SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT (the "Agreement") is made and entered into
effective as of December 31, 1999, by and among CAPITOL INDEMNITY CORPORATION, a
Wisconsin corporation ("Capitol Indemnity"), GEORGE A. FAIT ("George Fait"),
President of Capitol Indemnity, JOEL G. FAIT ("Joel Fait"), an officer of
Capitol Indemnity, SECURITY NATIONAL FINANCIAL CORPORATION, a Utah Corporation
("Security National"), SECURITY NATIONAL LIFE INSURANCE COMPANY, a Utah
corporation and a wholly-owned subsidiary of Security National, SOUTHERN
SECURITY LIFE INSURANCE COMPANY, a Florida corporation ("Southern Security") and
SSLIC HOLDING COMPANY, a Florida corporation, formerly known as CONSOLIDARE
ENTERPRISES, INC. ("Consolidare").
WITNESSETH:
WHEREAS, Capitol Indemnity, George Fait and Joel Fait are currently
shareholders of Southern Security, with Capitol Indemnity the owner of 151,871
shares of common stock ("Common Stock") of Southern Security, George Fait the
owner of 33,000 shares of Common Stock of Southern Security, and Joel Fait the
owner of 2,000 shares of Common Stock of Southern Security (hereinafter
collectively referred to as the "Shares");
WHEREAS, on November 4, 1998, Capitol Indemnity and the State of Idaho,
Department of Insurance, as Rehabilitator for Universe Life Insurance Company,
an Idaho corporation, instituted an action against Consolidare and George
Pihakis, Samuel P. Brewer, Stephen Reck, A. Thomas Frank, Frank A. Hulet, C.
Wesley Johnston, Lewis E. Kassis, Robert L. Martin, Charles W. Mullenix, Ferris
S. Ritchey, Jr., John M. Roehm, David C. Thompson, Nikki Clark and Lloyd Zobrist
(collectively, the "Individual Defendants"), that action being styled and
denominated as Capitol Indemnity Corp., et al. v. Consolidare Enterprises, Inc.,
et al., Case No. 98-2286-CA-16-K, pending in the Circuit Court of the Eighteenth
Judicial Circuit, Seminole County Florida;
WHEREAS, on December 17, 1998, Security National through its wholly-owned
subsidiary, Security National Life Insurance Company, acquired all of the
outstanding shares of common stock of Consolidare, which owned at closing
approximately 57.4% of the outstanding shares of Common Stock of Southern
Security;
WHEREAS, Consolidare desires to purchase all of the Shares owned by Capitol
Indemnity, George Fait and Joel Fait at an agreed upon price of $8.50 per share,
provided that Capitol Indemnity dismiss its claims with prejudice in the
above-entitled action against Consolidare and the Individual Defendants;
WHEREAS, Capitol Indemnity, George Fait and Joel Fait desire to sell their
shares of Common Stock of Southern Security to Consolidare at an agreed upon
price of $8.50 per share and, as a condition to such sale of stock, Capitol
Indemnity agrees to dismiss its claims with prejudice in the above-referenced
action against Consolidare;
WHEREAS, Security National, Security National Life Insurance Company and
Southern Security will guarantee the payments by Consolidare for the purchase of
the Shares; and
WHEREAS, the parties to this Agreement, in order to reduce the expense and
inconvenience incident to further litigation, now desire to settle the
above-entitled civil action on condition that Consolidare purchase all of the
Shares of Common Stock of Southern Security collectively owned by Capitol
Indemnity, George Fait and Joel Fait, that Security National, Security National
Life Insurance Company and Southern Security guarantee payment by Consolidare
for the purchase of the Shares, and that Southern Security pay the sum of
$5,000.00 to Capitol Indemnity and that Security National, Southern Security and
Consolidare assign their rights to Capitol Indemnity to receive a $35,000
contribution from National Union Fire Insurance Company of Pittsburgh,
Pennsylvania in settlement of the claims asserted against the Individual
Defendants.
NOW, THEREFORE, in consideration of the mutual covenants and conditions set
forth herein, and other good and valuable consideration, the receipt and
adequacy of which each party does hereby acknowledge, the parties hereto agree
as follows:
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1. Capitol Indemnity hereby agrees to dismiss its claims with prejudice in
the above-entitled action against Consolidare and the Individual Defendants and
hereby authorizes Foley & Lardner, its counsel of record, to sign on its behalf,
immediately upon the execution of this Agreement, the Stipulation and Joint
Motion for Dismissal with Prejudice, a copy of which is attached hereto as
Exhibit A, and to arrange for the filing of said Stipulation with the court.
2. Capitol Indemnity agrees to sell, transfer and deliver to Consolidare
and Consolidare agrees to purchase from Capitol Indemnity 151,871 shares of
Common Stock of Southern Security. These shares of Common Stock shall be sold
and delivered to Consolidare upon the execution of this Agreement in
consideration for Consolidare making payments to Capitol Indemnity in the
principal amount of $1,290,903.50, payable as follows: (a) the sum of
$645,451.75 to be paid in certified funds upon execution of this Agreement; and
(b) five annual payments, beginning one year from the effective date of this
Agreement, each payment in the principal amount of $129,090.35 plus interest on
the unpaid principal balance at a rate of 6-1/2% per annum until the principal
and accrued interest thereon have been paid in full.
