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UNIT PURCHASE AGREEMENT
dated as of July 16, 2007
by and among
SECURITY NATIONAL FINANCIAL CORPORATION,
C & J FINANCIAL, LLC,
HENRY CULP, JR.,
CULP INDUSTRIES, INCORPORATED
and
THE UNITHOLDER THAT HAS EXECUTED
AGREEMENT BY UNITHOLDER OF
C & J FINANCIAL, LLC
TO SELL UNITS IN UNIT PURCHASE TRANSACTION
IN THE FORM ATTACHED AS ANNEX I
<PAGE>
-1-
TABLE OF CONTENTS
Page
ARTICLE I - PURCHASE AND SALES OF
UNITS......................................1
1.1 Sale and Purchase of the Units
...............................1
1.2 Purchase
Consideration........................................1
1.3 Cancellation of Promissory
Note...............................2
1.4 Lease Agreement with C & J
Financial..........................2
1.5 Delivery of
Units.............................................2
1.6
Adjustments...................................................2
1.7 Noncompetition and Confidentiality
Agreements.................2
1.8 Key Man
Insurance.............................................2
1.9 Loan Agreement with Regions
Bank..............................3
1.10 Transfer of Automobile
Lease..................................3
ARTICLE II - THE
CLOSING.....................................................3
2.1
Closing.......................................................3
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF
C & J FINANCIAL, CULP AND CULP
INDUSTRIES...............................3
3.1 Organization, Good Standing and
Power.........................4
3.2 Capital Structure
............................................4
3.3 Authority
....................................................5
3.4 Distributions, Unit Purchases, Etc.
..........................5
3.5 Financial Statements
.........................................6
3.6 Compliance With Law
..........................................6
3.7 No Defaults
..................................................6
3.8 Litigation
...................................................6
3.9 No Material Adverse Change
...................................7
3.10 Absence of Undisclosed
Liabilities............................8
3.11 Information
Supplied..........................................8
3.12 Certain Agreements
...........................................8
3.13 Plans; Benefits; Employment
Claims............................9
3.14 Major Contracts
..............................................9
3.15 Taxes
.......................................................11
3.16 Interests of Managers and Members
...........................13
3.17 Intellectual Property
.......................................13
3.18 Restrictions on Business Activities
.........................14
3.19 Title to Properties; Absence of Liens and
Encumbrances; Conditions of
Equipment........................14
3.20 Governmental Authorization and
Licenses......................14
3.21 Environmental Matters
.......................................15
3.22 Insurance
...................................................16
3.23 Labor Matters
...............................................16
TABLE OF CONTENTS
(continued)
Page
3.24 Questionable Payments
.......................................16
ARTICLE IV - COVENANTS OF UNITHOLDER
.......................................16
4.1 Unitholder to Sell Units in
Transaction......................16
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF
SECURITY NATIONAL
.................................................16
5.1 Organization, Good Standing and Power
.......................17
5.2 Authority
...................................................17
5.3 Board
Authorization..........................................18
ARTICLE VI - CONDUCT AND TRANSACTIONS PRIOR TO
CLOSING DATE; ADDITIONAL
AGREEMENT................................18
6.1 Conduct of Business of C & J
Financial.......................18
ARTICLE VII - CONDITIONS PRECEDENT
.........................................22
7.1 Conditions to Each Party's Obligation to
Effect This Transaction
.....................................22
7.2 Conditions to Obligations of C & J
Financial.................22
7.3 Conditions to Obligations of Security National
and
Shareholders.............................................24
ARTICLE VIII - TERMINATION
.................................................25
8.1 Termination
................................................25
ARTICLE IX - INDEMNIFICATION
...............................................25
9.1 Obligation of Unitholders to Indemnify
.....................25
9.2 Notice and Opportunity to Defend
...........................26
ARTICLE X - GENERAL PROVISIONS
.............................................27
10.1 Survival of Representations, Warranties,
Covenants and
Agreements....................................27
10.2 Amendment
..................................................27
10.3 Extension; Waiver
