STOCK PURCHASE AGREEMENT
dated as of September 26, 2005
by and among
SECURITY NATIONAL LIFE INSURANCE COMPANY,
SOUTHERN SECURITY LIFE INSURANCE COMPANY,
MEMORIAL INSURANCE COMPANY OF AMERICA
and
THE SHAREHOLDERS THAT HAVE EXECUTED
AGREEMENT BY SHAREHOLDERS OF
MEMORIAL INSURANCE COMPANY OF AMERICA
TO SELL SHARES IN STOCK PURCHASE TRANSACTION
IN THE FORM ATTACHED AS ANNEX I
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C>
<C>
<C>
ARTICLE I - PURCHASE AND SALE OF SHARES
AND
COINSURANCE
AGREEMENT..........................................1
1.1 Sale and
Purchase of the Shares.........................1
1.2 Purchase
Consideration..................................1
1.3 Delivery
of Shares......................................2
1.4
Coinsurance Agreement ................................. 2
ARTICLE II - THE
CLOSING..................................................2
2.1
Closing.................................................2
ARTICLE III - REPRESENTATIONS AND
WARRANTIES OF
MEMORIAL AND
SHAREHOLDERS.............................................2
3.1
Organization, Good Standing and Power...................3
3.2 Capital
Structure ......................................3
3.3 Authority
..............................................4
3.4 Dividends,
Stock Purchases, Etc.........................4
3.5 Financial
Statements ...................................5
3.6 Annual
Insurance Statements ............................5
3.7 Insurance
Business .....................................6
3.8 Compliance
With Law ....................................7
3.9 No
Defaults ............................................7
3.10
Litigation .............................................7
3.11
No Material Adverse Change .............................7
3.12
Absence of Undisclosed Liabilities......................9
3.13
Information Supplied....................................9
3.14
Certain Agreements .....................................9
3.15
Plans; Benefits; Employment Claims......................9
3.16
Major Contracts .......................................10
3.17
Taxes
.................................................12
3.18
Interests of Officers and Directors ...................14
3.19
Intellectual Property .................................14
3.20
Restrictions on Business Activities ...................14
3.21
Title to Properties; Absence of Liens and
Encumbrances; Conditions of Equipment............15
3.22
Governmental Authorization and Licenses................15
3.23
Environmental Matters .................................16
3.24
Insurance .............................................16
3.25
Labor Matters .........................................16
3.26
Agents; Customers and Agent Complaints ................17
3.27
Questionable Payments .................................17
<PAGE>
Page
ARTICLE IV - COVENANTS OF SHAREHOLDERS
..................................17
4.1
Shareholders to Sell Shares in Transaction.............17
4.2
Shareholders to Maintain Memorial Policies.............18
ARTICLE V - REPRESENTATIONS AND WARRANTIES
OF
SECURITY NATIONAL AND SOUTHERN
SECURITY.........................18
5.1
Organization, Good Standing and Power .................18
5.2 Authority
.............................................18
5.3 Board
Authorization....................................19
5.4 Maintain
Office; Retention of Agents...................19
ARTICLE VI - CONDUCT AND TRANSACTIONS PRIOR
TO
CLOSING DATE; ADDITIONAL
AGREEMENT.............................19
6.1 Conduct of
Business of Memorial........................19
ARTICLE VII - CONDITIONS PRECEDENT
......................................23
7.1 Conditions
to Each Party's Obligation to
Effect This Transaction ...........................23
7.2 Conditions
to Obligations of Security National and
Southern Security..................................23
7.3 Conditions
to Obligations of Memorial and Shareholders.25
ARTICLE VIII - TERMINATION
..............................................26
8.1
Termination ...........................................26
ARTICLE IX - INDEMNIFICATION
............................................27
9.1 Obligation
to Indemnify ...............................27
9.2 Notice and
Opportunity to Defend ......................28
ARTICLE X - GENERAL PROVISIONS
..........................................29
10.1
Survival of Representations, Warranties,
Covenants and Agreements............................29
10.2
Amendment .............................................29
10.3
Extension; Waiver .....................................29
10.4
Notices ...............................................29
10.5
Interpretation ........................................31
10.6
Counterparts...........................................31
<PAGE>
Page
10.7
Entire Agreement ......................................31
10.8
No Transfer ...........................................31
10.9
Severability ..........................................32
10.10
Other Remedies ........................................32
10.11
Further Assurances ....................................32
10.12 No
Third Party Beneficiary Rights .....................32
10.13
Mutual Drafting .......................................32
10.14
Governing Law .........................................32
10.15
Jurisdiction and Venue.................................32
10.16
Expenses ..............................................32
10.17
Brokers or Finders ....................................33
10.18
Public Announcements ..................................33
10.19
Confidentiality .......................................33
10.20
Attorney's Fees........................................34
</TABLE>
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK
PURCHASE AGREEMENT
(the "Agreement")
is dated effective as
of
September __, 2005, and entered into by and among SECURITY NATIONAL LIFE
INSURANCE COMPANY, a Utah corporation
("Security National"),
SOUTHERN SECURITY
LIFE INSURANCE COMPANY, a Florida
corporation and a
wholly-owned
subsidiary of
Security National ("Southern Security"),
MEMORIAL INSURANCE
COMPANY OF AMERICA,
a Arkansas corporation ("Memorial"),
and the shareholders
of Memorial that have
executed the AGREEMENT BY SHAREHOLDERS OF
MEMORIAL INSURANCE
COMPANY OF AMERICA
TO SELL SHARES IN STOCK PURCHASE TRANSACTION in the form attached as Annex I
(the "Shareholders").