3. George Fait agrees to sell, transfer and deliver to Consolidare and
Consolidare agrees to purchase from George Fait 33,000 shares of Common Stock of
Southern Security. These shares of Common Stock shall be sold and delivered to
Consolidare upon execution of this Agreement in consideration for Consolidare
making payments to George Fait in the principal amount of $280,500.00, payable
as follows: (a) the sum of $140,250.00 to be paid in certified funds upon
execution of this Agreement; and (b) five annual payments, beginning one year
from the effective date of this Agreement, each payment in the principal amount
of $28,050.00 plus interest on the unpaid principal balance at a rate of 6-1/2%
per annum until the principal and accrued interest thereon have been paid in
full.
4. Joel Fait agrees to sell, transfer and deliver to Consolidare and
Consolidare agrees to purchase from Joel Fait 2,000 shares of Common Stock of
Southern Security. These shares of Common Stock shall be sold and delivered to
Consolidare upon execution of this Agreement in consideration for Consolidare
making payments to Joel Fait in the principal amount of $17,000.00, payable as
follows: (a) the sum of $8,500.00 to be paid in certified funds upon execution
of this Agreement; and (b) five annual payments, beginning one year from the
effective date of this Agreement, each payment in the principal amount of
$1,700.00 plus interest on the unpaid principal balance at a rate of 6-1/2% per
annum until the principal and accrued interest thereon have been paid in full.
5. Consolidare shall execute and deliver to Capitol Indemnity, George Fait
and Joel Fait upon execution of this Agreement promissory notes (the "Notes")
bearing interest at a rate of 6-12% per annum, which shall provide for the
payments required to be made by Consolidare pursuant to paragraphs 2 through 4
of this Agreement.
6. Security National, Security National Life Insurance Company and Southern
Security shall execute and deliver Guarantees to Capitol Indemnity, George Fait
and Joel Fait upon execution of this Agreement, which shall guarantee payment of
the Notes.
7. Consolidare may at any time prepay any balance owed on any of the Notes
to be issued to Capitol Indemnity, George Fait or Joel Fait hereunder without
premium or penalty by paying the principal balance owed on any such Notes plus
the interest thereon at a rate of 6-1/2% per annum to the date of such payment.
8. Security National agrees upon execution of this Agreement to pay the sum
of $5,000.00 to Capitol Indemnity on behalf of the Individual Defendants in full
settlement of all claims asserted by Capital Indemnity against the Individual
Defendants in the above-entitled civil action. Security National, Southern
Security and Consolidare also agree to assign to Capitol Indemnity their rights
to the $35,000.00 contribution that National Fire Insurance Company of
Pittsburgh, Pennsylvania is prepared to make in settlement of the
above-referenced action against the Individual Defendants as set forth in the
letter of March 2, 2000 from Laurie Beatus of D'Amato & Lynch to Don B. Long,
Jr. of Johnston, Barton, Proctor & Powell, LLP, a copy of which is attached
hereto as Exhibit "B" and by this reference made a part hereof.
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9. Capitol Indemnity, George Fait and Joel Fait, singly and jointly, hereby
release, indemnify, and hold harmless Consolidare, and the Individual Defendants
from and against any and all claims, suits, actions of any kind, whether legal,
administrative or other proceedings brought or initiated by Capitol Indemnity,
George Fait or Joel Fait relating to or in any way rising out of the acquisition
of Consolidare by Security National and Security National Life Insurance
Company.
10. Capitol Indemnity, George Fait and Joel Fait, singly and jointly,
hereby release, indemnify, and hold harmless Consolidare, Southern Security,
Security National, Security National Life Insurance Company and the Individual
Defendants from and against any and all claims, suits, actions of any kind,
whether legal, administrative or other proceedings brought or initiated by
Capitol Indemnity, George Fait or Joel Fait against Consolidare, Southern
Security, Security National or Security National Life Insurance Company or any
of their present or past directors, officers or employees, including the
Individual Defendants, relating to or in any way arising out of the conduct of
the business and affairs of Consolidare, Southern Security, Security National or
Security National Life Insurance Company by any of their respective directors,
officers or employees prior to the date of this Agreement.
11. Security National, Security National Life Insurance Company, Southern
Security, and Consolidare singly and jointly, hereby release, indeminfy and hold
harmless Capital Indemnity, George Fait and Joel Fait from and against any and
all claims, suits, actions of any kind, whether legal, administrative or other
proceedings brought or initiated by Security National, Security National Life
Insurance Company, Southern Security or Consolidare against Capitol Indemnity,
George Fait or Joel Fait relating to or in any way arising out of the conduct of
the business and affairs of Consolidare, Southern Security or Capital Indemnity
by any of their respective directors, officers or employees prior to the date of
this Agreement.