..........................................27
<PAGE>
TABLE OF CONTENTS
(continued)
Page
10.4 Notices
....................................................28
10.5 Interpretation
.............................................29
10.6 Counterparts
...............................................29
10.7 Entire Agreement
...........................................29
10.8 No Transfer
................................................29
10.9 Severability
...............................................29
10.10 Other Remedies
.............................................29
10.11 Further Assurances
.........................................29
10.12 No Third Party Beneficiary Rights
..........................30
10.13 Mutual Drafting
............................................30
10.14 Governing Law
..............................................30
10.15 Expenses
...................................................30
10.16 Brokers or Finders
.........................................30
10.17 Public Announcements
.......................................30
10.18 Confidentiality
............................................30
10.19 Attorney's
Fees.............................................31
EXHIBITS
Exhibit 1 C & J Financial Disclosure Schedule
<PAGE>
UNIT PURCHASE AGREEMENT
THIS UNIT PURCHASE AGREEMENT (the "Agreement") is dated
effective as of
July 16, 2007, and entered into by and among SECURITY NATIONAL
FINANCIAL
CORPORATION, a Utah corporation ("Security National"), C & J
FINANCIAL, LLC, an
Alabama limited liability company ("C & J Financial"), HENRY
CULP, JR. ("Culp"),
CULP INDUSTRIES, INCORPORATED, an Alabama corporation ("Culp
Industries") and
the unitholders of C & J Financial that have executed the
AGREEMENT BY
UNITHOLDERS OF C & J FINANCIAL TO SELL UNITS IN UNIT
PURCHASE TRANSACTION in the
form attached as Annex I (the "Unitholders").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements
contained herein, Security National, C & J Financial, Culp,
Culp Industries and
the Unitholders hereby agree as follows:
ARTICLE IPURCHASE AND SALE OF UNITS
1.1 Sale and Purchase of the Units. At the Closing, as
hereinafter defined,
upon and subject to the terms and conditions set forth in this
Agreement, the
Unitholders shall sell, transfer, assign and deliver to Security
National, and
Security National shall purchase from the Unitholders, Sixty-six
and Two Thirds
(66-2/3) units of C & J Financial (the "C & J Financial
Units"), representing
all of the issued and outstanding units owned by the
Unitholders, free and clear
of all liens, claims, options, proxies, voting agreements,
charges and
encumbrances.
1.2 Purchase Consideration. Subject to the terms and conditions
of this
Agreement, including cancellation of the Culp Promissory Note as
described in
Section 1.3 of this Agreement, in reliance upon representations,
warranties,
agreements and covenants of C & J Financial, Culp and Culp
Industries contained
herein, and in consideration of the sale, transfer, assignment
and delivery of
the C & J Financial Units as herein provided, Security
National agrees to
provide the following purchase consideration (the "Purchase
Consideration") at
the Closing Date as defined in Section 1.5 below: (a) Cash in
U.S. dollars by
certified funds or wire transfer in the amount of One Million
Two Hundred Fifty
Thousand Dollars ($1,250,000) payable to Culp; (b) A quit claim
deed from C & J
Financial conveying and quitclaiming to Culp all rights, title
and interest in
or to that certain building and surrounding property located in
the Jester
Commercial Park at 170 Jester Parkway, Rainbow City, Alabama
(the "Jester
Building"); and (c) A promissory note (the "Culp Promissory
Note") in the amount
of Three Hundred Eighty-one Thousand Five Hundred Dollars
($381,500) plus
interest at the rate of 5% per annum from Security National to
Culp, as payee,
payable over a period of twenty-four (24) months in monthly
payments of
$16,736.94 per month, including interest, until paid in
full.
<PAGE>
1.3 Cancellation of Promissory Note. Culp agrees to deliver to
Security
National at the Closing Date as defined in Section 1.5 below
that certain
promissory note dated June 27, 2007 (the "Note") in the
principal amount of One
Million Seven Hundred Fifty-five Thousand Two Hundred Thirty-six
and Forty-three
Hundredths Dollars ($1,755,236.43) plus interest at the rate of
8.25% per annum
from C & J Financial, as borrower, to Culp, as lender, with
such Note to be
cancelled and marked on its face "paid in full" in consideration
and in exchange
for the Purchase Consideration provided to Culp as described in
Section 1.2
above. Culp additionally acknowledges and represents that as of
the Closing Date
there are no outstanding obligations or debts owed by C & J
Financial to Culp
other than the Note which is to be cancelled pursuant to this
Section 1.3.