NOW,
THEREFORE,
in consideration of the mutual covenants and
agreements
contained herein, Security National, Southern Security, Memorial and the
Shareholders hereby agree as follows:
ARTICLE I
PURCHASE AND SALE OF SHARES
AND COINSURANCE AGREEMENT
1.1 Sale
and Purchase of the Shares. At the Closing, as hereinafter
defined, upon and subject to the terms and conditions set forth in this
Agreement, the Shareholders shall sell,
transfer, assign and deliver to Security
National and Southern Security, and Southern Security shall purchase from
the
Shareholders, a total of 4,681 shares of
common stock of Memorial (the "Memorial
Common Stock"), representing all of the issued and outstanding stock and
securities of Memorial owned by the
Shareholders,
free and clear of all
liens,
claims, options, proxies, voting
agreements, charges and encumbrances. Following
the completion of the purchase of the
Memorial Common Stock by Security National
and Southern Security pursuant to the terms and
conditions of the
Agreement,
Memorial will become a wholly owned
subsidiary of Southern
Security. Security
National, Southern Security, Memorial and the Shareholders
hereby acknowledge
and agree that regulatory approval, if
required, from the Arkansas, Florida and
Utah insurance departments for the transaction described in this Section 1.1
must be obtained prior to Closing.
1.2 Purchase
Consideration.
Subject to the terms
and conditions
of this
Agreement, in reliance upon Memorial's
representations,
warranties,
agreements
and covenants contained herein, and in consideration of the sale, transfer,
assignment and delivery of the Memorial
Common Stock as herein
provided, the
Shareholders shall receive, on a pro rata basis to the number of shares of
Memorial common stock held by such
Shareholders,
purchase consideration (the
"Purchase Consideration") in the aggregate amount of Thirteen Million Five
Hundred Thousand Dollars ($13,500,000) to
be distributed as follows:
(a) Cash in U.S.
dollars by certified
funds or wire transfer
in the
form of a
dividend to the
Shareholders equal to
the amount of the maximum
dividend allowed
and approved by the Arkansas Insurance Department; and
<PAGE>
(b) Cash in U.S. dollars by certified funds or wire transfer to the
Shareholders equal to the amount of $13,500,000 reduced by the amount of the
maximum dividend received by the
Shareholders pursuant
to Section 1.2(a) above.
1.3 Delivery of
Shares. At the Closing Date, the Shareholders shall deliver
to Security National and Southern Security certificates with stock power
executed in blank representing the outstanding
shares of Memorial
Common Stock
required by Section 1.2 hereof.
The certificates are to be transferred to and
held by Southern Security.
1.4 Coinsurance
Agreement. At the Closing Date, Security National, Southern
Security and Memorial each agree to enter into a
coinsurance
agreement (the
"Coinsurance Agreement") in substantially
the form attached hereto as Exhibit 1,
pursuant to which Security National, Southern Security and Memorial will
each
agree to reinsure all of the assumed liabilities of Memorial, to the extent
permitted by the Arkansas Insurance
Department, except for
certain policies not
included within the reinsured policies. Upon approval of the Coinsurance
Agreement by the Arkansas Insurance
Department,
certain insurance
business and
operations of Memorial, as set forth therein, will be transferred to
Security
National.
ARTICLE II
THE CLOSING
2.1 Closing. The
closing of the transaction (the "Closing") will take place
at the offices of Memorial Insurance Company of America, 634 West Main,
Blytheville, Arkansas, unless a different date
or place is agreed to in writing
by the parties hereto. Each party hereto shall use its
reasonable best efforts
to cause the Closing to occur on or before
October 30, 2005, unless this date is
extended as provided herein (the "Closing
Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
MEMORIAL AND SHAREHOLDERS
Except as
disclosed in a document to be prepared by Memorial and delivered
to Security National and Southern Security prior to the Closing Date (the
"Memorial Disclosure Schedule") referring specifically to the applicable
representation and warranty in this Agreement
that identifies the
basis for an
exception to a representation and warranty in this Agreement and that is
delivered by Memorial to Security National
and Southern Security and approved by
Security National and Southern Security by
execution of this Agreement, Memorial
and the Shareholders represent and warrant to Security
National and
Southern
Security as set forth below, and such representations and warranties shall be
true and correct as of the date hereof and
at all times
thereafter
including,
without limitation, the Closing Date, as if made at
all such times. As used in
this Agreement (i) "Business Condition" with respect to any
corporate entity or
group of corporate entities shall mean the
business and financial
condition and
prospects of such entity or entities taken
as a whole and (ii) "material adverse
effect" on the Business Condition shall be deemed to include, without
limitation, (x) any inaccuracy in the
capitalization representation set forth in
Section 3.2 below and (y) any material
liability not reflected on the Memorial
Financial Statements (as defined in Section 3.5 below) or Annual Insurance
Statements (defined in Section 3.6
below).
