ESCROW AGREEMENT
THIS ESCROW AGREEMENT is made and entered into this 28th day of December,
2006, by and between by and among Security National Life Insurance Company, a
Utah corporation (referred to herein as "Security National"), Southern Security
Life Insurance Company ("Southern Security"), a Florida domestic insurance
company, American Network Insurance Company, a Pennsylvania domestic insurance
company ("American Network") and Mackey Price Thompson & Ostler, a Utah
professional corporation (referred to herein as "Escrow Agent").
RECITALS
WHEREAS, prior to December 29, 2006, Security National was the owner of all
issued and outstanding shares of Southern Security (the "Shares");
WHEREAS, on December 12, 2005, Southern Security and Security National
adopted a Plan of Liquidation whereby Southern Security would be liquidated into
Security National in essentially the same manner as the liquidation described in
Private Letter Ruling 9847027 in order to achieve the same tax treatment and
consequences under ss.332 of the Internal Revenue Code of 1986 and other
applicable provisions described in said Letter Ruling;
WHEREAS, the first liquidating distribution occurred on December 31, 2005,
and all other assets of Southern Security have been subsequently liquidated into
Security National except the capital and surplus required by the insurance
departments of Florida and certain other states to conduct insurance business in
such states;
WHEREAS, Security National and American Network entered into a Stock
Purchase Agreement dated December 28, 2006 (the "American Network Agreement"),
which was closed on December 29, 2006, pursuant to which agreement Security
National sold and American Network purchased the Shares subject to a condition
subsequent in Section 1.04 of said agreement (the "Condition Subsequent")
requiring that the purchase and sale be approved by the Florida Office of
Insurance Regulation, the Florida Department of Financial Services, and the
Pennsylvania Department of Insurance (the "Governmental Approvals").
WHEREAS, pursuant to Section 1.02 of the American Network Agreement, the
approximate purchase price for the Shares (the "Approximate Purchase Price") is
being wire transferred on December 29, 2006 into a special interest bearing
account of American Network's attorney to be held by said attorney as escrow
agent pending the satisfaction of the Condition Subsequent. Upon satisfaction of
said Condition Subsequent, said escrow agent shall wire transfer the Approximate
Purchase Price being held in the escrow account to an account of Security
National designated by Security National. All investment income and interest
earned in the escrow account shall be transferred to Purchaser. In the event
said condition subsequent is not satisfied on or before June 30, 2007, or on or
before such later date as Security National and American Network may mutually
agree in writing, the American Network Agreement shall be rescinded and the said
escrow agent shall wire transfer the Approximate Purchase Price and interest
accrued thereon being held in the escrow account to an account of American
Network designated by American Network;
WHEREAS, the parties desire to establish this Escrow with the purpose of
preserving the desired tax consequences described in the second recital above by
assuring that, in the event the Condition Subsequent requiring Governmental
Approvals is not satisfied as required by the American Network Agreement, the
capital and surplus remaining in Southern Security will be automatically
distributed to Security National Life plus all investment income and interest on
the capital and surplus and Articles of Dissolution of Southern Security will be
automatically filed in Florida pursuant to documents executed and delivered into
escrow pursuant to this Escrow Agreement; and
WHEREAS, Escrow Agent is willing to receive the documents contemplated by
this Escrow Agreement and dispose of the same in accordance with the terms of
this Escrow Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Delivery of Documents into Escrow. Southern Security herewith
delivers the following documents to Escrow Agent to be held and disposed of
by Escrow Agent strictly in accordance with the terms of this Escrow
Agreement:
(a) A copy of the American Network Agreement.
(b) An original executed Assignment dated December 29, 2006, whereby
Southern Security distributes, assigns and transfers to Security
National all of Southern Security's capital and surplus accounts
and any and all other real and personal property which it may
have inadvertently failed to previously distribute to Security
National (the "Assignment").
(c) Original executed Articles of Dissolution of Southern Security
dated December 29, 2006 (the "Articles of Dissolution").
(d) Check dated December 29, 2006 in the amount of $35.00 made
payable to the Division of Corporations, as the filing fee for
Articles of Dissolution (the "Filing Fee Check").
(e) Certificates representing all of the Shares of Southern Security,
together with accompanying stock powers or instruments of
assignment, duly endorsed for transfer.
2. Delivery of Cash into Escrow. Security National herewith delivers cash
in the form of immediately available U.S. Dollars by bank wire transfer into
this Escrow in an amount equal to the statutory deposits of Southern Security
pertaining to the states of Alabama, Michigan and South Carolina, which are
statutorily required to be in form of bonds, such cash to be held by and
disbursed by Escrow Agent strictly in accordance with the terms of this Escrow
Agreement. Upon the obtaining of the Governmental Approval, American Network
shall immediately deposit with the states of Alabama, Michigan and South
Carolina its own bonds and shall take all other steps necessary to have Security
National's bonds released and returned to Security National. Upon receipt of a
written Notice from American Network that it has deposited with the states of
Alabama, Michigan and South Carolina its own bonds, and upon receipt of a
written Notice from Security National that it has received the bonds, the cash
delivered herewith into escrow by Security National equal to said statutory
deposits of Southern Security pertaining to the states of Alabama, Michigan and
South Carolina shall be disbursed to American Network. Upon receipt of a written
Notice from Security National and Southern Security that the Condition
Subsequent has not been satisfied, the cash delivered herewith into escrow by
Security National equal to said statutory deposits shall be returned to Security
National.