1.4 Lease Agreement with C & J Financial. Culp Industries
agrees to enter
into a lease agreement with C & J Financial at the Closing
Date as defined in
Section 1.5 below to lease to C & J Financial for a term of
three years
beginning on July 16, 2007 and ending on July 16, 2010
approximately 5,000
square feet designated in the buildings located in Jester
Commercial Park at 173
and 175 Jester Parkway, Rainbow City, Alabama, for which C &
J Financial, as
tenant, shall pay to Culp Industries, as landlord, monthly
installments of
Twelve Hundred Dollars ($1,200) payable in advance on the first
day of each
month, for a total lease payment of Forty Three Thousand Two
Hundred Dollars
($43,200).
1.5 Delivery of Units. At the Closing Date, the Unitholders
shall each
deliver to Security National certificates with power executed in
blank
representing the outstanding units of C & J Financial Units
required by Section
1.2 hereof.
1.6 Adjustments. If the amount of the total equity on the
balance sheet as
of May 31, 2007 of C & J Financial, as defined as total
assets minus total
liabilities, is greater than the amount of the total equity on
the balance sheet
as of the Closing Date of C & J Financial, Culp agrees to
pay to Security
National the difference between the total equity on the balance
sheet as of May
31, 2007 and the total equity on the balance sheet as of the
Closing Date by
reducing the amount of the Culp Promissory Note payable by
Security National to
Culp as described in Section 1.2(d) above by such difference in
the amounts of
the total equity on such balance sheets. If the amount of the
total equity on
the balance sheet as of May 31, 2007 of C & J Financial is
less than the amount
of the total equity on the balance sheet as of the Closing Date
of C & J
Financial, Security National agrees to pay to Culp the
difference between the
total equity on the balance sheet as of May 31, 2007 and the
total equity on the
balance sheet as of the Closing Date by increasing the amount of
the Culp
Promissory Note payable by Security National to Culp by such
difference in the
amounts of the total equity on such balance sheets.
1.7 Noncompetition and Confidentiality Agreements. At the
Closing Date, the
Unitholders shall each deliver to Security National
Noncompetition and
Confidentiality Agreements requiring the Unitholders not to
compete with C & J
Financial for a period of five (5) years from the Closing Date
and such
agreements shall also contain standard provisions concerning
confidentiality and
non-solicitation with respect to C & J Financial.
<PAGE>
1.8 Key Man Insurance. Culp shall be entitled to the assignment
of the key
man insurance policy in his name for the benefit of C & J
Financial, including
the rights to the cash value of the policy and the right to
change the name of
the beneficiary of the policy to someone other than C & J
Financial, provided
that Culp pay to C & J Financial the cash value of the
policy and agree to be
responsible for the payment of any premiums owed under the
policy.
1.9 Loan Agreement with Regions Bank. Security National, C &
J Financial,
Culp and Culp Industries acknowledge the existence of a business
loan agreement
with Regions Bank, as lender, and Culp Industries, as borrower,
which provides
for a line of credit for C & J Financial. The outstanding
balance on the line of
credit on July 16, 2007 is $1,971,763.59. The line of credit is
secured by,
among other assets, the accounts receivable of C & J
Financial and is personal
guaranteed by Culp. Security National has received written
confirmation that
Regions Bank will not authorize any further advances or sweeps
with respect to
the line of credit. C & J Financial, Culp and Culp
Industries each represent and
warrant that it or he, and any of its respective employees,
representatives, or
agents, will take no action to cause further advances or sweeps
to be made on
the line of credit. Security National agrees that it will pay
off the
outstanding balance on the line of credit with Regions Bank
relating to the
business of C & J Financial. Security National will
initially attempt to pay off
the line of credit by means of applying the payments on the
accounts receivable
of C & J Financial as such payments are made in the ordinary
course of business.