3.1
Organization, Good
Standing and Power. Memorial is a corporation, duly
organized, validly existing and in good
standing under the laws of its state of
Arkansas and has all requisite power and
authority to own, operate and lease its
properties and to carry on its businesses
as now being
conducted. Schedule
3.1
of the Memorial Disclosure Schedule contains a true and
correct listing of all
states in which Memorial is registered,
licensed and authorized to engage in the
insurance business. Memorial is not aware
of any threatened or pending action or
inaction that could result in the loss of or an adverse change in any such
registration or license. Memorial is in good standing under all such
registrations and licenses. Memorial is duly qualified as
foreign
corporations
and is in good standing in each
jurisdiction in which
the failure to so qualify
would have a material adverse effect on its
individual Business
Condition. The
Memorial Disclosure Schedule also sets forth a true and
complete list of
the
states where Memorial is qualified as a foreign corporation. Memorial has no
subsidiaries. Memorial has no other direct or indirect
equity interest in or
loans to any partnership, corporation, joint venture, business association or
other entity. Memorial has delivered to Security
National and Southern Security
complete and correct copies of its Articles
of Incorporation and Bylaws, in each
case as amended to the date hereof,
and has delivered or
made available minutes
of all of Memorial's directors' and stockholders' meetings, and stock
certificate books correctly setting forth the record ownership of all
outstanding shares of Memorial Common
Stock.
3.2 Capital
Structure
(a) The authorized
capital structure of
Memorial consists of
27,000
shares of Common
Stock, with a par value of $50.00 per
share. There are
4,681 shares of
Common Stock issued and outstanding, all of which are owned
by the
Shareholders.
Except as disclosed on Schedule 3.2 of the
Memorial
Disclosure
Schedule, there are no other debt, equity or hybrid debt or
equity interests
or securities of Memorial issued and outstanding.
(b) All outstanding shares of Memorial Common Stock and other
Memorial
securities,
if any, are validly
issued, fully paid and non-assessable and,
except as
disclosed on the Memorial Disclosure Schedule, are not subject
to
any liens, claims, encumbrances or charges of any kind or nature
or any
preemptive
rights created by statute, Memorial's Articles of
Incorporation
or Bylaws or any agreement to which Memorial is a party or by which
Memorial may be
bound. There are no options, warrants, calls, conversion
rights,
commitments
or agreements of any
character to which Memorial is a
party or by
which Memorial may be bound that do or may obligate Memorial to
issue
securities
of any kind or nature
or to grant, extend or
enter into
any such option,
warrant, call,
conversion right,
commitment or agreement
or which relate to the voting of the Memorial Common Stock or other
Memorial
securities, if any.
<PAGE>
3.3
Authority
(a) Memorial has all requisite corporate power and authority to
enter
into
this Agreement and to perform its obligations hereunder and
thereunder,
and to consummate
the transactions contemplated hereby and
thereby.
The execution and
delivery of this Agreement, the performance by
Memorial of its
obligations hereunder
and thereunder and the
consummation
of the
transactions
contemplated
hereby and
thereby have been duly and
validly
authorized
by all necessary corporate action on the part of
Memorial,
including
approval
by its Boards of Directors and the
Shareholders.
This Agreement
shall constitute legal, valid and binding
obligations of
Memorial enforceable
against Memorial in accordance
with
their respective
terms, except as enforcement may be limited by bankruptcy,
insolvency or
other similar laws
affecting the
enforcement of
creditors'
rights generally
and except that the availability of equitable remedies is
subject
to the discretion of the court before which any proceeding
therefore may be
brought.
(b) To the best
knowledge of Memorial and the Shareholders, the
execution and
delivery of this Agreement does not, and the consummation of
the transactions
contemplated hereby
and thereby, will not,
conflict with
or result in any
violation of any material statute, law, rule, regulation,
judgment,
order, decree or ordinance applicable to Memorial or its
properties or
assets, nor will it
conflict with or result in any breach or
default
(with or without the giving of notice or the lapse of
time, or
both)
under, or give rise to a right of termination, cancellation or
acceleration
of any material obligation or to the loss of any material
benefit
under, or result in the creation of a material
lien, charge or
encumbrance on
any of the properties or assets of Memorial pursuant to (i)
any provision of the Articles of Incorporation or Bylaws of Memorial or
(ii) any
material agreement,
contract, note,
mortgage, indenture,
lease
instrument,
permit, concession, franchise, registration or license to which
Memorial is a
party or by which Memorial or any of its properties or assets
may be bound or
affected.