12. Each of the parties to this Agreement (referred to herein as a
"Representing Party") hereby represents and warrants to the other parties
(referred to herein as the "Other Parties") that;
(a) Such Representing Party has all requisite authority to
execute and deliver this Agreement and to carry out and comply
with the terms hereof;
(b) This Agreement constitutes a legal and binding obligation of
the Representing Party, enforceable in accordance with its terms;
(c) Neither the execution and delivery by the Representing Party
of this Agreement, nor the consummation of the transactions
contemplated hereby, conflicts with or results in a breach of any
of the terms, conditions or provisions of any agreement or
instrument to which the Representing Party is a party or by which
the Representing Party is otherwise bound, or constitutes a
default under any such agreement or instrument;
(d) Each of the Parties acknowledge that they have received the
benefit of separate independent legal counsel in connection with
the negotiation and settlement of the matters relating to and
which are the subject matter of this Agreement. Capital Indemnity
Corp., George Fait and Joel Fait have been represented by the
firm of Foley & Lardner of Tallahassee, Florida, and Security
National, Security National Life Insurance Company and Southern
Security have been represented by the firm of Mackey Price &
Williams of Salt Lake City, Utah; and
(e) The representations and warranties made herein shall survive
the parties' execution and delivery of this Agreement.
13. The Agreement and undertakings contained in this Agreement have been
entered into and made by the parties solely for the purpose of completely
settling and compromising claims which Capital Indemnity has asserted against
Consolidare and the Individual Defendants in the above-entitled action, any
liability with respect to any such claims being specifically denied by
Consolidare and the Individual Defendants named in the action.
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14. The parties to this Agreement shall hold in strict confidence the terms
and conditions of this Agreement and shall not use any data or information with
respect to this Agreement to the detriment of any other parties, provided that
the parties hereto shall be entitled to disclose such terms and conditions as
may be required by law or a court of law or equity.
15. The Representing Parties will not, by words or actions, do anything or
issue any statements, either orally or in writing, that would tend to or would
disparage or defame the Other Parties or their reputations.
16. Capital Indemnity, George Fait and Joel Fait each hereby represent and
warrant to Security National, Security National Life Insurance Company, Southern
Security and Consolidare in connection with its purchase of the Shares of Common
Stock of Southern Security that each of them has sufficient investment
experience to enable them to evaluate the merits and risks of selling their
Shares of Common Stock of Southern Security to Consolidare. Capital Indemnity,
George Fait, and Joel Fait have conducted all of the due diligence of Southern
Security, its officers, directors, shareholders, markets and prospects which
they have deemed necessary in evaluating whether to sell their Shares to
Consolidare.
17. (a) The covenants and agreements contained herein shall be binding upon
and inure to the benefit of the successors and assigns of the respective parties
hereto;
(b) The invalidity or unenforceability of any particular provision in
this Agreement shall not affect the other provisions hereof, and this
Agreement shall be construed in all respects as if such invalid or
unenforceable provisions were omitted;
(c) This Agreement sets forth the entire understanding among the
parties and shall not be amended or terminated except by a written
instrument duly executed by all the parties hereto;
(d) This Agreement shall be interpreted, construed and enforced in
accordance with and governed by the substantive laws of the state of
Utah.
(e) In the event any dispute or contest shall arise hereunder or any
party shall breach or fail to perform or discharge any of its
obligations hereunder, any party to this Agreement that shall prevail
in litigation concerning any such dispute, contest or failure to
perform or discharge, shall be entitled to an award against the losing
party (or jointly against the losing parties, if more than one) of
reasonable attorneys' fees and other costs incurred by such prevailing
party (whether incurred by such prevailing party (whether incurred
before or after commencement of such litigation);
(f) Each party agrees to and shall forthwith provide such other and
further assurances, and agrees to and shall forthwith execute and
deliver such other and further instruments, as any other party may at
any time hereafter reasonably request to effectuate any of the
purposes of this Agreement;
(g) Each party agrees to bear its or his own costs, including
attorney's fees relating to the above-referenced action, including the
preparation of this Agreement; and
(h) This Agreement may be executed simultaneously, or in a number of
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date first above written.
CAPITOL INDEMNITY CORPORATION
By:____________________________________
Its:____________________________
_______________________________________
George A. Fait
_______________________________________
Joel G. Fait
SECURITY NATIONAL FINANCIAL CORPORATION
By:____________________________________
Its:____________________________
SECURITY NATIONAL LIFE INSURANCE COMPANY
By:____________________________________
Its:____________________________
SOUTHERN SECURITY LIFE INSURANCE COMPANY
By:____________________________________
Its:____________________________
SSLIC HOLDING COMPANY, FORMERLY KNOWN AS
CONSOLIDARE ENTERPRISES, INC.
By:____________________________________
Its:____________________________
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