1.10 Transfer of Automobile Lease. Security National agrees to
transfer to
Culp the lease on the 2007 Toyota Camry for the exclusive use by
Culp. Culp
agrees to assume the lease payments on the automobile as well as
costs of
insurance and maintenance of the vehicle. ARTICLE IITHE CLOSING
2.1 Closing. The
closing of the transaction (the "Closing") shall take place at
the offices of C
& J Financial, 175 Jester Parkway, Rainbow City, Alabama,
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
July 16, 2007, unless this date is extended as provided herein
(the "Closing
Date").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF C & J FINANCIAL,CULP AND
CULP INDUSTRIES
Except as disclosed in a document to be prepared by C & J
Financial, Culp
and Culp Industries and delivered to Security National prior to
the Closing Date
(the "C & J Financial 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 C & J Financial to Security National
and approved by
Security National by execution of this Agreement, C & J
Financial, Culp and Culp
Industries represent and warrant to Security National as set
forth below, and
such representations and warranties shall be true and correct as
of the date
thereof 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 business entity or group of
business 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 capital structure representation set forth in Section 3.2
below and (y) any
material liability not reflected on the May 31, 2007 Unaudited
Financial
Statement (as defined in Section 3.5 below).
3.1 Organization, Good Standing and Power . C & J Financial
is a limited
liability company, duly organized, validly existing and in good
standing under
the laws of its state of Alabama 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 C & J Financial
Disclosure Schedule
contains a true and correct listing of all states in which C
& J Financial is
registered, licensed and authorized to engage in business. C
& J Financial 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. C & J
Financial is in good standing under all such registrations and
licenses. C & J
Financial is duly qualified as a foreign limited liability
company 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 C & J
Financial Disclosure Schedule also sets forth a true and
complete list of the
states where C & J Financial is qualified as a foreign
limited liability
company. C & J Financial has no other direct or indirect
equity interest in or
loans to any partnership, corporation, joint venture, business
association or
other entity. C & J Financial has delivered to Security
National complete and
correct copies of its Articles of Organization and Operating
Agreement, in each
case as amended to the date hereof, and has delivered or made
available minutes
of all of C & J Financial's members' meetings, and unit
certificate books
correctly setting forth the record ownership of all outstanding
units of C & J
Financial Units.
3.2 Capital Structure .
(a) There are 66-2/3rds units issued and outstanding, all of
which are
owned by the Unitholders and there are 33-1/3rd units previously
issued but
subsequently surrendered to C & J Financial. Except as
disclosed on
Schedule 3.2 of the C & J Financial Disclosure Schedule,
there are no other
debt, equity or hybrid debt or equity interests or securities of
C & J
Financial issued and outstanding.
(b) All outstanding units of C & J Financial and other C
& J Financial
securities, if any, are validly issued, fully paid and
non-assessable and,
except as disclosed on the C & J Financial Disclosure
Schedule, are not
subject to any liens, claims, encumbrances or charges of any
kind or nature
or any preemptive rights created by statute, C & J
Financial's Articles of
Organization or Operating Agreement or any other agreement to
which C & J
Financial is a party or by which C & J Financial may be
bound. There are no
options, warrants, calls, conversion rights, commitments or
agreements of
any character to which C & J Financial is a party or by
which C & J
Financial may be bound that do or may obligate C & J
Financial 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 C & J Financial units.
<PAGE>
3.3 Authority .
---------
(a) C & J Financial has all requisite 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 C
& J Financial 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 action on the part
of C & J
Financial, including approval by its Manager, Members and
Unitholders. This
Agreement shall constitute legal, valid and binding obligations
of C & J
Financial enforceable against C & J Financial 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 therefor
may be brought.
(b) To the best knowledge of C & J Financial, 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 C & J
Financial 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 C & J
Financial pursuant
to (i) any provision of the Articles of Organization or
Operating Agreement
of C & J Financial or (ii) any material agreement, contract,
note,
mortgage, indenture, lease instrument, permit, concession,
franchise,
registration or license to which C & J Financial is a party
or by which C &
J Financial or any of its properties or assets may be bound or
affected.