(c) To the best
knowledge of Memorial and the Shareholders, no
consent,
approval, order or authorization of, or registration, declaration
or filing with,
any court,
administrative agency,
commission,
regulatory
authority
or other governmental authority or instrumentality, whether
domestic or
foreign (collectively, a "Governmental Entity"), is required by
or with respect
to Memorial in
connection with the
execution and delivery
of this
Agreement and by
Memorial or the
consummation by
Memorial of the
transactions
contemplated hereby or thereby, except for (i) filing required
documents
with the relevant authorities of states in which Memorial is
qualified to do
business, (ii) such
consents, approvals,
authorizations,
registrations
or qualifications as may be required under state
insurance
laws as
identified
in the Memorial Disclosure Schedule and (iii) such
consents,
approvals, orders,
authorizations,
registrations,
declarations
and filings as may be required under the laws of any foreign country,
which, if not
obtained or made, would not have a material adverse effect on
the Business
Condition of Memorial.
All approvals of
Memorial's Board
of
Directors and
Shareholders as required by applicable law have been obtained
and are in force and effect and no
dissenters'
rights have been
exercised
under applicable
law.
3.4 Dividends,
Stock Purchases, Etc.
Since June 30, 2005, Memorial has not
(i) declared or paid any dividends (either
in cash, property or its stock of any
class) upon, or made or become committed to make any other
distribution
with
respect to, or purchased, redeemed or
otherwise beneficially acquired any of its
outstanding capital stock of any class, or
become committed so to do; (ii)
<PAGE>
split up, combined or reclassified
any of its outstanding
capital stock of
any
class, or become committed so to do; or (iii) issued or become committed to
issue any additional capital stock of any class
(whether or not from
treasury
stock, heretofore authorized but unissued stock, or
newly authorized stock) or
any options, rights or warrants to acquire,
or securities
convertible into
or
exchangeable for, or which otherwise
confer upon the holder
or holders thereof
any right to acquire, any shares of capital stock of any class or any
other
security or debt of Memorial.
3.5 Financial Statements. Memorial has furnished or made available to
Security National and Southern Security or will furnish or make
available to
Security National and Southern Security within ten days from the date of
this
Agreement Memorial's audited financial statements for the fiscal years
ended
December 31, 2000, 2001, 2002, 2003 and
2004, including
balance sheets and
the
related audited statements of income, cash flow and stockholders'
equity, and
the related management letters (collectively, the "Audited Financial
Statements"), and Memorial's unaudited financial statements as of and for the
quarters ended March 31, 2005 and June 30,
2005, including
unaudited balance
sheets of Memorial as at March 31, 2005 and June 30, 2005, and the related
unaudited statements of income, cash flow and stockholders' equity
(collectively, the "Unaudited Financial Statements"). The Audit Financial
Statements and Unaudited Financial
Statements are, collectively, referred to as
the "Memorial Financial Statements." Except as disclosed
on Schedule 3.5 of the
Memorial Disclosure Schedule, the Memorial Financial Statements have been
prepared in accordance with statutory
accounting principles consistently applied
and fairly present the financial position of Memorial as at the
dates thereof
and the results of its operations and cash flows for the
periods then ended.
There has been no change in Memorial's
accounting policies,
except as described
in notes to the Memorial Financial
Statements.
3.6 Annual
Insurance Statements.
(a) Memorial has provided Security National and Southern Security
with
(i) all annual
statements, certificates and applications to the Arkansas or
any other insurance commissioner or other Governmental Entity, which
Memorial
has filed with or
submitted with respect to years ending on or
after
December 31, 2000,
and such documentation provided previously is
listed in
Schedule 3.6 of the Memorial Disclosure Schedule, and (ii) all
reports of
examination issued by such insurance commissioners, regulatory
authorities or
other Governmental
Entity regarding Memorial on or after
December 31,
2000, and such
documentation
provided previously is listed
also in Schedule
3.6.
(b) Such filings or submissions were in substantial compliance with
applicable
law when filed and, as of their respective dates, did not
contain
any materially false statements of fact or omit to state any
material
fact necessary to make the statements set forth therein not
misleading in
light of the
circumstances under
which such statements were
made;
no material deficiencies have been asserted by any insurance
commissioner,
insurance department or other Governmental Entity with
respect to such
statements;
Memorial has provided
Security National and
Southern
Security with copies of all material written responses with
respect to
comments from any Governmental Entity concerning such filings,
submissions
or reports of
examination
since December 31, 2000 and such
written
responses are described in Schedule 3.6 of the Memorial
Disclosure
Schedule,
and prior to the date
of this Agreement,
no fines or
penalties
have been
imposed on Memorial by any Governmental Entity; and no deposits
(other than in
the ordinary course of
business) have been made by Memorial
with any
Governmental Entity.
<PAGE>
(c) Except as disclosed in Schedule 3.6 of the Memorial Disclosure
Schedule, the
statutory financial statements for Memorial as of and for the
years ended
December 31, 2003 and 2004 (i) fairly
present the
statutory
financial
condition of Memorial
at such dates and (ii) have been prepared
in accordance
with the required or permitted statutory insurance accounting
requirements or
practices under the
insurance laws of Arkansas, except as
expressly
set forth or
disclosed in the notes, exhibits or schedules
thereto.