3. Destruction of Assignment and Articles of Dissolution in the Event the
Condition Subsequent is Satisfied. Upon receipt of (i) a written Notice from
Security National and Southern Security that the Condition Subsequent has been
satisfied and the Approximate Purchase Price has been distributed to Security
National pursuant to the American Network Agreement, and (ii) a written Notice
from Security National of receipt of payment from American Network of the
difference between the Approximate Purchase Price and the Purchase Price
pursuant to Section 1.02 of the American Network Agreement, the Escrow Agent
shall destroy the Assignment, the Articles of Dissolution and the Filing Fee
Check, by tearing the same in half and delivering such destroyed documents to
Security National, along with the copy of the American Network Agreement, and
shall deliver to American Network the certificates representing all of the
Shares of Southern Security, together with accompanying stock powers or
instruments of assignment, duly endorsed for transfer, and thereupon this Escrow
Agreement shall terminate.
4. Delivery of Assignment and Filing of Articles of Dissolution in the
Event the Condition Subsequent is Not Satisfied. Upon receipt of a written
Notice from Security National and Southern Security that the Condition
Subsequent has not been satisfied and the Approximate Purchase Price has not
been distributed to Security National pursuant to the American Network
Agreement, the Escrow Agent shall deliver to Security National the Assignment,
the copy of the American Network Agreement, and the certificates representing
all of the Shares of Southern Security, together with accompanying stock powers
or instruments of assignment, duly endorsed for transfer, and shall mail the
Articles of Dissolution and the Filing Fee Check to the Amendment Section,
Division of Corporations of the State of Florida at the following address for
filing with it, and thereupon this Escrow Agreement shall terminate:
Amendment Section
Division of Corporations
P.O. Box 6327
Tallahassee, FL 32314
5. Manner of Notice. All notices required by this Escrow Agreement or which
one party desires to serve on another party, shall be in writing and shall be
deemed given or made when delivered to such party personally, or three days
after mailing to such party by bonded courier, by registered or certified mail,
postage prepaid, return receipt requested, or by first-class mail, postage
prepaid, to the addresses specified below:
If to Security National, to :
Scott M. Quist, President
Security National Life Insurance Company
5300 South 360 West
Murray, Utah 84123
or to such other address or addresses as Security National shall hereinafter
designate by notice to the other parties as herein provided; and
If to Southern Security, to :
Scott M. Quist, President
Southern Security Life Insurance Company
5300 South 360 West
Murray, Utah 84123
or to such other address or addresses as Southern Security shall hereinafter
designate by notice to the other parties as herein provided;
If to American Network, to:
Mark Cloutier, Senior Vice President and
Chief Financial Officer
American Network Insurance Company
3440 Lehigh Street
Allentown, Pennsylvania 18103
or to such other address or addresses as American Network shall hereinafter
designate by notice to the other parties as herein provided; and
If to Escrow Agent, to :
Randall A. Mackey, Esq.
Mackey Price Thompson & Ostler
57 West 200 South, Suite 350
Salt Lake City, Utah 84101
or to such other address or addresses as the Escrow Agent shall hereinafter
designate by notice to the other parties as herein provided.
6. Governing Law. This Escrow Agreement shall be enforced and construed in
accordance with the laws of the State of Utah.
7. Agreement Irrevocable and Binding. The provisions of this Escrow
Agreement and the terms and conditions hereof are irrevocable and may not be
amended or terminated even by the mutual agreement of the parties and shall be
binding upon and inure to the benefit of the executors, administrators,
legatees, devisees, heirs, successors and assigns of the parties hereto.
8. Counterparts. This Escrow Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
9. Time. Time is of the essence of this Escrow Agreement.
10. Headings. The subject headings of the paragraphs contained in this
Escrow Agreement are included for purposes of convenience only and shall not
control or affect the meaning, construction or interpretation of any of the
provisions of this Escrow Agreement.
11. Disputes. Escrow Agent shall be obligated to act only upon receipt of a
court order or written notice given strictly in accordance with paragraphs 2 or
3 of this Escrow Agreement. Each of the other parties hereto hereby agrees that
Escrow Agent shall not be liable for any loss, damage, cost or expense arising
out of or in connection with any act or omission of Escrow Agent in good faith
pursuant to any such instruction. The Escrow Agent shall not be liable for and
shall be protected in acting upon any Notice believed by the Escrow Agent to be
genuine and to be signed by the proper party or parties. Should Escrow Agent be
notified or become aware of any dispute between any of the parties hereto or any
person or agent acting for them with regard to this Escrow Agreement, Escrow
Agent shall have the right to commence such interpleader or other legal
proceedings or actions, or take or withhold any other actions, as are reasonably
necessary or appropriate pending resolution of such dispute.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the day and year first above written.
"Security National"
SECURITY NATIONAL LIFE INSURANCE COMPANY
By /s/ Scott M. Quist
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Scott M. Quist, President
"Southern Security"
SOUTHERN SECURITY LIFE INSURANCE COMPANY
By /s/ Scott M. Quist
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Scott M. Quist, President
"American Network"
AMERICAN NETWORK INSURANCE COMPANY
By /s/ Cameron B. Waite
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Its: Exec. V.P., Strategic Operations
--------------------------------
"Escrow Agent"
MACKEY PRICE THOMPSON & OSTLER
By /s/ Randall A. Mackey
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Randall A. Mackey