(c) To the best knowledge of C & J Financial, 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
C & J Financial in connection with the execution and
delivery of this
Agreement and by C & J Financial or the consummation by C
& J Financial of
the transactions contemplated hereby or thereby, except for (i)
filing
required documents with the relevant authorities of states in
which C & J
Financial is qualified to do business, (ii) 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
C & J Financial. All approvals of C & J Financial's
Manager, Members and
Unitholders 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 Distributions, Unit Purchases, Etc. Since May 31, 2007, C
& J Financial
has not (i) declared or paid any distributions (either in cash,
property or its
units of any class) upon, or made or become committed to make
any distribution
with respect to, or purchased, redeemed or otherwise
beneficially acquired any
of its outstanding units of any class, or become committed so to
do; (ii) split
up, combined or reclassified any of its outstanding units of any
class, or
become committed so to do; or (iii) issued or become committed
to issue any
additional units of any class 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 units of
any class or
any other security or debt of C & J Financial.
3.5 Financial Statements . C & J Financial has furnished or
made available
to Security National prior to the Closing Date of this
Agreement, C & J
Financial's unaudited financial statement for the period ended
May 31, 2007,
including balance sheets and the related statements of income
and equity (the
"May 31, 2007 Unaudited Financial Statement"). The May 31, 2007
Unaudited
Financial Statement is listed in Schedule 3.5 of the C & J
Financial Disclosure
Schedule. The May 31, 2007 Unaudited Financial Statement has
been prepared in
accordance with generally accepted accounting principles (GAAP)
consistently
applied and fairly present the financial position of C & J
Financial as at the
date thereof and the results of its operations for the period
then ended. There
has been no change in C & J Financial's accounting
policies.
3.6 Compliance With Law . To the best knowledge of C & J
Financial, C & J
Financial is in compliance with and has conducted its business
so as to comply
with all laws, rules, regulations, judgments, decrees or orders
of any
Governmental Entity applicable to its 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 C & J Financial. There are no material
judgments, orders,
injunctions, decrees, stipulations or awards (whether rendered
by a court or
administrative agency or by arbitration) against C & J
Financial or against any
of its properties or businesses. Schedule 3.6 of the C & J
Financial 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.
3.7 No Defaults . To the best knowledge of C & J Financial,
C & J Financial
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 Organization or Operating Agreement or (b) in
default or violation
of any term, condition or provision of (i) any judgment, decree,
order,
injunction or stipulation applicable to C & J Financial or
(ii) any agreement,
note, mortgage, indenture, contract, lease, instrument, permit,
registration,
concession, franchise or license to which C & J Financial is
a party or by which
C & J Financial 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 C & J Financial.
3.8 Litigation . There is no action, suit, proceeding, claim,
arbitration
or investigation pending or, to the best knowledge of C & J
Financial,
threatened, against C & J Financial that, individually or in
the aggregate,
could be reasonably expected to have a material adverse effect
on the Business
Condition of C & J Financial, or which in any manner
challenges or seeks to
prevent, enjoin, alter or materially delay any of the
transactions contemplated
hereby. Schedule 3.8 of the C & J Financial Disclosure
Schedule sets forth with
respect to each pending action, suit, proceeding, claim,
arbitration or
investigation to which C & J Financial is a party, the
forum, the parties
thereto, a brief description of the subject matter thereof and
the amount of
damages claimed. C & J Financial is not aware of any
reasonable basis for any
other such action, suit, proceeding, claim, arbitration or
investigation. C & J
Financial has delivered or made available to Security National
correct and
complete copies of all correspondence prepared by its counsel
for C & J
Financial's independent public accountants in connection with
any audits or
reviews completed by C & J Financial's independent public
accountants.
3.9 No Material Adverse Change . Since May 31, 2007, C & J
Financial has
conducted its business in the ordinary course and there has not
occurred:
(a) Any material adverse change in the Business Condition of C
& J
Financial;
(b) Any amendments or changes in the Articles of Organization
or
Operating Agreement of C & J Financial;
(c) Any damage, destruction or loss, whether covered by
insurance or
not, materially and adversely affecting any of the properties or
businesses
of C & J Financial;
(d) Any issuance, redemption, repurchase or other acquisition of
the
units of C & J Financial or any declaration, setting aside
payment of any
dividend or other distribution (whether in cash, units or
property) with
respect to the units of C & J Financial;
(e) Any increase in or modification of the compensation or
benefits
payable or to become payable by C & J Financial to any of
its managers,
members 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 options or unit
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 C & J Financial
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 C
& J
Financial;
(i) Any (a) incurrence, assumption or guarantee by C & J
Financial of
any debt for borrowed money; (b) issuance or sale of any
securities
convertible into or exchangeable for debt securities of C &
J Financial;
(c) issuance or sale of options or other rights to acquire from
C & J
Financial, 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 C & J Financial 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 C & J Financial 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 C & J Financial 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 C & J
Financial
Intellectual Property Rights (as defined in Section 3.17 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 C & J Financial;
(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 C & J Financial knows,
might reasonably
be expected to materially and adversely affect) the Business
Condition of C
& J Financial; or
(p) Any agreement or arrangement made by C & J Financial 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.