The amounts shown in such statements of account on aggregate
reserves for
life or annuity policies and contracts, aggregate reserves for
accident and
health policies, net deferred and uncollected premiums and all
policy and
contract claims
liability as of the
end of each such year, are
computed in
accordance with accepted actuarial and industry practices,
are
fairly stated in
accordance with those
called for in applicable insurance
policy
provisions, meet the requirements of the insurance laws of
Arkansas,
make a
sufficient
provision for all unmatured obligations of Memorial
provided for
under the terms of its policies and are consistent with the
assumptions
previously employed.
Adequate provision has
been made for all
actuarial
reserves
and related statement items which ought to be
established.
3.7 Insurance
Business.
(a) Security National and Southern Security has been provided true
and
complete copies
of all contracts,
arrangements,
treaties,
understandings
and agreements of (or related to) Memorial with
any party with respect to
reinsurance
currently in force and such documents and information are
listed in
Schedule 3.7 of the Memorial Disclosure Schedule attached
hereto.
All policies
assumed by Memorial were assumed under agreements submitted to
and approved by all relevant regulatory authorities and are valid, in
force, and not
subject to recapture (except at Memorial's option), and are
fairly reflected
on the Memorial Financial Statements. No party thereto is
in material default with respect to any provision thereof and no such
agreement
contains any provision providing that the other party thereto
may
terminate same
by reason of the transactions contemplated by this Agreement
or any
other provisions which would be altered or otherwise become
applicable by
reason of such transactions.
(b) All policies of insurance issued or assumed by Memorial as
now in
force are, to
the extent required under applicable law, on forms
submitted
to and approved
by the applicable jurisdiction's insurance commissioner. No
policy holder or
related group of policy holders which, singularly or in
the aggregate, accounted for 5% of the gross revenues of Memorial
considered
as a whole for the
year ended
December 31, 2004 has, after
December 31,
2004, terminated
or, to the best
knowledge of the
Memorial,
threatened
to terminate
its relationship with Memorial. The contracts
between Memorial
and its agents, managers or brokers are valid, binding and
in full force
and effect in accordance with their terms. Memorial is not in
material
default with respect
thereto and no such
contract contains any
provision
providing that the
other party thereto may terminate the same by
reason of the
transactions
contemplated
by this Agreement or any other
provision which
would be altered or otherwise become applicable by reason
of such
transactions.
<PAGE>
3.8 Compliance With Law. To the best knowledge of Memorial and the
Shareholders, Memorial is in compliance with and
have conducted its business so
as to comply with all laws, rules,
regulations,
judgments, decrees or orders of
any Governmental Entity applicable to their
operations or with respect to which
compliance is a condition of engaging in the business
thereof, except to the
extent that failure to comply could,
individually or in the
aggregate, not have
had and is not reasonably expected to have, a material
adverse effect on the
Business Condition of Memorial. There are no material judgments, orders,
injunctions, decrees, stipulations or awards
(whether rendered by a court or
administrative agency or by arbitration) against
Memorial or against any of its
properties or businesses. Schedule 3.8 of the Memorial Disclosure Schedule
contains a summary of all material violations of, or conflicts with, any
applicable statute, law, rule, regulation, ruling, order, judgment or
decree,
listed by each such Governmental Entity,
including any of the foregoing relating
to any environmental or health laws.
3.9 No Defaults.
To the best
knowledge of Memorial
and the
Shareholders,
Memorial is not, nor has it received notice that it is or would be with
the
passage of time or the giving of notice, or both, (a) in violation of any
provision of its Articles of Incorporation or Bylaws or (b) in default or
violation of any term, condition or provision of (i) any judgment, decree,
order, injunction or stipulation
applicable to Memorial
or (ii) any agreement,
note, mortgage, indenture, contract, lease, instrument,
permit,
registration,
concession, franchise or license to which Memorial is a party or by which
Memorial or any of its properties or assets may be bound,
which violation or
default could, individually or in the aggregate,
have a material adverse effect
on the Business Condition of Memorial.
3.10 Litigation.
There is no action,
suit, proceeding,
claim, arbitration
or investigation pending or, to the best
knowledge of
Memorial, threatened,
against Memorial that, individually or in the aggregate, could be reasonably
expected to have a material adverse effect on the Business Condition of
Memorial, or which in any manner challenges
or seeks to prevent,
enjoin, alter
or materially delay any of the transactions
contemplated hereby.
Schedule 3.10
of the Memorial Disclosure Schedule sets forth with respect to each pending
action, suit, proceeding, claim, arbitration or
investigation to which Memorial
is a party, the forum, the parties thereto,
a brief description of the subject
matter thereof and the amount of damages
claimed. Memorial is not aware of any
reasonable basis for any other such action,
suit, proceeding, claim, arbitration
or investigation. Memorial has delivered or made
available to Security National
and Southern Security correct and complete
copies of all correspondence prepared
by its counsel for Memorial's independent public accountants in
connection with
any audits or reviews completed by
Memorial's independent public accountants.
