the provisions of, the laws of the
State of Utah without regard to its conflicts of law principles.
10.7 Counterparts. This Agreement may be executed in any number of counterparts,
each of which, when so executed, shall constitute an original copy hereof.
10.8 Severability. If any clause, provision, or section of this Agreement is
ruled illegal, invalid, or unenforceable by any court of competent jurisdiction,
the invalidity or unenforceability of such clause, provision, or section shall
not affect any of the remaining provisions hereof.
10.9 Notices. Any notice, request, instruction, or other document to be given
hereunder shall be in writing and shall be transmitted by certified or
registered mail, postage prepaid, by reputable express courier, or by facsimile
transmission. The addresses or facsimile telephone numbers to which such
communications shall be sent are as follows:
If to SSLIC:
755 Rinehart Road
Lake Mary, Florida
Attention: Scott M. Quist, President and
Chief Operating Officer
Facsimile Number: (407) 323-9701
If to Security National Life:
5300 South 360 West, Suite 250
Salt Lake City, UT 84123
Attention: George R. Quist, Chairman and
Chief Executive Officer
Facsimile Number: (801) 265-9882
With a copy to:
Mackey Price Thompson & Ostler
57 West 200 South, Suite 350
Salt Lake City, Utah 84101-3663
Attention: Randall A. Mackey, Esq.
Facsimile Number: (801) 575-5006
If to the Disbursing Agent:
Mackey Price Thompson & Ostler
57 West 200 South, Suite 350
Salt Lake City, Utah 84101-3663
Attention: Randall A. Mackey, Esq.
Facsimile Number: (801) 575-5006
or to such other address or facsimile telephone number as any party may from
time to time designate to the others in writing.
10.10 Waiver. The accuracy of any representation or warranty, the performance of
any covenant or agreement or the fulfillment of any condition of this Agreement
by SSLIC, SSLIC Holding or Security National Life may be expressly waived only
in writing by the other parties. Any waiver hereunder shall be effective only in
the specific instance and for the purpose for which given. No failure or delay
on the part of SSLIC, SSLIC Holding or Security National Life in exercising any
right, power, or privilege under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. The rights and remedies
expressly specified in this Agreement are cumulative and are not exclusive of
any rights or remedies which either party would otherwise have.
10.11 Definition of SSLIC's Knowledge. For the purposes of this Agreement, the
knowledge of SSLIC shall be deemed to be limited to the actual knowledge of the
individuals identified on Schedule 10.11 delivered to Security National Life.
10.12 Definition of Security National Life's Knowledge. For the purposes of this
Agreement, the knowledge of Security National Life shall be deemed to be limited
to the actual knowledge of the individuals identified on Schedule 10.12
delivered to Security National Life.
10.13 Attorney's Fees. In the event any party hereto institutes litigation to
enforce its rights or remedies under this Agreement, the party prevailing in
such litigation shall be entitled to receive an award from the non-prevailing
party of the prevailing party's reasonable attorney's fees and costs incurred in
connection with such litigation. The foregoing shall include reasonable
attorney's fees and costs incurred at trial, on any appeal and in any proceeding
in bankruptcy.
10.14 Consent to Jurisdiction. Each of the Parties irrevocably consents to the
non-exclusive jurisdiction of the courts of the State of Utah located in the
County of Salt Lake, and of the United States District Court for the Central
District of Utah for purposes of any suit, action, or proceeding relating to
this Agreement or the Plan of Merger (a "Related Proceeding") and irrevocably
waives, to the fullest extent it may effectively do so, (i) any objection it may
have to the laying of venue of any Related Proceeding in any such court, and
(ii) the defense of an inconvenient forum to the maintenance of any Related
Proceeding in any such court.
10.15 Cross References. Unless additional information is provided or the content
clearly requires otherwise, references to a specified Article or Section shall
be construed to mean a reference to the specified Article or Section of this
Agreement.
IN WITNESS WHEREOF, each of the parties hereto, intending to be legally
bound hereby, has duly executed this Agreement as of the date first written
above.
SECURITY NATIONAL LIFE
INSURANCE COMPANY
By: /s/ George R. Quist
-----------------------
George R. Quist, Chairman and
Chief Executive Officer
SSLIC HOLDING COMPANY
By:/s/George R. Quist
----------------------
George R. Quist, Chairman and
Chief Executive Officer
SOUTHERN SECURITY LIFE
INSURANCE COMPANY
By:/s/Scott M. Quist
------------------------
Scott M. Quist, President and
Chief Operating Officer
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: August 30, 2004 By: /s/ Scott M. Quist
----------------------
Scott M. Quist, President and Chief
Operating Officer