3.10 Absence of Undisclosed Liabilities . Except as disclosed in
Schedule
3.10 of the C & J Financial Disclosure Schedule or as
reflected in the May 31,
2007 Unaudited Financial Statement and except for liabilities
and obligations
arising after May 31, 2007, 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 C & J Financial, C &
J Financial has no
liabilities or obligations (whether absolute, accrued or
contingent, and whether
or not determined or determinable) of a character that, under
GAAP, should be
accrued, shown or disclosed on an unaudited balance sheet of C
& J Financial.
3.11 Information Supplied . None of the information supplied or
to be
supplied by C & J Financial 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.
3.12 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 manager, member or employee of C & J
Financial under any
Plan (as defined in Section 3.13 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.
3.13 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
C & J
Financial are listed in Schedule 3.13 of the C & J Financial
Disclosure
Schedule (individually, a "Plan" and, collectively, the
"Plans"). To the
extent applicable, the Plans comply with the requirements of the
Employee
Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code,
and any Plan intended to be qualified under Section 401(a) of
the Code has
either obtained a favorable determination letter as to its
qualified status
from the Internal Revenue Service (the "IRS") or still has a
remaining
period of time under applicable Treasury Regulations or IRS
pronouncements
in which to apply for such a determination letter and to make
any
amendments necessary to obtain a favorable determination. To the
extent any
Plan with an existing determination letter from the IRS must be
amended to
comply with the applicable requirement of the Tax Reform Act of
1986, as
amended, and subsequent legislation, the time period for
effecting such
amendments will not expire prior to this transaction. C & J
Financial has
furnished or made available to Security National 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
C & J
Financial nor any officer or director of C & J Financial 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 C & J Financial,
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 described in Schedule 3.13 attached hereto, no
present
or former employee of C & J Financial has any claim against
C & J Financial
(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 C &
J Financial has
threatened to file, any claim against C & J Financial 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 C & J Financial 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 C & J Financial, or to or by which
C & J Financial
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 C
& J
Financial including, without limiting the generality of the
foregoing,
sexual harassment, wrongful termination, or other actions.
3.14 Major Contracts . Except as disclosed in Schedule 3.14 of
the C & J
Financial Disclosure Schedule, C & J Financial 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 C & J Financial on thirty (30) days' or less
notice without
penalty or obligation to make payments related to such
termination;
(b) Any plan, contract or arrangement, whether written or
oral,
providing for bonuses, pensions, deferred compensation,
severance pay or
severance benefits, retirement payments, profit-sharing payments
or similar
such payments;
(c) Any joint venture contract, agreement or arrangement or any
other
agreement that has involved or is expected to involve a sharing
of profits
with another person or entity;
(d) Any existing marketing, distribution, agency or
brokerage
agreement in which the annual amount involved in fiscal 2007
exceeded
$5,000 in aggregate amount or pursuant to which C & J
Financial 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 C & J Financial 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 C & J Financial 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 C & J
Financial or
any of its managers, members 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 C & J
Financial;
(l) Any agreement, contract or commitment relating to
personal
services to be rendered by any person to C & J Financial
requiring the
payment of more than $1,000 per month or the disposition or
acquisition of
any assets by C & J Financial; or
(m) Any other agreement, contract or commitment that is material
to C
& J Financial's business.