3.11 No Material Adverse Change. Since June 30, 2005, Memorial has
conducted its business in the ordinary
course and there has not occurred:
(a) Any material adverse change in the Business Condition of
Memorial;
(b) Any amendments
or changes in the
Articles of
Incorporation
or
Bylaws of
Memorial;
(c) Any damage,
destruction or loss,
whether covered by insurance or
not, materially
and adversely affecting any of the properties or businesses
of Memorial;
<PAGE>
(d) Any issuance,
redemption, repurchase
or other acquisition of the
shares of
capital stock of
Memorial or any declaration, setting aside
payment of any
dividend or other
distribution (whether
in cash, stock or
property) with
respect to the capital stock of Memorial;
(e) Any increase in or
modification of the
compensation or
benefits
payable or to
become payable by Memorial to any of its directors, officers
or employees,
except in the ordinary
course of business
consistent
with
past
practice;
(f) Any material
increase in or modification of any bonus, pension,
insurance
or other employee benefit plan, payment or arrangement,
including,
but not limited to,
the granting of stock
options,
restricted
stock awards or
stock appreciation
rights made to, for or
with any of its
employees,
except in the ordinary
course of business
consistent with past
practice;
(g) Any sale of the
property or assets of Memorial individually in
excess of $1,000
or in the aggregate in excess of $2,500;
(h) Any alteration in any term of any outstanding security of
Memorial;
(i) Any (a)
incurrence, assumption
or guarantee by Memorial of any
debt for
borrowed money; (b) issuance or sale of any securities
convertible
into or
exchangeable for debt securities of Memorial; (c) issuance or sale
of options or other rights to acquire from Memorial, directly or
indirectly,
debt
securities
or any securities convertible into or
exchangeable
for any such debt
securities;
or (d) any
material premium
refunds;
(j) Any creation or assumption by Memorial of any mortgage, pledge,
security
interest, lien or other encumbrance on any of its assets or
properties;
(k) Any making of any loan, advance or capital contribution to, or
investment
in, any person other
than (a) travel loans or advances made in
the ordinary course of business of Memorial and (b) other loans and
advances in an
aggregate amount that does not exceed $1,000 outstanding at
any time;
(l) Any entry into or any amendment or relinquishment of or any
termination
or renewal by Memorial
of any contract, lease transaction,
commitment or
other right or obligation, except in the ordinary
course of
business
consistent with past practice;
(m) Any transfer or grant of a right under the Memorial Intellectual
Property
Rights (as defined in Section 3.19 below) other than those
transferred or
granted in the ordinary course of business consistent with
past
practice;
(n) Any labor dispute,
other than routine individual grievances, or
any activity or
proceeding by a labor
union or
representative thereof
to
organize any
employees of Memorial;
<PAGE>
(o) Any violation of or conflict with any applicable laws, statutes,
orders,
rules or regulations promulgated, or judgment entered by any
Governmental
Entity, that, individually or in the aggregate, materially and
adversely
affects (or,
insofar as Memorial
knows, might reasonably be
expected to
materially
and adversely affect) the Business Condition of
Memorial;
(p) Any agreement or
arrangement made by
Memorial to take any action
that, if taken
prior to the date hereof, would have made any representation
or warranty
set forth in this
Section 3 untrue or incorrect as of the date
when made;
or
(q) Any payment of
amounts owing
under Memorial issued insurance
policies
materially at variance
with the Company's
policy provisions
and
policy payment
history.
3.12 Absence of
Undisclosed
Liabilities.
Except as disclosed in
Schedule
3.12 of the Memorial Disclosure Schedule or as reflected in the Memorial
Financial Statements and except for
liabilities and
obligations arising
after
June 30, 2005, in the ordinary course of
business consistent with past practices
that could not reasonably be expected to have a
material adverse
effect on the
Business Condition of Memorial, Memorial has no liabilities or obligations
(whether absolute, accrued or contingent, and whether or not determined or
determinable) of a character that, under
statutory accounting principles, should
be accrued, shown or disclosed on an audited balance sheet of Memorial
(including the footnotes thereto) or should be described on
an Annual Insurance
Statement filed with any state insurance
commissioner
having jurisdiction
over
Memorial or its business.
3.13
Information
Supplied. None of the information supplied or to be
supplied by Memorial pursuant to this Agreement and no representation or
warranty made herein or in any exhibit
hereto or in any
financial statement
or
schedule attached hereto contains or will contain any untrue statement of a
material fact or omits or will omit to
state any material
fact required to
be
stated therein or necessary in order to
make the statements therein, in light of
the circumstances under which they are
made, not misleading.
3.14
Certain Agreements. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or
thereby will (a) result in any payment (including, without limitation,
severance, unemployment compensation, golden parachute, bonus or otherwise)
becoming due to any director or employee of
Memorial under any
Plan (as defined
in Section 3.15 below) or otherwise, (b) materially increase any benefits
otherwise payable under any Plan or (c)
result in the
acceleration of the time
of payment or vesting of any such
benefit.
3.15 Plans;
Benefits; Employment Claims.
(a) All employee
benefit plans,
programs, policies,
commitments or
other
arrangements
(whether or not set forth in a written document)
covering any
active, former or
retired employee or
consultant of Memorial
are listed in Schedule 3.15 of the Memorial Disclosure Schedule
(individually,
a "Plan" and,
collectively,
the "Plans"). To the extent
applicable,
the Plans comply with the requirements of the Employee
Retirement
Income Security Act of 1974, as amended ("ERISA"), and the
Code,
and any Plan
intended to be qualified under Section 401(a) of the Code
has
either obtained
a favorable determination letter as to its qualified status
from the
Internal Revenue Service (the "IRS") or
<PAGE>
still has a
remaining period of time under applicable Treasury Regulations
or IRS
pronouncements in which to apply for such a determination letter
and
to make any
amendments necessary
to obtain a favorable
determination. To
the extent any
Plan with an existing determination letter from the IRS must
be amended to
comply with the applicable requirement of the Tax Reform
Act
of 1986,
as amended, and subsequent legislation, the time period for
effecting
such amendments will not expire prior to this transaction.
Memorial
has furnished or made available to Memorial copies of the most
recent IRS
letters and IRS Form 5500 with respect to any such Plan. No
Plan
is covered by Title IV of ERISA or Section 412 of the Code. Neither
Memorial nor any
officer or director of Memorial has incurred any liability
or penalty under
Section 4975 through
Section 4980 of the
Code or Title I
of ERISA.
Each Plan has been
maintained and
administered in all
material
respects in
compliance with its terms and with the requirements prescribed
by and all
applicable statutes, laws, rules, orders, rules and
regulations,
including,
but not limited to,
ERISA and the Code,
that are applicable to
such
Plans. No suit, action or other litigation (excluding claims for
benefits
incurred in the ordinary course of Plan activities) has been
brought, or, to
the best knowledge of Memorial, is threatened, against or
with
respect to any such
Plan. All contributions, reserves and premium
payments
required to be made or
accrued as of the date hereof to the Plans
have been made
or accrued.
(b) Except as
disclosed in Schedule
3.15 of the Memorial
Disclosure
Schedule,
no present or former
employee of Memorial
has any claim against
Memorial
(whether under federal or state law, under any employment
agreement,
or otherwise) on
account of or for (i) overtime pay, other than
overtime pay for
work done in current payroll period; (ii) wages or salary
for any period
other than the current payroll period; (iii) vacation time
off or pay in
lieu of vacation time off, other than (x) accumulated
vacation
pay as show in the
schedule referred to
above, and (y)
vacation
time off (or pay
in lieu thereof)
earned in or in
respect of the
current
fiscal year;
or (iv) any material
violation of any
statute, ordinance
or
regulation
relating to minimum wages or maximum hours of work.
(c) No person or party
(including, but not
limited to
governmental
agencies
of any kind) has
filed, or to the knowledge of Memorial has
threatened to
file, any claim
against Memorial under
or rising out of any
statute,
ordinance or
regulation relating to
discrimination in employment
or employment practices. No person has any material claim under which
Memorial has any
material liability under any health, sickness, disability,
medical,
surgical, hospital, or surgical, hospital, or similar benefit
plan
or arrangement, or by virtue of his or her employment maintained by
Memorial,
or to or by which
Memorial is a party or is bound, or under any
workmen's
compensation or similar law, which is not fully covered,
subject
only to standard
deductibles,
by insurance maintained with reputable,
financially
responsible insurers.
No person has any claim or has filed any
action or has
threatened
to file any action or
bring a claim by virtue of
his or her employment by Memorial including, without limiting the
generality of
the foregoing, sexual
harassment, wrongful
termination, or
other
actions.
3.16 Major
Contracts. Except as
disclosed in Schedule 3.16 of the Memorial
Disclosure Schedule, Memorial is not a
party to or subject to:
(a) Any union contract
or any employment or consulting contract,
agreement or
arrangement providing for future compensation, whether written
or oral,
with any officer,
consultant,
director or employee
that is not
terminable by
Memorial on thirty (30) days' or less notice without penalty
or obligation to
make payments related to such termination;
<PAGE>
(b) Any plan,
contract or arrangement, whether written or oral,
providing for
bonuses, pensions,
deferred compensation,
severance pay or
severance
benefits, retirement payments, profit-sharing payments or
similar
such
payments;
(c) Any joint venture contract, agreement or arrangement or any
other
agreement
that has involved or
is expected to involve a sharing of profits
with another
person or entity;
(d) Any existing marketing, distribution, agency or brokerage
agreement
in which the annual
amount involved in fiscal 2004 exceeded
$5,000 in
aggregate amount or pursuant to which
Memorial has granted or
received most
favored nation
pricing provisions or exclusive marketing
rights related
to any product, group of products or territory;
(e) Any lease for realty or personal property in which the amount
of
payments
that Memorial is required to make on an annual basis exceeds
$1,500;
(f) Any instrument
evidencing or related
in any way to
indebtedness
incurred in the
acquisition of
companies or other entities or indebtedness
for borrowed
money by way of direct loan, sale of debt securities, purchase
money
obligation,
conditional sale,
guarantee, leasehold
obligations or
otherwise;
(g) Any material license agreement, either as licensor or
licensee;
(h) Any contract containing covenants purporting to limit the
freedom
of Memorial to
compete in any line of business in any geographic area;
(i) Any insurance policy or fidelity or surety bond;
(j) Any agreement of
indemnification
relating to Memorial
or any of
its officers,
directors or employees;
(k) Any agreement, contract or commitment relating to capital
expenditures
that involves future payments individually in excess of $1,500
or in the
aggregate in excess of $5,000 by Memorial;
(l) Any agreement, contract or commitment relating to personal
services to be
rendered by any person to Memorial requiring the payment of
more than $1,000
per month or the
disposition or acquisition of any assets
by Memorial;
or
(m) Any other
agreement, contract or
commitment that is
material to
Memorial's
business.