Each agreement, contract, mortgage, indenture, plan, lease,
instrument,
permit, concession, franchise, arrangement, license, regulations
and commitment
listed on the C & J Financial Disclosure Schedule pursuant
to this Section 3.14
is valid and binding on C & J Financial, and is in full
force and effect, and
neither C & J Financial nor, to the best knowledge of C
& J Financial, any other
party thereto has breached or is aware of any facts that would
lead it to
believe that it has breached, any provision of, or is in default
under the terms
of any such agreement, contract, mortgage, indenture, plan,
lease, instrument,
permit, concession, franchise, arrangement, license, regulation
or commitment.
To the best knowledge of C & J Financial, 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 C & J Financial,
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.
3.15 Taxes
(a) For all periods since its organization, C & J Financial
has been
recognized by all Taxing Authorities as a partnership and not as
a
corporation or other entity, and 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 3.15(f) below) with respect to
any Taxable
period ending on or before the Closing Date, by or on behalf of
C & J
Financial (collectively, the "C & J Financial 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 May 31,
2007 Unaudited Financial Statement (i) fully accrues all actual
and
contingent liabilities for Taxes with respect to all periods
through May
31, 2007 and C & J Financial has not and will not incur any
Tax liability
in excess of the amount reflected on the May 31, 2007 Unaudited
Financial
Statement with respect to such periods and (ii) properly accrues
in
accordance with GAAP all liabilities for Taxes payable after May
31, 2007
with respect to all transactions and events occurring on or
prior to such
date.
(b) No material Tax liability since May 31, 2007 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 GAAP
on at least a quarterly basis. C & J Financial has withheld
and paid to the
applicable Taxing Authority all amounts required to be withheld.
Neither C
& J Financial nor any member of any affiliated or combined
group of which C
& J Financial has been a member has granted any extension or
waiver of the
limitation period applicable to any of the C & J Financial
Returns.
(c) The Unitholders agree to be jointly and severally liable
for
paying any premium tax due and owing with respect to C & J
Financial's
operations ending on or before the Closing Date. Security
National agrees
to be liable for paying any premium tax due and owing with
respect to C & J
Financial's operations beginning after the Closing Date.
<PAGE>
(d) There is no material claim, audit, action, suit, proceeding
or
investigation now pending or (to the best knowledge of C & J
Financial)
threatened against or with respect to C & J Financial in
respect of any Tax
or assessment. No notice of deficiency or similar document of
any Tax
Authority has been received by C & J Financial, and there
are no
liabilities for Taxes (including liabilities for interest
additions to tax
and penalties thereof and related expenses) with respect to the
issues that
have been raised (and are currently pending) by any Tax
Authority that
could, if determined adversely to C & J Financial,
materially and adversely
affect the liability of C & J Financial for Taxes. There are
no liens for
Taxes against the assets of C & J Financial except liens for
current Taxes
not yet due. C & J Financial has not been and will not be
required to
include any material adjustment in its Taxable income for any
Tax period
(or portion thereof) pursuant to the Code or any comparable
provision under
state or foreign Tax laws as a result of transactions, events or
accounting
methods employed prior to the Closing.
(e) There is no contract, agreement, plan or arrangement,
including,
but not limited to, the provisions of this Agreement, covering
any employee
or independent contractor or former employee or independent
contract of C &
J Financial that, individually or collectively, could give rise
to the
payment of any amount that would not be deductible pursuant to
the Code.
Other than pursuant to this Agreement, C & J Financial is
not a party to or
bound by (nor will it, prior to the Closing Date, become a party
to or
become bound by) any tax indemnity, tax sharing or tax
allocation agreement
(whether written, oral or arising under operation of federal law
as a
result of C & J Financial being a member of a group filing
consolidated tax
returns, under operation of certain state law as a result of C
& J
Financial being a member of a group filing consolidated tax
returns, under
operation of certain state laws as a result of C & J
Financial being a
member of a unitary group or under comparable laws of other
states or
foreign jurisdictions) that includes a party other than C &
J Financial. C
& J Financial has listed in Schedule 3.15 of the C & J
Financial Disclosure
Schedule all of C & J Financial's material federal and state
tax returns
for years ending December 31, 2006 and 2005, information
statements,
reports work papers, Tax opinions, Tax memoranda and other Tax
data and
documents of C & J Financial that C & J Financial
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