Each agreement,
contract, mortgage, indenture, plan, lease, instrument,
permit, concession, franchise, arrangement, license,
regulations and commitment
listed on the Memorial Disclosure Schedule pursuant to this Section 3.16 is
valid and binding on Memorial, and is in full force and
effect, and neither
Memorial nor to the best knowledge of Memorial, any other party thereto has
breached or is aware of any facts that
would lead it to believe that it has
breached, any provision of, or is in
default
<PAGE>
under the terms of any such agreement, contract, mortgage, indenture, plan,
lease, instrument, permit, concession, franchise, arrangement, license,
regulation or commitment. To the best knowledge of Memorial,
no such agreement,
contract, mortgage, indenture, plan, lease, instrument,
permit, concession,
franchise, arrangement, license or commitment contains any
material liquidated
damages, penalty or similar provision. To the best knowledge of Memorial,
no
party to any such agreement contract, mortgage, indenture, plan, lease,
instrument, permit, registration,
concession, franchise, arrangement, license or
commitment intends to cancel, withdraw,
modify or amend the same.
3.17 Taxes
(a) All tax returns, statements, reports and forms (including, but
not
limited to,
estimated Tax returns
and reports and information returns and
reports)
required to be filed with any Taxing
Authority (as defined in
Section
3.17(h) below) with respect to any Taxable
period ending on or
before the
Closing Date,
by or on behalf of
Memorial
(collectively, the
"Memorial
Returns"),
have been or will be
filed when due
(including any
extensions
of such due
date), and all amounts shown due thereon on or
before the
Closing Date have been or will be paid on
or before such date.
The balance
sheets included in the Memorial Financial Statements (i) fully
accrue all
actual and contingent
liabilities for Taxes with respect to all
periods
through June 30, 2005 and Memorial has not
and will not incur any
Tax liability in
excess of the amount
reflected on the Memorial Financial
Statements
with respect to such periods and (ii) properly accrues in
accordance with
statutory accounting
principles all
liabilities for Taxes
payable
after June 30, 2005
with respect to all
transactions
and events
occurring
on or prior
to such date. All information set forth in the
footnotes to the
Memorial Financial
Statements relating to
Tax matters is
true, complete
and accurate in all material respects.
(b) No material Tax
Liability since June
30, 2005 has been
incurred
other than in
the ordinary course of
business and adequate
provision has
been or will be
made for all Taxes
since that date in accordance with
statutory
accounting principles on at least a quarterly basis. Memorial
has
withheld
and paid to the applicable financial institution or Taxing
Authority
all amounts
required to be
withheld. Neither
Memorial nor any
member of any
affiliated
or combined
group of which
Memorial has been
a
member
has granted any extension or waiver of the limitation period
applicable to
any of the Memorial Returns.
(c) The Shareholders
shall be entitled to receive on a pro rata basis
any tax refund
that Memorial shall
receive from any Taxing Authority with
respect to any
Taxable period ending on or before December 31, 2004.
(d) The Shareholders agree to be liable for paying any premium tax
due
and owing with
respect to Memorial's operations ending on or before October
31, 2005.
Security National and Southern Security agree to be liable
for
paying any
premium tax due and owing with respect to Memorial's operations
beginning as of
October 31, 2005.
(e) There is no material claim, audit, action, suit, proceeding or
investigation
now pending or (to the best knowledge of Memorial) threatened
against or with
respect to Memorial in respect of any Tax or assessment. No
notice of
deficiency
or similar
document of any Tax
Authority has been
received by
Memorial, and there
are no liabilities
for Taxes (including
liabilities for
interest
<PAGE>
additions to tax
and penalties thereof
and related expenses)
with respect
to the issues
that have been raised (and are currently pending) by any Tax
Authority that
could, if determined
adversely to Memorial,
materially and
adversely
affect the
liability of Memorial
for Taxes. There are
no liens
for Taxes
against the assets of Memorial except liens for current Taxes
not
yet due.
Memorial has not been and will not be
required to include any
material
adjustment
in its Taxable
income for any Tax
period (or portion
thereof)
pursuant to the Code
or any comparable
provision under state
or
foreign Tax laws
a
